Food and Beverages at Southwestern University Football Games

SouthwesternUniversity(SWU),alargestate university inStephenville,Texas,30milessouthwestoftheDallas/FortWorthmetroplex,enrollscloseto20,000students. Theschoolisthedominantforceinthesmallcity,withmorestudentsduringfallandspringthanpermanentresidents.

Alongtime football powerhouse,SWUisamemberoftheBigElevenconferenceandisusuallyinthetop20incollegefootballrankings. Tobolsteritschancesofreachingtheelusiveandlong-desirednumber-oneranking,in2013SWUhiredthelegendaryBillyBobDillonasitsheadcoach. Althoughthenumber-onerankingremainedoutofreach,attendanceatthefiveSaturdayhomegameseachyearincreased. PriortoDillon’sarrival,attendancegenerallyaveraged25,000–29,000. Seasonticketsalesbumpedupby10,000justwiththeannouncementofthenewcoach’sarrival. StephenvilleandSWUwerereadytomovetothebigtime!

Withthegrowthinattendancecamemorefame,theneedforabiggerstadium,andmorecomplaintsaboutseating,parking,longlines,andconcessionstandprices. SouthwesternUniversity’spresident,Dr.MartyStarr,wasconcernednotonlyaboutthecostofexpandingtheexistingstadiumversusbuildinganew stadium. Starrtoldthestadiummanager,HankMaddux,todevelopabreak-evenchartandrelateddataforeachofthecenters.

HeinstructedMadduxtohavethefoodserviceareabreak-evenreportreadyforthenextmeeting. Afterdiscussionwithotherfacilitymanagersandhissubordinates,Madduxdevelopedthetable below showingthesuggestedsellingprices,andhisestimateofvariablecosts,andthepercentrevenuebyitem. Italsoprovidesanestimateofthepercentageofthetotalrevenuesthatwouldbeexpectedforeachoftheitemsbasedonhistoricalsalesdata.

Maddux’sfixedcostsareinteresting. Heestimatedthattheproratedportionofthestadiumcostwouldbeasfollows: salariesforfoodservicesat$100,000($20,000foreachofthefivehomegames);2,600squarefeetofstadiumspaceat$3.00persquarefootpergame;andsixpeopleperboothineachofthesixboothsfor5hoursat$10anhour. Thesefixedcostswillbeproportionatelyallocatedtoeachoftheproductsbasedonthepercentagesprovidedinthetable. Forexample,therevenuefromsoftdrinkswouldbeexpectedtocover20%ofthetotalfixedcosts.

Item / Selling Price/unit / Variable Cost/unit / Percent Revenue
Softdrink / $2.50 / $0.65 / 25%
Coffee / $2.00 / $0.40 / 20%
Hotdogs / $2.50 / $1.20 / 20%
Hamburgers / $3.00 / $1.40 / 20%
Popcorn / $3.00 / $1.90 / 10%
Misc.snacks / $1.50 / $0.80 / 5%

MadduxwantstobesurethathehasanumberofthingsforPresidentStarr:

(1)Thetotalfixedcostthatmustbecoveredateachofthegames;

(2)Theportionofthefixedcostallocatedtoeachoftheitems;

(3)Whathisunitsaleswouldbeatbreak-evenforeachitem—thatis,whatsalesofsoftdrinks,coffee,popcorn, hotdogs,andhamburgersarenecessarytocovertheportionofthefixedcostallocatedtoeachoftheseitems;

(4)Whatthedollarsalesforeachofthesewouldbeatthesebreak-evenpoints;and

(5)Realisticsalesestimatesperattendeeforattendanceof60,000and35,000. (Inotherwords,hewantstoknowhowmanydollarseachattendeeisspendingonfoodathisprojectedbreak-evensalesatpresentandifattendancegrowsto60,000.)

Hefeltthislastpieceofinformationwouldbehelpfultounderstandhowrealistictheassumptionsofhismodelare,andthisinformationcouldbecomparedwithsimilarfiguresfrompreviousseasons.

Discussion Questions

  1. PrepareabriefreportwiththeitemsnotedsoitisreadyforDr.Starratthenextmeeting.
  2. What is your recommendation concerning the ability of the food service to be self-supporting?
  3. Mr. Maddux is concerned whether the food service items are the correct items. What do you recommend concerning the items for sale?

AdaptedfromJ.HeizerandB.Render. (2000). Operations Management (6thed.). UpperSaddleRiver,NJ:PrenticeHall,pp.274–275.

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