Wendy's Chili Case Essay

1863 Words Aug 23rd, 2013 8 Pages
Executive Summary
Dave loved a good burger, and was tired of waiting over 30 minutes for one. So he opened his own restaurant and named it Wendy’s, after his daughter. One thing that always plagued the decision makers, how much does it cost to make a bowl of chili? Should they keep or eliminate the chili product from the menu? After, analyzing full cost and out-of-pocket; the choice not to eliminate Wendy’s chili would benefit them in the long run.
Introduction
In 1969, R. David Thomas founded Wendy’s, named after his youngest daughter. “His goal was to provide customers with bigger and better hamburgers that were cooked to order, served quickly, and reasonably priced (p. 1).” Wendy’s achieved its initial success by differentiating
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This method does not properly forecast the high and low season of chili sales. It assumes that Wendy’s Chili is always made from scratch; all patties made are all sold and is worse case scenario if the Chili has to be cooked during the low season or 10 percent of the time. If this was the case, where the chili has to be made from scratch, then all employees will need to be aware that they should push the sale of the 12 oz chili to minimize the loss by over per serving or per batch.
At Out-of-Pocket, the cost of a chili bowl is $24.09 per batch ($ 0.42 per 8 oz or $0.63 per 12 oz serving). This is the Spilt off Point, where the chili is processed further from, overcooked or unsold patties is at time of sale. The allocation of cost does not include the cost of making the patties because it already is included in making of the burger and assumes that over the course of 1 to 2 days will accumulate 48 over cooked or unsold patties; all other cost remains the same. The Out of Pocket calculation yields a higher profit margin of $32.34 ($0.57 per 8oz serving) and $36.33($0.96 per 12 oz serving) and looks more favourable than the Full cost method. This might not constantly sustain if both burger and chili’s high demand season is from October to March.
Recommendations
The analysis would be more accurate if Wendy’s provided more data, such as: number of patties made, number of chili bowl sold at 8oz and 12 oz, how many times (month by month) did the Assistant Manager had

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