You are the leader of a group of investors that is planning to open a nationwide chain of seafood restaurants called “Starving Sailor Restaurant.” You are preparing for tomorrow’s strategy meeting. The investor group is considering two strategies for how the restaurant chain will be operated. One strategy, internally titled “Classy,” proposes to market the restaurant chain as the quality leader among seafood restaurants. The restaurants will be located in good neighborhoods, will offer choice seafood selections, and will have an excellent cleanup crew. Each restaurant will also have a trained manager on site during business hours to handle customer complaints, in addition to a national troubleshooting team that will promptly fly to any location to investigate consistent patterns in customer complaints received via a toll-free complaint hotline.
The other strategy is titled “Tight Budget.” The restaurants will be located wherever cheap real estate can be found, will be staffed with the lowest-cost labor possible, and will focus on offering low-cost food. There will be no mechanism for receiving customer complaints, and the store manager will not be trained in customer satisfaction.
A significant portion of the investor group advocates the “Tight Budget” strategy, arguing that it offers the lowest operating costs and, therefore, the highest profit. You are worried that these investors may not have thought carefully about all the costs associated with this strategy. Using the costs of quality (COQ) categories, outline some of the major costs that will differ between these two restaurant strategies.