1. CASE STUDY: Restaurant Remodel
Problem: Bob’s restaurant has been in business for five years. He has a loyal customer base,
but when two new restaurants opened up just down the street, Bob began to see a dip
in sales. Bob’s restaurant earns $1.6 million in annual revenues but that was starting
to slide.
Solution: After visiting the new establishments in his neighborhood, Bob realized the
missing link to his business was having a bar. While the others offered great food
and service, they had little space for diners as they waited for a table. Further, it
attracts customers who are just looking for a place to grab a drink. Clearly, the
addition would bring on added revenue and entice some of his old customers to
become repeat business once again. He spoke to his contractor and settled on a $100K
investment.
Bob knew the remodel would take 14 days to complete, at which time, the
restaurant will be closed, costing approximately $62K in lost revenue, meaning his total
remodel will cost $162K.
During the remodel, Bob’s contractor suggested instead of adding the expensive
chandelier he’d originally wanted, he should upgrade some existing equipment and
lighting to include energy efficiencies which would save Bob $7K in annual energy
costs. With these savings, that brings Bob’s total remodel costs to $155K.
Results: Opening a bar offered Bob’s restaurant additional revenue
opportunities and boost his sales by 10.4% or an increase of $167K
in the first 12 months, which more than paid for his original
investment.
Bob’s contractor advised him that the typical remodel lasts around five years, so if
business is maintained over that period of time, he will have earned an additional $835K
in revenue over the life of the remodel.
That’s a 438% return on investment!