Analysis of Business Decision Making for a Restaurant Chain Expansion

This report provides a comprehensive analysis of business decision-making for a restaurant chain planning to open a second location in London. It details the collection of both primary and secondary data, including the design of a customer questionnaire to gather preferences and choices. The re...Read More

Business Decision
Making

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Creating a plan for primary and secondary data collection...................................................3
1.2 Survey methodology & sampling frame used........................................................................3
1.3 Design a questionnaire to collect data and provide a justification for its design...................4
2.1 Collect data and create information for decision making by summarizing data using
representative values....................................................................................................................5
2.2 Analyzing the results to draw valid conclusions in a business context.................................6
2.3 Analyzing the collected data using measures of dispersion. You must be able to use the
analysis to inform and support decision making..........................................................................7
2.4 Carrying out suitable calculations to draw useful and realistic conclusions and provide
valid recommendations................................................................................................................8
Task 2...............................................................................................................................................9
3.1 Graphs and charts (e.g line, pie, bar chart, histogram, scatter) to clearly and effectively
present the findings......................................................................................................................9
3.2 Creating trend lines in graphs to assist in forecasting for specified business information.. 14
3.3 Preparing a business presentation to disseminate information effectively..........................14
3.4 Preparing a formal Business Report to be presented to the board of directors....................14
4.1 Using appropriate information processing tools to analyze the information.......................15
4.2 Project plan for an activity and the critical path. ................................................................15
....................................................................................................................................................18
....................................................................................................................................................18
4.3 Evaluation of the financial viability of the project..............................................................19
Conclusion.....................................................................................................................................21
References......................................................................................................................................22

Index of Tables
Table 1: Sample Frame....................................................................................................................5
Table 2: Summarizing of data..........................................................................................................7
Table 3: Sales quartile and percentile..............................................................................................8
Table 4: Profit quartile and percentile.............................................................................................8
Table 5: Correlation Coefficient between sales and profit............................................................10
Illustration Index
.Illustration 1: Line graph of Sales.................................................................................................11
Illustration 2: Scatter plot of Sales. ...............................................................................................12
Illustration 3: Bar graph of profit. .................................................................................................13
Illustration 4: Pie chart of the profits............................................................................................14
Illustration 5: Trend chart of sales and profit.................................................................................15
Illustration 6: Gannt chart..............................................................................................................19
Illustration 7: Critical path.............................................................................................................19

INTRODUCTION
For a business success, decision making is an important component for the company.
Decision making helps the company in selecting the best actions from the several alternatives
possibilities (Black, 2011). The present report is based on the scenario of restaurant chain which
is planned to open a second restaurant in London. This report is going to explain the collection of
primary and secondary data and a questionnaire to collect data will be design. Furthermore,
different calculations of mean, median, mode, quartile, percentile and correlation coefficient will
be calculate along with their conclusions. Line, pie, bar chart and graphs for sales, cost and
profits are forecast. Evaluation of different investment appraisal tools and the critical path are
covered in this report.
TASK 1
1.1 Creating a plan for primary and secondary data collection
To start a second chain of restaurant in London, it is necessary to collect the information
regarding customers preferences, choices etc as it help the company in making appropriate
decision for business (Power, Sharda and Burstein, 2015). There are two methods which can be
used by the mentioned company for collecting of data. Such as:
Primary data- This data refers to the information collected first hand by intense research and
surveys. From this primary data, company will gather the information by filling the questionnaire
from the customers (Kline, 2010). The questionnaire contains a list of multiple choice questions
can be filled by the customers through post, face to face, email or also through internet.
Secondary Data- This are the information which can be already been collected for other
purpose. Company will gather information by collecting information through previous reports,
books, annual reports and also from published reports of the government.
1.2 Survey methodology & sampling frame used.
The mentioned company can use the simple random sampling methods for gathering the
information. There is an open invitation for the customer to participate by filling the
questionnaire which is designed by the company and from these filled questionnaire company
can select randomly (Hacklin and Wallnöfer, 2012). As, it enables collection of the information
from the mass audience. In random sampling methods, every respondent get equal chances to

provide information. Hence, 100 customers are chosen from the London and from this,
information regarding opening second restaurant and customers choices can be obtained. The
sample frame used by them is
Table 1: Sample Frame
Sample method Simple random sampling
Sample unit To all kind of customers
Sample Size 100 samples
Sample instrument Through Questionnaire
Sample location London
1.3 Design a questionnaire to collect data and provide a justification for its design
Personal information
 Name.................
 Age....................
 Residence...........
 Income...............
1. What do you think about eating?
 More convenient
 Doesn't matter
2. How many times do you eat out in a month?
 10 or more days
 5-10 days
 1-4 days
 None
3. How often do you eat in ABC restaurant?
 Once a week
 Twice in a week
 Once a month
4. What kind of food do you prefer to have in the restaurant?
 Chinese food

