Chapter 37 — Exercises

Work these with a calculator and a blank page. Items marked † have worked solutions in the answers appendix; the rest are for you, your instructor, or your study group. Every figure in these exercises is constructed and illustrative.

No answers appear in this file.

A. Recall and definitions

37.1 Name the four jobs a single-unit owner performs simultaneously and continuously, and state which three of them must move into systems as a group grows past one building.

37.2 State both questions of the write-it-down test in order. For each branch, say what document the answer produces — nothing, a specification, or a procedure.

37.3 Define brand consistency in terms of variance rather than average, and explain in one sentence why the distinction changes what you measure.

37.4 † List the four conditions that must all hold before central production of a given item pays. For each, give one menu item that fails that condition specifically.

37.5 Define comparable-store sales. State why units that have recently opened are excluded from both sides of the comparison rather than just the current year, and name the one thing that must never change opportunistically about a comp base.

37.6 Name the three components a working exception threshold must have. Which of the three is most often missing, and what does a threshold become without it?

B. Applied reasoning

37.7 † A district manager has 48 usable hours a week, 12 of which are fixed load independent of unit count. A stable unit consumes 7 hours a week. (a) How many stable units can this person carry? (b) Two of their units are in their first six months and each consumes 2.5 slots. How many stable units can they carry alongside those two? (c) Explain in one sentence what the answer to (b) means for a group planning to open two restaurants in the same year.

37.8 A four-unit group's quarterly audit scores are 92, 91, 93, and 44. Compute the group average. Explain why the average is the least useful number on the page, what it conceals, and what you would put at the top of the report instead.

37.9 † A unit self-audits at 96. A leadership audit conducted two weeks later returns 74. State the three most plausible explanations for the gap and describe how you would distinguish among them without accusing anyone of anything.

37.10 Your operations manual devotes three paragraphs of method to plating the beet salad. Apply the write-it-down test. What should the entry be instead, roughly how long should it be, and why is the current version near-certain to be wrong within a season?

37.11 Explain why two units is described in §37.1 as "the worst number in this business." Identify the specific arithmetic that makes it so, and name the two — and only two — ways the resulting gap can be filled.

37.12 † A commissary model projected a saving of 14 prep hours per unit per week. Four weeks after the first delivery, actual prep hours at every unit are unchanged. Name the failure precisely, state what should have been published before the first delivery, and say what the group is now paying for.

37.13 A district manager reports proudly that they personally expedited three services last week at a struggling unit. Evaluate this against the measure given in §37.4. Under exactly what condition would it be the right call, and what two things must accompany it?

37.14 Explain why a manual that documents a standard you do not actually follow creates more exposure than having no manual at all. Give two distinct examples from different areas of the business.

C. Cost this

37.15 † Cost the commissary. A four-unit group is pricing a leased central production kitchen. Fixed annual costs: 1,400 sq ft at \$14 per sq ft all-in; equipment lease and amortization \$9,000; utilities \$6,800; licensing, insurance, pest and waste \$4,200; one production lead at \$64,000 fully loaded; delivery van, fuel and insurance \$8,400; driver hours of 16 per week at \$21 fully loaded. Compute the total annual cost of having this commissary. Show the driver line as a separate calculation.

37.16 † Using your answer to 37.15: each unit served removes 12 prep hours a week at \$21.50 fully loaded, gains \$3,200 of annual purchasing benefit and \$1,900 of annual waste reduction, and gives back 5 hours a week of marginal commissary labor at \$20.50 fully loaded. Compute (a) the net annual saving per unit, (b) the break-even number of units, and (c) the annual result for this four-unit group. Is the project viable as structured?

37.17 Rework 37.16 for a rented hourly commissary instead of a leased one. There is no space, equipment, utilities, licensing, or production-lead cost. Instead: 20 hours a week of shared kitchen at \$32 per hour all-in; 20 hours a week of production labor at \$22 fully loaded; the same van at \$8,400; and a driver at 12 hours a week at \$21 fully loaded. Per-unit savings are the same 12 removed prep hours plus purchasing and waste, with no marginal-labor give-back (production labor is now explicit in the fixed cost). Compute the new annual fixed cost, the new break-even, and the four-unit result. What single sentence does the comparison of 37.16 and 37.17 teach?

37.18 A unit with a large kitchen and a soft Monday begins producing sauces for two sister units. Its labor line now carries production for restaurants it does not own. Describe the accounting treatment needed to keep all three units' profit-and-loss statements comparable, and state precisely what breaks in the multi-unit reporting package if you skip it.

D. Price it, allocate it, decide it

37.19 † Allocate this. A three-unit group carries \$190,000 of annual shared overhead. Unit revenues are \$1,800,000, \$1,550,000, and \$1,100,000. Allocate the overhead (a) equally across the three units and (b) pro rata on revenue. Show each unit's allocated overhead to the dollar under both methods and confirm each set sums to \$190,000. Which method would you use, and what behavior does the other one produce in a unit manager who is measured on profit after allocation?

37.20 Set a transfer price for commissary-produced demi-glace moving to the units. Name three defensible bases for that price and state, for each, what behavior it produces at the receiving unit and what it does to that unit's food cost percentage.

37.21 † The owners of the group in Figure 37.5 propose a further 3.0% menu price increase next period to keep comparable sales positive. Using the decomposition in that figure, argue for or against. Then state the one number you would require before agreeing to it, and what value of that number would change your answer.

