Mongolian Grill Case

Mongolian Grill Case

Tanner Keelan
Submitted to: J. Austin Davey & Tannys Laughren
COMM 1006E-02
November 10, 2014
Executive Summary: The Mongolian Grill case is based around a successful restaurant in London, Ontario owned by John Butkus. Mr. Butkus is opening another Mongolian Grill in Waterloo, Ontario which gives him the opportunity to make adjustments from the London location to increase efficiencies to ensure great success in Waterloo. The biggest problem for the London location is that it is so busy on Thursdays, Fridays, and Saturdays that it has to send potential customers away. To fix this Mr. Butkus has to create a shorter customer experience to open up tables and serve more people. The decision recommended was to add an additional food bar as well as moving the grill to a more central location as opposed to being tucked in the corner which only leaves a small amount of counter space for customers to view their food being cooked. With the new floor plan Mongolian Grill will in theory make $2,200 more on Thursday, Friday, and Saturday, which comes to $330,000 more per year. All of this being done without sacrificing quality or service is possible and may actually increase service due to the faster serving times. The initial cost being an extra $24,400 is miniscule compared to the potential payout in the first year which leaves a balance of $305,600 after taking that cost out of the total extra revenue earned with the new floor plan.

Problem Statement:
John Butkus is opening a new location in Waterloo, and at his already established location in London, he has a problem with not being able to meet the demand of the market during his busy times on Thursday, Friday, and Saturday; therefore he has to push potential customers off to other restaurants and lose their business. He has the opportunity to go with a new layout at the Waterloo location that will increase the restaurants ability to serve more customers, but Mr. Butkus must decide if this the best decision for his restaurant.

Sub Issues:
Mongolian Grill is an attractive restaurant choice for many demographic categories because of its food quality and interactive environment, therefore there are many factors that theoretically look like they will increase sales such as increasing capital or labour but may be detrimental to the culture of Mongolian Grill.
Overcrowding is an example of this, because if for example they have 2 food stations and then one central grill, a bottleneck effect is likely to happen and this will put a damper on the atmosphere. Instead of customers excitingly collecting their food and then watching the cook prepare it for them (like the London location), they will be waiting in lines while people select their food and then by the time they get to the cook they will be so impatient that the enjoyment of the whole experience will be replaced with irritation of waiting.
As for the cost of additional equipment, it’s a high risk going into an unknown market such as Waterloo and paying off this equipment will come right from the profits. Therefore if the restaurant is not as busy as projected then there will be an even larger chance of going into debt because of extra equipment that the single food bar could have handled.
The Mongolian Grill in London’s layout clearly is a successful layout. Although innovation is a necessity for survival in the restaurant business, changing the layout may be a risk not worth taking for Butkus because London and Waterloo are generally similar markets therefore it would seem like the layout would be transferrable considering the results at the London location are positive.

Production Task:
1. Quality
2. Function
3. Service
4. Price
5. Quantity
Quality in the restaurant business is number one because Mongolian Grill like most other restaurants gain market share in a new city by having better food than the restaurants that already have a solid customer base. Next is function because in an all-you-can-eat setting, the flow of the operation can make or break the customer’s experience. Service is similar to function because service is a key part of the final product at Mongolian Grill due to the cooks being involved with the customer’s experience and the quality at which their food was prepared. Price is important in the sense that every decision must be cost conscious in order to keep the prices low enough to have a high demand from their market in Waterloo which involves a lot of young people and university students who are on tight budgets. Quantity is ranked last because Mongolian grill is already successful therefore it is not a priority when decision making.

Production Process: The Mongolian Grill production process involves the customers, which is a selling point for them because of the “interactive cooking experience” that other restaurants like Swiss Chalet do not. They have a line flow process where customers have checkpoints in the production process where they can decide what they want in their dish. It is also partially a Job Shop and Batch process because of the flexibility of the process due to the fact that the employees do not have much control over if the customers skip certain steps or add a variety of spices and sauces whenever they please. The largest problem of this process is the bottleneck effect. This process is prone to this problem because due to the nature of the task, people may second guess what they want to put in their dish considering there is a lot of choice. Also for many people especially at the new Waterloo location, it may be their first time therefore they have to think harder about what they will enjoy or like to try thus creating a backup in the production line.

