Chapter 30 — Exercises

Work these with a calculator and a notebook. Items marked † have worked solutions in the answers appendix; the rest are for you, your instructor, or your study group. Every dollar figure in this file is illustrative and constructed — mobile-vending costs, commissary rates, festival fees, and ghost-kitchen license fees vary enormously by market, and every regulatory item must be verified with your own health department, fire marshal, and city clerk.

A. Recall and vocabulary

30.1 In one sentence each, define: commissary kitchen, mobile vending permit, pop-up, residency.

30.2 † State the small-format tradeoff in three dimensions. For each dimension, say which format in Figure 30.1 is strongest and which is weakest.

30.3 What is the difference between a ghost kitchen and a virtual brand? Give one example of an operation that is both and one that is only the second.

30.4 Why does a mobile vending permit in most jurisdictions require a commissary agreement? What is the regulatory concern being addressed?

30.5 † Bellwether's occupancy is 6.1% of sales. The illustrative truck in Figure 30.2 pays no rent on a dining room, yet the chapter says its equivalent cost is 13.8%. List the five line items that make up that 13.8% and give each one's percentage.

30.6 What is a shared-kitchen incubator, and name three things a small food business can do only with a licensed commercial address.

30.7 Explain route and location strategy by analogy to Chapter 24's revenue management. What is the truck's unit of perishable inventory?

30.8 The chapter says the ghost-kitchen sector "expanded rapidly and then contracted." State the structural reason in one sentence, without reference to any specific company.

B. Applied reasoning

30.9 † A friend says: "A food truck is a cheap way to get into the restaurant business." Write a three-sentence reply that corrects the two things wrong with that sentence without discouraging them.

30.10 The chapter argues that the small formats' exposure falls faster than their ceiling does. Explain why that asymmetry is the structural argument for testing a concept in a small format, and name one situation where the argument does not apply.

30.11 † A ghost-kitchen operation holds a prime cost of 57.0% — better than the full-service benchmark of 60% — and loses money. A consultant recommends cutting food cost by two points. Write a short memo (150 words) explaining why that is the wrong recommendation and what you would do instead, with a dollar figure attached to your alternative.

30.12 A truck operator has been offered a standing Thursday-night spot at a brewery with no kitchen. The brewery wants 10% of gross. Using the illustrative brewery-evening figures from Figure 30.4 (gross \$1,190, costs the service causes \$688), is the deal still worth taking? Show the arithmetic. Then argue the other side: what is the brewery giving up by charging, and why do many such arrangements involve no fee in either direction?

30.13 Why does the chapter say the private-gig channel is "frequently the profitable half of the business" while also warning against cancelling all your festivals? Reconcile the two claims in one paragraph.

30.14 † A truck operator wants to skip the commissary and prep at home to save \$13,200 a year. Give two separate reasons this is a bad idea — one regulatory, one operational — and state what the \$13,200 is actually buying.

30.15 Bellwether is closed Monday. Using the host-side numbers from §30.4's residency example (\$964 of contribution on the night), explain in Chapter 24's language why a dark Monday is an inventory problem, and estimate the annual value of converting 40 of Bellwether's 52 Mondays.

30.16 The chapter's On-the-Line callout in §30.6 says "the dine-in guest pays for the virtual brands." Describe the mechanism in operational terms, and name the single metric you would put on a weekly report to catch it.

30.17 † Chapter 1 said undercapitalization is the leading cause of first-year failure. Explain how each of these three small-format decisions is an undercapitalization error in miniature: (a) spending your whole budget on the truck itself; (b) not funding a replacement reserve; (c) forecasting the year on calendar days rather than operable days.

C. Cost this

30.18 † Cost a festival day. A truck grosses \$5,800 at a two-day street fair (one day's figures). The festival charges 18% of gross. Food runs 30%. Crew is 4 people for 13 hours at a blended \$18/hour plus 12% payroll burden. Packaging runs 3.5% of gross. Card processing is 2.9% on 90% of sales. Fuel, generator, and ice come to \$165. Compute: total costs, contribution, and contribution per crew hour. Compare to the private-gig figure in Figure 30.4 and state the operating conclusion in one sentence.

30.19 Cost the same day under a flat fee. The festival organizer offers you a choice: 18% of gross, or a flat \$1,150 space fee. At what gross does the flat fee become the better deal? Show the break-even, then state which you would choose if the weather forecast is 60% chance of rain, and why.

30.20 † Cost a private gig. A corporate client books lunch for 165 guests at a contracted \$23 per head. Food runs 26% (known covers). Crew is 4 people for 8 hours at a blended \$18** plus **12%** burden. Disposables run **\$0.60 per guest. Fuel and travel are \$70. The client pays by check. Compute contribution and contribution per crew hour. Then compute what the same \$3,795 of gross would have contributed if it had arrived as 237 lunch-route tickets at \$16 with the route's cost structure (30% food, 3 crew × 6 hours at \$18 + 12%, 3.5% packaging, 2.9% card on 85%, \$48 fuel, \$25 site fee) — noting that 237 tickets is more than a two-hour window can produce, which is itself part of the answer.

