You have average time for a whole meal of 1.5 h in the exhibit 4. I think it should be rephrased as 1.5 h/1 meal for each person on the on a table. If we follow just 1.5 meal/1 one meal then in 3 hours you would have 2 meals not 4. So reducing this to 1 hour/1 meal gives extra 1 meal in 3 hours. Then you would get -0.1 M loss per year.
Could you please clarify?
hey there!
I would say: good catch
You're right to question the phrasing. If the exhibit says "1.5 hours per meal," it typically refers to the entire table's occupancy per dining party, not per individual. So in this case, 1.5 hours would be the average time one table is occupied by a group for a full meal.
If you reduce that to 1 hour per meal, then yes, you increase the table turnover — potentially allowing 3 meals in 3 hours instead of just 2. This would boost capacity and, depending on demand, may lead to higher revenue (not loss). Your interpretation is correct assuming the restaurant operates at or near full capacity. Always check if the exhibit is talking about per person or per party to avoid this confusion.
Alessa
Can you clarify which case you're referring to?
Hi there,
Thanks for solving my case! Regarding your question:
Q: You have average time for a whole meal of 1.5 h in the exhibit 4. Could you please clarify?
This means it takes 1.5 hours for the table to complete an entire meal, which implies that in the 3-hour slot, there will be, on average, 2 meals per table.
Given we have 20 tables in the restaurant, this translates to 20*2 = 40 tables per day completing their meals in the 3 hours, with the current 1.5 hours/meal time.
With the new system, a meal could be completed in just 1 hour. As a consequence, in the 3-hour slot, there will be, on average, 3 meals per table. Given there are 20 tables, this implies 60 tables per day with the new system.
The additional tables, therefore, will be 60-40 = 20. Given there are 4 customers per table, this means 20*4 = 80 additional customers served. Given each customer generates $10, this implies an additional margin of 80*10 = $800 per restaurant/day.
From there, you can then calculate the additional margin for all 10 restaurants in a year and find the payback period considering the upfront investment ($8M) and yearly fee ($800K), as indicated in the solution.
Hope this clarifies,
Francesco
Hey there ! I don't necessarily follow your logic. 1.5h is indeed the average time for a full meal (meaning the 4 people come in a group, sit at the same time, and leave at the same time). I don't fully understand what's the problem there.
To calculate the payback period as per the question, you would need to :
- Calculate additional customers from the new system, and their related additional profit, then translate it to yearly for the whole chain (details below)
- Compare it to the investment to see how many years it would take to reach breakeven.
If you have any questions, do not hesitate to reach out.
Calculations :
To compute payback time, calculate (i) additional margins due to extra customers (ii) costs per year (iii) payback time.
i. Additional margins due to extra customers
ii. Costs per year
iii. Payback time = 8m / (2.8m – 0.8m) = 4 years
Expert case by
