Reference no: EM133145066

Can This Restaurant Be Saved?

You have just been appointed general manager of an under-performing restaurant. The good news is that there is a substantial bonus if you can turn it around. You look at the income statement for the previous year and see several things that need immediate attention. 

Income Statement (Last Year)

Sales (income)

Food                                        $500,000

Beverage                                 $100,000

Total Sales:                            $600,000

Cost of Sales

Food                                        $175,000

Beverage                                 $45,000

Labor                                      $220,000

Maintenance                           $60,000

Supplies                                  $60,000

Total Costs:                           $580,000

Rent                                        $10,000

Insurance                               $4,000

Net income, before taxes, is $6,000. 

This data should alarm you into action. Your first step is to make a detailed plan for making this restaurant more profitable. Things to consider are menu options, pricing, advertising, labor, supplies, maintenance, rent, and insurance. 

Question: Based on the financial information provided, answer these questions:

(a) Where would you cut costs and why?

(b) What could you do to boost sales and earn more income? 

(c) Is this restaurant savable? Explain your reasoning based on the things you did in (a) and (b).