The Bunniv’s Conundrum: A Restaurant Part 1 Theodore Colzione is a restaurant supply sales representative. Working in a large metropolitan area, Colzione calls on many of the restaurant owners in the city. He dreams of one day owning his own restaurant. He saved a substantial amount of his earnings during his 15 years in the restaurant-supply business and had recently gone over some financial figures with his banker. He and the banker both agreed that he had enough capital to get serious about investing in his dream. His banker, Ron Sterling, was very optimistic about Colzione's potential for success, even though he had seen many failed attempts in the rest aurant business. Sterling had confidence in Colzione because he thought that because of his restaurant -supply experience, few people knew the restaurant business as well as Colzione did. Colzione's idea was not to try to compete with everyone else. There were too many restaurants that, except for their décor and a few menu items, offered little to the market. He had seen many of the “me-too” restaurants falter after a short time of operation. His plan was to offer something not currently available in the market, even though the city was fairly large. Colzione had traveled extensively during his career. His primary purpose in traveling had been to attend trade shows in the restaurant-supply business. There were usually several of these a year, and Colzione had been diligent about attending these shows as he learned about new products and services his supplier firms were offering for him to sell to his local restaurants. While attending the trade shows, Colzione and some of his friends made a habit of visiting restaurants of all types in the various cities. Colzione was familiar with restaurants in New Orleans, San Francisco, Dallas, Miami, New York, and many of the other major cities in the United States. These cities all had restaurants by the dozens. But there was one type of restaurant these cities had that was missing from his metro area. His city did not have a fine, upscale restaurant featuring the finest entrées, drinks, and desserts in an elegant atmosphere. He had visited with the owners of these types of restaurants in several of the cities in which he traveled. Many had been very willing to talk with him about what they had learned and how they operated. Colzione had planned his restaurant for several years. He took the best ideas from the restaurants he had visited and put them into his plan. His restaurant would be called “The Bunniv’s Conundrum.” The Bunniv’s Conundrum: A Restaurant to Be or Not to Be Part 2 Although Theodore Colzione feels prepared for the business and is encouraged by his banker, Ron Sterling, he has several concerns. He knows that although he has learned quite a bit about restaurant operation in his area and also quite a bit about upscale restaurants from his friends in other cities, he is not sure if there is an interest in his city for such a restaurant. Even though the metro area has a population of nearly 500,000, he has no assurances that there are enough persons with the income and tastes necessary to make his business successful. He needs some additional information that would give him some inkling that a market exists. He does not want to lose the money that he has so diligently saved during the last 15 years. There are also other decisions for which he feels he needs additional information. He is not certain how to promote the restaurant in his town. Sure, the owners of the other restaurants have told him what they did, but they already had well-established reputations in their city. Where will he promote the restaurant when he first opens? Also, there are many choices to m ake about the design of the restaurant, the price the market is willing to pay for an upscale entree, the best location, and so on. Now that his banker is willing to work with him and the financing is in good shape, Theodore Colzione is ready to start making the other decisions needed to open The Bunniv's Conundrum. Theodore Colzione tells Ron Sterling that he is concerned about making the design, location, promotion decisions. Ron tells him his experience with existing restaurant clients will not be of much help because Theodore's restaurant concept is so new to the market. Ron suggests that Theodore call the local office of CMG Research. CMG is a full-service firm that offers custom designed research studies. The research firm has been in business for ove r 30 years and has offices in several cities around the country. Ron gave Theodore a business card from CMG Research, and later in the day, Theodore calls CMG and is referred to Clay Albright, project director. Clay Albright asks Theodore Colzione to generally explain what he is looking for from CMG. After Theodore explains that he is interested in gathering some research to help him make some decisions about opening an upscale restaurant in the area, Clay tells him that he will check to ensure there are no conflicts of interest with other clients and will get back in touch. The next day, Clay calls and asks that Theodore spend one and one-half hours with him. Later that day, Theodore visits the offices of CMG and is greeted by Clay Albright. Clay has arranged a comfortable, quiet meeting place and has asked his staff assistant to please not disturb him during the meeting with Theodore. Clay encourages Theodore to talk freely about his concept and assures him that the company has no other clients interested in such a business and that everything Theodore