“Well, what do you think so far?” asked Damario, the revenue manager at the Barcena Resort.
Damario was talking with Sam, the resort’s F&B director. They were standing outside the
resort’s pool-side dining area. It was noon and the operation was in full swing, with all tables
and nearly every seat full. There was a short line of diners, mostly families, waiting to be seated.
“Well”, replied Sam, “since we began the special promotion that you recommended, our lunch
time check average is down and the lines to get in seem to be shorter than they used to.
Especially during our peak periods. I’m not sure those are good things.”
Damario and Sam were discussing the roll-out of a newly implemented program designed to
move guests away from ordering the restaurant’s very popular Pizza and Pop Special (one large
pizza and four sodas for $29.99) and toward its newly initiated Dogs and Drinks Special (five hot
dogs and four sodas for $24.99). Prior to the promotion, the five hot dogs and four sodas, if
purchased separately, would have cost a family of four nearly $30.00, so a family purchasing
the hot dog meal received savings of nearly $5.00. Because of the added value, when the new
promotion began, the sale of pizzas had declined and the sale of hot dogs had increased
substantially.
“Tell me again,” said Damario, “how long does it take to cook a pizza?”
“About five minutes to make, about 20 minutes to cook,” replied Sam.
“And the hot dogs?” continued Damario.
“Those are already cooked, so delivering them to a table takes us about five minutes,” said
Sam.
“And do I recall that we priced the hot dog special to yield a contribution margin similar to the
pizza promo?” asked Damario.
“Yes, we did get close on the two specials, but actually the contribution margin on the hot dog
special is about $1.00 less than on the pizza special. That’s why I’m concerned about all these
hot dog sales!” said Sam. “It’s such a popular promotion, maybe when we are really busy like
now, during our rush hour, we should raise the price back up closer to the pizza price. That
might even out our sales of each special and increase our overall check average.”
“Actually Sam,” replied Damario, “that would be the last thing we would want to do. Let me tell
you why.”
Many foodservice professionals (like Sam) equate increased check average with increased
profitability. For the typical foodservice operation, do you feel it makes more sense to grow
profits via the maximization of check average or the optimization of seat utilization? (8 Points)
