Case Study Coyote Loco Essay
1. Introduction There are many restaurants tries to increase their revenue nowadays. Restaurants struggled to find the appropriate way to reduce their cost and increase their profit. The restaurant business can be considered similar with the hotel or airline industry, therefore the use of revenue management can be implemented also in the restaurant business. In fact, many restaurants have used various types of revenue management practices, in order to achieve higher profit.
However, the application of those strategies seems to be too tactical.Therefore, it is suggested for restaurants to reconsider the use of a broad theory from revenue management which might help the restaurant operators to gain more profit and to successfully implement restaurant revenue management. Furthermore, before we go into deep in the process of restaurant revenue management it is wise to understand what is the meaning of revenue management it self. According to Kimes et al. (1998, pp. 33) Revenue Management is the “application of information systems and pricing strategies to allocate the right capacity to the right customer at the right time and place.
This system can help the restaurant to determine the right price for the right time and the right customer. However, the application of revenue management system can only be applicable for the restaurant that has the characteristic of relatively fixed capacity, predictable demand, perishable inventory, appropriate cost and pricing structure and also demand that is variable and uncertainty (Kimes et al. , 1998). This paper will discuss and critically analyze the use of restaurant revenue management system within Coyote Loco Restaurant which is located in Ithaca.The purpose of this paper is to develop a set of framework to help Coyote Loco Restaurant to increase their revenue as well as to reduce the turn away guest. Before we go into deep analyses it is wise to examine several characteristics that Coyote Loco restaurant has and need to be improved.
1. 1 Relatively Fixed Capacity Restaurant capacity can be measured in terms of the capability of the kitchen, seating, type of menus and the capability of the restaurant server. According to Kimes et al. (1998), there are options available to extend capacity by adding seats to tables a number of times during that meal period.Kitchen capacity might be effectively increased by changing menu items or production system or even by increasing staffing levels.
Coyote Loco is located on the portal of Ithaca, approximately one mile from the Cornell University campus, their targeting on local residents and also students from Cornell University. In order to get a higher RevPASH Coyote Loco restaurant need to add more seats or create a system which might boost the turnover rate of the table. According to the Coyote Loco case study the capacity of this restaurant is fixed.The restaurant is divided into two closely separate places (bar and restaurant) which have 68 fixed seats in the restaurant area, which consist of two tables for six person, fourteen tables for four person and eleven tables for two people. In addition, there are nine bar stools in the bar area which was used to all intents and purposes such as waiting area for guest who has not get their seats yet or even for dinning place during the busy hour.
However, the number of seating can be varied depending on the mixture of party sizes.In addition, Coyote Loco can also increase their capacity by adding tables in the outdoor dinning area. In fact, coyote Loco is very famous in their open air patio seats during summer season, this area can help the restaurant to increase their seats capacity into sixty six more customer. Therefore, is it recommended to maximizing the use of each area within the restaurant for example the restaurant can use the outdoor area of the restaurant for all season, by adding removable glass window and additional heater for winter season.By doing that it can be assured that the restaurant can exceed the demand of the customer during the busy hour as well as to maximize the table management of the restaurant for example: since 60 percent of the customer came in parties of only one or two, instead of only 11 tables for two the restaurant can provide more tables for two. However, once again it is depending on the mix of party sizes.
Adjusting kitchen capacity is generally more expensive than adding tables, although kitchen output can often be increased by changing the menu or by dding more employees so that the food delivery system become faster and also more food can be prepared (Kimes et al, 1998) in order to exceed the demand. However, since the expense of adding kitchen equipment can be considered very high, therefore the kitchen capacity can be considered to be relatively fixed. Although service capacity can be increase by adding staff or by reducing meal duration, the limitations of the kitchen and dining room may make that change fruitless. Thus, although restaurant operators can tweak their capacity, it is essentially fixed. . 2 Demand inventory Overall demand is composed of the following two customer types: guests who make a reservation and walk-in guests.
However restaurant food service must consider the demand from resident versus non-resident guests-both forms of demand can be managed, but different strategies are required. In order to manage and forecast the demand and select the most profitable mix of customer, a restaurant should maintain an information system to compile information on tracking customer arrival and duration of stay patterns (Kimes et al. , 1998).Furthermore, Ingold et al. (2002, p. 274) argued that, “the demand from each market segment can be predicted based on analysis of the historical data of the restaurant.
” Coyote Loco target markets are consists of surrounding resident and the student of Cornell University. In fact, Coyote Loco restaurant has several loyal customers who dine almost three times a week. Therefore, it is recommended for this restaurant to analyze specifically the pattern of customer arrival so that this restaurant can exceed the demand of the customers. According to Kimes et al.