says will be kept in strict confidence. Theodore explains everything to Clay, including his desire to open the restaurant after having worked in the industry for 15 years. Clay asks probing questions that center around the steps Theodore will have to take to go into business. Even though Theodore assures Clay that the financing is set and that Ron Sterling at First Bank is enthusiastic about the plans, Clay covers all the details of the financial plans as well. Theodore is surprised when almost two hours have passed so quickly and is surprised again when Clay says, "I would like to investigate some of these issues more thoroughly and then we will need another fairly long meeting right away.” Theodore enthusiastically agrees, and another appointment is made. At the second meeting Theodore is impressed with how informed Clay is about the restaurant business. It is apparent that overnight Clay has learned many facts about the business, such as importance of tracking food costs, table turnover rates, and financial ratios and operating expense norms for the restaurant business. He has also ordered a marketing research report that was prepared last year about upscale restaurants in general. Theodore feels assured tha t CMG is a good choice, and the two men continue their discussion about the decisions that would be necessary to open and operate The Bunniv's Conundrum. The second meeting is structured around some issues that Clay says are key to the success or failure of The Bunniv's Conundrum restaurant. Is There Demand for an Upscale Restaurant and at What Price Level? Clay feels that one of the key issues deals with demand. Are there adequate numbers of customers in their metro area to generate profitable revenue? Clay tells Theodore that based on his research, several successful upscale restaurants operate in metro areas as large as theirs. However, Clay is quick to point out that there are big differences in markets in terms of consumer preferences and income levels. Population alone is not a good predictor of success, but at least there is evidence that other metro areas of 500,000 support upscale restaurants. The two individuals spend the rest the appointment discussing operating expenses for the restaurant. Clay tells Theodore he will e-mail him an Excel spreadsheet with a break -even analysis based on their assumptions about operating costs and possible entree prices. The break-even analysis will tell Theodore how many customers he will need to have weekly in order to break even. Different revenues are included for lunch and dinner meals. The next day, Theodore receives the break-even analysis and calls Clay for another meeting. He tells Clay that he is excited because he feels the break-even figure is easily achievable. Clay Albright feels the best way to start off the meeting with Theodore Colzione is to make certain that Theodore has not placed too much faith, at this point, in their break-even analysis. Clay points out to that the purpose of the break-even analysis, at this stage, is to see if they are dealing with a reasonable number of restaurant patrons required to break even. He explains that sometimes CMG has to advise clients, after a rough break-even analysis, that they do not recommend going further with the project even though it means losing their business. "Our philosophy at CMG,” Clay states, “is that you will come back to us when you need research in the future. We want to provide research that leads to success.” He tells Theodore he views this as only a very rough start that basically has informed them to continue with the planning. Theodore agrees that this exercise is necessary, and he thanks Clay for being up-front with him. The last thing Theodore wants is to be led down the path to failure. Clay says what they want to do is to get some other inkling, some measurement from this market, that consumers in their town will support an upscale restaurant. And they want some idea of what this market would be willing to pay for a dinner meal in an upscale restaurant. “We're making a big assumption that the price per meal we've entered in our break-even analysis is valid. I would hypothesize that people in our city would expect an evening dinner entree to be priced at $18, but I don't have any supporting data.” Clay Albright then shows Theodore Colzione a forecasting model to predict the number of customers expected to patronize a restaurant. One of the most important components in the forecasting model is a measure of the percentage of consumers in the market who stated that they would very likely patronize the restaurant and the average amount these same persons were spending, per capita, in restaurants per month. Also, another important component is the average price consumers would expect to pay for a dinner entree. Clay explains that they would have to conduct research in their city to determine the amount of these required components to be entered into the forecasting model. Clay tells Theodore, "If we can collect valid and reliable information on likelihood to patronize your restaurant, average amount spent in restaurants per month, and the average price to be paid per entree, we can create a much more accurate break-even analysis and compare that with the number of patrons you can expect. This is the information we need in order to determine if you will have adequate demand for The Bunnivs' Conundrum.” In fact, Clay had already made some estimates of demand using the forecasting model. He tells Theodore that if only 4 percent of heads of