1)Review the advice of the professional advisors, Tom and Terri. Do you believe

Question

1)Review the advice of the professional advisors, Tom and Terri. Do you believe they have some merit? What would you recommend to move forward to resolve their perspective of the problem(s)? What type of information technology could be implemented?

Information from ch - 1
KIMBALL’S RESTAURANT: Business Systems and Information

Liz and Michael Kimball dreamed about opening their own restaurant. They believed that they could use their talents and experience to operate a successful restaurant. Liz was a great cook and had accumulated many family recipes for appetizers, entrees, and bakery desserts. Michael had a degree in business and several years of experience in business management. They believed that it was the right time to think about new careers and realize their dream.

Michael began his career in the human resources department of a local manufacturing business. Over the course of his 20 years in human resources, he was responsible for recruiting, compensation evaluation, and employee orientation. He also managed employees’ performance evaluations for the production departments. While he has some accounting and budgeting experience, it was specific only to human resources, not for an entire business organization.

Liz started work as a customer service rep for a financial services company right after high school. Her 15 years of customer service experience has given her some ability to manage people. She does not have a formal culinary education, but she has an excellent sense of food preparation, ingredient selection, and meal planning. These skills should provide a foundation for the menu development and food preparation that a restaurant will require. However, her lack of a formal culinary education and experience in a commercial kitchen, operations might require some additional training.

The Kimball’s live in Lakeside Heights, a suburb of a metropolitan city. Their community and the adjacent towns consist of primarily middle-income households. Many of the adults in the community are college-educated and have professional jobs in business and manufacturing. The population of the town and surrounding communities is approximately 40,000 people. The city, about 12 miles from Lakeside Heights, has a population of 110,000.

Michael and Liz believe that a restaurant serving Liz’s specialties of “home style” American, Italian, and seafood dishes would be a good choice for their location. They are excited about the possibility of providing quality food at a reasonable cost. The same family and friends that enjoy Liz’s cooking would match their expected customers. They want to offer a quiet, relaxed dining environment offering mid-priced meals.

Researching the Business   

As they talked about the details, their dream gathered momentum. However, they both knew that they couldn’t build their business on dreams alone. They would need additional business advice and perspective to ensure that their business concept was realistic. First, they checked out the numbers. Liz and Michael, along with their advisors and friends, assessed the capital required for starting a restaurant. They agreed that Liz and Michael had sufficient funds to use as start-up capital for the new venture.

Tom, a family friend employed as a marketing consultant, felt that their business model would be well suited for their location. They had their eye on a strip mall location that was vacant and could be suitable for a small family restaurant. They contacted the local real estate agent, Anne Marie Sim- mons, to ask about its rental cost, availability, and size. Liz and Michael visited the location with Anne Marie. The agent said that the store housed a diner for three years before it closed. She speculated that the diner might not have been able to compete against the fast-food franchises in the area. The agent also believed that the owners did not have the proper financial and marketing plan to be successful.

Liz studied the store’s floor plan and dimensions. The store had floor space to accommodate about 50 diners as well as a full kitchen operation and storage areas. The strip mall location had plenty of parking as well as access on a major road. The gas, plumbing, and electrical infrastructure were in good working order. The decor and kitchen appliances need to be purchased as well as all restaurant fixtures (pans, dishes, flatware, etc.) if they signed a lease to occupy the restaurant.

In order to be efficient and leverage their individual skills, Liz and Michael segregated the various research tasks necessary to compile business projections and forecasts. Michael focused his attention on the front-house operations, sales, and marketing plan while Liz analyzed the kitchen operations, inventory, and menu planning. Each of them compiled forecasts for the startup and operational costs in their areas of specialty. These costs included the labor, materials, food, utilities, rent, and other necessary costs. These forecasts would be the foundation of their business, financial, and operations plan.

n Creating the Business Plan

Michael continued to work with Tom on the marketing and promotion of the restaurant. Their first thought was to gather sales, customer, and meal data from the previous owner. To protect the anonymity of the new owners, Michael asked Anne Marie to contact the previous owner. She provided three years of weekly data on the number of meals and tables served. Unfortunately, the previous owner could not or did not want to provide any sales data. Michael entered 164 weeks of data into a simple Excel spreadsheet to review. The spreadsheet contained three data points: week ending date (Sunday), total checks, and total meals served. Michael and Tom reviewed the spreadsheet to attempt to find some relevant information for their marketing and forecasting projections.

