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Tuesday, January 17, 2006

Profitable Lines?

Any operation with a "no reservation" policy wants a line out their door on a good night. It's worth the money to advertise if you have no line on a Friday. If the line can't be achieved, the policy should be changed to accommodate reservations.

The most popular restaurants have long lines at dinner time on Friday and Saturday. With a decent size lounge area, the average revenue per patron can be significantly increased. The next turn is waiting in line or in the lounge boosting bar profits. A steady line increases turns and the average spent per patron.

When is the line too long? The line is too long when the estimated wait produces a negative profit expectation.

To solve this riddle, we need to know quite a lot about the operation. Valuable information would include the number of seats, average dining time per patron, peak hour arrival rates, off-peak arrival rates, recent promotions and the expected impact on arrivals.

Your hostess can help to answer the question. Find out the percentage of parties willing to wait 15 minutes, 30 minutes, 45 minutes, an hour, 90 minutes, etc. Keep records to document the sweet spot.

What's the policy on keeping your best customers waiting in line? Perhaps they are treated exactly the same as someone who has never dined in your restaurant before today. You might discreetly escort them to the bar and comp them with a drink order.

A factor called mean service rate equals the average number of patrons you can serve in one hour (or another time period which works in your operation). The expected time someone needs to wait in line equals the traffic intensity ratio divided by the net of mean service time and mean arrival rate. The traffic intensity ratio equals the mean arrival rate divided by the mean service rate.

The idea here is simple. It pays to know 3 pieces of information in your operation: the unacceptable wait time, covers served per hour and peak period arrival rate.

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