Corner Pizza: A New Product

Analysis and Recommendations for Menu Expansion

Prepared by
Rosilaine Francisco and Tanisha Bajaj

Instructor
Professor Musa Sharif

Course
AF 610 - University of Massachusetts

Date
December 2024

This document presents an analysis and recommendations for menu expansion at Corner Pizza, including the
potential addition of new products such as Flatbread Sandwiches, Pancakes, and Waffles.
 Corner Pizza
Rosilaine Francisco and Tanisha Bajaj
December 2024

Memorandum
To: Antonio Sousa
From: Rosilaine and Tanisha, Summer Intern
Date: December 2024
Subject: Recommendation for Adding New Menu Items to Corner Pizza

Introduction
Corner Pizza’s loyal customer base presents an opportunity to expand the menu by adding Flatbread
Sandwiches, Pancakes, or Waffles. This memorandum evaluates the quantitative and qualitative factors
affecting this decision and provides a recommendation.

Cost and Revenue Analysis

PIZZA. Current Cost and Revenue Data Per Unit Total

Sales per month (number of pizzas) 2,250
Selling price per pizza $20.00
Variable costs per pizza:
Ingredients (pizza dough, sauce, cheese) $3.50
Ingredients (pizza toppings) $4.00
Pizza boxes, paper plates, napkins, eating utensils $1.50
Total variable costs per pizza $9.00
Fixed/Capacity costs (per month):
Storefront ownership (mortgage, insurance, property taxes) $1,500
Shift manager labor $5,000
Pizza maker, waitperson labor $6,000
Depreciation, equipment* $1,200
Telephone service, utilities $400
Owners’ salary and benefits, administrative costs $3,500
Total fixed/capacity costs (per month) $17,600

Table 1: Pizzas

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FLATBREAD SANDWICH: Current Cost and Revenue Per Unit Total
Data
Sales per month (number of sandwiches) 600
Selling price per sandwich $10.00
Variable costs per sandwich:
Ingredients (bread, fillings, vegetables, sauce) $3.00
Packaging (wrappers, napkins, etc.) $0.40
Total variable costs per sandwich $3.40
Fixed/Capacity costs (per month):
Storefront ownership (mortgage, insurance, property taxes) $1,000
Operation labor $2,000
Depreciation, equipment* $200
Telephone service, utilities $50
Total fixed/capacity costs (per month) $3,250
Revenue and Profitability:
Total Revenue (600 sandwiches at $10.00 each) $6,000
Total Costs (Variable + Fixed) $5,290
Profit/Loss (Revenue - Total Costs) $710

Table 2: Flatbread Sandwiches

PANCAKE: Current Cost and Revenue Data Per Unit Total
Sales per month (number of pancakes) 300
Selling price per pancake $5.70
Variable costs per pancake:
Ingredients (flour, eggs, milk, toppings) $2.50
Packaging or serving costs $0.40
Total variable costs per pancake $2.90
Fixed/Capacity costs (per month):
Storefront ownership (mortgage, insurance, property taxes) $1,000
Operation labor $2,000
Depreciation, equipment* $200
Telephone service, utilities $50
Total fixed/capacity costs (per month) $3,250
Revenue and Profitability:
Total Revenue (300 pancakes at $5.70 each) $1,710
Total Costs (Variable + Fixed) $4,120
Profit/Loss (Revenue - Total Costs) -$2,410

Table 3: Pancakes

WAFFLE: Current Cost and Revenue Data Per Unit Total

Sales per month (number of waffles) 250
Selling price per waffle $6.00
Variable costs per waffle:
Ingredients (flour, eggs, toppings) $3.50
Packaging or serving costs $0.40
Total variable costs per waffle $3.90
Fixed/Capacity costs (per month):
Storefront ownership (mortgage, insurance, property taxes) $1,000
Operation labor $2,000
Depreciation, equipment* $200
Telephone service, utilities $50
Total fixed/capacity costs (per month) $3,250
Revenue and Profitability:
Total Revenue (250 waffles at $6.00 each) $1,500
Total Costs (Variable + Fixed) $4,225
Profit/Loss (Revenue - Total Costs) -$2,725

Table 4: Waffles
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Problem
You are considering adding new items to the menu to meet customer demand and diversify the offerings.
However, these additions involve increased costs and operational complexity, and their profitability is
uncertain.