The diner had been open seven days a week. However, the data Michael received was not broken down by the day of the week. Therefore, the data could not be used to analyze daily traffic and sales, but only to analyze weekly trends without information on daily traffic and sales.

Tom coached Michael on how to analyze the data through a “rough” first glance. He separated the data into three spreadsheet tabs by year, where the first row of weekly data was the first week in the calendar year. He added a column that calculated the average meals per check. Then, to gain an understanding of the restaurant’s customer load, he ranked both the number of meals and checks within the year. These values provided a basic sense of the high and low weeks for the previous restaurant. He then sorted each of the three calendar years by the meal count (descending with the highest ranking first).

The lack of daily data limited the depth of analysis that could be completed. Tom looked at the hard- copy of three years of data side by side. After reviewing the three years of data, Tom pointed out that their weekly data showed only one clear trend: Some weeks showed lower sales than the other periods. Upon further analysis, it appeared that they were holiday periods (Thanksgiving and Christmas weeks) as well as some summer weeks. Without the daily data, it was impossible to determine the distribution or trending of customer sales.

Liz completed another tour of the restaurant location. The kitchen was equipped with an operational walk-in refrigerator, exhaust fan, several tables, and shelving units. She assembled a tentative new floor plan for the kitchen and food preparation area. From the floor plan, she compiled a cost estimate listing the appliances and fixtures still needed for the kitchen.

In addition to seating about 50 people comfortably with 15 tables, Michael believes that a bar can be built to seat an additional 10 patrons. He created estimates for dining room and bar equipment, furniture, and fixtures, including all labor installation costs.

Tom helped them create a spreadsheet using various factors to estimate the weekly sales. They used some of the previous owner’s data to calculate the seasonal and weekly trends. With the menu that Liz compiled, they estimated the weekly sales for the restaurant for the first year. The entire spreadsheet calculated the variable costs (labor, food) based on the number of meals served. The list of fixed overhead costs (like utilities, taxes, and rent) then helped to generate the monthly cash flow and profit estimates. The spreadsheet calculated three scenarios: aggressive, reasonable, and conservative. The most conservative estimate resulted in a small loss for most months. They felt comfortable with the range of projections they had compiled. Tom believed that Liz and Michael could present these forecasts and a business plan to a bank for a loan for the startup costs.

n Launching the Dream

Kimball’s Restaurant opened in the strip mall location. As with any new business, the restaurant started out slowly with sales closer to the conservative estimates. However, as their reputation for quality, reasonably priced meals developed, Liz and Michael knew their dream had become a reality.

Three years later, Kimball’s was operating successfully and profitably. Their dining room was often at capacity with both new and returning customers. They often had a small waiting line on weekend nights. Liz and Michael were very satisfied with their dream. What would be next?

BUSINESS CHALLENGES

In the next three chapters, you will learn what Michael and Liz need to get started in harnessing the power of information systems to help build and grow their restaurant. They will need to understand how information systems can help with a restaurant’s short-term (operational) needs as well as plan for long-term initiatives (strategic) to expand the business.

In Chapter 1, “Business Information Systems: An Overview,” you learn the various types of information systems businesses use and why familiarity with information technology is important for your career. You also are introduced to some of the major ethical and societal concerns about acquiring, storing, and reporting potentially sensitive information.

In Chapter 2, “Strategic Uses of Information Systems,” you learn how to use information strategically, and how to harness information technology for competitive advantage.

In Chapter 3, “Business Functions and Supply Chains,” you learn how you might best use information technology to help manage a business, whether you need to order inventory and track sales, generate financial statements, or automate payroll systems. You also learn how supply chain management systems serve whole enterprises.

