International Journal of the Information Systems for Logistics and Management (IJISLM), Vol. 2, No. 1, pp.

55-62 (2006) 55

A New Coffee Shop Location Planning for Customer

Satisfaction in Taiwan

Wen-Hwa Ko1 and Chihwei P. Chiu2

1Department of Tourism and Hospitality Management, Kainan University,
No. 1 Kainan Rd., Lu-jhu, Taoyuan, Taiwan 338
2Department of Nutrition and Food Sciences, Fu Jen University,

Taipei, Taiwan

ABSTRACT
The purpose of this study is to select on optimal alternative for the planning of new coffee shop
based on customer satisfaction. We used a modified Delphi method involving 5 experts and 10 coffee
shop managers. We analyze the data using an Analytic Hierarchy Process (AHP) method to find the
weighted values of each evaluation factors. We construct a decision structure including six criteria
for the performance evaluation of the three alternatives. Locating the coffee shop in a commercial area
was found to be the most preferable, followed by a school and a hospital center. The proposed method
was found to be a good method for decision-making in coffee shop location planning. A more general
model will be developed in further research.

Keywords: analytic hierarchy process (AHP), coffee shop, consumer satisfaction, location planning.

1. INTRODUCTION Goodchild, 1984). Such approaches provide a set of

systematic steps for the problem-solving, but do not con-
Taiwan has become more westernized in recent sider the global relationships between the decision factors.
years, and the number of coffee shops, consumer A decision maker has to choose worth-creating invest-
expenditures, and frequency of visits are all on the rise ments, not just for present prosperity but for proactive
(Kao, 2004). Coffee shops are located in proximity to stability as well (Agrawal and Kamakura, 1995).
commercial trade, residences, offices, schools, and hospi- However, a desirable strategic decision-making implies
tals in Taiwan (Kao, 2003). Research on the customer a complex process that entails satisfying the following
satisfaction has flourished over the past two decades be- principles (Klammer, 1994): (1) relating investment deci-
coming one of the most popular topics in the service sions to strategic plans and operating goals, (2) consistent
marketing. Generally food service companies are using evaluation of investment alternatives, (3) evaluation of in-
customer satisfaction data to determine the level of the vestment alternatives using multiple decision attributes
service/product quality in order to increase customer including both financial and non-financial criteria, (4)
retention. Restaurant planning should be focused on both assessment of risk evaluation among the alternatives, and
providing services for individual customers, and also (5) establishment of a management system that provides
on the required service characteristics for the customers the cost and performance data needed to evaluate invest-
as a whole (Yun and Hing, 1995). Therefore, the purpose ment decisions. Decision making, one of the most im-
of this paper is an evaluation model of a new coffee shop portant roles of directors, requires consideration of priori-
planning for proving the customer needs and increasing ties within overall operations and, compromises between
in value-added. opinions (Martin and Conklin, 1999; Spears and Gregoire,
Generally, managerial decision-making for coffee 2003).
shop planning is aimed at increasing of value added and One way of improving the decision-making pro-
profit created effect for investors as a final objective. Con- cess is to develop performance criteria in terms of goal
ventional scholarly approaches to understanding mana- achievement and making decisions based on these criteria.
gerial decision-making include understanding managerial Performance criteria developed in terms of goal achieve-
knowledge and experience, the checklist method, the ana- ment can address efficiency (Andersson, 1996). Using
log approach and regression models (Achabal, 1982; performance criteria, restaurant managers can evaluate
56 International Journal of the Information Systems for Logistics and Management (IJISLM), Vol. 2, No. 1 (2006)

