So, You Want to be an Entrepreneur?

Generic Hamburger Production Exercise

You are about to open a fast-food restaurant that specializes in generic hamburgers – quarter pound beef patty with lettuce, tomato, onion, pickle and special sauce on a sesame seed bun.   You will serve, on average, 60 burgers per hour and will be open 10 hours per day, 7 days per week (for a total of 300 hours per month).  You have several decisions to make about your business:

1. How many people do you want to employ in addition to yourself and how much do you want to pay them?  Two employees can handle the work - but just barely. They will not have time for breaks and will have to work at a very fast pace.  With fast work and consequent fatigue there is always the possibility of accidents.  In addition, with two employees it will sometimes be difficult to meet health department cleanliness regulations.  Things will go better with 3 employees, but that will increase your costs.

The minimum wage is $6 per hour, and you can find workers at that wage.  The standard wage for food workers in comparable establishments is $7, but the Dept. of Labor says that $8 per hour is a living wage in your area.

2. How much rent are you willing to pay?  For $2100 per month you can rent a satisfactory building with everything you need and with a good parking lot.  For $2400 per month, the landlord will do some remodeling that will make the kitchen easier to keep clean.  For $3000 per month the landlord will also improve the kitchen and add worker safety features like handrails on employee stairways and lighting of employee parking spaces and will install a separate employee restroom.

3. How much are you willing to pay for employee health benefits?  You are not required to provide health care coverage.  For $1 per hour you can provide basic medical coverage; for $2 per hour you can provide full coverage.

4. How much will you pay for improvements to your kitchen equipment?  For $3 you will get the basic equipment to do the job.  For $4 per hour, you can add features that will assure greater cleanliness, and for $5 you can also add worker safety features that will reduce the likelihood of injuries.

5. How much will you pay for hamburger patties?  For $2 per pound you can get domestic beef, but you can save money by buying foreign imports for $1.20 per pound.  The quality is the same, but some local activists have been complaining about loss of jobs in the country due to imports.  Of course, they probably won’t know where the beef comes from.

6. You can get the buns, condiments and other supplies that you need for the equivalent of $7 per hour of production.  Of course, for $8 per hour you can get buns that are more nutritious, without added sugar and with real sesame seeds.  And for $9 per hour of production, in addition to better buns, the condiments will have no preservatives and the paper products will be recycled.

7. Finally, how much do you want to pay yourself?  This should be equal to what you could make at your next best alternative employment.  You hope, of course, that you will also make a big profit, but the amount you pay yourself is what it will take for you to just stay in business.

After you make these decisions you will also have to come up with a name for your business and a slogan or advertising jingle – McMoton’s?  Pearce’s Palace of Burgers? Bausch’s Better Burgers?  Have it our way? We do burgers right?  What’s the beef?  Good Buns, Better Burgers!