1998), reservation can be one of the effective ways to help the restaurant managed their demand, however reservation might also cause problems when customer do not honor their reservation or show up late. Therefore, in this case it is recommended for coyote loco restaurant to accept reservation only for large parties (six or more people) during high demand times and in the other hand reservation will not be restricted during other times (low demand times). In addition, Coyote Loco restaurant can also kindly ask the customer to guarantee the reservation with a credit card. However, due to the security issues many ustomers feel uncomfortable to give their credit card number. Therefore, the other suggestion for Coyote Loco Restaurant is to inform the customer that the table would be held for only 20 minutes after the designed reservation time more information about reservation policies will be discussed in the reservation policies within this paper.
1. 3 Perishable Inventory A restaurant inventory should be measured in terms of time, for example the time during which a seat at a table is available. Kimes et al. (1998) recommend that restaurant operators should measure revenue per available seat hour (RevPASH).
This method might help the restaurant to captures the time factor involved in restaurant seating. One might think of a restaurant inventory as its supply of raw food, however most of that is not perishable until it is removed from the freezer or sitting on the receiving dock. Instead, restaurant inventory should be thought of as time or, in this case the time during which a seat or table is available. According to the case study of coyote loco restaurant, customers of coyote loco restaurant always confused when the host is not available and after several minutes the customer may even decide to leave the restaurant.
The waiting space at coyote loco is sometimes inadequate, and approximately 20 customers walk out per night on busy evenings. In addition, the waiting time estimates communicated to the guest by the host is often inaccurate. This situation may lead to frustration and also the customer may prefer to eat in other restaurant instead of waiting to be seated. Therefore, Kimes et al. (1998) suggests that restaurants need to hire a dedicated operator, for example during high-demand times, a restaurant needs to have a dedicated operator in order to solve the problem of loosing customer because of insufficient seats capacity.
In this case it is highly recommended for coyote loco restaurant to hire a dedicated host, an additional person must need to be hired to handle ancillary duties such as filling take out orders, answering the phone and seating the guest. If some one is not readily visible to arriving customers on busy nights, they may be confused, and if waiting space is not readily available, the customer may leave. This situation may affect the perishable inventory of the restaurant. A dedicated host is necessary to greet arriving guests, put them on the waiting list if necessary, and quote an accurate waiting time.
This host will also responsible for the flow of the tables and must track when the tables become available. The host must also notify the place which parties should be seated and where to find the party. During low time or valley hour the host can perform other duties, but still need to be aware of arriving customers so that the customers can be promptly seated. 1. 4 Appropriate cost and pricing structure According to Ingold et al.
(2002), restaurant have relatively high fixed costs and low variable costs, which allows some pricing flexibility and gives operators the option of reducing prices during low demand times.Therefore, it is suggested for Coyote Loco restaurant to adapt their pricing strategy according to the situation. For example during the peak time coyote loco should consider to reduce the size of its menu in order to reduce customer ordering times and speed preparation time. In the other side during off-peak time coyote loco restaurant should consider offering special promotional meals in an attempt to build demand. Data in the case study shows that, the demand was low for all lunch periods from Mondays and Wednesday from 5:00 to 6:00 pm and 8:00 to 10:00 pm and on Thursday and Saturdays after 9:00 pm.
In the other side, demand was high on Thursdays and Sundays from 6:00 to 7:00 pm and on Friday and Saturday from 6:00 to 9:00 pm. After identifying the high and the low hours of the restaurant, it can be argued that coyote loco restaurant need to decide the most appropriate pricing method in order to boost the revenue and to reduce the unused cost. Furthermore, it is also recommended that, along with streamlined menu coyote loco restaurant should also consider to increase the menu item prices during peak hours. A special weekend menu should also be prepared in which the streamlined menu is offered at slightly higher prices.
Conversely, during weekday where there are fewer customers, prices should be discounted in order to increase the business. However, there are some customers who are willing to pay a high price in order to get special meals. Therefore, it is also recommended for coyote loco restaurant to create a special promotion or special meals that carry premium prices during weekdays, this activity is to attract the customer who are willing to pay higher price during the weekday or valley time. Since coyote loco offers two-for one discount, happy hour specials and frequent dining programs.Use of discount coupons should be allowed only during valley time or low hours. Happy hours should be offered only during valley hours or low hours.
In addition it is also suggested that Friday night happy hour should either be eliminated or stopped earlier than 06:00 PM, and for frequent-dining program, this program should be offered to encourage dining during off-peak times. For example, if customers dine during a off-peak time they could receive extra credit, conversely if the customer dine during peak time they should receive credit only for one meal that they ordered. Free meals should be used only during the off-peak time. .
