CHARLEYS FAMILY STEAK HOUSE. Class Announcements Service Learning Assignment: Progress Report should be completed one week after initial meeting with.

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

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

1. Considering the components of performance measurement

2. Understanding performance measurement effectiveness

3. 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

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of1994 Sales 1994 Sales

Gross Sales 1,936,025 100.0% 1,861,860 100.0%Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6%Food 1,025,870 53.0% 1,024,020 55.0%Labour 207,000 10.7% 220,000 11.8%Expenses 152,450 7.9% 148,950 8.0% Contribution 341,405 17.6% 368,790 19.8%Advertising 78,625 65,165Miscellaneous 3,320 3,000Depreciation 24,000 24,000Insurance 9,780 9,400Taxes and licenses 10,940 11,700Rent (Base) 72,000 72,000Rent (Overage) 26,980 23,275Management 98,000 95,000 Operating Profit 17,760 65,250

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of Variance1994 Sales 1994 Sales 1994

Gross Sales 1,936,025 100.0% 1,861,860 100.0% 74,165Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6% -35,035 Food 1,025,870 53.0% 1,024,020 55.0% 1,850Labour 207,000 10.7% 220,000 11.8% -13,000 Expenses 152,450 7.9% 148,950 8.0% 3,500 Contribution 341,405 17.6% 368,790 19.8% -27,385 Advertising 78,625 65,165 13,460Miscellaneous 3,320 3,000 320Depreciation 24,000 24,000 0Insurance 9,780 9,400 380Taxes and licenses 10,940 11,700 -760 Rent (Base) 72,000 72,000 0Rent (Overage) 26,980 23,275 3,705Management 98,000 95,000 3,000 Operating Profit 17,760 65,250 -47,490

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of Variance Flexible % of1994 Sales 1994 Sales 1994 1994 Sales

Gross Sales 1,936,025 100.0% 1,861,860 100.0% 74,165 1,936,025 100.0%Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6% -35,035 1,831,938 94.6%Food 1,025,870 53.0% 1,024,020 55.0% 1,850 1,064,811 55.0%Labour 207,000 10.7% 220,000 11.8% -13,000 228,763 11.8%Expenses 152,450 7.9% 148,950 8.0% 3,500 154,883 8.0% Contribution 341,405 17.6% 368,790 19.8% -27,385 383,480 19.8%Advertising 78,625 65,165 13,460 65,165Miscellaneous 3,320 3,000 320 3,000Depreciation 24,000 24,000 0 24,000Insurance 9,780 9,400 380 9,400Taxes and licenses 10,940 11,700 -760 11,700Rent (Base) 72,000 72,000 0 72,000Rent (Overage) 26,980 23,275 3,705 23,275Management 98,000 95,000 3,000 95,000 Operating Profit 17,760 65,250 -47,490 79,940

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of Variance Flexible % of Variance1994 Sales 1994 Sales 1994 1994 Sales 1994

Gross Sales 1,936,025 100.0% 1,861,860 100.0% 74,165 1,936,025 100.0% 0Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6% -35,035 1,831,938 94.6% -105,213 Food 1,025,870 53.0% 1,024,020 55.0% 1,850 1,064,811 55.0% -38,941 Labour 207,000 10.7% 220,000 11.8% -13,000 228,763 11.8% -21,763 Expenses 152,450 7.9% 148,950 8.0% 3,500 154,883 8.0% -2,433 Contribution 341,405 17.6% 368,790 19.8% -27,385 383,480 19.8% -42,075 Advertising 78,625 65,165 13,460 65,165 13,460Miscellaneous 3,320 3,000 320 3,000 320Depreciation 24,000 24,000 0 24,000 0Insurance 9,780 9,400 380 9,400 380Taxes and licenses 10,940 11,700 -760 11,700 -760 Rent (Base) 72,000 72,000 0 72,000 0Rent (Overage) 26,980 23,275 3,705 23,275 3,705Management 98,000 95,000 3,000 95,000 3,000 Operating Profit 17,760 65,250 -47,490 79,940 -62,180

