Sunset Grill Ivey Operations Club

Mid-term Review

General Overview

• Role – Bruce Mulhuish: Franchise owner - Sunset at Blue

• Needs to get buy-in from partner for decision making

• Key Issues – Long-wait time

– Slow Table Turnover

– Capacity

– Seasonality

• Timing – April 30, 2009 now

– 30 days to make a decision

External Size Up

• Industry/Market

– Seasonality – summer occupancy rate vs winter

• Correlated with Blue Mountain’s success

– Tourist destination – Recessions?

– Geographic issues – inventory management

• Other considerations

– Fresh ingredients vs. inventory management

– Diverse menu items

• Industry KSFs: Service, Quality, Turnover

External Size-Up

• Competitive Analysis

– Barrier To Entry – Franchise License = $45,000

- Other Competitive entrants: McDonalds, Subway?

• Consumer Analysis

– Value – quick service, good quality food, and consistency

– Flexibility in orders

Internal Size-Up

• Business Operations

– Ops cycle – labor intensive

– Type of flow – Batch with Line

• HR

- Right people – Min wage – align with strategy

• Financials

- $750,000 average annual sales

- 5% of revenue – Royalty cost

Internal Size-Up

• KSFs – Location – One shift per day reduced variability – Brand and support from franchisor – Low price means high volume and table turnover is

important – Fresh and healthy cooked to order

• Operationally more difficult (cannot prep as much)

– Strong supplier network can negotiate better prices (higher margins)

– Inventory Management (fewer deliveries)

Internal Size-Up

• Concerns

– Only two Sunset grill franchises in tourist areas- low experience and skill in corp management

Quantitative

Step #1: Lay Out Process Map

Step #2: Layout All Processes (labour)

At this point, we know Dishwashers, cashiers, and hosts are not the bottleneck, so we will leave them alone going forward

Make Some Assumptions

• # chits/order

– We have assumed 3 1/3

– You could have done a weighted average (# seats/# tables)

– Could have assumed 3

– This assumption is not the be all and end all…just make sure to clearly state your assumption

Step #3: Determine Time Per Order

Rough Work Time per order

Servers 7 minutes 7 minutes

Bussers 3 minutes 3 minutes

Cooks 2 minutes/plate 6.66 minutes

Tables 60/74*# tables

More Assumptions

• Servers (7 minutes per order)

– 1 minute taking order

– 1 minute putting order into the computer

– 3 minutes to get drinks and deliver them

– 1 minute to deliver food to the table

– 1 minute to process payment

More Assumptions

• Bussers (3 minutes per order)

– 3 minutes to clear the table after the customers have left

More Assumptions

• Cooks (2 mins per chit/6.66 mins per order)

– There are many ways to do this

– 6 minutes for 2 plates (3 minutes per order)

– 50 chits in 26 minutes (about 2 minutes per chit)

– 5 minutes per order (hidden in the case)

More Assumptions

• Tables

– Throughput time is about 74 minutes right now

– Therefore, you turn less than the number of tables available per hour

• 60/74 percent of tables turned a year

Step #4: Calculate Capacity

• We have chosen to calculate capacity as number of orders that can be processed per hour

• Then we can compare that to the demand schedule to see where the bottlenecks are

Summer (with Patio) Winter

Weekday Weekend Weekday Weekend

Servers 26 51 17 34

Bussers 40 40 20 40

Cooks 27 36 18 36

Tables 30 30 19 19

The calculation for servers, bussers, and cooks is (60/time per order)*(# labourers) i.e. (60/7 minutes)*3 servers = 26 orders during summer weekdays For tables, it is (60/turnover time)*(# tables available) i.e. (60/74)*37 = 30 tables turned over every hour

This will then give us how many orders/tables of 3 1/3 people the different

labourers can handle

Convert to Plates/Hour

Summer (with Patio) Winter

Weekday Weekend Weekday Weekend

Servers 86 171 57 114

Bussers 133 133 67 133

Cooks 90 120 60 120

Tables 100 100 65 65

We can compare these numbers to those on the demand schedule

Results

• Summer Weekends

– The tables are the bottleneck

– Cooks are somewhat a bottleneck; however, this is not as big of a concern.

