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Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Question 2
Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits. Extract ... show full transcript
Worked Solution & Example Answer:Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Step 1
Evaluate the option: Upstairs renovation
Answer
The upstairs renovation aims to double the seating capacity, allowing for increased customer volume. This could ultimately drive higher sales revenue, provided the restaurant maintains a steady flow of customers. Additionally, private party bookings would create new revenue streams. However, the renovation comes with a significant investment of £140,000, which may take time to recoup. Furthermore, any delay in furniture installation could impact turnover during peak months, reducing the potential for profits.
Step 2
Evaluate the option: External catering
Answer
External catering provides an opportunity to serve local businesses, potentially increasing customer base without the need for extensive renovations. This option, while less disruptive, requires an initial investment of £8,000 for the kitchen setup. It diversifies revenue sources but relies on the restaurant's ability to attract new customers, which can pose a risk. The potential success of this model highly depends on effective marketing and the restaurant's relationships with local businesses.
Step 3
Recommendation
Answer
Considering the evaluation of both options, the external catering route may be the more stable choice for Holly and Andy. It requires a smaller investment and allows the restaurant to diversify its offerings without significant disruption. However, they should carefully assess their resources and capacity to ensure high-quality service in both the restaurant and catering aspects. If they effectively leverage local networks and market their services, this option could yield a more immediate return on investment.