Hansen's Resturant

Executive Summary

Dean Hansen and his wife Kathryn just took over the Hansen’s Hideaway Restaurant located in Jasper Alberta. Hansen’s Hideway has been a family owned business that has been around since 1952. Kathryn who is the main Chef has decided she would like to expand the menu to include a dinner service along with the traditional lunch and breakfast menu they currently operate. She is faced to choose whether she should buy ready to cook pre-portioned cuts of beef or fabricate portions in-house from larger cuts or whole cow carcasses, essentially become the butcher.

Kathryn is the expert when it comes to the restaurant industry, her butcher skills have vastly improved over the last couple years and her education consist of both vast culinary and menu preparation along with restaurant management. Kathryn knows that meat in particular has some of the highest yield in the restaurant industry resulting in some of the highest profit for menu items and overall restaurant revenue. She knows the benefits of the make and buy models of the restaurant food industry but needs to report the fiscal benefits to her other co-owners, who are also her family on Monday.

The data regarding the prices of buying and butchering the cows they plan on serving up for dinner is incomplete but she does have a rough estimate on what each option she has identified will cost and the risk associated with each.

On Monday, Kathyrn will present to her co –owners that purchasing her meat portioned through prepackaged supplier is the model Hansen’s will be following until the dinner service can be realized as a sustainable revenue generator. Once and if a market for dinner can be established then she will look at bringing the fabrication of the meat in-house

Issues Identification

Issue 1: Changing Cliental

Over the years has seen the town of Jasper grow in size and also bring in more wealthy people who have the appetite to eat out more and are willing to pay for good food. Hansen’s must adapt to this by bringing in a more sophisticated menu in order to stay competitive.

Issue 2: Make or Buy the Beef

Meat will become their most profitable item on the menu, Kathryn needs to quantify the money that will give her the greatest profit level, whether that is buying her own butcher equipment, freezer, and everything else that comes along with butchering a cow that is ready to serve or if it is buying the portions pre- cut from a supplier

This presents many challenges, which supplier does she choose, how does she manage the inventory, how does she keep the meat fresh, what is the most cost effective, what do her new customers want, what is the menu going to look like?

The make vs buy decision has to take into account all these issues as well as the financial one.

Operating Environment

The Hansen’s family business is more than just the restaurant, it is a resort consisting of a dozen cabins with a lodge and general store, being family owned there will be some resistance from the elder family members to change too much. Kathryn and her husband Dean have identified that their cliental has changed over the years and to stay competitive they must bring in the ever changing tourist who wants to eat out more instead of bbq’ing and picnicking. The restaurant has fairly simple up until now. These changes will require more than just a different menu; it will require higher skilled staff that knows food pairings, sanitary food preparation and menu preparation in addition to the infrastructure updates that must happen to support a dinner menu.

Root Cause Analysis

For the first time in the business history they will have new owners that have the skill, education and experience to run a highly profitable restaurant. They have determined that there is a market to bring a fairly sophisticated menu that includes a dinner menu to the restaurant (SWOT analysis Appendix 1). As previously mentioned, meat has the highest upside of all items on the menu, that also means it can also have a huge downside due to the expensive price associated with it. In the past the restaurant has struggled with its forecasting resulting in wasted food leading to diminishing profits. With the investment of the taking on the dinner menu and the price of meat, forecasting will be even more business critical. Whether pre-fabricated or not, forecasting will be vital to ensure profitability with her new menu.

Forecasting will vary by what option is selected to go with, either the make or buy. If Kathryn wants to go with buying a whole carcass and butchering from scratch, that will require an upfront payment of roughly $2,550 for a 800 pound carcass compared on the other end of the spectrum of buying the meat ready to cook which would require frequent forecasting and JIT scheduling, payments will be spread across weekly in comparison would be a greater total cost for the meat if pre-fabricated, a whole carcass will be less expensive per edible portion(EP) than each more fabricated option (Appendix 3). As with anything, if you want something pre-fabricated, you will end up paying more than if you were to do it yourself. Kathryn also knows this doesn’t represent the total cost of ownership regarding the meat as the make approach requires a sizable up front asset and ongoing labor costs (Appendix 2). Currently they do not have any assets that can accommodate butchering and storing the meat in-house, not to mention the proper training and sanitary equipment to handle such an endeavor, this will all have to be factored into her final decision.

Lacking the quantitative data to accurately forecast what option has the higher upside Kathryn must use qualitative information to help make her decision. Being a chef she believes in buying the cow as is, and fabricating her meat based on what her menu demand. Fresh and local food is always the better option for customer retention and long run cost. Size allocation on the cuts of meat is something else she must consider; as the skill required cutting exact sizes that match the profitability structure are crucial. For example if she buys a pre- cut piece of meat she can almost guaranteed it is the 8oz if that is the size she ordered, if fabrication of the meat is brought in house, that will never be an exact, structured number.

Alternatives

Pilot buy model to establish market

Hansen’s restaurant is breaking into the dinner market for the