The restaurant has been operating successfully for three years. Although they experienced challenges, Liz and Michael believe that they developed a great dining establishment. Sales forecasts have steadily increased over the last three years. Thankfully, the growth was not so fast as to cause any “growing pains” or problems with their business. Michael found that during most weeks, they had reservations for 50 to 100 percent of their dining capacity.

Processing Orders and Payments

Michael believed his analysis was fairly accurate, but it took a lot of effort to compile his information. The servers wrote the customer orders on multipart paper checks. One copy of these checks went to the kitchen for preparation. The server tabulated totals on the original copy and gave it to the customer when the meal was complete. At that point, the customer paid the cashier directly with cash or a credit card and the hardcopy of the check was saved. Several times a week, Michael used the paper checks to enter the sales and table information in an Excel spreadsheet for analysis. Because he was so busy with other operational priorities, the spreadsheet data entry and subsequent analysis was often delayed.

The restaurant processed its payroll through a local service. Employees maintained their timecards manually. Each week, the timecard data was validated by Michael and sent to the payroll service for processing and check printing. Michael was not comfortable with the manual entry of employee time punches, but he did not have a simple, cost-effective alternative.

Michael used a small business accounting package to track the restaurant’s expenses, process payable checks to suppliers, and record deposits. The software was easy to use and provided the balance sheet and income statement needed for the business. It also generated the required tax information for his accountant to file the appropriate tax forms. However, it did not track a level of information needed for analyzing the business operations and forecasting sales. From his experience in human resources, Michael understood the need for quality data and business information. At his former employer, the information technology department provided that expertise and assistance. Unfortunately, those skills were not available at the restaurant.

Michael knew that his time was limited and that he needed to focus more on the operations rather than data entry, but he also wanted to collect and analyze data about his business to manage it and plan effectively.

Their son, Tyler, finished his education to complete a business degree, specializing in marketing and management. He had worked in the restaurant during the summers and semester breaks as a busboy and server so he had some familiarity with the business. He was also anxious to gain more experience to try out some of the skills he had learned in business school. Liz and Michael decided it was a good time for Tyler to join the business.

Defining the Problems

Michael told Tyler that he would like to streamline the front- and back-house operations and gather more information for analysis without relying on manual data entry. Tyler understood the challenges because some of the problems in these areas were directly related to issues that Tyler encountered while he was a server at the restaurant. The issues could be categorized into two areas: completeness and accuracy of guest check information and check payment.

Because the guests’ orders were handwritten, sometimes parts of the orders were not legible. In addition, especially with new servers, some of the information needed to complete a meal was either inaccurate or incomplete for that meal choice (cooking preferences, toppings, special preparation). This issue added time for the server and cooking staff as well as reduced customer satisfaction. Check payment was another problem. Often, it was not clear to the customers whether they should pay the server or the cashier. Michael wanted to control the cash and credit-card processing at a central location but was willing to review this policy.

Tyler talked to the servers and kitchen personnel to gain perspective on the guest check and payment problems. The staff was pleased to be asked for input. They confirmed that guest check accuracy and payment were issues, but additional issues were uncovered. As in many restaurants, at Kimball’s the servers were responsible for any checks not paid by the customer. However, it was impossible for the server to know if the customer paid the cashier or left without paying. The servers would prefer that customers settle their payment directly with the server so that they could know if a customer has paid. Servers also conveyed that even when they wrote out the order legibly and completely, meals sometimes were not prepared properly. The kitchen staff said that changes to guest orders are often “rushed” and disrupted the completion of other meals in progress. On many occasions, servers submitted changes after the order was ready to deliver to the table. Kitchen staff said a new process was needed to communicate order changes before the table’s meals were cooked. Unfortunately, it was impossible to tell from the current checks which orders required changes. Therefore, no data was available to objectively assess the magnitude of the problem.

