RE2102 Real Estate Economic Page 6 of 8 Q19-Q20 are based on the following data.
ID: 1114494 • Letter: R
Question
RE2102 Real Estate Economic Page 6 of 8 Q19-Q20 are based on the following data. Fast-food restaurants (abbreviated as FFRs), such as KFC, McDonald's, and LongJ Silver's, are often found in the same shopping center. You are a manager of a fast-food chain, Dairy King (abbreviated as DK). You are assigned to investigate the possibility o opening a new store in a newly developed shopping center. You know that the landlord has already signed contracts with KFC and Long John Silver's, with a daily rental rate of $200. The landlord of the new center also offers a rental rate of $200 to you. Your market analysis team creates the following projections based on their observations of daily customer flows in other shopping centers. Net revenue from each customer, after subtracting labor and other non-rental costs, is $5. Rental cost in a smaller shopping center, where DK is the only FFR, is $100 per day. There are many small shopping centers available for DK to choose from. One FFR Two FFRs Daily #Customers for DK Daily total net revenues Daily rental costs 200 $1,000 $100 Three FFRs 240 $1,200 $200 Four FFRs 210 $1,050 $200 $1,250 19. Given all the information above, should DK enter the shopping center? (b) No. (a) NO. sible to (c) Impossible to determine. Suppose you are informed that McDonald's is also negotiating with the owner of the shopping center. McDonald's is offered a daily rent of $200. The market analysis in the above applies to all FFRs, including McDonald's, KFC, Long John Silver's, and of course DK. Which of the following statements is the most reasonable? 20. (a) McDonald's should accept the offer of a daily rent of $200 because it can get (b) The operators of KFC and Long John Silver's are not affected by (c) (d) more customers than if it operates in a small shopping center. negotiations between the owner and DK or McDonald's The maximum acceptable daily rent is $100 for the deal to make sense to DK, assuming the deal between the owner and McDonald's is successful. The maximum acceptable daily rent is $150 for the deal to make sense to McDonald's, assuming the deal between the owner and DK is successful.Explanation / Answer
19-Fast food restraurent like KFC,Mcdonald and long john's silver were found in the same shopping center.The new opportunity was offered to open a fast food center for a small shopping center which was newly developed and the landlord has offered the rental cost $200.As per the rental cost was low and the total net revenue earned by dairy king was more and the daily customers visiting were also good so on an average it would be beneficial for him to enter the new shopping center so the answer is yes.
20-As mcdonald hasbeen offered the daily rent of $200 after negotiating with a owner of the shopping center but the offer was not very beneficial for mcdonald because there was no changes in rental and it was same for all fast food retraurents.So the most reasonable statement will be option b
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