Breka Bakery

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School

University Canada West *

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Course

620

Subject

Economics

Date

May 28, 2024

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docx

Pages

6

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Breka Bakery & Café Breka has been one of the Vancouver favorites, regularly voted among the city’s best bakeries and cafes. It is located about 15 min in transit from my house and I often visit Breka to read or work on my laptop. The coffee is excellent, and they have one of my favorite pastries, which are hard to find -- Mango Coconut Mousse. Best of all, it is open 24/7 and I come here early Sunday morning or late on a weekday evening and always feel at home. Forcasting for small businesses like a restaurant or a café is challenging without having access to resources and data, but if we have to list down major challenges for forecasting it would be as following. 1. Weather Patterns: 2. Tourism Fluctuations 3. Changing Consumer Trends 1. Weather Patterns: Breka is one of those businesses and cafes that operates 24 hours a day, 7 days a week, 365 days a year – in each of its 7 locations including Fraser Street. which means they need to anticipate demand variations throughout the day and across seasons. Vancouver's weather during the summer months can be quite unpredictable with a mix of sunny days and rainy periods, and with the predictions of long hot summer with occasional heatwaves. This variability in weather conditions can directly impact footfall at the cafe and their beverage preferences. Hot and sunny days might drive higher demand for iced beverages and outdoor seating, while rainy days could lead to lower foot traffic.
2. Tourism Fluctuations: Vancouver is a popular tourist destination and the influx of visitors during the summer months can significantly impact demand for cafes. Breka being one of the most popular Café chains in Vancouver, Breka has even become a prominent feature behind the scenes for many movie crews in what is also known as “Hollywood North”. However, predicting the exact volume of tourists and their spending patterns can be challenging due to factors such as changing global economic conditions, travel trends, and local events and festivals that might attract or deter tourists. 3. Changing Consumer Trends: Consumer preferences and trends in the food and beverage industry can shift rapidly which makes it difficult to anticipate demand accurately. For example, We have seen the rise of plant-based or alternative milk options lately in last couple of years. Even the popularity of certain dietary trends such as keto, gluten-free, and the emergence of new beverage trends could also have an influence on customer demand and overall marketing, operations and product mix requirements. External Factors: Local Events and Festivals: Vancouver hosts various events and festivals during the summer months. Festivals such as the Celebration of Light fireworks competition, The Vancouver Folk Music Festival, Vancouver International Jazz Festival, Car Free Day Vancouver, Khatsahlano! Music + Art Festival, Vancouver Diwali Fest, Pride celebrations, and cultural festivals. These events can significantly impact foot traffic as majority of people prefer to dine out. Breka being 24/7 café becomes a hot place to be, It can have an impact on demand in specific areas of the city. It can be challenging to forecast accurately for them.
Economic Conditions: In recent times economical conditions are not sound for Canadians, Peopl are finding it difficult to survive, to pay rent, to pay for groceries. This can also make it difficult to forecast demand for the future keeping overall economic climate in mind. Factors like unemployment rates, and income levels can influence consumer spending habits and overall potentially impacting the cafe demand. Expansion and New Locations: Breka will be opening their new location in East Hastings in spring 2024; new location and their local customer base will take time to establish their business. It would be difficult for them to forecast their demand and resources for the new location. Some of their old consumers have started feeling less satisfied with their quality of products in new locations, lack of trust and losing brand loyalty of the old consumers are also a factor to consider while forecasting for the upcoming quarter. Competition: The presence of new competitors like Aidan’s and Mercato Di Luigi can influence customer preferences and divert demand at their location on Fraser Street. Pricing and offerings of competitors as well as promotions can also have some impact on the footfall of Breka’s customers. Competitors would also be an important factor to consider for Breka’s for upcoming quarter of 2024. Question 1: I recommend using the Linear Regression method for forecasting because it provides a simple yet effective way to predict future values based on historical linear trends. This
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method assumes that the past pattern of demand will continue into the future, which seems reasonable given the steady increase in demand over the past quarters. MAD MSE MAPE 44 2200 2.53% With this method we get the forecast of Q2 and Q3 2024, As we can see based on the historical data, where demand has been increasing every quarter. With Linear Trend model of forecasting, We can forecast that for Q2 and Q3, demand would be increasing as well at 2890 cups and 3200 cups. With this model we get the equation of y = 310x + 1030 (we get b=310 and a=1030). With this method we get MAD of 44 cups which is relatively low for a quarter and MSE of 2200 Cups which also gives confidence in forecast. MAPE expresses the error as a percentage, making it easy to interpret. A MAPE of 2.53% is quite low, suggesting that the forecasts are generally close to the actual values. t y ty t^2 1 1400 1400 1 2 1600 3200 4 3 1900 5700 9 4 2300 9200 16 5 2600 13000 25 15 9800 32500 55 225 Cycle t y y=mx+a Q1, 2023 1 1400 1340 Q2, 2023 2 1600 1650 Q3, 2023 3 1900 1960 Q4, 2023 4 2300 2270 Q1, 2024 5 2600 2580 Q2, 2024 6   2890 Q3, 2024 7   3200
Question 2: Looking at all the available data of Days to delivery, Delivery Cost and additional costs, we can calculate the total costs for both the options. Given these calculations below Transportation Alternative A is more cost-effective with a total cost of CAD 116 compared to CAD 134 for Alternative B, Eventhough Alternative B is faster but difference is of just 1 day. Days to Deliver Cost Additional costs TOTAL COSTS fees, insurance, etc.($2 per day) A 8 $100.00 $16.00 $116.00 B 7 $120.00 $14.00 $134.00 Since the difference in delivery time is just of 1 day, Transport Alternative A would be ideal if owner manages inventory and manages order fulfilment in timely manner. Question 3: Outsourcing bakery duties(cakes, pasteries, pies) to third party is not new and it is quite common among bakeries and cafes.   Unit Cost (Including Delivery Duty) Additional Cost Forecast units to be sold /Year Total Cost for Forecast In-House $5.00 $30,000.00 20,000 $130,000.00 Outsourcing $6.00 N/A 20,000 $120,000.00 Given these calculations, outsourcing the pastries would be more cost-effective by CAD 10,000 annually compared to baking them in-house. I would recommend outsourcing the production of the pastries as it would save the business
CAD 10,000 per year. Café would have to remember that important factors such as quality control, supplier reliability, and potential for future cost increases are well thought of they are making the final decision. Since Breka already have a inhouse bakery, it would be easier for them to introduce French pastries but in this example we are not considering them having a bakery already, outsourcing would be an ideal choice for their plan.
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