Collecting Data to Address Problems and Make Decisions

Tyler then focused his attention on the data analysis. He asked his parents to define two lists of questions: (1) What do you know from the information you currently maintain? and (2) What answers would you like to know that would help you operate the business more efficiently and profitably? They responded that they knew how many tables were seated by day as well as the total check amounts. The checks separated the liquor and food totals for tax purposes, but the daily totals for these categories did not provide any details about the individual customers’ orders. Michael would also like to know more details, such as ... What meals did they order? Did they order appetizers? How many patrons were at the table (adults and children)? Did the customer take advantage of any of the specials? Liz wanted to know, how much food do I need to order based on past sales?

Tyler said that these questions were a great start. He categorized their questions into two areas: marketing/promotion and operational. He knew that additional marketing information was needed to determine menu planning, promotions, and customer satisfaction. He wondered how many people were returning or new customers. How did they learn about the restaurant? For operational issues, was there any monitoring of the operations as issues occurred?

KIMBALL’S RESTAURANT: Using Information Strategically chapter - 2

Kimball’s business has steadily grown over its first three years. With all their hard work and long hours, Liz and Michael were pleased to see their dining room full of customers on many nights. The bar developed a strong, local clientele for weekday sporting events and “after work” gatherings. Several nights a week, there was standing room only in the bar area. The implementation of a point-of-sale system helped the dining and kitchen operations and provided several benefits over their antiquated hardcopy guest check process. The new system tracked and stored each meal and customer check information. This additional detail provided data for analysis without the need to enter data from the paper guest check method.

Restaurant sales continued to grow. As they grew, Mike and Liz wondered if they should consider expansion. Michael’s analysis of customer checks and sales showed that their current location’s capacity was an issue. However, they did not want to expand just for the sake of expanding.

An Opportunity

Liz and Michael were approached by Shaun Reilly, whose family owned a lakeside campground property about five miles from the restaurant. The campground business closed after his parents retired. With changing consumer behavior and lifestyles, Shaun did not think the property could continue successfully as a campground. Therefore, he was looking to sell or lease the property for an alternative use.

The campground’s picturesque view of Lake Zephyr was an excellent location for a restaurant. The main building had housed a medium-sized restaurant for the campground. Several areas could be easily converted to expand the current dining room area. In addition, the building included a spacious covered patio area that was used as a lounge area for campers. The patio area could be used for additional Lakeview dining during the warmer months.

Intrigued by Shaun’s proposal, Liz and Michael visited the campground. Although the building was over 30 years old, Shaun’s family had maintained the property meticulously. The kitchen area was ample to cook, prepare, and store food. The additional three rooms in the building could be redesigned easily to serve as two dining areas and a lounge/bar area. One of the dining rooms could also be used as a small function room for business meetings or family events. The views of the lake provided a remarkable atmosphere for a unique dining experience.

Michael estimated that the dining area would increase their dining capacity to 110 seats and the lounge area to 25. Liz thought “Could this location support a successful restaurant?” Would Liz and Michael damage a successful restaurant to seek out a larger establishment? They expressed some concern about whether it would be a viable business opportunity. Or were they leaning toward the safe, no-risk approach? Or should they remain with the current location and business model they currently have?

Looking Before They Cook

Michael and Liz spoke to their son, Tyler, about the opportunity. They all agreed that it would be better to revisit their original business plan. Because Tom’s marketing expertise was so valuable when they first planned the business, they hired him to update the plan in terms of the proposed new location. Michael provided the detailed menu item and daily sales summary data that he had collected since Kimball’s point- of sale-system was installed. At a first glance, it was clear to Tom that the restaurant was doing well. With the new point-of-sale system, Michael captured more data than the previous owner had from the manual guest check system.

Tom analyzed the time customers spent at each table, known as table turnaround. The higher the value of this metric, the more efficiently the tables were being used, meaning less time spent by customers at tables. Michael had never tracked this data or understood the range of information that was available from the new system.