Present Process:
Mongolian Grill’s current process is broken up into sections below, and it is show on the left side of the chart how long each customer takes at each section. The following times are demonstrating the experience on a Saturday night in London.
Area and Description

Time Taken (sec)
Customer walks from table to food bar
25
Customer waits in line at food bar
106
Customer selects food items
161
Customer walks to sauce, oil and spice bar
12
Customer waits in line at sauce, oil and spice bar
94
Customer selects food items
99
Customer walks to cooking station
10
Customer waits for open space
80
Customer waits for food to be cooked
246
Customer walks back to table
33

New Floor Plan:
Costs and Calculations
Second Food Bar - total investment 3200
Second Oil, Sauce, Spice Bar - total investment 2100
One extra kitchen staff (8hrshift*8$/hr*3days*50weekends+tips) 9500
One extra cook (5hrshit*12$hr*3days*3days*50weekends+tips) 9000
Additional counter space - total investment 600
Total Investment 24,400

Time Benefits of New Floor Plan
Time Saved (Sat Night)
Waiting in line at food bar - 90 sec new time 16 sec
Selecting items at food bar- 60 sec new time 101 sec
Waiting in line at SSO bar- 80 sec new time 14 sec
Selecting items at SSO bar- 30 sec new time 69 sec
Waiting for counter space at cook station - 80 sec new time 0 sec
Time saved (assuming it is a full Saturday night and walking times are the same)
London time: 866sec or 14:26min
Waterloo time: 526sec or 8:44min (about 40% faster)

Quantitative Benefits and Costs:
Old Floor Plan:
Average customer makes 3 trips to food bar
Average group of 4-6 people take 90 min from sit down to departure in restaurant
Average Saturday Night 15min a trip* 3 trips = 45min 10min to eat each plate*3plates = 30 min Restaurant Mannerisms (chatting, washroom, etc.)= 15 min Total = 90min
Total Money made at Waterloo restaurant if changes aren’t made: 5 people per group*$20 per person ($15 before tax + tip)*3 groups per table*44 tables = $13,200*50%profit margin = $6,600

New Floor Plan:
Average Saturday Night 9min a trip*3trips = 27min 10min to eat*3plates = 30min Misc. time = 15 min Total = 72min Diff = 18 min or 20% faster

Total Money made at Waterloo restaurant if changes are made: 5 people per group*$20 per person ($15 before tax + tip)*4 groups per table*44 tables*50% profit margin = $8,800

$2,200 average more per night * 3 nights per weekend * 50 weekends = $330,000 extra revenue per year.

Extra Revenue in 1 year – Total Investment = First year Extra Revenue
$330,000 - $24,400 = $305,600
Qualitative Benefits: With the new floor plan, the customer’s experience will improve because the less time they spend up getting their food, the more time they have to eat and talk amongst each other. Also having multiple food bars gives more choice which benefits everyone. Cutting the time down allows the restaurant to seat more people therefore more people will have the opportunity to try the Mongolian Grill in Waterloo and hopefully suggest it to those around them.
Alternatives:
1. Keep the floor plan of the London location.
Pros:
This floor plan has already proven to work sufficiently
Design is well understood for Butkus
Less “trial and error” due to already smoothing out the process in London
Less expensive initially
Cons:
Waterloo has an even larger market so it could be pushing away even more customers than London
Not taking the opportunity to increase efficiency is not a good business decision for the future
Bottleneck effect can still happen with this floor plan

2. New Floor Plan with two food prep areas and moved grill.
Pros:
Faster service for customers/ increased customer satisfaction
Increased long term cash flow
Potential to bring in more revenue every busy night
Cons:
Initial estimated cost of $24,400
If Waterloo ends up being a weak market for Mongolian Grill the extra food prep areas will actually hurt revenue
Bottlenecks still possible

Overall Implications: Mr. Butkus can see that theoretically, moving the grill and adding an extra food bar will decrease the amount of time a group of customers spends at the restaurant but they are customers running the production line therefore it is impossible to know if this will speed up the process due to the lack of control. Also another implication will be that although this may move customers faster, the customer experience may decrease due to factors such as feeling rushed or feeling like the restaurant has too many people coming from two food bars to one grill.
Recommendation:
Mr. Butkus should take on the new floor plan for the Waterloo location which involves an additional food bar and moving the grill to the centre of the serving area. The old floor plan worked but an opportunity to improve revenue is one that any business owner should make as long as it does not sacrifice the quality, function, or service of the restaurant. The research that Mongolian Grill found was that their market was going to be even stronger in Waterloo, so with the new floor plan they will be able to serve more customers but may still be too full to seat everyone that comes to the door. But with the old floor plan you would be pushing away way too much business, therefore with the new floor plan you maximize the capacity of your restaurant.
Contingency Plan:
Installing an extra food bar and moving the grill are two big decisions that are permanent until renovation. But the only way they can hurt the restaurant is if the restaurant is not as busy as projected. This will cause two food bars to be sitting out for customers and if there aren’t enough then the products may expire and go to waste. For short term corrections, if the restaurant isn’t as busy then the company can decide to only have one food bar and close the other food bar until it gets busier again. A long term correction if the restaurant is considered to never be as popular as the Mongolian Grill in London would be to transform the food bar into a drink station which would reduce the waiter/waitress staff needed for each shift and would also include the customers even more while using the unused food bar as a positive instead of just having it closed.