Business Expansion Proposal

Topics: Variable cost, Costs, Marginal cost Pages: 4 (1043 words) Published: September 6, 2012
Business Proposal For Expansion
Jonathan Perez
July 30, 2012
Laurie Gazzale
Business Proposal For Expansion
A family-owned Italian deli has experienced prosperity for the past four years. The owners conducted extensive research and developed a successful business plan that guaranteed financial backing for the larger appliances; refrigerator, slicing machine, industrial toasters, espresso machine, etc. The deli has a good location and an established customer base. Consistent profits with food services while in a recession are a remarkable achievement. Management of fixed and variable costs has allowed revenues to exceed marginal costs. Market saturation and outgrowing the current locale and requires expansion for increasing profits. Financials

The financials for the past four years reflect the fixed costs of property rental, insurance and equipment at $3,250 per month. Variable expenses had incremental increases as food sales increased. Certain ingredients are more expensive than others, and replacement was based on consumption. The deli is run by the two owners with occasional help from two children when customer demand peaked. Specializing in Panini (grilled sandwiches); the cost of sandwiches varies from $4.50 to $9.50 dependent upon ingredients. The average cost for sandwiches is $6.25. The lower-demand higher priced sandwiches can create higher fixed costs for unsold products and ingredients. The deli must increase the elasticity of products and to increase revenue. This can be a challenge because repeat customers tend to order favorites of a selected sandwich. However, the deli must consider that people selecting items from an assortment show greater variety in choices (Salisbury & Feinberg, 2012). The deli can increase revenues by increasing the elasticity and price of its products with greater variety. Expansion

The strategy to increase revenues is to expand the location, the customer base as well as expand the menu variety. The...
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