Reference no: EM132820508

Question - Tokyo Lamington originated in Tokyo when two friends (Eddie and Min) from MELBOURNE, Australia were living in Tokyo and trying to come up with a business idea. They developed a café selling exotic Australian lamingtons in Tokyo and later also distributed the special lamingtons in Singapore.

Initially they tested their idea by partnering with Koko Black stores and after selling out in one day, they opened their flagship store in Market City where they pay $1,200 per week in rent. They currently make about 15 different flavours ranging from Black Sesame to Fairy Break Popcorn and Yuzu Meringue.

The average cost for the ingredients for one lamington is $2 except for the Yuzu Meringue which costs $4. The selling price for each lamington is $7 except the Yuzu Meringue which has a $2 surcharge.

Q1) If Eddie and Min are working without a salary, what is the break-even number of lamingtons that need to be sold per day before any other costs are considered?

Besides rent, the store also incurs costs of approximately $1,000 per month. Note: assume 4 weeks per month. If you include the other costs, what is the break-even number of lamingtons that need to be sold per day?

Q2) How is this affected if salary costs of 35 hours at $30/hour are included in the break-even calculation?

Q3) If the actual salaries that Eddie and Min were making before they started Tokyo Lamington were $50,000 and $70,000 per year, respectively, how do you consider these salaries when looking at the viability of Tokyo Lamington?

Q4) Eddie and Min are considering a franchise model to try to expand their business. They believe that if they perfect the products then franchises will be willing to pay them $50,000 up front and 20% of revenue. How would this affect the average profitability per lamington for the franchisee and how many lamingtons would a franchisee need to sell per week if they had to cover rent of $1,000 per week and worker costs of $2,600 per week?