“I think we have to do it,” said Paula, the director of operations for the five‐unit Hungry Henry’s pizza chain. Paul was talking to Henry Acosta, the chain’s founder.

Paula and Henry were discussing the fact that their competitors in the area had extended their hours of operation. Instead of closing at 9:00 or 10:00 p.m. as they had in the past, increasing numbers of competitors were extending their hours to midnight or even 2:00 a.m.

Since its founding 20 years earlier, the Hungry

Henry chain units closed at 10:00 p.m., even on weekends.

“I don’t know,” replied Henry. “Our sales between 9:00 and 10:00 p.m. are a good bit lower already than they are between 6:00 and 8:00 p.m. I’m not sure staying up until midnight will generate much more business. Or how much it will cost us to do it?”

“Well,” replied Paula, “I think if we don’t do it, we are in danger of being left behind by the big boys. And once customers get used to going somewhere else it can be hard to get them back, even though our product quality is much better than theirs!”

1. How important do you think it will be for Paula and Henry to know their chain’s fixed operating costs as they consider whether to extend their hours of operation? Why?

2. How important do you think it will be for Paula and Henry to know their chain’s variable operating costs as they consider whether to extend their hours of operation? Why?

3. In addition to costs, what marketing‐related factors may be important in their decision making? Why?

4. In addition to costs, what human‐resources related factors may be important in their decision making? Why?