CASE It was a regular working day in April 2021, when four business partners gathered together for strategy session for their organization: Food for Thought (FFT).

Background: FFT operated a chain of Quick Service Restaurants (QSR) in business localities in the GTA, Mississauga, Brampton, Oakville, Kitchener, Waterloo, and Cambridge. Their first outlet opened in 2007 in Vaughn and then continued to expand to other areas. FFT outlets offered food and beverages for takeout and delivery only. There was no dine in option available. The rapid expansion of food delivery service provided a strong headwind for FFT. Since their outlets did not require a prominent location, the leasing costs were minimized. The above factors contributed to the success and growth of FFT until Covid struck in early 2020. Most the revenue generated by FFT was from lunch items, afternoon snacks and early evening dinners consumed by clients working in their offices. With 90% of client working from home, the demand for such services almost disappeared overnight. FFT had to downsize its operations, close outlets, and lay off nearly 60% of its workforce. Positive news began to appear in April 2021 with the arrival of vaccines in Canada. Both the Federal and Provincial governments expressed confidence of vaccinating a majority of the population by Fall 2021 and allow restaurant businesses to function normally by November 2021. About business partners Sonia Jimenez (Sonia) is the Senior Vice President- Marketing. Erin Smith (Erin) was the Corporate Chef of FFT. Noah Wiseman (Noah) was the Chief Financial Officer of FFT. Babatunde Jones (Tunde) was the Senior Vice President-Operations Reshaping business strategy The four business partners set up their meeting with a view to re-orient their business strategy in the context of changes coming to how work would look like when the economy reopened after the pandemic. The goal was to develop a business model which would be relevant with the hybrid work model which was likely to be the norm once post pandemic recovery takes shape. Sonia began the meeting with a discussion of what work would look like in the post-pandemic era. A typical client of FFT was between 25 48 years of age and worked in an office setting. Due to their clients workload and schedule, they preferred to buy food from a Quick Service Restaurant so that they could consume the food as and when their work schedule allowed for. With the hybrid work model, they would be attending office two or three days a week and work from home for the remainder.

The food consumption pattern would shift from consumption only in the office (pre-pandemic), to consumption both at office and home (post-pandemic). The question therefore was: how can FFT adapt to this change in consumer behaviour? Erin thanked Sonia for her insight and began her discussion. She pointed out at this time, there was a very short time lag between food being prepared at FFT and being consumed by the client. The time lag possibly was no more than two hours. As a result, consumers were able to eat freshly prepared food which was packed to retain the attributes of the cooked meal till it reached the consumer. She expressed opinion that the food production process needed a transformation. In addition to the food being prepared and delivered to the client for consumption, there would have to be a secondary process where food would be prepared and packed. The packed food would retain its original attributes for 48 hours. Therefore, a client could order two versions of the same meal the first, which could be consumed in the office within the next two hours and the second, the packed version, which can be taken home, kept in the refrigerator, and consumed on the following day. Tunde wanted to point out that while the revenue generated by FFT was from (1) lunch items, (2) afternoon snacks and (3) early evening dinners, the third segment, early evening dinners, had been showing a loss, due to the relatively lower sales, costlier ingredients, and the need for specialized equipment. The group wondered if dropping this segment, early evening dinners, would be advisable and could be an important part of this new strategy. At this point, Noah took over and pointed out that to implement this strategy, the following steps would be necessary: Determining whether dropping a segment, early evening dinners, would be advisable. As a next step, they decided to retain the services of Coyra Consulting (CC), a reputable consulting agency. The scope of work for CC would be to develop financial projections based on the above issues and provide a recommendation as to the best way forward for FFT.

Objective: Determine whether to Drop or Retain a segment, early evening dinners. As part of this process, a Contribution Margin Income Statement needs to be prepared. Scenario: Using the Income Statement in Appendix One, prepare the Contribution Margin Income Statement, given the following information related to the companys expenses: Cost of Goods Sold is 50% variable and 50% fixed Operating Expenses are 3/4 variable and 1/4 fixed Administrative Expenses are $2,000 variable and $20,000 fixed Rent Expense is all fixed HINT: Please note that the operating profit that you calculate in your Contribution Margin Income Statement will be the same as the Profit Before Income Tax in the Income Statement provided in Appendix One (in other words, in the student template, the two fields that are shaded in yellow should be the same amount). The financials by segment are then provided in the student template. It is believed that if the segment of early evening dinners is dropped, that half of the fixed expenses of that segment would remain. As well, it is believed that if the segment of early evening dinners is dropped, sales of lunches would increase by 10%. Complete the template accordingly and determine whether this segment should be dropped.

FFT Corporation Inrnme Statement FFT Corporation Inrnme Statement