E. Build this to a target

37.22 † Build the visit schedule. A district manager has 45 usable hours a week, 10 of them fixed. Their district contains: two stable units; one unit whose general manager starts Monday; one unit that failed two audit criticals last week; and one unit opening in nine weeks. Build a weekly plan that fits inside 35 available hours. State explicitly what you are choosing not to do, and name what you would ask the owners for and why.

37.23 Build the period calendar for a three-unit group. Choose four-week periods or calendar months and defend the choice in one sentence. Then specify: inventory count day and time, period close day, flash-report distribution day, and period-package distribution day. Justify each in one sentence, and say what goes wrong if two units count on different days.

37.24 † Build the audit. Write a 20-item leadership operations audit for a single Bellwether-style restaurant. Allocate exactly 100 points across five sections in proportion to consequence. Designate exactly six critical items that cap the result regardless of score. Every item must survive the test: would a guest, a regulator, or the P&L notice? Note beside each item whether it measures a result or a method, and justify any method item.

37.25 Build the staffing guide change that has to accompany 37.17. If 12 prep hours a week come out of each unit, write the specific schedule change you would publish — which shift, which position, which day — and state how you would verify in week four that the hours actually left.

F. Read this and find the leak

37.26 † Read this constructed period summary for a four-unit group and state, in order, the three things you would investigate and why. Say which unit you would visit first.

37.27 A group's consolidated prime cost is 60.4%, comfortably inside a 61.0% exception threshold. Describe two entirely different unit-level situations that would produce that same consolidated number, and state exactly what must be added to the report to distinguish them.

37.28 † A unit's cash over/short has been within \$10 every week for two periods, while its pour cost has risen 3.2 points over the same span. Using Chapter 34's investigation ladder, list what you check and in what order. Explain why a perfect drawer is not reassuring here, and name the two non-theft explanations you must rule out first.

37.29 Comparable sales for a four-unit group are +2.8%. Traffic is −0.4%, price is +3.4%, and mix is −0.2%. Verify that these three are consistent with the reported comp. Interpret the result in two sentences and state what you would do about it before the next period.

G. Write this

37.30 † Write the one-page service standards document for Bellwether's dining room. Obligations only — no scripts. Maximum twelve items. Every item must be observable by an auditor standing in the room, and none of them may specify words a server has to say.

37.31 Write the delegation-of-authority table for a two-unit group with two owner-partners and two general managers. Include the owners as rows, not as exceptions. Cover at minimum: purchase orders, guest comps, hiring, terminations, capital expenditure, vendor contracts, and payroll changes. Set a dollar threshold and a second-signature rule for each.

37.32 † Write the memo a district manager sends on Monday morning to the general manager of Unit 3 in Figure 37.6 — the unit with nine exceptions and one critical. Three actions, each with a role and a date. It must open with the critical, it must not be a lecture, and it must name what support the district manager is providing rather than only what the unit owes.

37.33 Write the section of a group operations manual that explains how the manual itself is maintained: who owns each section, review intervals, how a change is proposed by anyone at any unit, who decides, and how the change reaches the station. One page.

H. Judgment and ethics

37.34 † A unit manager's quarterly bonus is tied to prime cost. Their prime cost is excellent. Their trailing turnover is 118%, and two servers have separately mentioned that they are asked to clock out and finish side work. State what you do first, second, and third. Then say what this episode reveals about the design of the bonus, and rewrite the bonus so this outcome is harder to produce.

37.35 Your best unit's general manager tells you informally, and asks you to keep it off the record, that they filled in two weeks of cooling logs from memory during a compressor failure because they were afraid of the audit result. Nobody became ill. Walk through your options. State what you do, what you document, what you tell the other units, and — the important part — what you change about the system that produced this behavior in a good manager.

37.36 A group ties 20% of every general manager's bonus to guest review scores. Within two periods, average scores rise at all four units and comparable traffic is flat. Name three mechanisms other than improved hospitality that could produce this, and describe the one measurement you would add to tell them apart.

I. Business Plan extension

37.37 † Business Plan extension — assemble the manual. Build Bellwether's operations manual index from the fifteen-section structure in §37.2. For each section: cite the chapter of your plan that supplies the content, mark it Written / Partial / Missing, name the role that owns it, and set a review interval. Then convert the checkpoint's three-item, twelve-month readiness plan into a dated schedule with a cost estimate for each item and the specific evidence that would prove each one is done.

37.38 Business Plan extension — the absence test. Design the eight-week test described in the checkpoint: a non-owner general manager runs the room with both owner-partners absent two services a week. Specify the metrics measured, the thresholds, who audits, what would constitute a pass, what would constitute a fail, and what you would do differently in the second attempt if it failed for reasons that had nothing to do with the manager.

37.39 Business Plan extension — the multi-unit flash report. Take Chapter 31's single-unit weekly flash report and produce the multi-unit version: per-unit columns, a consolidated column, and a comparability footnote. Then write the six definitions from §37.6 that must be identical across units, as they would appear in the manual, for Bellwether specifically.

37.40 Business Plan extension — the honest ending. Write the two-paragraph section of the business plan titled Growth Strategy that Bellwether's owners could put in front of a reader today. It must state the current answer honestly, name the three things that would have to change, and avoid both false modesty and unearned confidence. Do not promise an outcome the plan has not tested.