households in the 12 ZIP code area claimed they were "very likely" to patronize the restaurant and if these same people spent an average $200 per month in restaurants and were willing to pay an average $18 for an a la carte entree, then the model predicted a very success ful restaurant operation. What about Design and Operating Characteristics? At their next meeting, Clay refers to questions Theodore raised in their first meeting. Theodore had told Clay there were a number of design and operating characteristics that he had seen in other restaurants, but he didn't know what he should use in The Bunniv's Conundrum. How elegant should the decor be? Should there be live entertainment such as a jazz combo? Should the restaurant have a water view? Should the wait staff be formal ly dressed in tuxedos? Should the menu include a variety of choices, including exotic entrees not found in other restaurants such as elk, bison, or truffles! Would traditional desserts be desirable, or should they offer unusual desserts served with fanfare such as flaming Bananas Foster or Baked Alaska? Would patrons view valet parking as a convenience or an extra expense? And what about driving time? Theodore thought if he located in a central section of the city, people from all over the metro area would come if they didn't mind the driving time. Clay's background research reveals that Theodore is correct in having concerns about all these issues. Successful upscale restaurants in other cities have such a variety of design and operating characteristics that it is impossible to tell what each market values. For example, one very successful, very expensive restaurant has the barest of decor. Its plain brick walls and wooden furniture seem to add to the ambiance for customers in this city. On the other hand, a similar restaurant in terms of menu and prices in another city has very formal decor, with curtained walls and large, original antique, upholstered furniture, and expensive chandeliers. Yet another restaurant has no entertainment, and another has a jazz combo during dinner hours. It seems that each restaurant owner has discovered what his or her local market desires: this, no doubt, was at least part of the reason for their many years of success in the competitive restaurant business. "Well, we are going to have to rely a great deal on your own personal decisions in terms of how you will specifically design and operate your business,” says Clay. “But, we will be able to get some good feedback from our local market when we collect the information we will need to determine demand. I'm just concerned that we don't have a clear handle on the design and operational characteristics that consumers will think important when patronizing a restaurant. We will have to think more about how to clearly determine what these are and how consumers describe them.” Where to Locate The Bunniv's Conundrum Restaurant Theodore is aware of the old axiom in retail business: The most important three factors for success retailing are location, location, and location! Even though he knows his restaurant will be unique in the market, the location must be considered convenient to his patrons. “You are right,” says Clay Albright, "many customers will be willing to drive far out of their way for a unique experience once or maybe even a couple of times. But everything we know about the restaurant business tells us that, if you want repeat business, you must be within a reasonable driving time of your primary target market.” This makes perfect sense to Theodore. In almost • • • • every case, the owners of successful upscale restaurants told him, "Sure, we get some business from the out-of-town tourists like yourself, but 80 percent of our revenue comes from our local, repeat customers.” Clay Albright lays out a map of the city showing the 12 ZIP code areas of the metro area. Along with the map, Clay has acquired demographic information on each ZIP code, and he categorized them into four groups based on their commonalities. He summarized the information on the ZIP codes as follows: Location A: ZIP Codes 1, 2. Low-income, older population located in the south-southeastern part of the city. Clay and Theodore both clearly rule out this part of the city. Location B: ZIP Codes 3, 4, and 5. Located in the northwestern part of the city with high income, older population of retirees and established professionals. Essentially, these are families with inherited wealth, professionals, and entrepreneurs. There is also a growing population of young professionals and managers who are upwardly mobile. Clay explains that these younger families are moving into the area and renovating older homes. Theodore thinks this could possibly be a good area in which to locate. He expresses some concern about an older population and older homes. He recalls how neighborhoods seemed to decline as homes get old. Clay suggests they keep an open mind about this area since the incomes are so high. Location C: ZIP Codes 6, 7, 8, and 9. Almost double the population of areas 3, 4, and 5 who live in the eastern part of the city along the shoreline. These are young, upwardly mobile and older, upper-middle-class households with occupations in management, government, and young entrepreneurs. This is Theodore's part of town and he feels that this area represents an excellent opportunity. Although the incomes are not as high as in ZIP codes 3, 4, and 5, there are almost twice as many people and they have above-average incomes. Theodore comments that he has told several of his