how well they are achieving their quality and cost service (Dube et al., 1994) are known to be the most
objectives, and evaluate strategic decision alternatives. critical factors affecting customer decision-making for
In light of the usefulness of criteria in making restaurant planning.
decisions, this study examines the use of criteria to find
optimal location planning for new coffee ships. The 2.2 Customer’s External Factors
objectives of this study are: (1) to provide a new method
of effective implementation of an Analytic Hierarchy Lo et al. (2005) suggested that the restaurateur’s
Process (AHP) to make a decision, and (2) to evaluate consideration of the importance of atmosphere could
alternatives for the optimal location planning for of a be equal to or even more important than the food itself.
new coffee shop based on the customers’ satisfaction It may also help an organization to differentiate itself
using AHP. from its competitors. Qu (1997) found the food and en-
The remainder of this paper is organized as follows. vironment were the most important factors influencing
The literatures are collected in section 2 and 3. The customer choice of Chinese restaurants. Milliman (1986)
methodology is proposed in section 4 to describe its ideas looked at the effects of playing fast and slow music in
and procedures. An example is used to apply the pro- a restaurant and North et al. (1999) studied the effects
posed method in section 5. Discussions are presents of music on the sale of wine. Selection of a restaurant
in the section 6 and conclusion is in the last section. location is a crucial decision, since a good location
can attract a large number of visiting customers and make
2. RESTAURANT PERFORMANCE FACTORS them easy to reach. The business activates maintains
FOR THE CUSTOMER SATISFACTION high developing potential in the commercial trade area
and they have about 70% of persons consumers in this
Restaurant performance factors for customers area. Further, location planning exerts a significant effect
could be determined by five factors including customer on the market share and profit-making ability of the
satisfaction, customer loyalty, customer retention, market restaurant.
share, and the firm’s ability to charge a premium price. A number of papers discuss stores and the retail
If the quality of service, products and price exceed location problems. Kuo et al. (1999) evaluated store
customer expectations, they are likely to be satisfied with sites, determined store rents and proposed criteria for
the restaurant (Bitner et al., 1990). Customer perception location selection. Zhao and Olsen (1997) also analyzed
of the quality of restaurant service directly affects both the opening mode by means of location factors related
customer satisfaction and revisit intention (Kim and Kim, to the external or macro-environment, and the factors
2005). Based on these studies, researchers found that of the task environment or micro-environment, as well
customer satisfaction is related to the customer’s internal as other aspects of the issue.
and external expectation factors (Knutson, 2000; Nicolau,
2002; Pagliarini et al., 2005). 3. APPLICATIONS OF AHP IN FOOD SERVICE
PLANNING
2.1 Customer’s Internal Factors
AHP is a powerful tool proven to be useful in struc-
Food choice is a problem of complex function for turing complex multi-person, multi-criterion decision in
preferences of sensory (taste, odor, texture) characteristics, business management (Handfield et al., 2002). This is an
combined with the influences of non-sensory factors, in- efficient way to deal with complex systems, and prefer-
cluding food- related expectations and attitudes (Rozin, ence priorities for alternatives can be developed based on
1996; Shepherd, 1989), health claims (Vickers, 1993), the decision maker’s judgments throughout a decision
ethical concerns (Sparks et al., 1995) and mood (Roger, system. A hierarchy is an effective approach to tackling
1996). Nettles and Gregoire (2000) observed that man- unstructured problems because it is efficient in organiz-
agers were involved in the food decision-making pro- ing structure for a system as well as controlling and pass-
cess, and that factors considered in selecting a food ing information down through the system (Saaty, 1987).
production system included satisfaction with food quality, AHP has been successfully applied in the performance
food safety concerns, the temperature of food at service, evaluation of research and development (Calantone
and the holding time of prepared food. Performance et al., 1999; Fogliatto and Albin, 2003).
measures of food, including variety, quality, nutrition, Studies on hospitality management also have
portion size, and prices, are known to be the most critical utilized AHP. Min et al. (1997) used AHP for competi-
factors in determining overall rating of the service tive benchmaking of health care quality by prioritizing
(Johnston and Upton, 1991; McFarlane and Pliner 1997). quality standards, and compared different healthcare
Dube et al. (1994) recommended that the customiza- facilities. Tzeng et al. (2002) used a multiple criteria
tion was the most critical service factors for the food decision analysis method in the optimal location selec-
satisfaction. Professional staff (Soriano, 2003) and tion in restaurant planning for a new coffee shop. Cebeci
 W. H. Ko and C. P. Chiu: A New Coffee Shop Location Planning for Customer Satisfaction in Taiwan 57

