Question 6: Frank’s All-American BarBeQue is planning to significantly expand it

Question

Question 6: Frank’s All-American BarBeQue is planning to significantly expand its takeout business. Currently, customers come into the restaurant and order from the menu. With the new Darien facility and website, customers will be able to order online or fax an order to the restaurant. Frank and Robert have been arguing over how to structure the takeout portion of their operations. Frank wants to maintain the approach where customers order items from the menu. Robert believes that in today’s world, it would be more convenient for customers to order complete prepackaged meals. Father and son have argued about the nature of these meals. Frank has suggests a limited number of standard meals that could be prepared during the day and sold in the evening when commuters are returning home. However, this might mean that excess inventory would be built up on unwanted items. Robert wants to offer greater variety. These would include a main course, two side dishes, and a dessert. Because there could be a large number of combinations, most would have to be made after the receipt of an order. The “rush” to make these meals would drive up costs. How would you go about pricing these two types of meals?

Explanation / Answer

The standard meals which is having a fixed menu and could be offered to a larger number of customers and is usually made to store. This can be inventoried and sold to customers without much meal preparation time. Since this is a stock offering, the pricing on this item can be kept on the lower side as this will benefit from economies of scale.

On the other hand, the meal having the greater variety including the main course, side dishes and dessert is a more customized offering and can only be prepared based on order. Thus this will need extra time for preparation and won't enjoy benefits of economies of scale. So the price point for this offering should be premium with a higher price demanded for a more customized offering based on tastes of customers.

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