5 Time-variable demand Customer demand varies by time of year, week and day. Restaurant operators must be able to forecast time related demand so that they can make effective pricing and table allocation decisions to manage demand, particularly during times of high demand. Estimation of the length of time a party stays once seated is very useful (Kimes et al. , 1998). In addition, Ingold (2002) stated that restaurant operators who can predict accurately the meal duration will make a better reservation decisions and also give better estimation of waiting times for walk-in customers.Once again, data in the case study shows that, the demand was low for all lunch periods from Mondays and Wednesday from 5:00 to 6:00 pm and 8:00 to 10:00 pm and on Thursday and Saturdays after 9:00 pm.
In the other side, demand was high on Thursdays and Sundays from 6:00 to 7:00 pm and on Friday and Saturday from 6:00 to 9:00 pm. below you can find the number of guests who come to eat in Coyote Loco restaurant based on a weekly and hourly data Number of guests for each meals duration, by hour for each day within a week. 11. am12pm1pm2pm3pm4pm5pm6pm7pm8pm9pm Monday9301089822231366 Tuesday1038148614243725129Wednesday1542179118263517137 Thursday14431791216274024211 Friday1439201014183775572918 Saturday811141012162668714616 Sunday234530227 In addition, according to the case study, the duration of time from the guest arrival until the guest departure can be considered inadequate, one hour twelve minutes can be considered very long for only one table service. This is all because of, the waiting time that assigned from the host to the customer are sometimes inaccurate, there are often lags between when the table is ready and the host is notified, and also between when the host is notified and when the party is found.In addition, occasionally the servers forget or did not realize that there are new customers that need to be served.
Moreover, the slowness of servers in this restaurant might affect the time variable of each service, since this restaurant need a very high table turnover during peak time it is recommended that the server together with the host need to be as efficient as possible. Therefore, it is recommended for Coyote Loco restaurant to improve the training program. This means that, the front-of-the-house employees need a formal training program concerning about service procedures and restaurant revenue management strategies.In order to be able to predict the time duration for each meal coyote loco manager should develop a standard operating procedure which will set a limited time for each section of the service sequent. First, all parties should be greet and seated within period of one minute. Second, all appetizers should be delivered within five minutes of ordering.
Third, all entree should be delivered within twelve minutes of ordering or five to seven minutes after the appetizer has been cleared. Fourth, entree should not be delivered until the appetizer has been cleared.Fifth, if possible, all the servers should remove any unnecessary dishes from the tables. Servers should always be carrying something when they walk back to the kitchen. Sixth, server should bring the check to customers within the period of two minutes from the request.
After the dessert has been ordered (or refused) the server could prepare the check for immediate delivery to the customers upon request, however if the customer still want to order another items the server can always add the item in to the system and than the check should be reprinted again, the payment process should be accomplish not more than five minutes.Seventh, all dirty tables should be bussed continuously during service (especially at the end of the meal) so that when the customer leaves the table there will be less to clean and the items to remove. All tables should be cleaned within the duration of one minute after the departure of the guests. Those set of standard operation procedure might help the restaurant to be more efficient in serving the guest. However, there are several undeniable factors that might also affect the time duration of a service sequent for example; some guest prefer to linger and have a chat after they finish their dinner, this situation is inevitable.
The server can not force the guests to leave; however, the server can ask gently whether the customer would like to order anything else. Furthermore, suggestive selling can also be used, however this activity can only be used during the off peak time, whereas during the peak time it is highly suggested that the server concern more about serving as much table as they can rather than stay in one table to do suggestive selling. 1. 6 Segmentable customer Coyote Loco is less than a mile from an area known as “College town”, the students and the local residents are the main target market of this restaurant.
Coyote Loco quickly proved its success and attracted a good mix of local people and students and a large group of loyal customers who dined at the restaurant at least once a week. In the other words, Coyote Loco can segment the customers into two groups: local residents and students or in other words, those who are price sensitive and those who are not. The local residents are those who are comparatively not so price sensitive and are often willing to pay a premium for a desirable table at a desirable time.Conversely, the students might be considered as a market who are price sensitive, who rather change their dining time in exchange for a lower price. The owner should differentiate the two segments and try to exceed their needs. Special promotion or special meals that carry premium prices such as business meal with a full menu can be introduced to attract those less price sensitive groups to boost RevPASH while student set menu with discounted price could be launched as well to enlarge the price sensitive target market share.
However, it is highly recommended that the discount coupon for student can only be used for specific time such as during the off-peak time where there are fewer customers and at the same time the server could try to do a reasonable suggestive selling towards the students. 2. Managing Demand The use of revenue management as one of restaurant revenue generating tools appears to be very useful. Many restaurants try to increase their profit by giving the right price for the right guest and the right time.
