Mighty Mac
Mighty Mac (MMT) was founded by Stephanie Swift in 2020. Stephanie is a budding entrepreneur and graduated from a culinary school. Stephanie made the decision to take her skills ‘on the road’ and operate a food truck to take advantage of the explosive population of street vendors.
Stephanie hired you in January 2021 in order to prepare the first year-end financial statements and you finished compiling her second year of operations in Fe
uary 2022. Stephanie had a very successful year in the summer of 2021 and is now gearing up for the summer 2022 season. She has come to you for some assistance in analyzing another business proposal that has come her way, and some general advice in how to properly monitor her growing business.
The proposal and details can be found in Appendix A. Appendix B contains information that Stephanie has provided you to assist her in continuing to make her business successful.
Required:
Based on the information in Appendix A and B, provide a report to Stephanie that fully addresses her concerns.
Appendix A – The Proposal
Stephanie has been approached by the City of Niagara Falls to operate a new food shack that they have built along their waterfront. The food shack would have a set fixed price menu that would cater to pedestrians walking the waterfront. The shack would be open from May 1st to September 30th of each year, 7 days per week, rain or shine.
Key details are as follows [all amounts are for the operating season]:
· The food shack was built by, and belongs to, the City of Niagara Falls. MMT would rent the shack from the City for $1,000 per month;
· The City would provide a discount to MMT on the vendor fee from $500 per month to $100 per month;
· The fixed menu [hamburgers, hotdogs & limited sandwiches and drinks] will have a fixed priced of $8 including a drink;
· MMT must pay $1 per meal to the City as a form of franchise fee;
· The cost of the meal based upon a City purchasing agreement with a food distribution company is $3 per meal. MMT is responsible to pay this cost;
· The City will pay to staff the food shack with students; however, MMT is responsible for managing the staff;
· MMT is required to pay for all utilities which is estimated to be approximately $200 per month;
· In addition to the cost per meal, MMT will pay the City $0.50 per meal sold as an environmental clean-up fee;
· Stephanie expects that she will have to be at the food shack during start-up and then periodically throughout the week. Her travel costs from Simcoe (her home base) to Niagara Falls would be $500 per month;
· When Stephanie is in Niagara Falls, she will need to pay for more staff to cover her food truck. She estimates this to be $500 per month.
Stephanie has examined the traffic reports provided to her from the City. Based upon an independent third party, pedestrian traffic through the area is expected to average between 3,800,000 million people and 4,500,000 people for the five months in question. It is expected that approximately 0.5% to 1.5% of those people will buy a meal over the course of the 5 months.
Stephanie wants to ensure that MMT makes money from this venture and needs an analysis of the
eakeven point. In addition, she would like to know what she would have to sell if she wanted to make $140,000 from the venture. Finally, she knows that this is expanding MMT outside of Simcoe and into a slightly different venture and she would like you to provide a discussion of some of the key factors you have thought of during your analysis.
Appendix B– Other Matters
Stephanie stresses that the food shack venture is her major concern at the moment; however, she would like you to include in her report, some recommendations on how to proceed with her business going forward. She is noticing that, although the business is successful, she doesn’t seem to have a firm handle on how well she should be doing month over month and year over year.
“Having something to compare to might allow me to benchmark a bit more. I’m finding it hard to figure out if food costs are normal or if I might be having some issues with spoilage, etc. As I grow, I find myself less in the truck and more on the road promoting it and seeking complementary business ventures. By doing this, I am leaving other employees running the truck. If you have any recommendations here, I would really appreciate it.”
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