2. A Penny for Your Thoughts?
The Cost Side of the Equation
How Much Does it Cost to Produce a Generous
Serving of Fresh Penne Pasta?
(A)$1.77
(B) $2.02
(C) $1.08
(D)$3.21
3. A Penny for Your Thoughts?
The Cost Side of the Equation
Let’s Take a Look:
PASTA: 32 cents SAUCE: 24 cents CHEESE- 52 cents
$ 1.08, or in other words, a highly cost effective product
4. A Penny for Your Thoughts?
The Cost Side of the Equation
Hmmm…Not too different than the costs to produce
choice items at traditional fast-food restaurants, huh?
5. A Penny for Your Thoughts?
The Cost Side of the Equation
• Low Initial Investment in
Restaurant Equipment
• Low-rent plaza location
6. Penne Profit
The Revenue Side of the Equation
• Better value for customers than other leading
fast food venders
• Carbohydrate-heavy nature of pasta = more
filling meal for customer
• Through use of different sauce and
vegetables, customers are able to customize
their meal
7. Penne Profit
The Revenue Side of the Equation
Low Prices = Recession Proof Product
Thank you for taking the time out to meet with us vis-à-vis our proposition to develop PastaHouse, LLC, a pasta-based fast food restaurant.
Traditionally, pasta generally has not been associated with fast food. However, we are rather confident that a pasta-centric fast food restaurant is a rather viable business model. Consider, for instance, the cost to produce a generous serving of fresh penne pasta.
As the above graphic shows, the cost to produce a generous helping of fresh pasta (with fresh, in-store produced sauce) is a mere $1.08.
It’s incumbent to note here that this figure of $1.08 is very much in line with the costs to produce popular items at leading fast fast competitors, such as Subway and Taco Bell. As an example, take Subway’s cost structure: Even when the price of labor and overhead is ignored, it costs Subway about $2 to produce a footlong sandwich, almost double the cost to produce our aforementioned hearty pasta dish.
There are also other cost-based advantages to consider: First, making pasta is a rather simplistic process, thus eliminating the need to make an initial fixed cost heavy investment in special equipment. Because it is a fast food venture, the store can also be located in an inexpensive strip mall or plaza. In contrast, more upscale restaurants such as Chipotle and Moes have to invest in new standalone real estate.
Of course, profitability doesn’t involve just keeping costs low. Rather, the company must also be able to generate enough revenue. Along these lines, there are several reasons why a customer would be incited to visit PastaHouse. First off, the meal discussed earlier is a very hearty meal- half a pound of pasta, plus several more ounces of cheese and fresh sauce. Pasta’s also a carbohydrte-heavy food, which means that the customer will feel full for a longer time after eating at PastaHouse, thus giving the customer more bang for his buck. Finally, customers will be empowered to build their own pasta with different sauces and vegetables, a very important element in this age of customer customizaton.
In addition, the fast food industry overall is a very safe industry, as its low-price nature mitigates it from recessionary effects. As the above graphic shows, the earnings per share of McDonald’s actually increased during the recession! What other industry can say that?