neighbors about his upscale restaurant idea and, without exception, they have each vowed to patronize the business. Also, Theodore is convinced that a waterfront view was important, and this is the only section of town where waterfront property could be acquired. Again, Clay suggests they keep an open mind. Location D: ZIP Codes 10, 11, and 12. Middle-class neighborhoods; primarily laborers with occupations in the building and manufacturing trade who are located in the western part of the city. Theodore and Clay quickly eliminate this area as an alternative along with ZIP code 12, which is primarily an industrialized southwestern part of the city with relatively few permanent residents. Theodore notes that the demographic information available suggests either a location somewhere within ZIP codes 3, 4, and 5 or within 6, 7, 8, and 9. Unfortunately, the two sets of ZIP codes are not close to one another. Clay tells Theodore the decision is going to be one or the other, not a central location. He also explains that they need information from the market to determine which area represents the best location. Once they make the decision about the area in which to locate, they start dealing with choosing the specific site because there seem to be good alternatives in both the areas. Clay tells Theodore he is going to start working on a questionnaire that will address the issues they have discussed up to this point. The two set up another meeting for a week later. How to Promote The Bunniv's Conundrum Restaurant At their next meeting Theodore reminds Clay that they have not fully discussed his questions regarding how best to promote the restaurant. He is most concerned about which media and programming to select rather than ad copy. He feels comfortable about what to say in his promotional messages, but he is not confident that he knows where to say it. They discuss some ideas for preopening publicity and some direct marketing. Clay recommends a local ad agency to help with these decisions and to actually do some of the work. Theodore eagerly accepts the suggestions, knowing that he will be very involved with all the details of getting the restaurant operational. Theodore asks, “But, after the grand opening, where am I going to direct my advertising?” After some discussion, the two agree that Theodore will be using all the media from time to time: radio, television, newspaper, and perhaps the local city magazine. Theodore says he knows which medium to use and where to place the message for virtually every type of restaurant in town. He knows where the fast-food restaurants run their ads, where the cafeterias run their ads, where the restaurant/lounges run their ads, and so on. But he does not have a clue about where to place ads for The Bunniv's Conundrum. Clay next shows Theodore the questionnaire he has been working on. It contains the questions needed to measure likelihood of patronizing the restaurant and the other issues the two had agreed needed addressing. Clay then identifies each medium, and the two discuss the alternatives. For radio, there are many stations from which to choose, and each provides a listenership study that gives some demographics on the audience of their station. But, even with many stations, Clay and Theodore agree they all break down into these station formats: country and western, jazz, easy listening, rock, and talk radio. Each station provides demographic information on its listeners by income. So, once Theodore Colzione knows what type of programming to select, he will then need to know which specific stations to select that offer the desired type of programming. By knowing if there are differences in income between customers with different intentions to patronize the restaurant, Colzione will be able to select the appropriate radio stations. For television, few local ad opportunities exist except during daytime television, local sporting events, and the news. They both agree that news broadcasts were likely to be the most appealing, but which news broadcast will hit their target market? There was a morning, 7:00 A.M. time slot, a noon slot, early evening (6:00 P.M.), and late evening (10:00 P.M.) slot. As for the newspaper, which section did most members of the target market read? Editorial? Business? Local? Sports? Health, Living and Entertainment? Classifieds? Theodore noted that the sports section seems to be a good place to promote restaurants. As far as the local city magazine, Theodore's primary concern is whether the target market subscribes to it. It is an attractive, high-quality publication, but it is expensive, and he has never heard how many subscribers the magazine has. He wonders if more than a handful of subscribers will read an expensive ad in the magazine. Theodore recalls that three years ago when the magazine started, the owner gave away many copies in order to develop interest. But for the past two years the magazine has been mailed only to actual subscribers. Clay tells Theodore that he will take the notes from this meeting and add questions to the survey questionnaire he is working on to address the questions Theodore has about promoting The Bunniv's Conundrum. Clay tells Theodore that if he had answers to the questions they had discussed and advice from an ad agency, Theodore should be in good shape as far as promotion decisions. Finally, Clay said, "Now I need to put together some standard demographic questions we will ask on the survey. These demographics will help us do several things. First, they can tell us about