Week 9 EOC: Book Question

With Dan and Lorelai creating a partnership with the Watershed restaurant there will be fixed costs. “Some fixed costs include items such as property and income taxes, insurance, occupation costs (rent or mortgage), interest, and depreciation.” (203). Along with fixed costs, there will be variable costs, “a cost that increases as sales volume increases and decreases as sales volume decreases.” (487). Some variable costs include: hourly wages, labor costs, credit card fees, supply costs and commissions. I believe that Dan and Lorelai can run the restaurant and make profit, however they won’t be blown out of the water with profit immediately. They will both have to commit to one plan, but I believe that plan is to combine their ideas. For example, buying the restaurant at a good price isn’t guaranteed. If they do buy at a good price, great but I still believe they should increase the sales as well as reduce the cost. If they can do that they will make a slow but sure amount of money to make a profit. If Dan and Lorelai were able to get investors that would help them out immensely. However, “All stakeholders who are affected by a business’s profitability will care greatly about the effective operation of a hospitality business.” (65). This could help the restaurant’s business and profitability, however at the same time they would risk damaging the business operations. I would say this is a good idea for them to make only is they weren’t too dependent on investors for the long run.