30.21 Cost the commissary decision. Two commissary options: (a) \$1,100/month flat, unlimited access, 20 minutes from your route; (b) \$34/hour with a 12-hour weekly minimum, 5 minutes from your route. Assume you need 16 hours a week, 48 weeks. Compute both annual costs. Then add a value for drive time: 250 round trips a year, 30 extra minutes each for option (a), and price your own time at \$22/hour. Which wins, and what non-financial factor might override the answer?

30.22 † Cost a truck's monthly fixed nut. From Figure 30.2, extract every cost that does not vary with volume — commissary rent, insurance, permits, marketing, supplies, accounting, replacement reserve, and the owner's draw with burden — plus the \$1,956 monthly note payment. State the monthly fixed nut in dollars. Then compute how many \$1,520 lunch services (at \$538 of contribution each) it takes to cover one month of it.

30.23 Cost the generator decision. A quiet inverter generator costs \$6,500; a construction-grade open-frame unit costs \$2,400 and is roughly 12 dB louder. Three of your best locations (two office lots and the brewery) require quiet operation, and those three account for 145 services a year at an average \$538 of contribution. Frame the decision as a number rather than a preference.

D. Price this / engineer this

30.24 † Price the truck menu. You are building a six-item truck board. Your plate costs are: item A \$3.10, B \$3.85, C \$2.40, D \$4.60, E \$2.15, F \$5.20. Your target food cost is 28% (trucks often run tighter than restaurants because the menu is narrow and cross-utilized). Price each item using the target-cost method from Chapter 11, then round to whole dollars or to \$0.50, and state the resulting food cost percentage for each. Which items would you re-engineer, and why is the answer different on a truck than in a dining room?

30.25 Engineer the ghost menu for order value. Figure 30.5 showed that packaging and labor are per-order costs, and that raising average order value from \$34 to \$41 flipped a \$14,271 loss into a \$22,106 profit. Design three specific menu additions or bundles that would raise average order value, and for each one state what it does to packaging cost, food cost percentage, and travel quality. Reject at least one plausible idea on the grounds that it does not travel.

30.26 † Price a residency. You are the guest operator. The host takes 30% of food sales and keeps all beverage. Your food cost target is 34% (small batches, unfamiliar kitchen). You will bring two cooks at \$20/hour for 9 hours each plus 12% burden, and spend \$130 on printing and specialty ingredients. You expect 50 covers. What prix fixe price do you need to charge to clear \$400 of contribution on the night? Then state what happens to your answer at 35 covers, and what that tells you about pricing a test.

30.27 Price a per-head catering menu three ways. For a 120-guest private gig, build three price points — a \$19 single-item option, a \$26 two-item option, and a \$34 option with a side and a dessert — and cost each one to a target food cost of 26%. State which one you would lead with in an outbound email and why the answer depends on the client type rather than on the margin.

E. Build this schedule to a target

30.28 † Crew a truck week to a labor target. The week: four lunch-route services (Tue–Fri), one brewery evening (Thu), one festival day (Sat, 13 hours), and one private gig (Sun, 8 hours). Forecast gross: \$1,520 × 4 + \$1,190 + \$5,800 + \$2,750 = ? Build a crew schedule using an owner-operator (unpaid in this exercise — treat the draw as fixed), a second crew member at \$18, a third at \$17, and a commissary prep hand at \$19, plus 12% burden. Hit 26% variable labor on the forecast gross. State which service you had to under-crew and what the risk is.

30.29 Schedule the commissary. You have 16 hours a week of commissary access and the week above to prep for. Allocate the hours across the seven services and identify the day the schedule breaks. What would you change about the week — not the schedule — to fix it?

30.30 † Cap the virtual brand by daypart. A 68-seat restaurant open for dinner Tuesday through Saturday plus weekend brunch wants to run a delivery-only brand. Ticket times currently average 14 minutes and the standard is 18. Design the daypart cap: state the hours the brand's listing is on and off, the maximum simultaneous delivery tickets you will allow, and the metric and threshold that switches the brand off. Justify each with reference to Chapter 22 or Chapter 28.

F. Read this P&L and find the leak

30.31 † The truck that isn't making money. An operator brings you this year, and every figure is real to them. Find the three problems, in order of size, and say what you would do first.

Compute: COGS %, labor %, prime cost %, total costs, operating result, net result. Then diagnose.