Analysis
Quantitative Factors
To decide whether to add Flatbread Sandwiches, Pancakes, or Waffles to Corner Pizza’s menu, Sousa
must consider the following:

Profitability of Each Item

• Flatbread Sandwiches:
– Selling Price: $10.00
– Variable Costs: $3.40
– Contribution Margin: $6.60 per unit
– Monthly Sales: 600 sandwiches
– Monthly Contribution: 600 × 6.60 = $3, 960
• Pancakes:
– Selling Price: $5.70
– Variable Costs: $3.00
– Contribution Margin: $2.70 per unit
– Monthly Sales: 300 pancakes
– Monthly Contribution: 300 × 2.70 = $810
• Waffles:
– Selling Price: $6.00
– Variable Costs: $3.90
– Contribution Margin: $2.10 per unit
– Monthly Sales: 250 waffles
– Monthly Contribution: 250 × 2.10 = $525

Fixed Costs Impact

Monthly fixed costs for adding any of these items include labor ($2,000) and additional utilities ($50),
totaling $2,050.

Breakeven Analysis
Formula:
F ixedCosts
BreakevenP oint(units) =
ContributionM arginperU nit
Flatbread Sandwich:
3, 250
≈ 492units(roundeduptonearestunit)
6.60
Pancake:
3, 250
≈ 1, 160units
2.80
Waffle:
3, 250
≈ 1, 548units
2.10
Observation: Flatbread Sandwiches require fewer sales to break even and are the only profitable item
at the current sales estimates.

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Net Contribution (Profit or Loss)
• Flatbread Sandwiches: $3, 960 − $2, 050 = $1, 910

• Pancakes: $810 − $2, 050 = −$1, 240

• Waffles: $525 − $2, 050 = −$1, 525

Observation: Flatbread sandwiches are the only item immediately profitable under the current as-
sumptions. Pancakes and waffles require adjustments in sales volume, pricing, or cost structures to break
even.

Operational, Qualitative, and Strategic Factors

Operational Considerations
• Adding new menu items increases the complexity in the kitchen and can slow service times.
• Training existing staff or hiring additional labor impacts operational efficiency.

• The storage capacity for ingredients and equipment may become limited.

Customer Preferences and Market Fit

• Flatbread sandwiches may fit well with lunch/dinner offerings, complementing pizzas.
• Pancakes and waffles target a breakfast audience, potentially diversifying the customer base but
requiring shifts in operational hours.

Competitive Advantage
• Adding Flatbread Sandwiches leverages existing ingredients and processes, minimizing complexity.
• Pancakes and waffles introduce new market segments but require significant adjustments.

Brand Strategy
It is crucial to maintain a cohesive menu that aligns with Corner Pizza’s brand identity. Adding non-
related items can dilute the brand.

Recommendation
1. Focus on Flatbread Sandwiches: Flatbread Sandwiches offer the highest potential for synergy
with existing operations. They leverage shared ingredients and appeal to a similar customer base,
reducing complexity.

2. Conduct a Test Run: Introduce Flatbread Sandwiches on a trial basis for 2-3 months to evaluate
customer demand, operational feasibility, and financial performance.
3. Adjust Pricing or Costs: Explore supplier negotiations or menu pricing adjustments to improve
profitability. For instance, increasing the selling price of flatbreads by $0.50 could significantly
improve the net contribution.
4. Delay Pancakes and Waffles: Consider adding pancakes or waffles only if Corner Pizza plans to
expand into breakfast service, which would require operational adjustments and a revised marketing
strategy.

Conclusion
Flatbread Sandwiches represent the most practical and strategic addition to the Corner Pizza menu. By
conducting a trial, you can mitigate risks and make a data-driven decision.