Charley's Family Steak House (a)
7 Pages Posted: 21 Oct 2008 Last revised: 24 May 2019
The owner of four Charley's Family Steak Houses is about to meet with the new manager of Charley's Family Steak House No. 2, in mid-December 2007. The primary purpose of this meeting is to finalize the 2008 operating plan for the restaurant. The owner has decided that, due to the growth of his business, he can no longer continue to manage the operation as he did when there were only one or two restaurants. So he wants to implement a more formal and rigorous planning and budgeting process. The owner and the manager reach an agreement regarding the final operating plan for the restaurant for 2008. The description contained in the case is both detailed and thorough, and includes the basis on which annual revenues are projected as well as the basis on which each expense is forecast for the year. Students are asked to verify all the amounts shown in the 2008 operating plan and then to prepare a revised operating plan based on a more pessimistic sales forecast.
Rev. Jan. 31, 2011
CHARLEY'S FAMILY STEAK HOUSE (A)
Charley Turner was in an unusually good mood as he pulled into the parking lot of Charley's Family Steak House No. 2 (Charley's). It was a beautiful day in mid-December 2007, and he was about to have a meeting he had been looking forward to for several weeks. Turner was scheduled to meet with Alex Pearson, the new manager of Charley's, to finalize the 2008 operating plan for the restaurant. He hoped this meeting would be a good first step toward increasing sales and improving profitability at all of his restaurants.
Unit No. 2 was one of four Charley's owned by Turner through a privately held corporation. He opened his first family steak house in 1997, on the west side of a rapidly growing cosmopolitan city in eastern Texas. He managed this restaurant for three years, experimenting with various menus, pricing strategies, and customer-service concepts. Turner's goal was to create the best steak house in the city—one that was known for having a pleasant atmosphere, fast and courteous service, high-quality, freshly prepared food, and reasonable prices. As with many other family steak houses, the menu was posted on the wall, and customers went through a cafeteria-style line to place their orders, pick up their beverage, and pay the cashier. The food was then prepared and brought to their tables by a staff of servers. The servers also provided chocolate mints and comment cards to customers once they had finished their meals, and Turner utilized these customer comments and suggestions to make continuous improvements at his restaurants.
By 2000, Turner knew he had developed a solid recipe for success. Customers raved about his restaurant's food, service, cleanliness, and overall value. During the next few years, he took his finely tuned formula and replicated it on the east, north, and south sides of the city. As each new restaurant was opened, Turner would manage the unit himself until operations had achieved the Charley's style of friendly customer service and consistent, high-quality food. By the end of 2006, Turner owned four restaurants, all of which were similar in size and appearance. None of these restaurants served breakfast, although Turner was thinking seriously about test-marketing the idea at Unit No. 2 as a means of obtaining greater utilization of his facilities and covering some of his fixed costs.
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Keywords: Accounting methods, management control systems, profit planning flexible budgeting operating profitability variance analysis cost drivers behaviors variable costs fixed costs
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