Reference no: EM13877553

Theory of Constraints for a Restaurant Taylor's is a popular restaurant that offers customers a large dining room and comfortable bar area. Taylor Henry, the owner and manager of the restaurant, has seen the number of patrons increase steadily over the last two years and is considering whether and when she will have to expand its available capacity. The restaurant occupies a large home, and all the space in the building is now used for dining, the bar, and kitchen, but space is available to expand the restaurant. The restaurant is open from 6 p.m. to 10 p.m. each night (except Monday) and has an average of 24 customers enter the bar and 50 enter the dining room during each of those hours. Taylor has noticed the trends over the last two years and expects that within about four years the number of bar customers will increase by 50 percent and the dining customers will increase by 20 percent. Taylor is worried that the restaurant will be not be able to handle the increase and has asked you to study its capacity. In your study you consider four areas of capacity: the parking lot (which has 80 spaces), the bar (54 seats), the dining room (100 seats), and the kitchen. The kitchen is well staffed and can prepare any meal on the menu in an average of 12 minutes per meal. The kitchen when fully staffed is able to have up to 20 meals in preparation at a time, or 100 meals per hour (60 min./12 min. X 20 meals). To assess the capacity of the restaurant, you obtain the addi- tional information:

• Diners typically come to the restaurant by car with an average of three persons per car, while bar patrons arrive with an average of 1.5 persons per car.

• Diners on the average occupy a table for an hour while bar customers usually stay for an average of two hours.

• Due to fire regulations, all bar customers must be seated.

• The bar customer typically orders two drinks at an average of $7 per drink; the dining room customer orders a meal with an average price of $22; the restaurant's cost per drink is $1, and the direct costs for meal preparation is $5.

Required: (Note: When calculating capacity usage, you may round numbers up to the nearest whole digit)

1. a. Given the current number of customers per hour, what is the amount of excess capacity in the bar, dining room, parking lot, and kitchen?

b. Calculate the expected total throughput margin for the restaurant per hour, day, and month (assuming a 26-day month).

2. a. Given the expected increase in the number of customers, determine if there is a constraint for any of the four areas of capacity. What is the amount of needed capacity for each constraint?

b. If there is a constraint, reduce the demand on the constraint so that the restaurant is at full capacity (assume some customers would have to be turned away). Calculate the expected total throughput margin for the restaurant per hour, day, and month (assuming a 26-day month).

3. Taylor has obtained construction estimates. To increase the capacity of her bar to 80 seats and din- ing room to 120 seats and kitchen to 25 meals at the same time would cost $250,000 which she could finance for $5,000 per month for the next four years. There would be no change to the parking lot. Given your analysis above, prepare a brief recommendation to Taylor regarding expanding the restaurant.