and Kahraman (2002) compared catering firms using criteria using the AHP method. Fig. 1 shows the pro-
four attributes and AHP. Creed (2001) discussed the cesses for planning a new coffee shop. The overall
results of a survey on how consumers perceive the ac- methods for coffee shop planning are based on the litera-
ceptability of the prepared meals according to age group, ture reviews. The total of two rounds of surveys was
social class, gender and frequency of eating out, and conducted using the modified Delphi. Then, a question-
the potential for extending the use of prepared meals naire was distributed to identify relative weights of per-
to those who could benefit from. Jansen et al. (2001) formance criteria.
developed a simulation model to analyze a multi-com- Fifteen experts, including five scholars and ten cof-
partment distribution system which should satisfy fee shop managers who had experience in one or more
customer demands for shorter lead times, increased coffee shops of at least 50 seats were invited to evaluate
delivery frequency and improved quality of process and the weights of the objectives and criteria. An open ended
product. The simulation model quantifies logistic and questionnaire was applied. This was followed by asking
financial performances in various alternatives of logistic directors to list performance criteria used in assessing
scenarios for multi-compartment distribution problems the opening of a new coffee shop. We tabulated the crite-
in the supply chain. AHP is an appropriate tool when ria obtained by the results of responses to questionnaire 1.
there is a clearly stated goal for a decision, a set of In questionnaire 2, the Delphi panel reviews compiled
relevant criteria, and a set of alternatives that can be performance criteria in a hierarchical structure and were
described using these criteria. AHP is also a useful tool asked whether they agreed with the hierarchical structure
for evaluating complex multi-attribute alternatives in- and whether the items needed modification. The hierar-
volving subjective or intangible criteria (Armacost et chical structure was then modified by incorporating the
al., 1994), such as customer satisfaction or service qual- responses to questionnaire 2, and the final structure of
ity in the area of coffee shop planning. Coffee shop plan- the performance criteria model determined.
ning fits these requirements. In questionnaire 3, the expert panel compares the
performance criteria in all possible pairs using the pairwise
4. METHODOLOGY comparison scale. Pairwise comparisons form pair-
wise matrices for each level of hierarchical structure.
The individual decision making is influenced by For each matrix, a consistency index (CI) and a priority
cultural, social, personal, and psychological factors. The vector are calculated using the AHP software package
study is to select on optimal alternative for the planning (Hwang, 2001). The main attributes determined by the
of new coffee shop based on customer satisfaction. This questionnaires are professional service (B1), food quality
section first establishes the objective hierarchy of evalua- (B2), environment (B3), reasonable price (B4), other
tion using Delphi process, and identifying the relative food and drink (B5) and promotion (B6). We as-
weights of each critical using the AHP method. sumed three alternative locations for the coffee shop,
all in Taipei: (1) hospital: a coffee shop to be opened
4.1 Planning a New Coffee Shop Design in the shopping building at National Taiwan University
Hospital, the biggest hospital in Taipei; (2) school: a
This study is designed to decompose critical factors coffee shop near National Taiwan University, the big-
in planning a new coffee shop using a modified Delphi gest university in Taipei; and (3) a commercial center
process, and identifying the relative weights of each located at the intersection of two subway lines, a metro-
politan core commercial center such as the Sogo Depart-
ment store.
Step 1: Coffee shop location selection indicators are collected from
4.2 Modified Delphi Method
the review of related papers and documents

The traditional process of the Deplhi method elimi-

nates by face-to-face interaction and encourages indi-
Step 2: Modified DHP (Delphic Hierarchy Process) method-Design
of the questionnaire and data collection vidual inputs by maintaining anonymity and confidenti-
ality among those taking part in the process. After each
round of questions, the information is consolidated and
Step 3: Evaluation of the weights of the performance criteria edited. The Delphi method requires a number of rounds
for the researcher and participants to complete the dif-
ferent activities. The coordinators of the study are re-
Step 4: Validation of the results and the final decision on the location sponsible for the evaluation of the answers from each
of the new coffee shop round of questionnaires. If the group reaches a consen-
sus in the early rounds, subsequent rounds may be
Fig. 1. The processes for planning a new coffee shop dropped. On the other hand, if group convergence is not
58 International Journal of the Information Systems for Logistics and Management (IJISLM), Vol. 2, No. 1 (2006)

reached, the original research problem may be restated C1 C2 Cn

and the process restarts (Khorramshahgol and Moustakis, a 11 a 12 a 1n
1988). The Delphi allows participants to express opin- C1
ions freely and to value numerical values in an opinion. C 2 a 21 a 22 a 2n
A =
In addition, the Delphi process prevents domination of
particular individuals in the process of approaching a Cn a a a nn
n1 n2
consensus. Six general steps are summarized for the
application of Delphi method (Delbecq et al., 1975) as Numbers in matrix A are true values if they were
follows: determined based on the accurate sense of weight.
Therefore, the following is true in the matrix when wi
(1) researchers mail respondent group to develop initial is the true weight of object i.
questionnaire and distribute it; Pairwise comparison matrix: A = [aij]n×n
(2) respondents independently generate ideas in answer
to the first questionnaire; aij ≈ wi/wj and wi ≈ aij wj i, j = 1, 2, …, n
(3) researchers summarize responses to the first question-
naire and develop a feedback report along with the In this case, the relative weight (wi) can be estimated
second questionnaire for the respondent group; by taking the average value of aij wj illustrated in the fol-
(4) having received the feedback report, respondents lowing equation.
independently evaluate earlier responses;
(5) respondents are asked independently to write on n
priority ideas included in the second questionnaire w i ≈ n1 Σ a ijw j i, j = 1, 2, …, n
j=1
and mail their responses back;
(6) researchers develop a final summary and a feedback Calculate the priority and the weights can then be
report to the respondent group and decision makers. estimated by solving the eigenvector:

The modified Delphi method is a systematic Aw = nw

procedure of collecting expert opinions and obtaining
a consensus of the experts through review the relations where w is an eigenvector of matrix A given by equation
and documents, repeated inquiry, discussion, and opinion and n is the associated eigenvalue. Since the observed
collection. This can be achieved without the necessity matrix A may not be consistent, the estimation of w
of the experts meeting together, and also the modified could thus be found out by satisfying
Delphi method includes the collection of data for pairwise
matrix. Aw = λmax w

4.3 Analytic Hierarchy Process (AHP) Establish the consistency of a matrix: If maximal
eigenvalue λmax is exactly the same as n, the pairwise
The AHP is based on the idea that a complex issue comparison matrix A is thus perfectly consistent. Be-
can effectively examined if it is hierarchically decomposed cause the chance of this perfect consistency is small,
its parts. The procedure for AHP can be summarized in a consistency index (CI) is thus used to evaluate the
the following four steps: (1) set up the hierarchy system consistency of the observed matrix A, which is
by decomposing the issue into a hierarchy of interrelated
elements; (2) generate input data consisting of pair- CI = (λmax – n)/(n – 1)
wise comparison matrix to find the comparative weights
among the attribute of the decision elements; (3) synthe- Another indicator of consistency is consistency ra-
size the individual subjective judge and estimate the tio (CR), which is the ratio of CI to the average ran-
relative weights; and (4) determine the aggregating rela- dom index (RI). RI is a randomly generated reciprocal
tive weights of the decision elements to arrive at a set of matrix on a scale from 1 to 9, with reciprocals forced.
ratings for the decision alternatives. A CR of 0.10 or less is considered to be acceptable.
The exports compared performance criteria among
4.3.1 We describe as follows all possible pairs using the pairwise comparison scale
summarized in Table 1 (Saaty, 1980).
Let us consider the elements C 1, C 2, …, C n of
some level in a hierarchy and let us denote their 5. MODEL APPLICATION
normalized, unknown, priority weights by w1, w2, …, wn
respectively. The value of wi reflect the degree of impor- We applied this model to a new coffee shop plan-
tance of Ci with respect to Ci’s governing element. ning problem in Taiwan according to the four steps of
 W. H. Ko and C. P. Chiu: A New Coffee Shop Location Planning for Customer Satisfaction in Taiwan 59

Table 1. Pairwise comparison scale for the AHP method

Intensity of importance Definitions Explanations

1 Equal importance Two criteria contribute equally to the ob-
jective
3 Weak importance of one over another Experience and judgment slightly favor
one criterion over another
5 Essential and strong importance Experience and judgment strongly favor
one criterion over another
7 Very strong and demonstrated importance A criterion is favored strongly over
another, its dominance demonstrated in
practice
9 Absolute importance The evidence favoring one criterion over
another is of the highest possible order
2, 4, 6, 8 Intermediate values between adjacent scale When compromise is needed
values
Reciprocals of above If criterion i has one of the above non-zero A reasonable assumption
nonzero numbers numbers assigned to it when compared with
activity j, then j has the reciprocal value
when compared with i
Rational Ratios arising from the scale If consistency were to be forced by ob-
taining values to span the matrix
Source: Saaty (1980)

The goal to open a new coffee shop Al

Professional Food Reasonable Other food B1-6

Service Quality Environment Price Promotion drink

Business School Hospital C1-3

Fig. 2. The hierarchical structure of the problem

the planning model as Fig. 1. In questionnaire 1, Delphi ger 1 though 9 and their reciprocals (1, 1/2, 1/3, ...., 1/9).
experts were asked to select criteria they used to suc- When median values were not exactly the same as one
cessfully opening a new coffee shop. Twenty-seven per- of the possible values in the pairwise comparison scale,
formance criteria were obtained from responses to the closest value was entered into the software package
questionnaire 1. After analyzing the answers from the to develop the pairwise comparison matrix and calculate
experts and combining those from similar categories, six priorities of criteria, or priority vector. The relevant evalu-
categories were obtained. An AHP was used to calculate ation matrix to the goal for obtaining the good business
the selection problem in foodservice systems. The in coffee shop is shown in Table 2. Comprehensive
hierarchical structure of decision making of the example performance criteria were identified and organized under
problem is shown in Fig. 2. Median values of pairwise seven categories by coffee shop managers: (1) reasonable
comparisons were used to calculate priorities of categories. price, (2) food quality, (3) promotion, (4) professional
Possible values of the pairwise comparison scale are inte- service, (5) environment and (6) other food or drink. The
60 International Journal of the Information Systems for Logistics and Management (IJISLM), Vol. 2, No. 1 (2006)