Tom worked with the data to develop several factors that he could use to forecast sales and expenses for the proposed new location. He extracted the average for the total check amount, dining time, and number of people per table. Tom analyzed this data by day of the week, specific timeframe (holidays, etc.), and months. These different summaries of the data provided a wide view of the factors to compile a more accurate sales forecast. Michael had never reviewed the data from the POS system using this approach. He was a bit surprised by what the data could report.

Michael and Liz then had a meeting with Terri Jordan, the restaurant’s accountant. She prepared all of the restaurant’s financial statements, state sales tax reports, and income tax filings. Over the last two years, Terri reported that while the restaurant was doing well, their total expenses also increased. The financial statements showed that the cost of goods sold as well as labor expenses increased disproportionately compared to total sales. Although sales increased, the net profit margin decreased slightly each month. Liz asked Terri to tell them what they were doing wrong and how they could fix it.

Terri saw two possible factors in the declining prof- its: excess inventory and labor costs. She had analyzed the restaurant’s financial data, operations, and invoices. The information system did not maintain data for direct inventory costs for meals or spoilage. Terri was frustrated that she could not directly compare the meal sales to inventory in order to calculate the amount of spoilage (if any). However, using summary data, she felt that Liz might be purchasing more food than necessary based on forecasted sales. Without the ability to forecast food purchases based on past meal sales, it is difficult to maintain accurate inventory and to reduce spoilage costs.

Terri also looked at the labor costs for servers and kitchen staff. She reviewed and compared the weekly personnel schedules. The comparison clearly indicated that the hours scheduled did not match the anticipated number of diners. Terri noticed that the staff schedules did not change from day to day, even though some days’ sales were consistently lower. This could potentially explain the increased labor costs.

Liz and Michael thought about the information from Tom and Terri. Both advisors discussed that the increased sales and customers probably distracted the owners from managing the business from a strategic perspective. The owners admitted that as the business became popular, they felt that they did not need to manage costs and operations as strictly. Tom said this was a common mistake that a lot of small business owners make, and Terri had commented that the restaurant still had strong, stable sales and remained popular with customers. Therefore, they just needed to focus on a few things to increase profitability. The easy solution would be to raise prices, but either Michael or Liz wanted to do that. Michael decided that their first task would be to implement some strategies to strengthen their existing business before expanding.

Moving Forward

Liz, Michael, and Tyler met again with Shaun. Liz and Michael loved the location and were excited by its possibilities, but after their discussions with Tom and Terri, they realized that they weren’t ready to take on the expansion.

Tyler agreed that the business was doing fine, but they needed to focus their attention to building some strategies in operations and information technology to strengthen their business in the current location. He said that this focus could provide the results to leverage in a new location. Expanding the restaurant with a “critical eye” toward a lean operation would create a perfect transition to the new location when the time was right.

A solid action plan was in place!

Explanation / Answer

The information shared by both Tom and Terri has helped uncover important data about current operations of the resturant and has formed a base to improvemnets that can be made, if Liz and Michael decide to make the changes before expanding. I would recommend that Liz and Michael work on imporving the efficiency of current operations and work towards imcreasing the profit margins by optimizing both cost of goods sold and labour expenses. Implementation of Information technology systems such as Management Information systems can help in optimizing cost of goods sold and labour expenses. For example, the process of order taking and communication the order to kitchen and cashier can be reengineered with information technology to both reduce time and error, and cost. The Server can use a computer system to upload that order that can record table number, the number of customers, ordered items, order value etc, while passing on relevant information from this to relevant department. The kitchen can extract information regarding the food items that are to be prepared, any specific changes that the customer requested for. The cashier can look for information such as table occupancy, Turn around time, Bill amount and wheather the bill is paid or not. While, all of these helps in the front end operations of the restaurants, the same information can be used for back end optimizations as well. The order data can be used to curate the bill further by choosing what worked well adn what is being order frequently. Simillarly, the order value and turn around time can be used to understand the efficiency of table usage and to analyse the trends. The orders by customers when mapped to inventory management will help in automating stock replenishment process and thus will help in reducing the cost of goods sold

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