The class is “Business Process Management

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Revised June 5, 2004

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Mongols BBQ

I am still kind of torn between starting a delivery service or opening a new branch down in the financial district. Should I start the delivery service or should I start the new unit or both? What about the operational issues if I start the delivery service? When should customers place orders? How many delivery people do I need? If I start the new unit, how fast can I recover my investment? How should I handle my inventory and still keep everything fresh? This is where I really need help.

Wai-Ling Wang

Owner, Mongols BBQ

Mongols BBQ restaurant was an Oriental stir-fry “buffet bar” located in the busy business and theater district of Westwood, California, within walking distance of the University of Los Angeles campus. (See Exhibit 1). There, customers could choose combinations of food to be cooked as they watched.

Even though the restaurant was often quite busy, customers could be in and out within 30 minutes. While a number of tables were available inside, the most popular tables were outside where people could get a little sun and watch the moviegoers. At any given time Mongols could seat about 50 people. (See Exhibit 2 for the layout).

The only menu in the restaurant was a huge board above the cashier. (See Exhibit 3 for the menu). A customer first went to the cashier to place the order and pay. The cashier also provided a large empty bowl on a small tray and served drinks and side orders from the counter behind. This whole process took about 40 seconds. At regular intervals, the cashier went into the back room to replenish the counter with fresh sesame buns, rice bowls and soup. On a typical weekday lunch hour, one hungry student found himself behind five people in this line.

The next stop was the buffet bar along the wall between the cashier and the barbecue grill, where customers filled their bowls with the meats, vegetables, noodles and seasoning to be cooked. Here the student found four people serving themselves at the bar and one person waiting in line for the opportunity to fill her bowl. Since return trips to the buffet bar were not allowed,

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Professor Jay Rao, Babson College, prepared this case using only publicly available information with the assistance of David Wylie, Director of Case Publishing, as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © by Babson College 2000 and licensed for publication to Harvard Business School Publishing. To order copies or request permission to reproduce materials, call (800) 545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of copyright holders.

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Mongols BBQ

BAB035

more experienced customers had turned “bowl filling” into an art form by making incredible mounds of food in their bowls. This whole process took anywhere between two to three minutes. The buffet bar includes the following items:

•Uncooked, paper thin sliced: beef, pork, lamb and chicken

•Raw shredded vegetables: cabbage, green onion, lettuce, sprouts

•Fresh cut vegetables: tomatoes, onion, broccoli, carrots

•Seasonings: soy sauce, sesame oil, hot oil (din-ding), cooking wine, garlic, chili paste

•Cooked noodles (udon)

The Mongols employee charged with maintaining the buffet bar also helped customers choose seasonings since a poor choice could ruin the meal. The more adventurous might choose hot, perhaps to clear their sinuses, while others preferred medium and mild combination sauces. This lasted about 10 seconds.

Armed with bowls of uncooked food, customers then placed their trays on the counter top around the barbecue pit. By the time the student had filled her bowl, three trays were sitting on the counter waiting for cooking. Behind the counter was a large round grill, two and a half feet in diameter, where two bowls were being cooked. At peak times, only two cooks could work at the grill simultaneously, each cooking one bowl.

The cook emptied the bowl onto the grill and cooked quickly, stirring with extra long chopsticks. If necessary the cook might add water and/or oil to get the right texture and level of cooking. He grilled the vegetables, the noodles, and the meats separately and then mixed them and returned them to the bowl and to the customer. This process took only 60 to 80 seconds.

Finally, customers faced the challenge of finding somewhere to sit. A sprint to the sidewalk tables, the most popular seating area at Mongols, might reveal an seat, but at lunch time the only seats available were often at the bar stools next to the wall. The turnover at the bar stools was faster where people generally spent only about fifteen minutes. However, some people spent 20 or 30 minutes at the tables, depending on the group size. Each table had a holder for chopsticks, forks, napkins, soy sauce, chili paste and sesame oil. One employee circulated among the tables to pick up the empty bowls, trays, and drinks and wipe the tables.

One weekend, Wai-Ling spoke to the case-writer about Mongols. Wai-Ling and his wife, Hong, had come to the United States in the late 70s. As students, they had a lot of experience working in restaurants. However, they had never seen anything that resembled the Mongolian barbecues that were so common in their hometown of Taipei. When asked about his concept, Wai-Ling commented:

Having worked in several restaurants here in the United States I have learned a number of things. The economics of running a restaurant here is very different from back home. The cost of skilled labor here is very high and cooking is an art; not everyone can do it. I always wanted to set-up a system that did not require chefs and my constant presence.

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2

Mongols BBQ

BAB035

Even though we are open year round (350 days), I am able to limit my payroll and benefits to about 15% of my sales. We are open only during the hours of 11-2 p.m. and 5-10 p.m. This makes it easy for me to find part -time workers. The other factor is space. Unfortunately, a concept like Mongols will prosper only in places where the rents are very high. This means that I have to utilize every corner I can and make it productive. My rents are still higher than I like them to be around 6%. Luckily, I don’t have any administrative costs and I don’t believe in marketing; Mongols sells itself. We still provide the best value in Westwood. The average check size is $5.90. We serve about 300 people per day on weekdays and around 200 per day on weekends. I have worked as a waiter, as a chef’s assistant and as a chef as well and I have seen the waste in the kitchens. Unfortunately, here our waste occurs when customers think they can eat more than they actually can. Our food costs are around 30% of our sales.