According to Kimes et al. 1998, pp34) “A successful revenue management strategy is predicated on effective control of customer demand”. Therefore, the use of two strategies such as duration management and demand based pricing can be very useful to manage demand and restaurant revenue. 2.
1 Duration Management Duration management is crucial when it comes to restaurant revenue management. The simple reason is that if proper duration management is applied then the maximum amount of revenue can be achieved, if not applied properly then the business will lose this chance and potentially suffer.Now one may ask “What is duration management? ” To simply explain it; duration management is the time from when the customer walks in the restaurant until the time they leave (Restaurant Revenue Management, 2007). However, everything that happens in between the guest arrival to departure also has a huge affect on the duration. For example the amount of time that is used to greet the guests, amount of time used until the guests have been seated, the time from when the beverages are being ordered and delivered.These are just a few examples that would affect the duration, however there is no specific time for each process and therefore making it almost impossible to set a definite dining period for each guest.
Furthermore when we take a close look at the duration management at Coyote Loco their average guest time is about 1 hour with a standard deviation time of about 30 minutes. As we can see the deviation time of 30 minutes is quite long, so in the author’s opinion this time can be reduced to at least 10 minutes. In addition it took an additional 21 minutes from when the server would first approach the table till the appetizers were served.Entrees took a little over 18 minutes to deliver and the payment process to around 12 minutes. Therefore the by implementing proper training and making simple changes such as having the servers approach the tables in less time would greatly reduce the RevPASH and Coyote Loco may even have a chance to turn the table over and seat another table of guests’. 2.
2 Redefining Duration Redefining duration would be to reduce the time in each and every process to ensure that the amount of time spent on the meal to shorten and in return the restaurant owners would be able to turnover the table.The method of doing this would be implementing a standard time for each process. First of all proper training would be essential to the success of this method. By doing so the servers would roughly know how long each process would take, so for example the owners of Coyote Loco should tell their staff that they should approach the guest’s table as they are being seated and ask the guests if they would like to start of with some beverages such as aperitifs or water also within 10 minutes after the menu has been handed out.
This is to shorten the pre-process stage, which would allow the servers to take down order faster and if the guests couldn’t make up their mind as to what to eat then it would also serve as a good chance for the servers to do some suggestive selling and therefore speeding up the order taking process. Another training that should be placed is proper product knowledge because by having the staff with full product knowledge then they would know roughly how long each dish would take to make and serve.Therefore when the servers are inputting the order taking in micros they let the kitchen staffs know that they should start preparing to cook that certain dish. Having done so it would also shorten the time form course to course, however the servers should also let the guests having explicit control over their meal time by asking simple questions such as “Would you like to have your next course served straight away? Or would you like to wait for a little while for your main course to be served? Furthermore the servers should learn to be more attentive so that they are able to make to right judgment as to when the guests are finished and would like to have their bill or if the know for sure that the guests would not like anything else such as dessert or hot beverages then they can have their bills printed out in advance. In addition the bussing process can also be done more quickly by having one server clear the table while the other brings in a new table cloth if necessary, however if it is during peak hours or days then only one server should be doing this.Therefore, by having to implement all these simple steps Coyote Loco would be able to operate more efficiently and to greatly reduce the RevPASH.
3. Uncertainty of Arrival At Coyote Loco the arrival pattern is fairly unstable and even though when guests has made a reservation, sometimes they would arrive late or not even show up and also there are less than 10% of the customers would make a reservation. If Coyote Loco would introduce and implement a reservation policy then it would have a huge effect on the unstable arrival pattern.When we have a proper reservation system then the host or hostess would play a crucial role because they would be the ones that are taking in the reservation calls. By taking on reservations the guest flow can be managed for effectively so there wouldn’t be a huge flow of guests arriving at the same time which could potentially cause chaos to the staffs. Also it would reduce the amount of no-shows, they can then hand the table over to another set of customers that are next in line.
Furthermore if the guests has reserved a table and arrival late or not show up at all then there should be a clear policy that the guests should pay a deposit before hand and that if they are 20 minutes late then their reservation would automatically be cancelled. In addition Coyote Loco should only hold the table for a maximum of 20 minutes and not walk the guests because there could be a high possibility that the walk-ins are the ones that would spend more 4. Reservation PoliciesReservation can be considered important when it comes to revenue management, this simply because the restaurant owners would know approximately if the demand is high or low so that they can adjust the number of staff according and therefore being able to cut down on labor costs and increase efficiency. 4. 1 No-Shows According to the statistics at Coyote Loco the number of no-shows seems to be quite high and there are a few methods to reduce this amount of number.
