What are your short- and long-term recommendations? Explain your
rationale for these recommendations

Sunshine Enterprises Case Study

“I think the waiter wrote in an extra $25 tip on my Sunshine
Café bill after I received and signed my credit card receipt,” Mr.
Mark Otter said to the restaurant manager, Brad Gladiolus. “Mr.
Otter, mail me a copy of the restaurant receipt and I’ll
investigate,” responded Mr. Gladiolus. “I don’t have the receipt—I
lost it—but I have my monthly credit card statement,” replied Mr.
Otter. Mr. Gladiolus hesitated, then said, “Mr. Otter, I don’t see
any way to investigate your claim, so there’s nothing I can
do.”

Mr. Gladiolus sat down at his desk and sketched out possible
causes of this service upset as follows:

The customer is responsible for adding the bill and tipping
properly, writing legibly, retaining the second receipt, and
drinking alcohol responsibly.

The employee is responsible for typing the bill in the
register/computer correctly, going back to the customer if the tip
is unreadable and verifying the correct amount, and being
honest.

The restaurant manager is responsible for investigating the
store’s receipt history and finding this transaction; auditing the
source of the error if possible, such as a mistyped decimal or
extra zero; and contacting the credit card company and customer to
resolve the issue.

The credit card company, a third-party provider in this value
chain, is responsible for providing records of the electronic
transaction, helping resolve the issue, and issuing a debit or
credit to the customer and/or restaurant if needed.

Company Background

Abby Martin’s parents came to Florida from Chicago in the 1960s.
Her parents bought land in the Cape Coral area. Later they opened a
hotel on Fort Myers Beach, and Abby was part of the housekeeping
staff, her first job. By 17, she was running the hotel on her own.
Today, she owns and operates six restaurants and a by-the-sea
hotel. The restaurants are located in shopping centers next to
high-traffic facilities such as movie theaters, groups of retail
stores, and other clusters of restaurants. Abby uses four different
restaurant concepts (i.e., facility décor, size, and layout;
prices, menus; music and bands; wine list, lounge areas, etc.) for
these six restaurants, depending on the location and local market
demographics.

Abby has other investments but loves the challenge of managing
restaurants. “I have a great passion for finding a need and meeting
it,” she said. “The secret to our restaurant success is customizing
the business to local needs and being very consistent. Offer good
food and service at the most reasonable price you can afford. And
know that even if you offer all those things you can still fail.
The hospitality business is the hardest business, period. You can
never sit back and coast.”

In her spare time, she is a prominent community figure involved
in activities such as helping build the Ronald McDonald House,
fund-raising for the hospital cancer foundation, and serving as
chairperson of the local board for the Salvation Army. She likes
the Salvation Army because it runs a lean operation, with only six
cents spent on management for every one dollar in donations.

Day-to-Day Service Management

Sunshine restaurants are normally open seven days a week from 11
a.m. to 10 p.m. Lunch prices are in the $10 to $20 range and
include such entrees as a wood-grilled hamburger, seafood salad
croissant, and sesame-crusted yellow fin tuna. Dinner prices range
from $20 to $30 per person and include dishes such as shrimp and
scallop scampi, red snapper picatta, and wood-grilled filet mignon.
Each restaurant keeps about 20 to 30 popular wines in stock, such
as a Cakebread Chardonnay. Wine, liquor, and some food items are
ordered in bulk to take advantage of volume-price discounts and
shipped directly from the suppliers to individual restaurants. All
other items are ordered by the restaurant chef and general manager
for each unique restaurant.

Abby, like most entrepreneurs, has her own approach to quality
control. She notes that “I visit my restaurants every few days, and
as I walk in I immediately begin to watch customer faces and
behaviors. I try to see if they are happy, talking, smiling, and
enjoying the food and surroundings. I look at their posture and
facial expressions. I often talk with customers and ask if
everything was to their liking. I ask my employees—waiters,
bartenders, kitchen help, managers, and chef—if they have
encountered any problems or service breakdowns. I look for untidy
floors, tables, and restrooms. I try to learn from negative
customer comments or complaints. My employees know that I will try
to help them solve any problem—they trust me. I take the pulse of
the restaurant in a short visit. I meet weekly with the restaurant
chefs. I manage quality by observation and close contact with all
of the people in the restaurant. At night I go over the financials
and sales data.”

A typical Sunshine restaurant has a core staff of about 12
employees, consisting of a manager, an assistant manager, chef,
assistant chef, four waiters, two bartenders, and two helpers in
the kitchen. During peak season each restaurant hires about six to
eight additional employees. Peak demand is when the “snow-birds”
arrive in southwest Florida from November to April. During peak
demand, the populations of Lee and Collier counties double to
almost 2 million people.

Abby’s entrepreneurial approach to managing the business results
in about one negative customer complaint per 100 customer comments.
The complaints are nearly equal in focusing on food or service
quality. Contribution to profit and overhead per restaurant is 35
percent. The typical customer averages one visit every two months,
and the customer defection rate is in the 5 to 10 percent range,
but is difficult to estimate given the seasonal nature of the
business.

Long-Term Strategic Issues

Abby Martin has established a reputation in southwest Florida
for superior service and food quality in her restaurants. She was
considering expanding her restaurants to the Tampa and Orlando
areas to leverage her expertise and grow the business for the
family. She wondered whether she could maintain the proper
financial and quality controls with more restaurants and whether to
franchise or not. Due to the 2007–2009 credit crunch and high
foreclosure rates, there were plenty of commercial properties in
good locations for restaurants, and prices were at all-time lows.
Abby thought it was now or never in terms of expanding up and down
the west coast of Florida. She envisioned as many as 20 Sunshine
restaurants in the next five years.

Decisions

Abby wondered when she would ever get the time to analyze these
issues. It was not easy keeping up with her businesses. She knew
that superior day-to-day food and service quality determines repeat
business, so she had to successfully resolve this customer
complaint about the waiter adding a $25 tip, while trying to plan
for the future. She happened to be at her hotel, so she sat down in
a beach chair and watched the brilliant colors of a sunset over the
Gulf of Mexico. She began to write down a number of questions she
had to answer soon.

Case Questions for Discussion

What are your short- and long-term recommendations? Explain your
rationale for these recommendations.