Chapter 28 — Exercises

Items marked † have worked solutions in the answers appendix. Everything else is yours to defend in class, in a study group, or to yourself with a spreadsheet open.

Unless stated otherwise, use Bellwether's frozen figures: a $46.00 dinner check split $33.12 food / $12.88 beverage; food cost 30%, pour cost 22%, blended COGS 27.8%; the Hearth Chicken at $29.00 with a $8.52 plate cost; a hearth that sustains 28 items an hour; and packaging at a $0.60 base plus containers.

A. Recall and definitions

28.1 Define off-premise and list the five sub-channels it covers.

28.2 † In one sentence each, distinguish a third-party marketplace, first-party ordering, and direct delivery. For each, say who owns the guest's contact information.

28.3 What is the difference between a platform's commission rate and its effective take rate? Name four things that can appear in the gap.

28.4 Define incremental sales and cannibalized sales. Why can a restaurant's total sales figure never tell you which one it is looking at?

28.5 † Write the formula for the break-even cannibalization rate in plain words, and say what each input requires you to know.

28.6 What is throughput impact, and why is contribution per order the wrong denominator when it is present?

28.7 Name the two structural changes off-premise made to restaurant economics that have nothing to do with commission.

28.8 What is delivery price parity, and what is the alternative called?

28.9 State the packaging cost structure used in this chapter — the two components and roughly what each contributes to a typical order.

28.10 † Why did commission caps appear in 2020, which three U.S. cities does the chapter name, and what is the common shape of such an ordinance? What happened to some of them afterward?

B. Reading and interpretation

28.11 Look again at Figure 28.1. The dine-in column shows 67¢ of contribution and the marketplace column shows 40¢. Decompose that 27-cent gap into its causes and rank them by size. Which is largest, and why is it the one operators consistently overlook?

28.12 † A payout statement shows: 214 orders, $9,180 of gross menu sales, commission of $2,295, promotion funding of $410, sponsored listings of $268, refunds charged back of $340, and credits of $55. Compute the net remittance, the stated commission rate, and the effective take rate. Which lines could the operator change by Friday?

28.13 An operator says, "Our delivery does $8,000 a month and our food cost on it is only 29%, so it's our most efficient channel." Identify every error in that sentence.

28.14 Figure 28.6 shows off-premise open during 23 of 25 weekly service hours and closed for two-and-three-quarter hours. Explain why closing those particular hours is worth more than the revenue it forgoes.

28.15 † Reread the Where the Money Leaks callout in §28.2 on commission and food cost. Rank these three items by how much of their contribution margin a 25% commission consumes, and state the general rule: (a) a $16 grain salad at 26% food cost; (b) a $29 chicken at 29.4%; (c) a $38 short rib at 36%.

C. Cost this

28.16 † Build a packaging cost card for this order: one Hearth Chicken, one braise, one grain salad, one set dessert, three 2-oz sauce cups, one bag, one cutlery set, one seal, one label. Use the chapter's component prices, adding $0.44 for a dessert container. What is the total, and what is it as a percentage of a $79 order?

28.17 Recost the same order assuming you switch to a heavier-grade container that costs $0.19 more per container. What does that add per order, what does it add across 624 orders a year, and how many leak-related refunds a year would it have to prevent to pay for itself at a $52 average refund?

28.18 † Compute the packing labor on a six-item order at 5.5 minutes of hands and an all-in rate of $19.50 an hour. Then compute what the same order costs in packing labor if the person doing it is the expediter at an all-in rate of $34.00 an hour — and explain why the second number still understates the cost.

28.19 Cost a "family meal for four" bundle for Bellwether: one Hearth Chicken, a double portion of wood-roasted roots, a grain salad, and bread. Assume the roots and salad are priced to the 30% food-cost target at $11.00 and $12.00 respectively and the bread is $7.00. Show plate costs, packaging, and packing labor at 5 minutes, and state the contribution at parity pricing on first-party pickup with 2.9% + $0.30 processing and a 2% ordering-platform fee.

D. Channel math

28.20 † A $72.00 order carries $21.60 of plate cost, $2.55 of packaging, and $1.46 of packing labor. Compute the contribution at marketplace commissions of 15%, 22%, and 30%. Then compute the contribution of the same $72.00 of food sold to two dine-in covers whose check also included $26.00 of beverage, using Bellwether's cost percentages, $3.60 of card processing, and $1.20 of china and linen. Index each channel to dine-in.

28.21 Using the results of 28.20, compute the break-even cannibalization rate at each commission level. At which commission does the channel need to be more than 60% incremental to break even?

28.22 † Bellwether's hearth is producing 29 items in the 7:00–8:00 p.m. hour on a Saturday while 46 covers are seated. Recompute the contribution per hearth item if the check average rises to $52.00 and the mix shifts so that only 26 hearth items are produced in the hour. Does the case against peak-hour delivery get stronger or weaker, and by how much per order at a 25% commission?

28.23 A restaurant runs 5% of its sales through a 25% marketplace and its blended prime cost is 59%. Its accountant says the channel "adds a point of food cost." Is that the right way to see it? Restate the effect properly, in prime-cost terms and then in contribution terms, and say which statement an operator should act on.

28.24 † Compute the listed price required to hold contribution constant on a delivered $24.00 pasta with a $7.20 plate cost and $1.05 of allocated packaging and labor, at commissions of 15%, 25%, and 30%. Express each as a percentage uplift. At which rate does the required price exceed what you believe a guest would pay, and what does that tell you to do?