First of all as most restaurants would to is to call the guests the day before to reconfirm their reservation and to over book the restaurant and this is done to fill in for those who don’t show up. Additionally the owners of Coyote Loco can also apply a deposit fee from the guests credit card as they make a reservation because by doing so even if the guests don’t show up Coyote Loco would end up earning a little bit more from the no show and this policy would also enable them to save time by having to call the customers for reconfirmation. . 2 Late-Shows Looking at Coyote Loco there also seems to be a tendency for late shows, which is also quite costly because the restaurant would then have to hold up the table reserved but not occupied by any guests.
However the owners would still hold the table even though the guests would show up late and so it wouldn’t be unusual to have reserved tables empty although there are still other guests queuing up outside.When this is done quite often the guests waiting outside would naturally get frustrated and walk away and this wouldn’t be a good sign for Coyote Loco because then they would create a negative image for those walking away and also the “word of mouth” is extremely powerful. Therefore Coyote Loco would have a high possibility to lose potential customers.Therefore, in order to fully eliminate this problem then the host or hostess can let the customers know when they are calling to make a reservation is that if they show up 20 minutes late or more at the time they reserved the table then their table would then be given to the guests that are waiting. 4. 3 Short-Shows Short-shows are guests that either show up with less people that they had originally booked the table for, for example if someone booked a table for 10 and only 6 people showed up or if a guests leaves before the anticipated meal duration for example the guest would leave after they have finished their appetizer.
When this happens then the average guest check would decrease and also the duration time would be unstable because a table with more guests tend to have a longer meal duration, spends more and servers can easily use some suggestive selling. In order to solve this problem then the owner’s at Coyote Loco can set a policy that the guest would have to pay a minimum charge. Therefore each guest would have to pay the minimum charge no matter what dishes they order, by doing so the restaurant would have more potential to sell more hot dishes and increase the average guest check.In addition for larger parties the restaurant can also have a minimum charge for them. For example the minimum charge for a 10 person table would be $200 USD, by doing so the author’s of this paper believes that the Coyote Loco can have a more stabilized average guest check and it would be easier to forecast the monthly income.
5. Alternative Reservation Policies There are some alternative reservation policies which can help the restaurant to maximize revenue by increasing the RevPASH. In Coyote Loco, they do not have any reservation policy, and they will accept all the bookings.One idea for the restaurant to maximize revenue is to ensure the size of table matches the actual size of the party. For example, if a guest has made a reservation for two, the manager would reserve a 2-top for the guest instead of a 4-top.
This policy will help to improve the seating management and increase the revenue. The VIP system can also increase the RevPASH of the restaurant. When handling reservation, choosing the most valuable customers instead of normal guests, the restaurant can make sure more profit would be made.This action can increase customers’ loyalties to the restaurant, and they will come to the restaurant more frequently. Reservation on peak periods only can also improve the efficiency of the restaurant.
During non-peak periods, the restaurant would not be full. It is suggested that staffs do not have to spend too much time on guests’ reservation call. However, they still need to pick up their calls, but they only need to tell the guests that the restaurant would not be full and the reservation is not required.This action can reduce extra work for the staffs, so that they can use the time to focus on other tasks. A call-ahead seating can also be one of the alternative reservation policies. During peak period, there will be a staff at the entrance of the restaurant.
The job of the staff is to control the waiting list by assigning queue cards to the customers who are waiting for a table. This policy can only be used when there are no available seats for customers. The earlier the customers arrive, the earlier they can get the seat. For example, the earliest guests on the waiting list would receive a queue card no. , which means that they are the first one who will get the table on the waiting list.
The restaurant manager or the host has to make sure that guests are aware of this policy, and must inform them that when the time of their table is available but they do not show up, the table will not be available anymore and the guests queuing afterwards would take the place. 6. Without Reservation 6. 1 Improved forecasting There are a lot of special days and events each year, such as birthday, Easter and Christmas, and it is expected that the restaurant would be busy during these days.In order to generate more business during this high demand days, the restaurant should have a policy to improve the forecasting by referring to historical data.
A well organized and complete information system, such as Micros Point of Sales system should be installed in the restaurant so that better forecasting can be done. Such action can help the restaurant to perform better forecasting by looking at the historical data so that better tactics and strategies can be made. It can prevent turn away of guests, as well as to increase their satisfaction to the restaurant. 6.
