1. Rene was adamant, \"If we have to tell a customer we overbooked and there\'s
ID: 325491 • Letter: 1
Question
1. Rene was adamant, "If we have to tell a customer we overbooked and there's no seating available, they are going to be extremely angry, I'll bet it costs us $150 per couple in goodwill each time." Tom replied, "No way, it doesn't cost us a penny. We're so popular now it doesn't matter if one potential customer doesn't come back. What matters is getting the most profit out of each seating. We prepare everything ahead of time, so it costs us S50 per couple for food whether or not they show up or not, and charge S150 per couple. At that rate of profit, I don't want to see a single empty table. The restaurant Chez Rogat was run by two WMU grads, they had two seatings each night, 6:00 PM and 8:30 PM for their 30-table restaurant. They prepared the same meal for everyone at each seating. Due to their popularity, they always had more reservations than they could handle and reservations were made far in advance. They had few no-shows but did have some. They had an equal change of either 0, 1, 2, or 3 couples as no shows at any given seating. Given their costs, calculate and articulate the overbooking policy for Chez Rogat. Would you recommend any other capacity management strategy?Explanation / Answer
Taking an average no show to be two customers the monetary loss would be $50x2=$100 for a single seating but the loss of goodwill at $150 cannot be overlooked either as in the long run it could damage seriously the future prospects of the retaurant. In order to avoid loss of any kind or minimize it either in form of wasted seating or goodwill Chez Rogat should overbook for 2 seatings only per sitting and in case of 0 no shows they should offer the overbooked couples a $50 discount each on their next meal at Chef Rogat. In this way they would be having a reduction in profit by $100 for those two seatings which still makes for a profit of $100 on them and at the same time earn them additional goodwill for the $100 spend, so effectively the $100 would not be a loss but business promotion.
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