28.25 A first-party pickup order averages $50 and contributes $28.82. Your online-ordering vendor offers to drop its 2% per-order fee in exchange for a flat $249 a month. At what weekly order volume does the flat fee become the cheaper deal? Show the crossover.

E. Incrementality

28.26 † Design an eight-week incrementality test for a restaurant that already runs marketplace delivery seven nights a week. Specify what you measure, what you hold constant, what you change, how you handle confounds, and the specific number that would make you shut the channel off. State one risk of the test and how you would mitigate it.

28.27 You have delivery addresses for 900 orders. Describe exactly how you would use them to estimate cannibalization, what pattern would reassure you, and what pattern would alarm you. What can this analysis never tell you?

28.28 A partner argues that cannibalization does not matter on Friday and Saturday because "the seat refills anyway — we turn people away." Evaluate that argument against §28.6. Where is it right, where is it wrong, and what is the loss mechanism on a night when the seat does refill?

F. Menu and product

28.29 † Sort these twelve items into Figure 28.5's four quadrants and justify each placement: a fried chicken sandwich; a beef and root-vegetable braise; a whole roasted trout; a dressed little gem salad; a farro and squash grain bowl; a crudo of scallops; hearth bread with cultured butter; a wood-roasted carrot plate; hand-cut pasta with a butter emulsion; a chocolate tart; a soft-serve sundae; a half chicken from the hearth.

28.30 Take one item you placed in "Brand Risk" and write the three dispositions from §28.5 as concrete proposals — repackage, re-engineer, or remove — with the cost and the tradeoff of each. Then recommend one and defend it in four sentences.

28.31 Design the tasting-drive protocol from the §28.5 On the Line callout for a specific restaurant of your choosing. Specify the route, the timing, the scoring sheet, who attends, and what you would do with an item that scores badly but is your highest-margin dish.

G. Operations and schedule

28.32 † Build a one-week off-premise ordering window for a restaurant with a different constraint than Bellwether's: a 90-seat room whose bottleneck is a four-burner sauté station running at capacity from 6:30 to 9:00 on Thursday, Friday, and Saturday, open for lunch and dinner six days. Show the window as a grid and justify each closure in one line.

28.33 Write the pack-station standard operating procedure for Bellwether — the five steps from §28.8, adapted to a kitchen with four people on the line and a host who will be doing the packing on weeknights. Keep it to one page a new host could follow on their third shift.

28.34 Bellwether's shell may not permit a pickup point off the guest path. Write the two versions of the plan's Off-Premise section — one assuming it does, one assuming it does not — and state the revenue and contribution consequence of each in a single table.

H. Read the leak

28.35 † A 120-seat restaurant's monthly off-premise summary reads: marketplace sales $41,300; commission $10,325; promotions $2,890; ads $1,640; refunds $1,735; packaging $4,265; food cost 31.5% of menu sales; packing labor from a dedicated $21/hour position working 30 hours a week. Compute the channel's monthly contribution. Then find the three largest recoverable leaks and quantify each.

28.36 The same restaurant's owner says the channel "must be working, it's 19% of our sales." Write the four-sentence response you would give as their consultant, and name the one number you would ask for before saying anything more definitive.

I. Write it

28.37 Write the one-page memo to a chef-owner recommending that the restaurant not list on a marketplace this year. Address the reach argument fairly before you dismiss it, and give the specific conditions under which you would change your recommendation.

28.38 † Write the guest-facing paragraph for a restaurant's website explaining that delivery-app prices are higher than menu prices. Keep it under 90 words, keep it honest, and make it an argument for ordering direct without being petulant about the platform.

28.39 Write the insert card that goes in every marketplace bag to convert a guest to first-party ordering. Specify the offer, the mechanism, and how you would measure whether it worked. State what you would check in the platform agreement first.

J. Judgment

28.40 A regular tells you they now order delivery twice a month instead of coming in once a month, "because it's easier with the kids." Total spend is roughly the same. Is this good for your business? Work the arithmetic, then answer the harder question: is it good for the relationship, and does that change your answer?

28.41 † A platform's rating for your restaurant has fallen. The largest driver is delivery time, which is dominated by driver wait and routing. Your general manager proposes marking orders "ready" four minutes before they are, to improve the metric. Evaluate the proposal on three grounds — the metric, the food, and the ethics of the number — and state what you would do instead.

28.42 Your restaurant is listed on a marketplace you never signed an agreement with. The menu is two years old and three prices are wrong. Describe your response, in order, and name the one thing you should not do.

K. Business Plan extension

28.43 † Rebuild Bellwether's Off-Premise section on the assumption that the plan's takeout line is **$62,400** (24 orders a week) rather than $31,200. Does the specification in the chapter still hold? Recompute the labor decision, the window, and the break-even cannibalization rate, and say which constraint binds first.

28.44 Write the assumptions-register entry for Bellwether's off-premise line, in the format Chapter 4 established: the assumption, its value, the evidence behind it, the sensitivity, and the test that would resolve it. Include the cannibalization assumption explicitly.

28.45 The chapter defers a marketplace listing to a year-two test. Write that test as a one-page document a general manager could execute without you: the schedule, the controls, the data to capture, the decision thresholds, and who decides.