“With the growth of Hard Rock Café—from one pub in London in 1971 to more than 191 restaurants in 59 countries today—came a corporate-wide demand for better forecasting. Hard Rock uses long-range forecasting in setting a capacity plan and intermediate-term forecasting for locking in contracts for leather goods (used in jackets) and for such food items as beef, chicken, and pork. Its short-term sales forecasts are conducted each month, by café, and then aggregated for a headquarters view.

The heart of the sales forecasting system is the point-of-sale system (POS), which, in effect, captures transaction data on nearly every person who walks through a café’s door. The sale of each entrée represents one customer; the entrée sales data are transmitted daily to the Orlando corporate headquarters’ database. There, the financial team, headed by Todd Lindsey, begins the forecast process. Lindsey forecasts monthly guest counts, retail sales, banquet sales, and concert sales (if applicable) at each café. The general managers of individual cafés tap into the same database to prepare a daily forecast for their sites. A café manager pulls up prior years’ sales for that day, adding information from the local chamber of commerce or tourist board on upcoming events such as a major convention, sporting event, or concert in the city where the café is located. The daily forecast is further broken into hourly sales, which drives employee scheduling. An hourly forecast of $5500 in sales translates into 19 workstations, which are further broken down into a specific number of wait staff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs people in based on their availability. Variances between forecast and actual sales are then examined to see why errors occurred.

Hard Rock doesn’t limit its use of forecasting tools to sales. To evaluate managers and set bonuses, a three-year weighted moving average is applied to café sales. If café general managers exceed their targets, a bonus is computed. Todd Lindsey, at corporate headquarters, applies weights of 40% to the most recent year’s sales, 40% to the year before, and 20% to sales two years ago in reaching his moving average.

An even more sophisticated application of statistics is found in Hard Rock’s menu planning. Using multiple regression, managers can compute the impact on demand of other menu items if the price of one item is changed. For example, if the price of a cheeseburger increases from $7.99 to $8.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches, pork sandwiches, and salads. Managers do the same analysis on menu placement, with the centre section driving higher sales volumes. When an item such as a hamburger is moved off the centre to one of the side flaps, the corresponding effect on related items, say French fries, is determined.” (Heizer, Ch. 4, p. 146, 3rd ed.)

Heizer, J., Render, B., & Munson, C. (2019). Operations management: Sustainability and Supply Chain Management. Pearson.

Review the Forecasting at Hard Rock Café Case study on pages 146-147, 3rd ed. of the Operations Management textbook. Respond to the following questions. “You may wish to view the video that accompanies this case before addressing these questions.”

You can read pages 120 to 128 in Operations Management textbook for more information.

• If you don’t know how to create the needed mathematical symbols, e.g. x̄, x̿, ȳ, σ, R̄, etc., see this tool
• GeoGebra for math problems and statistics

1. In relationship to the Hard Rock Café business:
   1. Describe three different forecasting applications at the café
   2. Name three other areas in which you think the café could use forecasting models (no one-liners; full and detailed explanation)
2. What is the role of the POS system in forecasting at Hard Rock Café?
3. Justify the use of the weighting system used for evaluating managers for annual bonuses (begin with a compare/contrast of the advantages/disadvantages and go from there)
4. Name several variables besides those mentioned in the case that could be used as good predictors of daily sales in each café (explain why you suggest them in details. While generic ideas from the Internet or any Supply Chain Management textbook do apply to almost any business, your answers and explanations must be specific to this business)
5. At Hard Rock’s Toronto restaurant, the manager is trying to evaluate how a new advertising campaign affects guest counts. Using data for the past 10 months (see the table), develop a least-squares regression relationship and then forecast the expected guest count when advertising is $35,000.

Pre-flight checklist

The marking scheme

• Share a digital copy of your final paper with me via Google Docs (use my gmail address)
• Day 5 is the last day for this assignment (there will be a penalty for late submissions)