Author Question: Initiating an RRM program will cost 10,000 and would likely increase revenues by 1. Would you adopt ... (Read 58 times)

clippers! · **on:** Aug 10, 2018

Initiating an RRM program will cost 10,000 and would likely increase revenues by 1. Would you adopt RRM if this were your restaurant?

What will be an ideal response?

Question 2

A restaurant's overall average RevPASH is 7.50 . The restaurant has 120 seats and is open 5 nights a week from 5:00pm to 10:00pm. Determine how much revenue the restaurant makes per year.

What will be an ideal response?

amcvicar · **Reply #1 on:** Aug 10, 2018

Answer to Question 1

Calculate the 1 increase in revenues:
1,170,000 .01 = 11,700

The cost of the RRM initiative is less than the expected increase in revenue, so adopting the RRM program makes financial sense. In addition to the fact that expected revenue increases will cover the cost of the program, arguments for an RRM program could include: better understanding of operations, better understanding of customers, the potential to increase revenues above the expected 1, and the expectation that the 1 increase is permanent (will reoccur in subsequent years). The primary argument against adoption of this RRM program is the risk of not recouping the 10,000 if the 1 increase does not materialize, especially since the expected 1 increase just barely covers the cost.

Answer to Question 2

Calculate the number of hours the restaurant is open:
5 nights/week 5 hours/night 52 weeks/year = 1300 hours
Then calculate revenue:
1300 hours 7.50 RevPASH = 1,170,000