Mongolian Grill Analysis

Executive Summary

Our team has been instructed to help advise on a business case involving a restaurant, The Mongolian Grill. It’s owner, John Butkus, is contemplating renovations, in hopes of adding capacity and increasing revenue. There are several scenarios that are available to him. One option is to add an extra food bar. The second option is to move the location of the cooking area. He can also implement both options, if he so chooses. Our team has done the appropriate financial calculations, as well as qualitative considerations.

Our decision is that Mr. Butkus should choose to implement both options. The additional capacity is definitely needed, and the demand to fill the capacity is also present. We calculated the possible revenue that could be earned under two sections: Low additional demand and High additional Demand. The additional revenue generated in these two scenarios are $42 900 and $31 200, respectively. Also, the in both of these scenarios, the time needed to pay for the cost of the required expansions are less than a year.

We have looked at a number of possibilities, both positive and negative, and we feel that this is the best option. There really is no justification to not go through with the changes. They will result in a greater profit, both in the short and long run. Our analysis is included in the following document.

Problem

The Mongolian Grill is a restaurant with a unique concept. It prides itself on not only delivering good food, but also an original dining experience that leaves customers wanting to come back. The restaurant uses four features to help accomplish this: An entertaining and interactive atmosphere, fresh and healthy food, unlimited quantities, and customer involvement in the meal preparation. The restaurant owner, John Butkus, is looking to finalize the operation decisions for one of his future restaurants, which will be located in Waterloo, Ontario.

First, a brief explanation of how the Mongolian Grill restaurant works: Customers that arrive at the restaurant are seated. A member of the serving staff explains the concept to first-time diners, and takes the table’s drink orders. Customers then proceed to the food preparation area. They select the meat and vegetables that they would like from the food bar, and place them in a bowl. Customers then move to the second bar, which contains sauces, oils, and spices. Customers add the sauces, etc. that they would like, and proceed to the cooking station. Cooks accept the bowl of food from customers and proceed to cook it on a circular iron grill, which is in full view of the customers. Once the food is done being cooked, the cook returns the food to the customer in a clean bowl and the customer returns to their seat.

The Waterloo location, which is not yet completed, will have a capacity of 190. It is close to nearby cities, which have a combined population of roughly 560,000 people. It will operate from 11 am until 11 pm, 7 days a week. Mr. Butkus has decided that the demand will likely exceed the capacity of the restaurant, especially during peak hours (6 pm to 10 pm) on days near the end of the week. He estimates that the Mongolian Grill will have to turn 20 to 30 people away on Thursday nights and 30 to 40 people away on Friday and Saturday nights. He feels that if he can reduce dinner times by fifteen minutes, he will not have to turn these customers away and will ultimately generate additional sales revenue and higher profits.

Decision Statement

There are two options available to Mr. Butkus, both intended to potentially increase capacity and reduce dinner times. The first is to add an additional food preparation area. This would require the installation of a second food bar and a second sauce, oil, and spice bar. An additional staff member would be needed to work an eight-hour shift during Thursday, Friday, and Saturday nights to ensure that the food preparation area is stocked and clean.

The second option is to move the cooking grill from the corner of the restaurant to a more central area. This would increase space around the grill and Mr. Butkus believes that this alteration would save customers a considerable amount of time when waiting to give their food to the cook. This change would require one additional cook during peak hours. The two cooks would then work in 30-minute intervals to cover a single five-hour shift.

As a result, the following alternatives are available to Mr. Butkus:

1. Make no changes to the future restaurant

2. Add second food preparation area

3. Move the cooking grill

4. Implement both alternative II and III

The criterion on which we will base our recommendation will be predominantly quantitative. We are looking to optimize restaurant’s profitability, while also reducing the average dinner time by a minimum of fifteen minutes. There are also some qualitative issues to consider and we will discuss them in the section on implementation.

Data

Through observation, Mr Butkus calculated how long it took customers on average to go through each step of the food preparation process. Using this information, Mr Butkus estimated the amount of time that would be saved if the proposed changes were to be made. We assume these estimations to be accurate, as we will rely on them in our analysis.

In regards to adding a second food preparation area, it is believed that the addition would save approximately 90 seconds per trip for customers waiting in like at the food bar, and 80 seconds per trip for customers waiting in line at the sauce, oil and spice bar. Since there would be fewer people at each station, customers are also expected to save 60 seconds per trip when selecting their food, and 20 seconds per trip when selecting their sauces, oils and spices.

The new positioning of the cooking grill is estimated to save customers 80 seconds per trip waiting for an open space along the counter of the cooking station. It was also noted that the average customer makes three trips to the food preparation area during a meal.

Mr Butkus also provided the forecasted costs associated with each potential alternative. These costs are also assumed to be accurate. The food bar would cost $3,200 and the sauce, oil and spice bar would cost $2,100. Additional counter space along the cooking station has a cost of $600. The required extra