 Japanese food
 Italian food
 American food
5. How much do you spend for lunch at ABC restaurant.
 £50-100
 £100-150
 £150-200
 £200 and above
6. What type of restaurant do you prefer?
 Traditional
 Modern
 Homey
 Romanesque
7. Source of information from which you get to know about this restaurant?
 Leaflet
 Internet
 Others
 Friends/family.
2.1 Collect data and create information for decision making by summarizing data using
representative values.
Year Sales(£00) Profit(£00)
2005 250 120
2006 200 110
2007 220 115
2008 240 117
2009 220 114
2010 230 119
2011 250 125
2012 270 130
2013 270 131
2014 280 133
2015 300 138

Table 2: Summarizing of data
Sales Profit
Mean 248 Mean 122
Standard Error 9 Standard Error 2.7
Median 250 Median 120
Mode 250 Mode #N/A
Standard Deviation 30 Standard Deviation 9
Sample Variance 896 Sample Variance 81.6
Kurtosis -0.64 Kurtosis -1.18
Skewness 0.13 Skewness 0.28
Range 100 Range 28
Minimum 200 Minimum 110
Maximum 300 Maximum 138
Sum 2730 Sum 1352
Count 11 Count 11
Confidence Level(95.0%) 20 Confidence Level(95.0%) 6.07
2.2 Analyzing the results to draw valid conclusions in a business context
Mean- The mean is a mathematical average, and it is represented as the sum of the data value on
sales for the last years' dividend by the number of sales (Nowduri, 2011). It is also known as
central tendency. It indicates the total sales and profits in the last 10 years. The mean value of the
sales is £249 and for the profit the mean value is £122. Hence, this shows the average of the
total sales and the profits.
Median- The number that falls in the middle position is the median. This is the known as the
50th percentile. The median of the sales is £250 and for the profit, it is £120 which represents the
middle value from the set of profit. Therefore, for the sales from the last 10 years, half of the
value is higher than the £250 and half value is lower than the £250.
Mode- It represents the most frequently appearing value, from the set of value
(Ho, Xu, and Dey, 2010). This is the third measure of central tendency. The most frequently
appearing value from the set of sales is £250. From the set of profits, there is no value which
appears frequent.

2.3 Analyzing the collected data using measures of dispersion. You must be able to use the
analysis to inform and support decision making.
Year Sales(£00) Profit(£00)
2005 250 120
2006 200 110
2007 220 115
2008 240 117
2009 220 114
2010 230 119
2011 250 125
2012 270 130
2013 270 131
2014 280 133
2015 300 138
Table 3: Sales quartile and percentile
Quartile Percentile
Q₁ 225 25P 225
Q₂ 250 50P 245
Q₃ 270 75P 270
Q₄ 300
Table 4: Profit quartile and percentile
Quartile Percentile
Q₁ 116 25P 116
Q₂ 120 50P 120
Q₃ 130.5 75P 130.5
Q₄ 138
2.4 Carrying out suitable calculations to draw useful and realistic conclusions and provide valid
recommendations.
Quartile
Quartile splits the data cell into 4 equal parts and are the three values. The quartile and
Median are different, in median the data is splits into 2 equally sized. The quartile are denoted as

Q, Q, Q and Q₄ respectively. Q and Q are the lower and upper quartile and Q is the
median value of the sale. The inter-quartile is the difference of the upper and lower quartile. The
inter-quartile value of the profit is £14.5 and it is the spread of the middle 50% of the profit.
According to the above result, the inter-quartile of the sales is £45.
Percentile
The percentile of the distribution are the 99 values that splits the data set into 100 equal
parts (Gigerenzer and Gaissmaier, 2011). 25th percentile is the corresponds to the first quartile,
50th percentile is the corresponds of the second quartile and 75th corresponds the third quartile.
Therefore, 25th percentile sale is £225 or less, the 50th percentile sale is £245 or less and 75th
percentile sale is £270 or less. For the profit of the company, the 25th percentile profit is £116 or
less, 50th percentile profit is £120 or less and the 75th percentile profit is £130.5 or less.
Standard deviation
Standard deviation is the square root of the variance. This is calculated to measure the
investment volatility (Mean, Median, Mode, and Range, 2016). It provides us with a measure of
just how spread out the scores. A high SD represents sales are widely spread, low means they are
bunched up closely on either side of the mean. The Standard deviation of the sales is £30, which
shows the spread of sales. The standard deviation of the profit is £9, which means, they are
bunched up closely.
Range
Range is the difference of the upper class boundary of the highest class from the lowest
class boundary of the lowest class. It shows the boundary of the class, this is calculated so to
understand how spread out sales are (Hwang and Lin, 2012). From the above calculations, the
range from the sale is £100 and the range from the profit is £28 which shows the spread of profit
in that particular last 10 years.
Correlation Coefficient
Table 5: Correlation Coefficient between sales and profit
Sales Profit
Sales 1 0.978631
profit 0.978631 1