2Improved arrival managementIn Coyote Loco, over 60% of customers came in parties of only one or two, and less than 5% of customers came in parties of 6 or more. This shows that 2-tops are much more frequently used than 6-tops. In some restaurant, policy of first come, first serve will be applied. However, in order to increase the RevPASH, policy of arrival management must be made. For example, if there is a party for 2 wanted to have a seat, but all the 2-tops and 4-tops are occupied and there are only 6-tops left, the policy of first come, first serve should not be applied even this action will dissatisfy the guests.
Guests should wait for 2-tops instead of getting 6-tops. In this case, the manager should explain the policy to the guests, and introduce the call-ahead seating method to them so that they do not need to wait for a long time. Exhibit. 1 proposed new floor plan for Coyote Loco restaurant with 2-tops and 4-tops. 7. Optimal Table Mix In Coyote Loco, there were 68 seats in the restaurant area.
There were two tables for 6 and fourteen tables for 4. As over 60% of customers came in parties of only one to two, the table mix of the restaurant did not really match the mix of party size.There should be more 2-tops in the restaurant area instead of fourteen 4-tops. In addition the 6-top tables should be fully removed and instead replaced by one 4-otp and one 2-top. It is a good idea to have 2-tops in the restaurant area as they are all combinable according to the party size. As the size of 2-tops is smaller than 4-tops, there will be more available seats for parties of 2.
If there are not enough 4-tops for parties of four, the staffs can use combination method to combine two 2-tops together. Therefore, the chance for the restaurant to become full-house will be lower.According to historical data or Point of Sales System, the host will know more about the optimal number of 2-tops and 4-tops tables. Another idea to prevent turn away or walk out of guests is to exchange the position of the host stand and the 6-tops next to the entrance. Based on the data, some guests will leave after waiting for a while or even simply observe from the door that the restaurant was full and did not enter. This move can make the guest to stay at the host stand for a while in which they can take a look at the menu or brochures which are available on the host stand.
The servers would then notice the waiting guests, and would take actions to serve them in order to prevent turn away of them. By placing some side tables with cutleries and napkins along the walls of the restaurant, less time would be required for table turnover after departure of guests. It can also reduce the course timing, since the guests do not need to wait too much if they need any assistance during their meal. 8. Uncertainty of duration 8. 1 Menu design The menu of Coyote Loco consist of too many unnecessary items, thus with eleven appetizers, almost forty entrees and six desserts.
This will delay the preparation time and increase the inventory cost. Furthermore, this can be solved by reducing the variety of the items, particularly the item which will not contribute to boost RevPASH. We used the Miller matrix based on the food cost percentage as the profitability measure and contrast with volume of the sales. Additionally, after the food cost and sales volume is calculated, the item with low profit margins will be removed immediately from the menu. Miller classifies the items on his menu into three categories, the winners, the marginal and the losers.The ‘winner’ reveals items with relatively low food costs and high sales volume.
On the hand, the ‘losers’ would be the opposite. ‘Marginal’ consists of two possible outcomes; it would either high in food cost and low in sales volume or low food cost and high sales volume. Moreover, the streamlined menu should focus on high contribution margin items. Karsavana and Smith (1982) use a weighted measure system.
This system could determine the same volume as well as the popularity. For instance, if an item on the menu is considered ‘less popular’, its selection rate will be less than 70% of the average popularity. Stars’ are high volume and high contribution margin, ‘Plow horses’ are high volume and low contribution margin, ‘Puzzles’ are low volume and high contribution margin or ‘Dogs’ are low volume and low contribution. According to the Miller’s and Kasavana and Smith’s matrix, Coyote Loco menu should be take away those ‘Losers’ or the Dogs and then adjust those ‘Marginal’ into ‘Winners’ or the Stars. However, there should not be any items which shouldn’t take a long preparation time and could diminish the revenue.The restaurant should prepare the supplies for ‘Winners’ items in advance to cut down the cycle time and take out a few ‘Marginal’ items to become the daily special.
Moreover, this can boost up the sales volume which was promoted in this category items. 8. 2 Improved service processes The keys of professional service are the standard operating procedures by using the employees who work with the way to improve and maintain an efficient service processes. The best way to solve this issue is by evaluating the mistake of the operating procedures and identifies the root cause of the problem from any specific area.There are three process of dinning experience; consisted of pre- process, in-process and post process. At the pre- process stage, the guests will get to know the host at one point.
Furthermore, the hosts will be responsible for greeting guests, handling take-our orders, answering the phone and help with any essential and basic services. This is an important state to assign the task at precise concerning each individual’s job specification and job description. During in-process, the servers, food runners and bussers play an important role but still poorly distributed.Additionally, the servers will be responsible for taking orders and offering service, the food runners are responsible for delivering food and the bussers are responsible for clearing the table and setting up.