Table 2. The evaluation matrix with respect to the goal

CI = 0.064
A B1 B2 B3 B4 B5 B6 Weighted value
CR= 0.052
B1 1 3/1 4/1 2/1 4/1 2/1 0.336
B2 1/3 1 3/1 1/1 4/1 3/1 0.201
B3 1/4 1/3 1 1/3 1/1 1/1 0.070
B4 1/2 1/1 1/1 1 6/1 4/1 0.244
B5 1/4 1/4 1/4 1/6 1 2/1 0.073
B6 1/2 1/3 1/3 1/4 1/2 1 0.075

Table 3. The main attribute of the goal

Alternative
A B1 B2 B3 B4 B5 B6
priority weight
Weighted value
0.336 0.201 0.070 0.244 0.073 0.075
Alternative
C1 0.655 0.263 0.705 0.193 0.238 0.625 0.434
C2 0.095 0.190 0.084 0.701 0.625 0.238 0.311
C3 0.250 0.547 0.211 0.106 0.136 0.136 0.255

alternatives in determining the priority weights for the using relative weights of each alternative in the perfor-
best coffee shop planning criteria are given in Table 3. mance criteria model. The commercial center appeared
Using the AHP, the best planning alternatives for the to be the better alternative because the coffee shop
new coffee shop were decomposed into comprehensive provided a comfortable space for business people. One
performance criteria as a hierarchical decision structure. of the most dramatic findings of recent research is that
Service, price and quality are the most important factors providing high levels of comfort reduces the price sensi-
in managerial selection among alternatives for opening tivity of business customers (Barsky and Nash, 2003).
new coffee shop, based on customer satisfaction as the Many consumers visit coffee shops to take a rest when
goal. they are shopping (Boer et al., 2004). A more important
In this paper, selecting the best location among al- value provided by coffee shops, as opposed to other
ternatives in new coffee shop location planning was de- types of restaurants, is comfortable space.
termined using AHP. Relative weights identified in the In Taiwan, the coffee shop market in college areas
model provide the information for managers to prioritize is large and growing. Most coffee shops provide mini-
important criteria in achieving the goal of customer mum service, usually comparable to fast food restaurants,
satisfaction. The commercial center was perceived to where the customers purchase and pick up their food and
be the best alternative for the new coffee shop; followed beverage orders at the counter, and then proceed to the
by the school and the hospital. Pairwise comparisons sitting or dining area for their enjoyment. Therefore,
of criteria for sub-attributes were consistent. customer selection criteria for the fast food restaurants
may be similar to those for coffee house chains (Lo et
6. DISCUSSIONS al., 2005). The average price of meals in coffee shops
is higher than that of fast food places, and it is different
From the results of example, the weighted values: to get profile for the coffee shops managers.
professional service (0.336), reasonable price (0.244) and Food service is one of many complicated issues for
food quality (0.201) are the three most important three satisfaction among hospital patients and visitors.
factors in obtaining customer satisfaction. Environment Traditionally, patients in hospitals have selected what they
(0.070) was least important among these factors. The want to eat the day before via a standard menu. When the
attributes of quick service and price, may be more im- food arrives, patients frequently feel that it is the wrong
portant than hedonic attributes like mood and variance temperature or appearance. The patients eat better and
of menu (Park, 2004). Pettijohn et al. (1997) also found are more satisfied with food service when allowed to
quality, cleanliness and value to be the three most impor- order food when they are ready to eat (Williams et al.,
tant attributes in fast food restaurants, while atmosphere 1998). Patients feel that the temperature, appearance
and menu variety were relatively unimportant. Customer and aroma of the food are particularly important for the
satisfaction is closely related to quality. patients (Stanga et al., 2003). providing clean, conve-
The overall the performance scores for three alterna- nient and good tasting products is already a trend of the
tives: business, school, and hospital were calculated hospital stores like coffee shops and fast food restaurants.
 W. H. Ko and C. P. Chiu: A New Coffee Shop Location Planning for Customer Satisfaction in Taiwan 61

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