Joe owns a chain of 30 restaurants. He has been taking phone calls at his restaurants but

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Question:

Joe owns a chain of 30 restaurants. He has been taking phone calls at his restaurants but is missing lots of phone calls which has meant missing out on lots of revenue. Joe is exploring the following three options: 1. Keep the phones in the restaurants 2. Outsource phone orders to a 3rd party and get charged a percentage of revenue 3. Open and staff a centralized call center where all restaurant phone calls can be taken Below we have outlined the assumptions under each scenario. Model the costs and benefits of each scenario and make a recommendation on which scenario makes more sense. Calculate the 3 year Cashflow expected to be generated.

by using following summary: Recommendation

After reviewing the 3 scenarios, the one that creates more value is the prepare your own call center. This scenario has a 44% (very high), and without taking into consideration time value money, it creates an additional $283,000 for the company. If there is operational feasibility, then the company should strongly consider creating the call center.

Outsourcing does create value for the company. Although top line increases, the costs outweigh the growth in sales. Since there is no initial investment, we can't accurately calculate an IRR, but the net cashflow is -17,952, which destroys value for the company. The company should not consider this option.

Lastly, the do-nothing scenario stagnates growth, and this can also be detrimental to the business. If there isn't confidence that the management team can prepare a call center, or there is big economical instability, then this is the last resort scenario.