Section A – BOTH questions are compulsory and MUST be attempted
1 Metis is a restaurant business in the city of Urbanton. Metis was started three years ago by three friends who met at
university while doing courses in business and catering management. Initially, their aim was simply to ‘make money’
although they had talked about building a chain of restaurants if the first site was successful.
The three friends pooled their own capital and took out a loan from the Grand Bank in order to fit out a rented site in
the city. They designed the restaurant to be light and open with a menu that reflected the most popular dishes in
Urbanton regardless of any particular culinary style. The dishes were designed to be priced in the middle of the range
that was common for restaurants in the city. The choice of food and drinks to offer to customers is still a group decision
amongst the owners.
Other elements of the business were allocated according to each owner’s qualifications and preferences. Bert Fish
takes charge of all aspects of the kitchen operations while another, Sheila Plate, manages the activities in the public
area such as taking reservations, serving tables and maintaining the appearance of the restaurant. The third founder,
John Sum, deals with the overall business issues such as procurement, accounting and legal matters.
Competition in the restaurant business is fierce as it is easy to open a restaurant in Urbanton and there are many
competitors in the city both small, single-site operations and large national chains. The current national economic
environment is one of steady but unspectacular growth.
The restaurant has been running for three years and the founders have reached the point where the business seems
to be profitable and self-sustaining. The restaurant is now in need of refurbishment in order to maintain its atmosphere
and this has prompted the founders to consider the future of their business. John Sum has come to you as their
accountant looking for advice on aspects of performance management in the business. He has supplied you with
figures outlining the recent performance of the business and the forecasts for the next year (see the performance report
below). This table represents the quantitative data that is available to the founders when they meet each quarter to
plan any short-term projects or initiatives and also, to consider the longer-term future. Bert and Sheila have often
indicated to John that they find the information daunting and difficult to understand fully.
John Sum has come to you to advise him on the performance reporting at Metis and how it could be improved. He
feels that the current report is, in some ways, too complex and, in other ways, too simple. He wants to look at different
methods of measuring and presenting performance to the ownership group. As a starting point, he has suggested to
you that you consider measures such as NPV, EVA™, MIRR as well as the more common profit measures. John is
naïve and wants the NPV and MIRR to be appraised as if the business was a three-year project up to 2012 so he
knows the performance of the business to date. He has requested that other calculations in your performance review
should be annual based on the 2012 figures although he is aware that this may be omitting in his words ‘some
important detail’.
At recent meetings, Sheila has been complaining that her waiters and waitresses are not responding well to her
attempts to encourage them to smile at customers although her recent drive to save electricity by getting staff to turn
off unnecessary lights seems to be working. Bert stated that he was not convinced by either of Sheila’s initiatives and
he wants her to make sure that food is collected from the kitchen swiftly and so delivered at the right temperature to
the customer’s table. Also, Bert has said that he feels that too much food is becoming rotten and having to be thrown
out. However, he is not sure what to do about it except make the kitchen staff go through lengthy inventory checks
where they review the food held in store. John is worried about these complaints as there is now an air of tension in
the owners’ meetings. He has been reading various books about performance management and has come across the
quote, ‘What gets measured, gets done.’ He believes this is true but wants to know how it might apply in the case of
his business.
