RESTAURANT MARKET PLACE ANALYTICS Harvard Case Solution & Analysis

RESTAURANT MARKET PLACE ANALYTICS Case Solution

Methodology for Analysis

            The return on investment methodology has been used to calculate and compare the value of each of the three restaurants for InstaFood and revisit the service fee strategy. The return on investment for InstaFood would determine the restaurant from where InstaFood is gaining a maximum amount of value, given the current cost and revenue structure. However, as the initial investment or the amount of the budget for each restaurant is not provided in the marketplace information, therefore, the return on investment measure has been computed on the basis of the set of assumptions which are discussed in next section.

Assumptions

            A number of assumptions have been made to analyze and calculate the value for each of the three restaurants. First of all, we have been provided with weekly data for each restaurant. For instance, we have been provided average number of the weekly eaters, week on week eater’s base growth and the number of the weekly order per eater. However, since we will be focusing on return on investment therefore, we need to have annual figures because return on investment is usually calculated on an annual basis.

Therefore, the total numbers of the weeks in each year have been assumed. For instance, if we assume that the total number of weeks in each month is on average 4 and as there are 12 months in a year therefore, the total number of weeks per year would be 48. 48 weeks would be used to compute the cost and revenue figures for each year. Apart from this, a second assumption is the initial investment or the budget of InstaFood Company. Moreover, the number of the Twitter followers is also different for each of the three restaurants.

Therefore, the initial investment which would have been investment by InstaFood in setting up the whole restaurant base has been assumed to be $ 1000,000. This would remain same for each of the three restaurants since a single investment would have been made and this will also enhance our comparison of the value generated by each of the three restaurants in terms of return on investment. Finally, the analysis for each restaurant has been performed for a period of 4 years and the net revenue earned by Insta Food is equal to profitability.

Analysis of Restaurant 1

            First of all, the analysis for restaurant 1 has been performed for a period of 4 years. Based on the average number of the weekly eaters of 1000, with weekly order of 1 per eater and a weekly base growth of 5%, the annual number of the total orders has been calculated for 48 weeks. The revenue per order for this restaurant is $ 22 per order which is used to calculate the total revenue. The delivery charges per order are $ 4 per order. Since, InstaFood pays these charges to its bike couriers from the total price which is paid by the eaters, therefore, the annual delivery charges have been calculated and then deducted from the total revenue. After this, the service fee percentage of 22% has been applied on the remaining gross revenue to calculate the share of the revenue which is received by InstaFood for its services. The revenues of each of the four years have been averaged to calculate the average revenue/profitability for restaurant 1 of $ 204,817. The initial investment has been assumed to be $ 1000,000 which gives us a return on investment of 20.48% for restaurant 1...................

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