# Decision Making Assignment | Homework For You

CASE 2: DECISION MAKING The spread of COVID-19 has caused all restaurants across the state to restrict dine-in option and offer food services through take-out and delivery. A local restaurant is deciding whether to continue to open for take-outs and delivery or to shut the operation entirely until the restriction is over. Using the information below and what you have learned so far, your task is to help the manager answer the following questions: 1. What is the approximate daily break-even sales? If the restaurant were able to break even every day, should they continue to open? Why or why not? Let’s assume that the COVID-19 restriction will end in 2 months. 2. Currently, the restaurant does not offer delivery but wants to start.

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It expects to increase sales by 20% by offering delivery service without outsourcing. Should the restaurant outsource its delivery service from one of the two companies below? Or offer delivery on its own? Costs Information for #1:  Staff (kitchen) \$550 per day (does not get paid if restaurant is closed)  Staff (counter) \$150 per day (does not get paid if restaurant is closed)  Manager salary is \$200 per day (paid even if restaurant is closed)  For simplicity, assumes federal & state payroll tax (payable by restaurant) to be 12%  Food cost is 25% of sales revenue  Credit card processing fee is 2.5% of the sales amount. During dine-in restriction, customers can only pay with credit cards to avoid cash transactions

 Utilities are variable cost and estimated to be \$80 per day  Other variable indirect cost is 10% of the total sales revenue Note: rents, insurance, and other normal fixed costs are not included in this analysis since they must be paid regardless of whether the restaurant is open or not. Costs information for #2:  NO OUTSOURCE: Delivery driver hired by the restaurant = \$65 per day (a delivery driver earns tips from customers)  DOORDASH: o Using Doordash, the restaurant is charged 30% commission of total sales ordered through Doordash’s website. Doordash also provides its own delivery driver. Using Doordash, delivery sales are expected to be 3 times more than if the restaurant does on its own.

 GRUBHUB: o Using Grubhub, the restaurant is charged 25% commission of total sales ordered through Grubhub’s website. Grubhub also allows customers to place a pick-up order. With Grubhub, the restaurant expects to double its delivery sales. However, its takeout sales will not increase, as customers who used to call in and placed an order would now be ordering online through Grubhub. It estimates that 20% of sales through phone calls will now be placed online through Grubhub. FEEL FREE TO USE MAKE REASONABLE ASSUMPTIONS TO HELP WITH THIS CASE.

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