Marketing
You are a marketing director for a Mexican Taco Restaurant located in Lynchburg, VA. The average order
size of your customers is $7.00 per order. That means that when all your food orders are divided by your
total number of customers, the average order amount is $7.00.
Your Role/Assignment
Your variable cost per order is $3.00 in food costs and paper products. Of course, there are also fixed
costs (whether you sell one or a hundred). These include your building lease ($2,000 per month,
electricity $500 per month, and labor $3,100 per month).
Using this formula, what is the break-even point? In other words, how many meals, at $7.00, would need
to be sold before you start making a profit?
Fixed costs/Average order – variable costs = Break-even point (Number of meals)
The problem is that, even after being in business for a year, your restaurant is selling slightly less than
1,000 meals. There are several actions that can be taken to reach your break-even point, which is
necessary if you are to remain in business. As the marketing director is responsible for the product, price,
promotion, and placement, you control many of the tools to make necessary adjustments.
Marketing 2
Introduction
Breakeven point for the hotel is the amount of food that the hotel can sell in order for it paid its
basic expenses and other fixed cost without generating any profit.
Price 7
Variable cost 3
Fixed costs 2000
3100
500
Price 7
Variable cost 3
Fixed cost 5600
Contribution 4
B/even 5600/4
B/even 1400
The breakeven sales from in terms of units is 1400 while in terms of dollars is 1400 x 7 = $9800
To improve the sales from the 1000 units that is the current trend to over 1400 units, the hotel
must first undertake cost reduction strategies that will enable it reduce its fixed costs and
maximize its generation of sales. These can be achieved by differentiating and positioning its
services as unique and unrivalled in that area (Kotler, Keller, Brady, Goodman & Hansen, 2012).
These can be achieved through product branding and also introducing new and authentic cuisines
that would attract new customers. The location of the restaurant should also be evaluated and its
contribution analyzed to confirm if it’s contributing to its dismal performance. The cost of the
food in the general area should also be surveyed and compared with the general prices the
Woolworths Group Plc 3
restaurant is charging to confirm the standard food prices in the region or area. Maybe the
charges of the food in the restaurant is above the average being charged in the area hence the
need to review the kind of food that’s common in that location and the average prices being
charged. The restaurant should also motivate the staff members to make them work harder and
be more productive.
Finally, the restaurant should embark on aggressive marketing strategy that will enable it win
over more clients in terms of improved service and food provision.
Marketing 4
References
Kotler, P., Keller, K. L., Brady, M., Goodman, M. & Hansen, T. (2012) Marketing Management,
2nd edition, Essex: Pearson Education Limited.