the sample we selected. We will prepare a demographic profile of the sample. We want to know on which group of people we are basing your decisions. Secondly, we will be able to profile the likely patrons of The Bunniv's Conundrum. This will help us more clearly understand your target market and will be helpful to you when you make future decisions, such as does this restaurant appeal more to females than males and knowing if media habits vary between males and females. Theodore thanks Clay and leaves the meeting feeling more confident than ever that he is on the road to realizing his dream. Marketing Problems for The Bunniv’s Conundrum Restaurant Decision Problem Item Description Will there be adequate revenue to allow the restaurant to be Will the restaurant be successful? profitable? How should the restaurant be designed? How elegant should the decor be? Should there be a waterfront view? What operating characteristics should the restaurant have? What type of live music should be played? How should the wait staff dress? Should unusual menu items be offered? Where should the restaurant be located? Are customers willing to drive more or less than 30 minutes? What are effective and efficient promotional choices? Where the restaurant ads should be placed for radio, TV, and newspaper? Should ads be placed in the city magazine? What is the profile of the target market? What are the demographic and lifestyle profiles of those who are most likely to patronize the restaurant? The Bunniv's Conundrum: Research Design Part 3 In the integrated case presented earlier (Integrated Case part 2), we learned that Theodore Colzione had a second meeting with Clay Albright at CMG Research. After the first meeting Clay had conducted some research on the restaurant business. He had learned about tracking food costs, table turnover rates, and financial ratios and operating expense norms for restaurants. In addition, Clay had ordered a marketing research report on upscale restaurants. We also learned that some of the critical issues centered around the following: (a) determining demand, (b) determining the best choice of restaurant design and operating characteristics, (c) determining where to locate the restaurant, and (d) deter how to promote The Bunniv's Conundrum restaurant. The Bunniv’s Conundrum: A Restaurant Part 4 After the first meeting between Theodore Colzione and Clay Albright of CMG Research, Clay decided to conduct some secondary data analysis on the restaurant business. He knew he benefit from doing this because he could conduct the research quickly and inexpensively and he also knew he was very likely to find information in these secondary data so that would be helpful to his client, Theodore Colzione. First, Clay walked into CMG's library. The library had a reference guide, the Encyclopedia of Business Information Sources, almanacs, handbooks, and special business dictionaries. In addition, Clay conducted an Internet search from his office. The Bunniv’s Conundrum Restaurant Part 5 Clay Albright, project director at CMG Research, was excited because he had just talked to Theodore Colzione on the phone, and Theodore had given him the go-ahead to conduct some focus groups on The Bunniv's Conundrum Restaurant project. To refresh his memory on the project, Clay checked his notes, searching for a summary table that he and Theodore had devised in the problem definition phase. Here is the table of problems based upon what you read in part 2 of the integrated case. Marketing Problems for The Bunniv’s Conundrum Restaurant Problem Item Description Will the restaurant be Will a enough people patronize the restaurant? successful? How should the What about decor, atmosphere, specialty entrées and desserts, wait restaurant be staff uniforms, reservations, special seating, and so on? designed? What should be the How much are patrons willing to pay for the standard entrées as well average price of as for the house specials? entrées? What is the optimal How far from their homes are patrons willing to drive, and are there location? any special location features (such as waterfront, ample parking, etc.) to take into consideration? What is the profile of What are the demographic and lifestyle profiles of those who are the target market? going to patronize The Bunniv's Conundrum? What are the best What advertising media should be used to best reach the target promotional media? market? The Bunniv’s Conundrum Restaurant Part 6 Clay Albright presented his interpretations of the focus groups he had subcontracted for Theodore Colzione's The Bunniv's Conundrum Restaurant to get a feel for what patrons wanted in the décor, atmosphere, entrées, specialty items, and other aspects of the restaurant's operation. Theodore was impressed with the amount of information that had been collected from just three focus groups. “Of course,” noted Clay, "we must take all this information as tentative because we talked with so few folks, and there is a good chance that they are just a part of your target market. But we do have some good exploratory research that will guide us in the survey.” Theodore agrees with Clay's assessment, and asks, “What's next?” Clay says, “I need to think about how we will gather the survey data. There are several options that I must consider in order to make the best choice to survey the entire metropolitan area.” The Bunniv’s Conundrum Restaurant Part 7 Clay Albright now feels he has a good grasp of the research objectives needed to conduct the research study for Theodore Colzione. He sits