After the menu is customized and some item was cut down, this will make it easier for the server to remember the entire list of the menu and be able to recommend better selection. In order to avoid serving to the wrong table, it is essential to review the order and the table location perfectly.Additionally, if the guests are waiting for the next courses or they are ready leave the restaurant, it is essential to continuously inform the food runners and the kitchen to always be ready and be fully prepared for the next order. This will speed up the payment process, thus enhance customer satisfaction by sustain accurate food description on the same line rapid services and leads to shorten of the meal duration. The process will certainly increase RevPASH, effecting the service system as well as the restaurant’s image in a positively way.
. 3 Staffing The restaurant should review the historical data and put more effort on forecasting the number of customer arrivals in order to match with the # of staff. This will reduce the payroll cost but still should always concerned about the number assigning the right # of staff turn-over and soon be fully in control of the entire meal duration. The percentage of permanent employees will be reduced and recruit more part timer to reduce any payroll cost. Additionally, the total of the labor expenses can be reduced to around 25-30%.
Also as those two managers’ salaries are too high, so the owner can consider replacing one of them by a supervisor to pay off any high staff turnover and labor cost. 8. 4 Communication We should always build relationship of the employees by enhancing communication continuously. Thus, the better communication can enhance the level of serving quality, together with the effectiveness and the efficient level of service. Additionally, effective communication is the key to revenue management, therefore will strongly affects RevPASH.If the restaurant can management their RevPASH effective, therefore can reduce the guest waiting time and increase their profitability.
The faster kitchen notify for the food order the shorten time preparation will be, when the food ready then the food runners delivery the food to the table so, if the food come fast guests will finish rapidly. After that before guests finished the meal, the service staff should notify bussers the faster they clean up and set table up consequently , more revenue the restaurant will make. 9. Setting the price The pricing strategy can be one of factors that might affect customer decision in choosing foods.The established prices will actually determine the amount of business that a restaurant will draw and influence the type of clientele attracted to the establishment.
Miller and Pavesic (1996) argue that, pricing decisions are very critical because price can really affect the customer decision process. Moreover, based on our observation in the case of Coyote Loco restaurant we believed that the pricing method for this restaurant can be broaden into two categories, namely; Demand based pricing and Competitive pricing. In the next section we will try to develop those two strategies into Coyote Loco restaurant. . 1 Demand-based pricing One streamlined menu with increased prices during high demand as well as a special streamlined weekend menu with higher prices has to be used.
In lower demand the prices should be discounted and to prevent cannibalization (customers who want to pay higher prices) special meals or special promotions with premium prices should be developed. In order to deal with the perceived fairness of demand based pricing, call ahead system is useful for regular customers who are always coming, thus by reserving the table we guarantee both customer satisfaction as well as revenue.According to the data, the slow period of the restaurant are lunch times, and weekday night. Moreover, the business lunch is slow. Due to this phenomenon, we suggest that the promotion of “business lunch set” or “menu of the day” is essential to improve the sales during slow period. In addition, we can use tea-time buffet within a small corner to attract more customers during the period of 1430Hrs to 1800Hrs.
We quite sure that the buffet style may rescue that slow period as people also think that buffet is cheap since they can eat as much as they can.But during that time the guests should not eat as much as during lunch and dinner time. Additionally for maximizing profit, we decide to have some promotions for the customers. Firstly, according to the information, we found out that the sales in the evenings of weekdays are very low. So we decided to keep happy hour in our bar section that customers can enjoy buy 1 get 1 free for any kinds of alcohol beverage. Secondly, we want to attract more group reservations since the restaurant did not have much parties of six.
So we will have promotion discount for large groups’ reservation for parties of 6 during the low business days.If their bill is over $300, they ca get 10% discount and we will give them coupons with 5% discount(see Appendix B) which only can use in weekdays for next time. Couponing can be considered a methodology that operators use to try to stimulate sales and increase public awareness. (Miller, 1996, p. 77) Then we will put advertisement on leaflet and distribute it around the school and companies. They can get a coupon for 5% discount with our leaflet, and our restaurant can arrange private party for guest, like birthday party or farewell party for customer.
9. Competitive pricing We suggest they should take a look at the competitors’ prices so as not to increase the prices too much, resulting in a large turndown. They could increase the prices and see which one more effect on customers and play a little with the streamlined menu to see which item sell more. The price should be similar to the price of the competitor in the same level, but the service has to be more professional than other competitors as higher class restaurant. There has to be a better atmosphere as well that to justify the increased prices.Below is several example of Mexican theme restaurant, within the area of Ithaca, including Coyote Loco restaurant and the competitors 1.