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of Variance Flexible % of Variance1994 Sales 1994 Sales 1994 1994 Sales 1994

Gross Sales 1,936,025 100.0% 1,861,860 100.0% 74,165 1,936,025 100.0% 0Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6% -35,035 1,831,938 94.6% -105,213

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual % of Planned % of Variance Flexible % of Variance1994 Sales 1994 Sales 1994 1994 Sales 1994

Gross Sales 1,936,025 100.0% 1,861,860 100.0% 74,165 1,936,025 100.0% 0Net Sales (net coupons) 1,726,725 89.2% 1,761,760 94.6% -35,035 1,831,938 94.6% -105,213

Coupons 209,300 10.8% 100,100 5.4% 109,200 104,087 5.4% 105,213

Charley’s Family Steak HouseCharley's Family Steak HouseOperating Profit Statement

Actual Planned VarianceSupporting Data 1994 1994 1994Average Weekly customer count 4,025 3,870 155.00% customers - lunch 50% 40% 10%% customers - dinner 50% 60% -10%Gross average check - lunch 7.50$ 7.50$ -$ Net average check - lunch 6.50$ 7.00$ 0.50-$ Gross average check - dinner 11.00$ 10.50$ 0.50$ Net average check - dinner 10.00$ 10.00$ -$

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual Planned VarianceSupporting Data 1994 1994 1994Average Weekly customer count 4,025 3,870 155.00% customers - lunch 50% 40% 10%% customers - dinner 50% 60% -10%Gross average check - lunch 7.50$ 7.50$ -$ Net average check - lunch 6.50$ 7.00$ 0.50-$ Gross average check - dinner 11.00$ 10.50$ 0.50$ Net average check - dinner 10.00$ 10.00$ -$

Contribution margin - overall 17.6% 19.8% -2%Contribution margin - lunch 1.32$ 1.49$ 0.16-$ Contribution margin - dinner 1.94$ 2.08$ 0.14-$

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual Planned VarianceSupporting Data 1994 1994 1994Average Weekly customer count 4,025 3,870 155.00% customers - lunch 50% 40% 10%% customers - dinner 50% 60% -10%Gross average check - lunch 7.50$ 7.50$ -$ Net average check - lunch 6.50$ 7.00$ 0.50-$ Gross average check - dinner 11.00$ 10.50$ 0.50$ Net average check - dinner 10.00$ 10.00$ -$

Contribution margin - overall 17.6% 19.8% -2%Contribution margin - lunch 1.32$ 1.49$ 0.16-$ Contribution margin - dinner 1.94$ 2.08$ 0.14-$

Contribution margin - overall 341,405 370,706 -29,301 Contribution margin - lunch 138,407 119,583 18,825Contribution margin - dinner 202,998 251,123 -48,126

Charley’s Family Steak House

Charley's Family Steak HouseOperating Profit Statement

Actual Planned VarianceSupporting Data 1994 1994 1994Average Weekly customer count 4,025 3,870 155.00% customers - lunch 50% 40% 10%% customers - dinner 50% 60% -10%Gross average check - lunch 7.50$ 7.50$ -$ Net average check - lunch 6.50$ 7.00$ 0.50-$ Gross average check - dinner 11.00$ 10.50$ 0.50$ Net average check - dinner 10.00$ 10.00$ -$

Contribution margin - overall 17.6% 19.8% -2%Contribution margin - lunch 1.32$ 1.49$ 0.16-$ Contribution margin - dinner 1.94$ 2.08$ 0.14-$

Contribution margin - overall 341,405 370,706 -29,301 Contribution margin - lunch 138,407 119,583 18,825Contribution margin - dinner 202,998 251,123 -48,126

Weighted Contribution Margin 1.63$ 1.84$ 0.21-$

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

1. Considering the components of performance measurement

2. Understanding performance measurement effectiveness

3. Linking performance measurement to compensation