TOOL

Necessary Conditions
for Restaurant Revenue Management
Use this tool to review the conditions for applying revenue management techniques to your restaurant.

Relatively Fixed Capacity

Although restaurants have some flexibility, most of these are relatively fixed:

• Number of seats and tables

• Kitchen size and capacity
• Labor and staffing levels

Describe the degree to which your restaurant meets this condition.

High Fixed Cost/Low Variable Cost

In restaurants, the building, infrastructure, and labor are relatively fixed costs. Only
food costs, which comprise about 30% of total costs, are variable.

Describe the degree to which your restaurant meets this condition.

SHA705: Introduction to Restaurant

Revenue Management ©
© 2019
2018 eCornell.
eCornell. All
All rights
rights reserved.
reserved. All
All other
other copyrights,
copyrights, trademarks,
1
trademarks,
trade
trade names,
names, and
and logos
logos are
are the
the sole
sole property
property of
of their
their respective
respective owners.
owners.
School of Hotel Administration,
Cornell SC Johnson College of Business
 Perishable Inventory
In restaurants, tables and seats are perishable. If a table is empty or 2 seats at a
4-seat table are empty, those seats are gone forever. If a seat is not occupied for a
period of time, that potential revenue can never be recuperated.

Describe the degree to which your restaurant meets this condition.

Advanced Reservations or Wait List

While not all restaurants take reservations, most restaurants have to manage wait
lists. You need a way to determine which reservations to take or who to seat on
the waitlist.

Describe the degree to which your restaurant meets this condition.

Varying Customer Price Sensitivities

Customers have varying sensitivity to price. Some customers are willing to pay
more, while other customer will pay less for the same items.

Describe the degree to which your restaurant meets this condition.

SHA705: Introduction to Restaurant

Revenue Management ©
© 2019
2018 eCornell.
eCornell. All
All rights
rights reserved.
reserved. All
All other
other copyrights,
copyrights, trademarks,
2
trademarks,
trade
trade names,
names, and
and logos
logos are
are the
the sole
sole property
property of
of their
their respective
respective owners.
owners.
School of Hotel Administration,
Cornell SC Johnson College of Business
 Time-Variable Demand
Restaurants need to be able to forecast time-related demand so they can make
better decisions. Variables include:

• When customers want to come to the restaurant, including which season, which
day of the week, and what time of day.
• How long customers typically take to complete their meals.

Describe the degree to which your restaurant meets this condition.

SHA705: Introduction to Restaurant

Revenue Management ©
© 2019
2018 eCornell.
eCornell. All
All rights
rights reserved.
reserved. All
All other
other copyrights,
copyrights, trademarks,
3
trademarks,
trade
trade names,
names, and
and logos
logos are
are the
the sole
sole property
property of
of their
their respective
respective owners.
owners.
School of Hotel Administration,
Cornell SC Johnson College of Business