Eddy has the world’s best recipes for Chili and Hot Dogs, and at the urging of f

Question

Eddy has the world’s best recipes for Chili and Hot Dogs, and at the urging of family and friends, is finally opening his restaurant, “Fast Eddy’s”. He has ample personal resources from his fortune earned as a stock trader, so finance is not a concern. He does however, have limited experience as a business operator, and has some decisions to make. Please address the following questions to help him make his choices.

1. Given the fact that he will be opening a restaurant and knowing a little about his personal situation, what legal form of ownership would you recommend he use? Please give your rationale for your recommendation, including any possible downsides to the form.

2. He anticipates being open for lunch and dinner, with both eat in and take out options available, 6 days a week.   Initially, he plans to hire approx. 25 employees. What formal organizational structure would you recommend he use? Provide a simple organizational chart and explain the pros and cons of this choice.

Explanation / Answer

1.

For a restaurant business the most safest and cost-effective legal form of ownership could be limited liability company (LLC) as it facilitates to be owned by one or more people and can be taxed either as corporation, partnership or as part of owner's tax return. Thus this provides LLC with exceptional tax flexibility opportunities which in fact can facilitate if right choices are made to maximize earnings.

Furthermore LLC is also protected from other kind of possible liabilities for instance if a person is infected by your restaurant food then your business would be held accountable for the damages but you and other members won’t be liable personally. Thus this makes LLC the best option for your food-service business because a person can't come after you at your house even if tries to take your business to court.

2.

Since restaurant business has very specific staffing needs organizational structure needs to be in line with functional requirements. Generally restaurant owners are ultimately in control of the restaurant. He appoints general manager who indeed is accountable for the everyday decision-making tasks of the restaurant.

Thus as a general manager he would be responsible for hiring, training and managing staff, administering the overall operation process and ensuring the smooth functioning of the business. Furthermore he would also be accountable for appropriate cash maintenance and ensuring adherence to all legal requirements.

Executive chef is regarded as the administrator of the entire kitchen. Thus they are accountable for maintaining appropriate records of all products coming in the kitchen from suppliers and for the overall food quality. Executive chefs needs to report general manager about inventory and ordering and would be responsible for all meals that leave the kitchen.

Front house manager is basically involved in maintaining good customer relations and appropriately administering the front desk of the restaurant. Thus they are responsible of selecting and monitoring the performance of shift leaders and are also accountable for the overall appearance of the staff and restaurant.

Shift leaders are the last level of restaurant administration thus they are usually the people deployed at the restaurant to effectively take care of the customers. They generally possess experience in serving the customers and are involved in appropriately administering problems.

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