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Charley’s family steak house. Class Announcements. Service Learning Assignment: Progress Report should be completed one week after initial meeting with the client – those submitted will be returned next class Final presentations should include Danika LeBlanc or I
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Class Announcements • Service Learning Assignment: • Progress Report should be completed one week after initial meeting with the client – those submitted will be returned next class • Final presentations should include Danika LeBlanc or I • Service Learning Final Report (group) due March 31st (flexible) • Final Exam 7:00pm April 11, 2014 in SCHW • Assignment #5 due April 3rd; available on-line
Class Objectives • Considering the components of performance measurement • Understanding performance measurement effectiveness • Linking performance measurement to compensation
Charley’s Family Steak House • Company Context: • Charley Turner’s four steak restaurants • Located in a rapidly growing mid-size city in Texas • Restaurant goal – best steak house in the city • Characterized by: • Pleasant atmosphere • Fast and courteous service • High quality food • Freshly prepared good • Reasonable prices • Innovative express lunch option
Charley’s Family Steak House • Company Context: Unit 2 • Alex Pearson is the manager of Charley’s Steakhouse Unit 2 (since one year) • Seating for 150 customers • Employs 18-20 people • Menu featured 4-6 items in each of four categories ranging in price from $1.99 (Small salad) to $16.99 (Lobster dinner) • Feature an express service for frequent lunch time customers
Charley’s Family Steak House • Company Context: Customer Segments • Community • Located next to a shopping mall • Business community • Offices are nearby • No eating establishment within one mile radius • Hotel • 100 room budget motel with no restaurant within walking distance
Charley’s Family Steak House • Company Context: Evaluation • Plans to implement a new bonus plan • 25% of salary in bonuses • Specific performance measures not yet determined • Suggestions from managers not solicited • Comparison between budget and actual • Original budget prepared was aggressive and optimistic • Profit is $46,490 less than planned • Severity of the recent recession
Charley’s Family Steak House • Issues: • How did actual sales compare with planned sales? • Profit is $46,490 less than planned • Actual sales vs planned sales – variance analysis • Sales mix analysis • Customer use of coupons • How well were costs and expenses controlled? • Actual expenses vs planned expenses – variance analysis • Performance Evaluation • Comparison of planned vs actual • New bonus plan
Charley’s Family Steak House • Conclusions: Budget vs Actual • Actual operating profit for Unit 2 is $47,490 less than anticipated • Actual profit for Unit 2 is $62,180 less than the flexible budget • Customer mix change from 40/60 to 50/50 which changed weighted contribution margin from $1.84 to $1.63 per customer • Customers made use of coupons in greater number than anticipated perhaps because of the recession ($105,213 more than anticipated).
Charley’s Family Steak House • Conclusions: Evaluation System • Participatory – no consultation • Inventive and risk – none communicated • Goal congruence – not linked to overall except generally (e.g. best steak house in town) • Fair and objective – unknown measures • Attainable – Optimistic and aggressive, high expectations.
Charley’s Family Steak House • Conclusions: Evaluation System - Controllability • Prices - are set (over 10%) by Charley • Ordering - of food done centrally • Coupons (discount) - good at all four locations • Recent economic recession -was not forcastable • Advertising - is managed by Charley • Management charge - is assessed by Charley
Class Objectives - Revisited • Considering the components of performance measurement • Understanding performance measurement effectiveness • Linking performance measurement to compensation
