Small Queuing Restaurant Sustainable Revenue Management

Abstract

When competitive small restaurants have queues in peak periods, they lack strategies to cope. However, few studies have examined small restaurants’ revenue management strategies at peak times. This research examines how such small restaurants in South Korea can improve their profitability by adapting their price increases, table mix, and the equilibrium points of the utilization rates, and reports the following findings based on the analysis of two studies. In Study 1, improving profitability by increasing prices should carefully consider the magnitude and timing. In Study 2, when implementing the table mix strategy, seat occupancy and profit also increase, and we further find the equilibrium points of the utilization rates. Under a queuing system, the utilization rate and average waiting time are also identified as having a trade-off relationship. The results provide insights into how managers of small restaurants with queues can develop efficient revenue management strategies to manage peak hours.

Variable Pricing in Restaurant Revenue Management: A Priority Mixed Bundle Strategy

“…The literature on capacity management is rich; these strategies are well established and commonly used in practice. Capacity management focuses on optimizing table configuration (Kimes & Thompson, 2004; Thompson, 2002, 2003), table allocation (Bertsimas & Shioda, 2003; Guerriero et al, 2014; Kim et al, 2020; Thompson, 2015; Wang et al, 2017), reservation decisions (Alexandrov & Lariviere, 2012; Gregorash, 2016; Kimes & Wirtz, 2016; Tse & Poon, 2017) and meal duration (Bloom et al, 2012; Kimes et al, 2002; Kimes & Robson, 2004; Noone et al, 2009; Seo & Hwang, 2014; Thompson, 2011). Improving capacity efficiency means serving more guests over the course of a meal period.…”

“…Even simple price increases that are not communicated effectively may be seen as chaotic and cause negative customer reactions (Kimes & Wirtz, 2003). Kim et al (2020) warn that price increases are not recommended as customers can become fickle due to the competitive nature of the industry. In such an environment, restaurants risk their long-term viability from frequent price changes and differential pricing across customers.…”

Queuing Theory in Fast Food Restaurants

“…(Green, 2007) The findings provide light on how managers of small restaurants with long lines might devise effective revenue management techniques to handle peak hours. (Kim et al, 2020) In food chains such as cafeterias, when the capacity of the servers is less than the demand of the clients, long lines are formed with long waiting periods. This predicament is exacerbated when demand varies, resulting in issues such as client loss, income decline, and poor service quality.…”

Simulación de Sistemas de Colas para Optimizar el Servicio al Cliente en el Sector de Restaurantes.

“…Asimismo, en Corea del Sur, el 85% de los restaurantes son pequeños o menos, y pocos de ellos tienen estrategias para dar soluciones al congestionamiento que se forman en las horas de mayor afluencia, lo que puede resultar frustrante para los clientes (Kim et al, 2020). Estas tácticas no aumentan la rentabilidad a largo plazo porque, tras una subida de precios o una expansión geográfica hasta el punto de que el restaurante deja de ser competitivo, la influencia social de las colas se desvanece y disminuye la percepción de valor de los consumidores.…”