How should Restaurants manage their pricing and costs during COVID-19?
When trying out a What-if analysis, begin with the objective! In our example, we ran the restaurant's current fixed costs, variable costs (per plate), and revenues (per plate).
Based on the calculation Breakeven = Fixed Costs/(Revenue per plate - Variable Costs per plate), we figured that the restaurant needs to sell 4443 plates of food per month before it starts making a profit.
The question we asked was, with COVID restrictions, space allocation has been halved. Do, if the restaurant can only sell half the plates (2221 plates per month instead of 4443 plates), what costs can the restaurant reorganize to break-even with half the sales?
Common company cost-cutting choices are one of two. Either cut employee costs or increase prices. So, let's look at how we could work them into the What-if analysis!
