Hospitality Services Case Study: Financial Analysis and Strategies

This case study analyzes the financial performance of Hospitality Services (HS) at the University of Western Ontario (Western), focusing on the fiscal year 2002. The analysis examines the various operational areas of HS, including cash operations, residence operations, and catering services, with a particular emphasis on the Center Spot. The case delves into the challenges faced by Centre Spot, such as lineup problems due to increased student population and operational inefficiencies. It quantitatively and qualitatively assesses decisions like adding a new register in Tim Horton’s and opening a new restaurant, evaluating their potential impact on profitability and customer satisfaction. The study highlights the importance of market research, understanding customer preferences, and leveraging technological advancements to enhance service delivery and financial outcomes. The case provides recommendations for improving profitability, addressing operational bottlenecks, and aligning strategies with student needs and time constraints. The analysis includes financial metrics like return on capital, asset turnover, and sales growth, offering insights for Kevin McCabe, the associate director, to make informed decisions and improve the financial health of HS.

1. The financial health of Hospitality Services was quite stable, with some discrepancies in
the end of 2002 fiscal year. They have earned near about $16 million in the year 2002,
from their food and hospitality industry, which included restaurants, contract food
suppliers, catering business, drinking spots and restaurants established in colleges and
restaurants. From the institutional food service area, they have earned more than $986.5
million in the year 2002, which is considered their fourth largest food service industry.
The profit generation is much more in case of food services in institutions and colleges as
the competition is quite less in Canadian Universities, which every colleges having their
own food segments and cafeterias. The food service and restaurant business were quite
self-contained, within the institutions and demographically distant from each other,
creating an opportunity for earning adequate revenues.
2. The Hospital Services (HS) had five operational areas and they were segmented into cash
operations, residence operations, conference operations, then catering and vending
services. The food administrator already has unique ideas implemented in making their
food services popularized among the various students of the institutions. Their Cash
operations earned them about $4.9 million in the fiscal year of 2002, through this
department the possibility of opening new restaurants were possible. The director of the
company Kevin McCabe did not give much attention to franchise development until and
unless the lineup problem in their restaurants and food services within the institutions
started affecting their profit and revenue collection. Franchise development is the option
that can help the company to solve their problem, due to the continuous increase in the
population of the students in institutions. The development of the new franchise must be
done by taking thorough surveys from students and understanding their taste, he should

hire new people, train them to manage the delivery services within the student’s time
constraints, deliver services and food according to new trends and patterns that are much
preferred by the students. The most important factor that the associate director must align
its operations to, is following the Health and Safety Standards.
3. Center spot was the most popular spot for all the students, staffs, teachers and faculty
members, as it was aligned to the largest library on campus called D.B Weldon
University, as well as there was also the presence of the University Community
Centre(UCC). The place being the most visited place by all the people from the college, it
was considered by HS the most popular place for food service, as various types of
customers were present. This situation id also pressurizing for the staff of HS, as they
have to fulfill the desire of various customer within the time constraints. The issue that
was faced by Centre spot was that they operated independently, they also paid an annual
occupancy fees to Western. They had tremendous good sales with a boost up of $2500
per day from the year 1993 to $18,250 up to the year 2003. Although their sales was high,
2002 profitability in Centre Spot was low, which was untraceable as the sales were
boosted up. Later, it was found that the lineup problem, created the issue, as their service
provisions were not aligning with the time constraints of students and other faculty
members of the institution.
4. The growth of population, resulted in putting pressure on the operational stores, the line
up problem, was clashing with the time constraints of the students, which decreased their
customers. In solving the lineup problem, HS provided two cash registers, in Centre Spot
and rest were placed in Tim Horton’s and other branches. Therefore, in relation to
quantitative analysis, the problems of lineup was more in Centre Spot, which can be due

to the increase in student population, as it was the hottest spot for every members of the
college visiting there , the lineup is considerable increased, old employees service
technique is still slow is making the problem sustain. Therefore, proper training to the
employees are necessary along with the inclusion of more registers is necessary.
5. The associate director came to a decision that adding another register in Tim Horton’s
will help them in avoiding the extra rental charges that is $70 per square foot of space
and this is much higher than the present rental charges. Slowing down the operations, and
focusing more on Tim Horton’s will make them gain more profit solving the lineup, and
is qualitatively much more effective. In case of quantitative perspective, Tim Horton’s
branch does not have liability of renting it with high charges, and also the
implementation of new registers will drive the population more in Tim Horton’s, as it
will have no line up problems. This strategy will be much more beneficial in case of
financial gain for HS, as McCabe believed that new register will give their business a 20
percent boost up
6. HS got a proposal from University Student Council (USC), for a rental free space to
open a new restaurant. This can be a very good decision in increasing their profit, and
also decreasing their problems like line up issues, as students will be scattering to all the
branches, creating less pressure on one branch. But the disadvantage of that spot, is that
HS already has a food service segment in Centre Spot which is unable to earn enough
profit, due to increase in population (Martínez‐Ferrero & Frias‐Aceituno, 2015). In case
of analyzing in an quantitative manner, there will vulnerability in profit generation, return
of investment can be less, considering the performance of the branch already situated in
Centre Spot, the return of capital on total assets will be less. If the asset turnover is $4.76

per $1 worth of assets, it will be profitable, and relating to their type of industry and
demand they have, it can be possible. However, chances of less profit generation is high
due to the location, and in case of qualitative analysis opening a new restaurant can also
help in creating more functional groups that will lessen the pressure on other branches,
decreasing the problem of line up, and meeting the time constraints of the students in
rendering services.
7. As Kevin McCabe, two profitable strategies for financial development can be opted, the
reasons the profit was not traceable in Centre Spot is due to lack of adequate Research.
Research should be done so that they can understand other restaurants techniques who are
operating successfully in other institutions effectively. Research on the preferences of
customers is also necessary, as customer demands are ever changing, the company should
keep a track of the preferences (Guan, Trotter& Yu, 2015). This can be more effective by
implementing another strategy like technological advancement, creating their own
websites, which will feedback forum. Customers can express their views and opinions, in
the feedback forum and thus this will be helpful in making better changes to their
services. Technological advancement will also increase their speed and delivery services
aligning it with the student time constraints.
References
Guang, T., Trotter, D., & Yu, L. (2015). Anthropological methods are meaningful in business
research: A case study of foodservice at a Chinese University. The Anthropologist, 19(1), 211-
227.

Martínez‐Ferrero, J., & Frias‐Aceituno, J. V. (2015). Relationship between sustainable
development and financial performance: international empirical research. Business Strategy and
the Environment, 24(1), 20-39.
Trumpp, C., & Guenther, T. (2017). Too little or too much? Exploring U‐shaped relationships
between corporate environmental performance and corporate financial performance. Business
Strategy and the Environment, 26(1), 49-68.