The Rose-$$, 2255 N Triphammer Rd Ithaca, NY, (607) 257-5542 2. Taco Bell-$$$, 222 Elmira Rd Ithaca, NY, (607) 275-0193 3. Viva Taqueria-$, 101 N Aurora St Ithaca, NY, (607) 277-1752 4. Chili’s Grill & Bar-$$, 614 S Meadow St Ithaca, NY, (607) 272-5004 5. Garcias-$$, 879 State Route 13 Cortland, NY, (607) 753-1151 6.
Taco Bell-$$$, 9 River St Cortland, NY, (607) 758-3228 7. Kope’s Garage-$$, 110 N Aurora St Ithaca, NY, (607) 273-9108 8.Coyote Loco–$$, 1876 Judd Falls Rd Ithaca, NY 14850, (607) 277-2806 The dollars symbols above representing the average meal price for each restaurant, the explanation of those symbols are as follows: $ = under $10 $$= $10-20 $$$= $20-30 $$$$= $30-40 $$$$$ = $40 + (Source website: http://ithaca. citysearch. com/find/section/ithaca/restaurants. html) 10.
Conclusion In conclusion, in order to be able to develop a revenue management program within a restaurant, managers should first establish the baseline by collecting detailed information on arrival patterns, meal times and RevPASH patterns.Second, managers should also try to understand the drivers which mean that in order to identify the root causes of the issues, managers should conduct an analysis within the operational process. This analysis can help the managers to make the right decisions to overcome the problems. Third, after identifying the root causes of the problems, managers can try to develop a revenue management strategy to increase the restaurant RevPASH, these strategies should be developed based on the way that would be appealing to the restaurant.Last but not least, managers can try to implement and of course monitor those strategies, to make sure that all the strategies have been implemented correctly.
The process of developing Restaurant Revenue Management program can be drawn as follows: Furthermore, as already mentioned before, that by establishing the baseline of revenue performance and then understanding the causes of that performance. Restaurant managers can develop a revenue management strategy which can help them to increase the RevPASH of the restaurant.However, those strategies will not stop until the development of revenue management strategy. Those designed strategies need to be implemented and controlled in away that is suitable to the restaurant situation. By using Revenue Management program restaurant managers can make the right decision for the right time and task to increase the revenue at both peak and valley hours .
For example, during valley hour managers will want to focus on increasing the average revenue and during peak hour managers should concentrate on raising the table turnover and serve as many customers as they can.In the case of Coyote Loco Restaurant our group believed that the use of pricing method which based on demand and competitors, adaptable table setting, reservation policies, employee training and several others suggestion on how to manage the cost and the time variable demand on how to chose the right customer on the right time and place are essentials in developing the successful of Restaurant Revenue Management. Kimes et al. (1999, 29) once argued that, “ The restaurant required one set of strategies for slow times and an entirely different set for busy times. References List •Antun, J.
M. , and Gustafson, C. M. (2005) Menu analysis design, merchandising, and pricing strategies used by successful restaurants and private clubs.
Journal of nutrition in recipe & menu development. Vol. 3, No. 3/4, pp. 81-102.
Available online from: http://www. haworthpress. com/store/ArticleAbstract. asp? sid=X0NWSJ4JS28M8LG17XD0GJMPA43U0HK2&ID=59614 (Last accessed 18 march 2008). •Ingold, A. , Beattie, U.
M. , and Yeoman, I. (2002) Yield Management-Strategies for the service industries. nd Ed. London: Biddles Ltd.
ISBN: 0-8264-4825-9. •Ithaca City search. (2008), Ithaca Restaurant-Restaurant. Available online from http://ithaca. citysearch. com/find/section/ithaca/restaurants.
html (Last accessed 18 march 2008). •Kimes, S. E. , Chase,R. B.
, Choi, S. , Lee, P. Y. , and Ngonzi, E. N. (1998) Restaurant Revenue Management-Aplying Yield Management to The Restaurant industry.
The Cornell Hotel and Restaurant Administration Quarterly. Vol. 39, No. 3, pp. 32-39.
•Kimes, S. E. (2004).Restaurant Revenue Management.
Cornell Center for Hospitality Research. Vol. 4, No. 2.
Available online from: http://www. hotelschool. cornell. Edu /research/chr/pubs/reports/abstract-13604. html (Last accessed 18 march 2008).
•Kimes, S. E. (2004) Restaurant revenue management: implementation at Chevys Arrowhead. The Cornell Hotel & Restaurant Administration Quarterly. Vol. 45, No.
1, pp. 52-67. •Miller, J. E.
, and Pavesic, D. V. (1996). Menu: Pricing & Strategy.
USA: Van Nostrand Reinhold.