The dining and barbecue areas occupied almost 80% of the floor space. In the rear were a prep-room and a walk -in refrigerator. The prep- room had meat and vegetable slicers, as well as an oven for buns, a rice cooker and a huge pot to cook the noodles. There was enough room for two people to do the prep work simultaneously. Only about half of the refrigerator was used, and the meat and fresh vegetables were neatly stacked with lots of room to walk around. Wai-Ling was quick to point out:

We cannot compromise on the quality of our meat and vegetables. They must be always fresh. We order and receive all our supplies twice a week. Luckily we do not have to deal with any seafood; if we did, it would have to be everyday. We do two major preps a day, one for lunch and one for dinner. We then fill the buffet bar as needed (prep included cutting and slicing meats and vegetables).

The case-writer asked Wai-Ling if there was anything that he would like to see improved or changed:

You know how it is here at noon on weekdays, nearly a third of my day’s business occurs in that one hour. I wish I could fit more tables. Somehow my customers don’t like to take out food, even though I would love them to. Also, in the last two years alone you have seen the profusion of new places and all within three blocks – Tommy’s Hamburgers, Falafel King, Slice-a-Pizza and 1$-Sushi. All these places have quite a sizable take-out.

I am considering two big changes. One possibility is to add a delivery service. The other is to open a new unit downtown.

A Delivery Service

Deliveries would be to nearby offices. I know for a fact that companies around here have Chinese food regularly delivered for their lunch meetings. The delivery package will consist of a value meal deal for the whole group: Combo

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Mongols BBQ

BAB035

BBQ (choice of meat – chicken, beef, pork, lamb, and veggies) + packaged sauces + soup + sesame bun + rice + drinks. I would like to generate about 100 extra customers each day via this delivery service and charge around $6 per person. This means I will have to start doing some marketing. You know I have no experience doing that.

A New Unit

The other opportunity is to open a second unit. Recently, some folks from the South part of the financial district approached me to open a unit in the food court of the renovated 25 story Bank of America building, just six blocks from here. The area around Ashton Avenue and Westwood Boulevard is quite residential and pretty upscale. Even though there are two movie theaters across the road, the food court is in the yard behind the building, away from the main road.

The food court already has a New York style deli that offers every thing from burgers to pizza to fried chicken to salads (average lunch check size is $ 6), a Souper-Salad (average lunch check size is $ 4) and a coffee shop that serves only beverages and baked goods. The delis are open from 11:00 AM to 7:00 PM, Monday through Friday and the coffee shop is open from 7:00 AM to 7:00 PM. That place really needs some Oriental touch, although I don’t know quite how to price my menu there. The great thing about this place is that all the vendors share common seating for 150 people in the courtyard. During lunchtime it is packed. The total traffic during the day is around 450.

The start-up costs look very attractive. If we do not install a walk -in refrigerator, I should be able to set it all up for around $100,000. I am hoping that I can store all of the meat and vegetables here and get someone to take them from time to time to the new site. However, the rent will be significantly higher, about two percent more than the industry average (see Exhibit 4). Also the new place is a little farther from the university and I might have problems hiring part time employees. This might bring my labor costs closer to about 20% of my sales. I wonder if there are other operational issues that I should be considering?

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Mongols BBQ

BAB035

Exhibit 1

UCLA and downtown Westwood

1 7

1 6

2 9

1 8

2 0

U C L A

2 4

3 0

1 9

2 1

2 5

2 8

3 1

2 2

2 6

2 7

2 3

5

1

2

73

8

4

6

9

1 1

1 3

1 2

1 0

1 4

1 5

1

Tommy’s Hamburger

6

Taco Bell

2

Falafel King

7 – 15

Movie Theaters

3

Slice-A-Pizza

16 – 23

Fraternities

4

$1-Sushi

24 – 31

Sororities

5

Burger King

Proposed Site of another MONGOLS

Scale:

= ¼ mile

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Mongols BBQ

BAB035

Exhibit 2

Restaurant Layout

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PREP-ROOM

RESTROOM

CLEANING

COUNTER

WALK-IN

DRINKS

FRIDGE

CASHIER

TABLE

MEATS

VEGGIES

SAUCES

GRILL

ENTRANCE

SIDE-WALK

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Mongols BBQ

BAB035

Exhibit 3

Menu

Mongolian BBQ Combo

$5.45

(with all side orders)

Regular BBQ

$4.45

Side Orders

Rice

$0.35

Soup

$0.65

Sesame bun

$0.20

Beer

Domestic

$1.75

Imported

$2.00

Sake

$2.75

Beverages

Small

$0.75

Large

$0.90

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Mongols BBQ

BAB035

Exhibit 4

The Restaurant Industry Dollar

(Industry average for limited menu restaurants with no table service)

Where It Came From

Food Sales

97.3

Beverage Sales

2.2

Other Income

0.5

Where It Went

Cost of Food Sold

31.6

Cost of Beverage Sold

0.6

Payroll

24.1

Employee Benefits

2.8

Direct Operating Expenses

6.4

Music and Entertainment

0.1

Marketing

4.2

Utilities

3.3

Administrative and General

2.1

Repairs and Maintenance

1.7

Rent

6.5

Property Taxes

0.6

Other Taxes

0.5

Property Insurance

0.7

Interest

1.1

Depreciation

2.3

Other Deductions

0.4

Corporate Overhead

3.1

Net Income Before Income Taxes

7.9

Source: National Restaurant Association Research and Information Service Department

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