Chili's Restaurant Case Study

ISOM 400
Final Project
12/12/11

Analyzing a Chili’s restaurant:

Step 1:
At what amount in total cost in food and labor will you need to spend to break even in a Chili’s restaurant if you average sales are at $80,000?

* Variable 1: 30% of your total cost is food * Example:
Purchases $500
 * Beginning Inventory $750 * 
Ending Inventory $625 * 
= $500 + $125
= $625 Cost of Food Sales 
 * FOOD COST PERCENTAGE Food Cost = Cost of Food Sales / Food Sales 

Example Food Cost = $625 /$1,850 = 33.8%

* Variable 2: 20% of your total cost is labor * .For example, labor costs $8,000 per month. If the total cost of doing business is $15,000 per month, you divide $8,000 by $15,000, which equals 0.53, or 53 percent. The employee labor percentage, therefore, is 53 percent of the total cost of doing business.
insurance and rent
Equation:

To break even we need our equation to be where everything equals zero:

X=sales
X=.3X + .2X +40,000
80,000=24,000 + 16,000 + 40,000
80,000=80,000

Answer: To break even you need to spend $24,000 in food and $16,000 in labor

Step 2: If the average guest-check for one person at a Chili’s restaurant is $12 (one entrée and one drink), how many people will have to come into the restaurant to cover your food cost?

Food cost is $24,000
X=guest count
24,000=12X

Answer: X=2,000 people

Step