down and starts working on the questionnaire that he will need. He knows he will need to write a cover letter and he knows he needs a screening question. Would everyone's opinion be useful? “Certainly not,” he thinks. Why would we want the opinion of persons who rarely eat out in restaurants? Clay then turns to the other issues he knows he needs to address. He knows he needs input for the forecasting model, so several questions will need to be designed to deal with demand assessment. Also, he needs several questions dealing with the design and operating characteristics questions as well as the advertising placement decisions. Finally, Clay knows he will have to address the location issue. Integrated Case: Part 8 - Due The Bunniv’s Conundrum Restaurant After some deliberation, Clay Albright has narrowed the data-collection method for The Bunniv’s Conundrum Restaurant down to two choices: a telephone sample or an online panel. For his forecasting model to work properly, Clay needs to use a sample design that will result in a sample that represents the entire greater metropolitan area. 1. Should Clay use a systematic sample using the metropolitan area telephone book as the sample frame? What are the advantages and disadvantages of this sample plan? 2. Should Clay use random digit dialing for the sample plan? What are the advantages and disadvantages of this sample plan? 3. Should Clay use a probability online panel such as the one maintained by Qualtrics? With respect to sample design, what are the advantages and disadvantages involved with using this approach? (You may want to reference the following blog post https://www.d8aspring.com/blog/the-pros-and-cons-of-online-research-panels ) Integrated Case: Part 9 The Bunniv’s Conundrum Restaurant Survey Descriptive Analysis Use the questionnaire attached to this assignment on CourseDen to answer these questions. You will use this questionnaire for the rest of the semester. Clay Albright was happy to call Theodore Colzione to inform him that The Bunniv's Conundrum restaurant survey data were collected and ready for analysis. Of course, Clay had other marketing research projects and meetings scheduled with present and prospective clients, so he called in his marketing intern, Melia Antiqua. Melia was a senior marketing major at High Entia University, and she had taken marketing research in the previous semester. Melia had "aced" this class, which she enjoyed a great deal. Her professor had invited Clay Albright to give a talk on "a typical day in the life of a market researcher," and Melia had approached Clay the next day about a marketing research internship. Like every dedicated marketing major, Melia had kept her marketing research notes and textbook for future reference. Clay called Melia into his office, and said, "Melia, it is time to do some analysis on the survey we did for Theodore Colzione. For now, let's just get a feel for what the data look like. I'll leave it up to your judgment as to what basic analysis to run. Let's meet tomorrow at 2:30 P.M. and see what you have found." Your task for this assignment is to take the role of Melia Antiqua, marketing intern and determine: 1.what variables are categorical (either nominal or ordinal scales), perform the appropriate descriptive analysis, and interpret it. 2. what variables are metric scales (either interval or ratio scales), perform the appropriate descriptive analysis, and interpret it. Integrated Case: Part 10 The Bunniv’s Conundrum Restaurant Survey Inferential Analysis Use the attached file BunnivData.xls for the analysis need for this and subsequent cases. Clay Albright was pleased with Melia Antiqua's descriptive analysis. Melia had done all of the proper descriptive analyses, and she had copied the relevant tables and findings into a Word document with notations to which Clay could refer quickly. Clay says, “Melia, this is great work. I am going to Theodore Colzione's in an hour to show him what we have found. In the meantime, I want you to look a bit deeper into the data. I have jotted down some items that I want you to analyze. This is the next step in understanding how the sample findings generalize to the population of the greater metropolitan area.” Your task here is to again take the role of Melia Antiqua, marketing intern. Using the Bunniv's Conundrum Restaurant survey data set (attached to this CourseDen assignment), perform the proper analysis, and interpret the findings for each of the following questions specified by Clay Albright. Please copy the appropriate output from Excel into your answer. 1. What are the population estimates for each of the following? a. Preference for "easy listening" radio programming b. Viewing of 10 P.M. local TV news c. Subscribe to City Magazine d. Average age of heads of households e. Average price paid for an entrée for an evening meal 2. Because Theodore Colzione's restaurant will be upscale, it will appeal to high-income consumers. Theodore hopes that at least 25% of the households have an income level of $100,000 or higher. Test this hypothesis. 3. With respect to those who are "very likely" to patronize the Bunniv's Conundrum Restaurant, Theodore believes that they will either "very strongly" or "somewhat" prefer each of the following: (a) wait staff with tuxedos, (b) unusual desserts, (c) large variety of entrees, (d) unusual entrees, (e) elegant décor, and (f) jazz combo music. Does the survey support or refute Theodore's hypotheses? Interpret your findings. 
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