A friend of mine has a coffee shop for many years. Business had been good and she was making a good income from it. But having other interests a few years ago she hired Frank to run the shop.
A year into running the shop Frank noticed his coffee prices kept climbing. But since the suppliers has consolidated he only had two to choose from and since the pricier supplier had a good image (but not as good coffee) he picked the expensive blends. But since more money was coming in than going out, Frank didn't worry too much about it.
Frank decided to get more customers, so he cut his prices by 20%. But to no avail. The same customers kept coming, but now he was just making money. A new rail station opened up the road with a lot of new businesses popping up but Frank did not want to take a loan to set up a stand there. Then the customers dropped off at the store. Now Frank was losing money.
So Frank decided to cut the hours the store was open and fire employees. Meanwhile coffee prices continued to climb, and sales started to drop and the store was losing a lot of money. Frank's solution? Cut the store hours again and fire more employees.
Is Frank doing the right thing to get back to profitability? What would you do?
