Chapter 39 — Self-Check Quiz
Twenty-six questions. Answer key in the collapsed block at the bottom. Where a question touches a legal obligation, the fully correct answer includes "and verify the rule in your jurisdiction."
Multiple choice
1. The turnaround diagnostic's Step 1 asks whether your best service of the week clears cash break-even. If the answer is no, what have you learned?
- A. You have an execution problem and should start a ninety-day turnaround
- B. You should re-price the menu immediately
- C. Execution cannot save you; you must separate a concept problem from a math problem
- D. You should cut labor on your slowest three nights
2. Which pair of tests distinguishes a concept problem from a math problem?
- A. Prime cost versus food cost
- B. Break-even covers versus physical capacity at realistic turns
- C. Average check versus the competitive set's average check
- D. Labor percentage versus the staffing guide
3. Bellwether's downside case nets \$3,820 on \$1,258,920 of sales, with a marginal contribution of \$26.33 per dinner cover and 260 dinner services a year. The annual cushion is closest to:
- A. Six covers a night
- B. Three covers a night
- C. About half of one cover a night
- D. Twelve covers a night
4. One point of prime cost on \$1,258,920 of sales, at \$6,845 of annual contribution per cover-per-night, raises the break-even by approximately:
- A. 0.4 covers a night
- B. 1.8 covers a night
- C. 4.6 covers a night
- D. 9.2 covers a night
5. A ninety-day turnaround board shows \$79,200 annualized and \$17,000 realized in ninety days. Which figure belongs in a thirteen-week cash plan, and why?
- A. \$79,200, because it is the true run-rate value of the program
- B. \$17,000, because measures ramp and a quarter is a quarter
- C. The average of the two, to be conservative
- D. Neither; cash plans should exclude turnaround effects entirely
6. A restaurant's distributor moves the account from net-14 terms to cash on delivery. On \$24,210 of weekly sales at 29.0% product cost, the cash requirement pulled forward is approximately:
- A. \$7,021
- B. \$14,042
- C. \$21,063
- D. \$3,510
7. Which of these is not something a ninety-day operational turnaround can do?
- A. Move three to five points of prime cost
- B. Recover most of a previously identified control-leak exposure
- C. Create demand that was not already there
- D. Improve the rate at which cash accumulates
8. In a Chapter 11 bankruptcy, an unexpired lease may be:
- A. Only assumed
- B. Only rejected
- C. Assumed or rejected, with the landlord's rejection-damage claim capped by a statutory formula
- D. Neither; leases are unaffected by a filing
9. A restaurant entity files for Chapter 7 bankruptcy. What happens to the owner's personal guaranty on the lease?
- A. It is discharged along with the entity's debts
- B. It is stayed permanently
- C. Nothing — the guaranty is a separate obligation of a separate person who has not filed
- D. It is reduced to one year of rent by operation of law
10. Which statement about a corporation or LLC in a Chapter 7 bankruptcy is correct?
- A. It receives a discharge on liquidation
- B. It receives no discharge; the entity simply ends
- C. It receives a discharge only if the owners also file
- D. It receives a partial discharge proportional to assets liquidated
11. Bellwether's closure floor is \$65,662 and its monthly fixed obligations are \$48,933. The floor expressed in days of fixed obligations is closest to:
- A. 14 days
- B. 21 days
- C. 40 days
- D. 62 days
12. Bellwether's cash reserve at opening is \$8,700 — 5.3 days. The correct reading of this alongside the closure floor is:
- A. The reserve is adequate because closure costs can be paid from equipment sales
- B. On day one the business cannot fund an orderly closure, so only the disorderly exit is available
- C. The floor is irrelevant until the restaurant is actually failing
- D. The reserve should be spent first, since the floor accrues later
13. In a forced sale, proceeds from restaurant equipment subject to a lender's lien on business assets generally:
- A. Belong to the owner and can fund final payroll
- B. Are split evenly between the owner and the lender
- C. Go to the secured lender and reduce the note
- D. Go first to unsecured trade creditors
14. A price increase of \$3 that costs four covers a night can still be profitable primarily because:
- A. Fixed costs fall when covers fall
- B. The departed covers take their product cost with them, and the added price is nearly all margin
- C. Labor is fully variable at the margin
- D. Average check and covers are independent variables
15. In the lunch pivot example, incremental labor of \$430 a service against a \$12.35 contribution per cover means the service must do at least:
- A. 22 covers
- B. 29 covers
- C. 35 covers
- D. 48 covers
16. Which is the cheapest pivot axis and therefore the one to test first?
- A. Concept
- B. Service model
- C. Daypart
- D. Price point
17. The most useful preparation before asking a landlord for rent relief is:
- A. A letter explaining how hard the year has been
- B. A computation of what it costs the landlord to replace you
- C. A promise to sign a longer term
- D. A list of nearby restaurants that also closed
18. Withheld employee payroll taxes are best described as:
- A. An ordinary payable that can be stretched like any other
- B. Money held in trust, with potential personal liability for responsible individuals
- C. A cost of goods sold item
- D. Dischargeable in a business bankruptcy along with trade debt
19. In an orderly closure, staff are told:
- A. On the final day, to prevent early departures
- B. After the guests, so the announcement is coordinated
- C. Before guests and before the public, with the final date, final pay date, and what each is owed
- D. Only individually, at their next scheduled shift
20. Final pay timing at separation is governed by:
- A. A single uniform federal rule
- B. The employer's written policy in all states
- C. State-specific rules that vary substantially, sometimes with penalties for lateness
- D. The terms of the commercial lease
Short answer
21. State the five steps of the turnaround diagnostic in order, in one line each.
22. Explain why the break-even ladder "climbs toward you as you deteriorate," and give the mechanism in one sentence.
23. Why is "you have stopped opening the flash report" listed as an immediate-action trigger? What is it actually measuring?
24. A guaranty's face value is \$1,032,600 and the realized claim in the worked example is \$173,034. Name the mechanism that produces the difference and two things that could defeat it.
25. Give the rule that decides whether to keep a restaurant open after a terminal diagnosis, and then give three legitimate reasons that satisfy it.
26. Explain the difference between a lease assignment and a sublease from the guarantor's point of view, and say which one an operator in distress should pursue first and why.