Owner Shan Mu is considering franchising her Noodles by Mu restaurant concept. She believes people will pay $10.00 for a large bowl of noodles. Variable costs are $5.00 per bowl. Mu estimates monthly fixed costs for a franchise at $9,000.
Requirements
1. Use the contribution margin ratio approach to find a franchise's breakeven sales in dollars.
2. Mu believes most locations could generate $61,500 in monthly sales. Is franchising a good idea for Mu if franchisees want a minimum monthly operating income of $21,000? Explain your answer.