30.32 The channel mix problem. The operator in 30.31 tells you their revenue breaks down as: lunch route \$61,000 (52 services), brewery \$18,000 (16 services), festivals \$196,000 (36 days), private gigs \$23,000 (9 gigs). Using Figure 30.4's logic, explain what is wrong with this business in one sentence, and write the one-year plan to fix it with specific service counts.

30.33 † The ghost kitchen at renewal. A single-suite operation's year: 8,400 orders at a \$29 average subtotal; 92% of orders through marketplaces at 28% all-in and 8% first-party at 3.2%; food cost 29%; packaging 5.8%; labor \$94,000 all-in; facility license \$2,900/month; utilities \$700/month; platform advertising \$16,500; all other operating \$19,400. Compute the operating result. The license is up for renewal at \$3,200/month. Write the three-sentence recommendation.

G. Write the memo, policy, or response

30.34 † Write the residency agreement term sheet. One page, plain language, covering: term and dates, the split, who buys food, who staffs kitchen and floor, whose POS, tips, card fees, comps, insurance, food-safety certifications, alcohol (be specific about who may sell it and why), the cancellation terms on both sides, product left at the end, and who owns the guest data. Do not write legal language; write the list of things that must be decided, with your recommended answer for each.

30.35 Write the festival vendor question list. You have been offered a spot at a festival you have never worked. Write the ten questions you send before signing, in priority order. At least three must be about money and at least two about weather.

30.36 † Write the virtual-brand disclosure standard. Your restaurant is launching a delivery-only second brand. Write the internal one-page standard covering what appears on the listing, what appears on the packaging, how allergen questions are handled when there is no server, and how a complaint reaches a human. State the principle in one sentence at the top.

30.37 Write the graduation memo. You operate a successful truck and you are considering a 60-seat restaurant. Write a two-page memo to yourself using Figure 30.6: what transfers, what doesn't, the four graduation questions from §30.8, and your honest answer to each. End with a recommendation and the cheapest test of your weakest answer.

30.38 Write the response to a bad platform rating. Your delivery-only brand has picked up four one-star ratings in a week, three of which cite cold food and one of which cites a missing item. You cannot contact the guests. Write the internal action list — not a public reply — with the operational change attached to each cause.

H. Judgment and ethics

30.39 † A landlord offers your truck a free standing spot in their retail plaza's parking lot, on one condition: you do not sell any item that competes with the plaza's existing sandwich shop. The sandwich shop is a two-person independent business that has been there eleven years. Is the condition reasonable? Would you take the spot? What would you want in writing, and what would you say to the sandwich shop's owners?

30.40 One kitchen operates six virtual brands with six names, six logos, and six sets of photographs. Nothing about the arrangement is illegal in the operator's jurisdiction. A guest orders from two of the six on the same night, expecting food from two different restaurants. Where exactly is the line between smart use of fixed capacity and deception? Write the standard you would apply, and then state the strongest argument against your own standard.

30.41 † You are hosting a residency. On the second night you notice the guest operator's cook handling raw chicken and then plating greens without a glove change or a hand wash. Your health permit and your inspection history are on the line, and the guest operator brings 60 covers a week you would otherwise not have. What do you do tonight, what do you do tomorrow, and what should have been in the agreement?

30.42 A shared-kitchen tenant tells you, privately, that another tenant is storing raw product above ready-to-eat food in the shared walk-in and has been told twice. You have no authority over either of them. What are your obligations — to yourself, to your own guests, to the facility, and to the health authority? What does Chapter 25 say about why this is not a small thing?

I. Business Plan extensions

30.43 † Build the small-format contingency. Using the checkpoint in this chapter, write the Small-Format Contingency subsection of the plan: the deferred truck extension with its trigger condition, the delivery-only second-brand line with its stated dependency, and the build-out-window residency with its downside. Two pages maximum. Every number must foot.

30.44 Stress the second-brand line. The checkpoint's \$39,241 of annual contribution assumes a 17.5% blended commission (60% marketplace at 27%, 40% first-party at 3.2%). Recompute the annual contribution at first-party shares of 0%, 20%, 40%, and 60%. At what first-party share does the line stop being worth the operational disruption, in your judgment, and why?

30.45 † Design the residency test properly. Write the ten-night residency as a test plan, not an event: the hypothesis, the price point, the menu, the data you will capture each night (be specific — what fields, on what form, by whom), the decision rules, and what result would cause you to change the plan's \$46 dinner check assumption. State in advance what result would make you walk away from the concept, because a test you cannot fail is not a test.

30.46 The counter-argument. Write the strongest honest case against running the residency during the build-out. Consider the partners' attention, the contractor relationship from Chapter 6, the hiring timeline from Chapter 9, the risk of a weak test poisoning confidence, and the fact that the Hearth Chicken cannot be tested at all in a borrowed kitchen. Then say whether the counter-argument changes your recommendation.