Coefficient correlation measures the strength and direction of liner relationship between
sales and profits of the company (Aharoni, Tihanyi and Connelly, 2011). Sales and profit of the
restaurant have a positive relationship between them. If there will be increase in the sales, then
the restaurant's profit will also increase. On the other side, if the sales decrease, there will be a
decrease in the profits too.
TASK 2
3.1 Graphs and charts (e.g line, pie, bar chart, histogram, scatter) to clearly and effectively
present the findings.
Year Sales(£000) Profit(£000)
2005 250 120
2006 200 110
2007 220 115
2008 240 117
2009 220 114
2010 230 119
2011 250 125
2012 270 130
2013 270 131
2014 280 133
2015 300 138

.Illustration 1: Line graph of Sales
The line graph represent the data, of both sales and the year. With the changes in the year,
the sales of the Restaurant is also changes, it means it changes continuously over time (García-
Peñalvo and Conde, 2014). In this, restaurant company's line graph, there is a movement in the
sales of the restaurant. In 2005, the sale of the restaurant was £250, and in 2006, the sales
decrease to £200. It shows the exact movement of the sales, whether increasing or decreasing. If
the line graph shows upward movement, it means there is increase in the sales and if it shows
downward, it means fall in the sales of the restaurant. In 2006, the company bears the lowest
sales of £200 and in 2015, the sales reaches to £300, the highest from the last 10 years.

Illustration 2: Scatter plot of Sales.
Scatter plot is a set of points, which is plotted on vertical and horizontal axes of the chart
(Zeleny, 2012). The scatter is similar to the line chart, but it shows that hoe much one variable is
affected with the change in other variable. It shows the relation between two variables. In this
graph, it shows the relationship between the sales and the year. Sales of the restaurant is
increasing in this graph. In 2008 and 2010, the sales of the company was £220.

Illustration 3: Bar graph of profit.
A bar chart shows the grouped data in a rectangular bar proportional to the value that
present in their respected rectangle (Kwak and et.al., Handysoft Global Corporation, 2010). The
value which is plotted on the X axis are the years which starts from 2005 to 2015. On the other
hand, the profit of the company is plotted on the Y-axis on this presented graph. In 2005, the
profit of the restaurant was 120, which goes down to 110 in 2006. Again, in 2009, it goes down
to 114, and then it start increasing and reaches to 138 in 2015. The reason of fall of profit is due
to decrease in the sales of the company. The highest profit of the restaurant is due to increase in
the sales as well as increase in the advertisement expenses.

Illustration 4: Pie chart of the profits
This is a type of graph, in a circle form and the circle is divided into different sectors
(Lunenburg, 2011). Each different sectors represent a portion of the whole. In this presented pie
chart the circle is divided into different profits of the restaurant. The orange color shows the
profit of £119 in 2010 with each color, the profit and the year is specified. Therefore, this pie
chart shows that in different year, company earn constructive profits.

3.2 Creating trend lines in graphs to assist in forecasting for specified business information.
Trend chart
Illustration 5: Trend chart of sales and profit
Trend line represent the tendency of the next period (Wu and Pagell, 2011). It gives the
direction of the sales and profit to the restaurant chain. It helps in making interpretation of the
sales and profits. It shows whether, the trend line goes upward or going downward. In above
presented graph, the sale of the restaurant is going upward, which results that in next years, there
will be increase in the sale. The trend line indicates that the profit of the company will also
increase in the next years.
3.3 Preparing a business presentation to disseminate information effectively
Attached in PPT
3.4 Preparing a formal Business Report to be presented to the board of directors
A formal business report is prepared by the XYZ consultancy, to the Board of director of
ABC Restaurant chain, as they want to open a second restaurant in London
Report on decision making of ABC restaurant
To: The Board manager of ABC restaurant
From: XYZ consultancy company
Date: 27th April 2016.
Introduction:

This report is based on the scenario, in which a ABC restaurant is planning to open its second
restaurant in London. To ensure that this is a viable move, data collection and data analysis is
evaluated. Furthermore, for expanding a restaurant, sales and profit for last 10 years are
identified. Furthermore, for the purpose of research, the questionnaire is filled by the customers
so to understand the customers' need and preferences.
Method:
To collect the relevant information from the customers and from other companies, primary and
secondary data is collected, so to target the people of London. Means, median and mode is
calculated on the basis of sales and profits.
Finding:
From the trend line graph, it was found that, in the next proceeding, there will be an increase in
the sales as well as profits in the company.
Conclusion:
This reports conclude that, in the next proceeding year, there is an increase in the profits and in
sales. ABC restaurant can plan to open the second restaurant, as there are profits, the company
will not face any loss while expanding the business.
ABC consultancy company
4.1 Using appropriate information processing tools to analyze the information
There are different information processing tools which help the company to analyze the
information. Some of these are:
 Management information system- this system helps the manager to make successful
decision regarding the operations of the business. It includes people, computer resources
and procedures which is used in the restaurant (Hwang and Lin, 2012). It develops and
maintain all the computer decision, so that it helps the restaurant in making the decisions
related to the expansion of the business.
 Decision support system- It is a computer based program application, it helps the
company in making decision, as this analysis the business data and also presents it. It
serves the management, operations as well as the planning level of the restaurant at the
time of expansion of business.

4.2 Project plan for an activity and the critical path.
Calculate the Project Duration
Task Name Duration Start Finish Predecessors
Preparation for project 5 days Thu 17-03-16 Wed 23-03-
16
Business Planning 4 days Thu 24-03-16 Tue 29-03-16 1
Recruitment and
Selection of candidates 90 days Thu 24-03-16 Wed 27-07-
16 1
Peripherals Installation 20 days Wed 30-03-
16 Tue 26-04-16 2
First Training 7 days Wed 27-04-
16 Thu 05-05-16 4
Design 10 days Fri 06-05-16 Thu 19-05-16 5
Conversion 12 days Fri 20-05-16 Mon 06-06-
16 6
Development of Norms 5 days Tue 07-06-16 Mon 13-06-
16 7
Sorting
14 days Thu 28-07-16 Tue 16-08-16 3
Continuous Experiment 10 days Wed 27-04-
16 Tue 10-05-16 4
Policy documentation 25 days Wed 17-08-
16 Tue 20-09-16 7,8,9,10
Appraisal 30 days Wed 21-09-
16 Tue 01-11-16 11

The duration of new project for QMB Investments Limited is 232 days.
Illustration 6: Gannt chart
Illustration 7: Critical path
A+C+D+I+K+L

5+90+20+14+25+30
=174 days
4.3 Evaluation of the financial viability of the project
Investment Appraisal Techniques of 2 projects, Project A and Project B
Project A Project B
Initial
investment 45000 45000
Cash flow Year
1 15000 17000
Year 2 25000 28000
Year 3 20000 22000
Net present Value
Project A
Project A
Year cash flow 10% Present value
1 15000 0.909 13636
2 25000 0.826 20650
3 20000 0.751 15020
Total present value 49306
Initial investment 45000
Net Present Value 4306
Project B
Project B
Year cash flow 10% Present value
1 17000 0.909 15455
2 28000 0.826 23128
3 22000 0.751 16522
Total present value 55105
Initial investment 45000
Net present value 10105
Internal Rate of Return
Project A

Project A
Year Cash flow @15%
present value
@15% @10%
present value
@10
0 -45000 1 -45000 1 -45000
1 15000 0.870 13044 0.909 13636
2 25000 0.756 18903 0.826 20650
3 20000 0.658 13150 0.751 15020
Total present value 96.5 4306
IRR 10.05
Project B
Project B
Year Cash flow @15%
present value
@15% @10%
present value
@10
0 -45000 1 -45000 1 -45000
1 17000 0.870 14783 0.909 15455
2 28000 0.756 21171 0.826 23128
3 22000 0.658 14465 0.751 16522
Total present value 5419.0 10105
IRR 10.11
From these projects the restaurant chain can choose the best investment project. In project
B, the present value is £10105 and in project A, the net present value is £4306. The net present
value of Project B is greater than project A. Therefore, it is more desirable and also the best
option for the restaurant chain to select Project B while opening its second restaurant in London.
IRR determines the interest rate of capital invested (Sutherland, 2010). IRR is used in the
project with a motive to assess the absolute advantages of an investment. It is measured that
higher the IRR, more advantageous will be for the restaurant company. The IRR of project A is
£10.05% and project B is £10.11%. Therefore, project B with £10.11% internal rate of return is
more advantageous for the restaurant chain.
CONCLUSION
The aforementioned report explained that the ABC restaurant Is planning to open a
second restaurant in London. Hence, collecting of primary and secondary data is required as it is
important for the restaurant to collect the information related to the customers preferences and

taste. Mean, median and mode are calculated so to make effective business decision. After
calculating the investment appraisal it is analyzed that, project B is beneficial for the restaurant.

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Online

Mean, Median, Mode, and Range. 2016. [Online]. Available through:
<http://www.purplemath.com/modules/printpage.cgi?path=/modules/meanmode.htm>.
[Accessed on 27th April 2016]