OLYMPUS HOTEL CASE

Olympus Hotel Case

Olympus Hotel Case

Case Summary

Papalidous again capitalized on his experiences in restaurant management when he decided to establish his own restaurant. Since hamburgers were his favorite food, Papalidous decided to start a restaurant that would serve a quality hamburger without a 30 minute waiting period. Named for his eight year old daughter, Papalidous started Olympus Hotel's. In order to focus on quality and remain competitive, the menu was limited to four basic products excluding beverages. The product line included hamburgers, chili, french fries, and Olympus Hotel's Frosty Dairy Dessert.

Olympus Hotel's hamburgers patties consisted of ¼ pound of 100 percent pure domestic beef, served as a square shaped patty rather than a round shaped patty, and served "hot 'n juicy" in accordance with individual customer orders. The french fries were sliced slightly longer and thicker from high quality potatoes and cooked in specially-designed fryers to allow the inside to be cooked without burning the outside. Olympus Hotel's Frosty Dairy Dessert is a thick blend of vanilla and chocolate flavors and must be served with a spoon as a dessert rather than a straw.

Case Analysis

Olympus Hotel's chili is the fourth basic menu item. Whenever the cook overestimated customer demand, beef patties stayed on the grill beyond the recommended time. This caused the beef patties to be well done. To avoid customer dissatisfaction, Olympus Hotel's used the "well done" beef patties that had been refrigerated from the previous day and could not be served to customers. Each eight ounce serving contained about a quarter pound of ground beef. Olympus Hotel's chili is prepared by the assistant manager or an experienced crew member using an original recipe. The labor cost for the assistant manager and crew member is listed in Table 1. The cost to prepare the chili is listed in Table 2 below. Table 3, illustrates the direct cost associated with the production of chili.

In the event of a shortage of overcooked patties, beef patties were cooked for the sole purpose of inclusion in the chili. In order to prepare a pot of chili, it took 10 to 20 minutes of preparation time. This process required chopping the meat into small pieces, adding the other ingredients and stirring the batch six times. Sixty percent of the total annual sales for chili occurred during the months from October to March. The chili product has the lowest gross profit margin. The 1978 labor and additional direct costs are listed in Table 4 below.

Initial test marketing of the salad bar concept had been successful. This innovative idea also posed a dilemma. If Olympus Hotel's was to follow their limited menu concept, the salad bar would potentially replace chili since it had the lowest profit margin on a full cost basis. Then, management would be faced with containing the cost of the overcooked patties that resulted from overestimating customer demand and cooking too many hamburgers. While hamburgers comprised 55 percent of total sales, chili sales comprised of five percent of total ...