Thursday, February 25, 2010

You know you are an MBA student when you analyze the core competencies of a restaurant

We heard the above title in class a few days back and the whole class laughed. What was even funnier (or sadder) was that when were at Otto's Restaurant, we did exactly that. Here is our analysis:

The restaurant is looking to move to a larger location down the road but its current location is rarely full anyway. On the weekends it is at capacity but there isn't much of a wait and they have a decent size bar that patrons can wait in and, more importantly, buy drinks.

Otto's core competency is mid level restaurant that caters to grad students, adults 25 and up, and craft beer enthusiasts. Their prices are typically too high for undergraduate students. They have made a name for themselves in the State College area as a legitimate brewery as they are the only brewery in town. They need to focus their attention selling their beer and the food should just be a complementary good.

By moving into the larger space they will incur more overhead costs and they still won't be able to reach capacity on weekdays. Weekend they will likely reach capacity but they will have less of a wait for a table, which will eat into their bar revenue. Usually, restaurants make most of their money from the bar and by having patrons go to the bar while waiting for a table, they will be more compelled to buy a drink or two. During dinner time, patrons will typically have one beer if they even order. It is in Otto's best interest to keep their patrons in the bar long enough for them to order a round of drinks but not too long that they give up waiting on a table and if they do end up leaving to go elsewhere for dinner, it's not too bad, based on the assumption that the margins on their beer is higher than their food.

On a side note, I don't know whether to feel ashamed that I actually analyzed a restaurant or accomplished. I will take the prior as I do feel like a total nerd.

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