Tag Archive for: profits

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Restaurant Math

“I was at this restaurant. The sign said ‘Breakfast Anytime.’ So I ordered French Toast in the Renaissance.”
Steven Wright

Forget about ordering off the menu; first, you have to get a seat. That’s not a given anymore.

It was never a slam dunk to get into our preferred local eatery. Once COVID-19 forced all patrons outside with social distancing, it was harder still. As we sat waiting for some seats for the third weekend in a row, we began to fidget. What to do? In an era where restrictions abound, sometimes it’s hard to see the options.

Happily, we knew the owner and every boss in the place. I pulled our most-beloved manager aside and asked her if she would be willing to rearrange the furniture and make more money. I explained to her that smaller parties were crowding out larger ones. Why not go from the arrangement you have (which was A) to one with several smaller tables (which became B), I asked? If you track the revenue changes, you’ll be pleasantly surprised.

As shown below, she did just that. Revenue went up by over 25%. Unlike A, Setup B recognizes they face a Demand Curve, with more parties of one or two people than groups of five or more.

#demand #demandanalysis #restaurant #restaurantmath #profits #revenue

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Five-Dimensional Markets

Markets move.

We may show the 2012 car market Value (the upper surface of the red space at left, the points deriving that surface omitted), and the Costs for those cars (an estimate shown by the lower red surface of that space).  The region between those surfaces is the Financial Opportunity Space (FOS), where suppliers make Profits.  That market’s matching Demand Frontier (in red) is at right. Electric car Value comes from Horsepower & Range (Dimensions 1 & 2), which determines Price (Dim 3), which drives Demand (Dim 4).

As this market moved into 2013, more entrants joined.  Existing models sales climbed. Over Time (Dim 5), the 2013 Demand Frontier shifted to the blue line.  Simultaneously, the viable profitability region moved too, from the red 2012 to the blue 2013 FOS.  Values changed (Value Space points left out for clarity), and learning on existing models drove their costs lower (the lower blue space surface).  We know costs fall over time for models due to the learning curves that apply to repetitive activities and producers drop prices at the same time to gain market size – see the post from a month ago on the Model T for a real-world example.

The origin of 5D systems is (0,0,0,0,Tn). Tn is a timestamp.

#markets #prices #profits #profitability