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Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Question 2
Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits. Extract ... show full transcript
Worked Solution & Example Answer:Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Step 1
Evaluate the upstairs renovation
Answer
The upstairs renovation offers the potential to increase the number of covers from 24 to 48, which could significantly boost sales. The anticipated costs for this option are £140,000, with an additional £600 for renovations. The ability to accommodate more customers may also allow for private party bookings, enhancing potential revenue streams. However, there is a risk associated with the timing of renovations, particularly if delays occur due to furniture delivery, which could impact busy months and reduce profits.
Step 2
Evaluate external catering
Answer
The external catering option leverages existing local businesses, providing a new revenue stream. This approach requires an initial investment of £8,000 for kitchen build, but it can diversify the business and attract customers outside the usual restaurant setup. The disruption caused by closing The Wonky Table for two weeks in December poses a risk, especially during the holiday season, which could lead to a loss of regular business. Training staff for external catering could also incur additional costs.
Step 3
Recommendation
Answer
Considering the analyses, the upstairs renovation appears to be the more reliable option for The Wonky Table. Despite its higher initial costs, it directly boosts seating capacity and thus revenue potential. However, if Holly and Andy can manage the risks of external catering effectively and capitalize on local demand, it could serve as a valuable complementary strategy to diversify offerings. Ultimately, if immediate profit increase is the priority, the renovation should be pursued.