• Summer Weekdays

– There are no bottlenecks here; however, capacity utilization is very close to 100% for cooks and servers.

Results

• Winter Weekend

– Tables are the bottleneck

• Winter Weekday

– There are no bottlenecks

What must we do?

• Summer Weekend

– Must increase table capacity

• This means increasing turnover rate (decreasing throughput time)

• Could also add tables

– Should add more cooks to deal with capacity issues

• This will decrease throughput time (chits spend less time in the queue)

What must we do?

• Summer Weekdays

– This one is ok for now

– Servers are most likely to become a bottleneck with variability; however, the result will be a short line up outside not a major concern

What must we do?

• Winter Weekend

– Again, tables are the bottleneck, so we must find a way to flip the tables quicker

Creating Criteria For Analysis

• What criteria would you suggest?

– Fix bottlenecks

• Tables

• Cooks

• Servers

– Decrease wait time

• 74 minutes of wait time is long for breakfast

– Increase ability to react to variability

– Rank the criteria by importance

Option 1: Add Runners

• Decrease time spent by servers by 1 minute/order

• Decrease throughput time by about 4 minutes (assume food sits for 1 minute before being taken to a table) – Consistent with analysis that table turns will

increase by 5%-10%

• Only necessary to hire during times when tables and/or servers are the bottlenecks

Option 1: Runners

• Have to do cost/benefit analysis

– $10/hr ($80)

– Can serve 6 more people per hour during peak hours (3 peak hours)

• 18 orders at about $10/order (70% margin) = $126

Summer (with Patio) Winter Weekday Weekend Weekday Weekend

Servers 200 133 Bussers 133 133 Cooks 120 120 Tables 106 69

Option 2: Menu Boards

• Decreases order time (lowers throughput time and increases table turnover) and push higher margin items – $180/month

– Increase revs by 5% • $62,480 average monthly sales @ 70% margin

– ~$2200 per month

• Is it reasonable to assume that Sunset Grill can increase revenues by 5% using this method??? (qualitative assessment)

Option 3: Substitution

• Pros – Improves customer service

• Cons – Slows down the kitchen, which is already a bottleneck

at many times

– Takes 1 additional minute per substitution • Even if 20% of people substitute 1 item, that would increase

a cook’s average time per chit to 2.2 minutes from 2 minutes

– Increases variability in cook time and most likely order time

Option 4: Winter Capacity

• Benches

– Increases table capacity inside by 9 seats, which would reduce the table bottleneck

– Allows better support for larger parties

– Can be done in conjunction with other options

– $1400*5 = 7000 for 5 benches

Option 4: Winter Capacity

• Heaters – Provide warmth for up to 10 seats

– $700 investment cost + $120/month

• 10 seats is 3 orders worth

• 3 hours/weekend day over capacity of 65 plates/hour

• 3 hours*10 plates/hour*8 weekends/month *$10/plate*70% margin – $1680/month

– Definitely worthwhile

Option 5: Reduce Menu Items

• Mostly qualitative assessment

• Pros

– Decrease throughput time by 3 minutes on average (increasing table turnover)

– Sell higher margin items

• Cons

– Reduced offering

– Could lose customers

Other Options/Alternatives

• Come up with some of your own alternatives

– Combo of other 5

– Maintain status quo

– Push alcohol sales

– Implement buzzer system for the line

– Hire more cooks/servers during bottleneck times

Evaluate Options Using Criteria

• Evaluate all the options with respect to the criteria

– Use the quantitative table if you feel comfortable with it

Recommendation

• Explicitly state your recommendation at the beginning

• Provide qualitative and quantitative reasoning for your decision

• Use your size-up to provide backup for the recommendation

Action Plan

• Briefly explain how you are going to roll out your recommendations

– Timing

– Who will be involved

Risks/Contingencies

• Outline the risks of implementing the recommendation

Questions?

ijacobsen.hba2014@ivey.ca

Ngoel.hba2014@ivey.ca