J & J Hot Dog Stand
Jack, a college business student, is back home in his scenic costal town for the summer. Jack has been looking for summer employment. His father mentions that his friend, Bob, has a fairly new high quality hotdog stand that he will not be using this summer. Jack’s father suggests that Jack run a hot dog stand for the summer since it will give Jack a taste of being an entrepreneur since Jack would one day like to own his own business. Plus, the town has a boardwalk along the seas that offers rides, games, and different food vendors, and draws lots of visitors to the area. A perfect place for a hotdog stand!
Bob offers Jack the use of his hotdog stand for the summer at a rental cost of $1,800 and wants all the money due upfront. Jack is also responsible for securing the town’s $1,400 permit to sell food on the boardwalk. The amount for the permit must also be paid in full prior to opening the hotdog stand.
Jack is a little concerned since this is a considerable amount of money that must be paid upfront prior to opening the hotdog stand. Jack can cover the upfront costs through his own personal savings and a loan for half the amount from his father that he must repay by the end of the summer plus $200 of interest.
Jack has also been talking with his best friend, Alan, about going into business together for the summer. Alan is willing to split half the upfront costs and work with Jack running the hotdog stand during the summer. Jack and Alan will then split the business profits evenly at the end of the summer. Under this scenario Jack will not need a loan from his father since he and Alan will have enough to cover the upfront expenses.
Jack realizes that he will need some help covering the hotdog stand if he goes into business by himself. His younger sister, Jess, is willing to work with him for $6.00 an hour plus any tips she makes. Jess will work with Jack for all the hours the hotdog stand is open for the summer. If Jack goes into business with Alan, he will not need to hire Jess since Jack and Alan will be able to handle the business themselves.
Jack plans to run the business from 10 AM to 6 PM Sunday through Saturday on the boardwalk for the next 12 weeks. His main product will be a premier hotdog loaded with chili, cheese, mustard, ketchup, relish, pickles, and onions for $3.00. Jack estimates that a hotdog will run him $0.50 each and an extra $0.50 for all the toppings for a total cost of $1.00. Based on his talks with Bob, Jack believes that he can sell anywhere from 200 to 800 hotdogs per week.
Case Questions:
Develop a mission statement for this hotdog business. Put some thought into this, Think about the service you provide and your product sell. Keep your mission statement simple but effective.
Jack would like to know the following before he commits to starting this business under the scenarios where 1) Jack runs the business by himself or 2) Jack and Alan partner together to run the business.
The variable and fixed costs for the business. Explain why they are fixed and variables costs.
The number of hotdogs that will need to be sold in order to breakeven.
An estimated income statement for the hotdog business for the summer period if Jack sells 200, 400, 500, 600, or 800 hotdogs each week. Use provided template.
3) What are the common forms of business ownership? Discuss the advantages and disadvantages of each. If you were Jack, would you go into business by yourself or partner with Alan? Explain your reasoning.
4) Discuss the marketing mix for the hotdog business. Be sure to include your use of social media. Which site(s) you will use? What basic marketing strategies would you use to promote your business?
5) Is this a good business for Jack to start? Discuss the advantages and disadvantages and possible risks to starting this business.