The following memorandum is from the business manager of Happy Pancake House restaurants.” Butter has now been replaced by margarine in Happy Pancake House restaurants throughout the southwestern United States. Only about 2 percent of customers have complained, indicating that 98 people out of 100 are happy with the change. Furthermore, many servers have reported that a number of customers who ask for butter do not complain when they are given margarine instead. Clearly, either these customers cannot distinguish butter from margarine or they use the term ‘butter’ to refer to either butter or margarine. Thus, to avoid the expense of purchasing butter and to increase profitability, the Happy Pancake House should extend this cost-saving change to its restaurants in the southeast and northeast as well.”

The following memorandum is from the business manager of Happy Pancake House restaurants.

“Butter has now been replaced by margarine in Happy Pancake House restaurants throughout the southwestern United States. Only about 2 percent of customers have complained, indicating that 98 people out of 100 are happy with the change. Furthermore, many servers have reported that a number of customers who ask for butter do not complain when they are given margarine instead. Clearly, either these customers cannot distinguish butter from margarine or they use the term ‘butter’ to refer to either butter or margarine. Thus, to avoid the expense of purchasing butter and to increase profitability, the Happy Pancake House should extend this cost-saving change to its restaurants in the southeast and northeast as well.”

Write a response in which you discuss what questions would need to be answered in order to decide whether the recommendation is likely to have the predicted result. Be sure to explain how the answers to these questions would help to evaluate the recommendation.

The memo suggests that Happy Pancake House has successfully replaced butter with margarine in the majority of its restaurants. Although this seemingly positive development may be seen as a positive step toward increasing profits, there are a couple of very key questions that need to be asked before a firm decision is made. First, is margarine really any more healthy than butter? The answer to this question may sway business owners away from replacing butter with margarine. Second, what was the ratio of customers to servers before Happy Pancake House made the change? If the ratio of customers needing butter to those whose needs could be met with margarine was small, then the cost savings may be negligible. If the ratio was very high, then the savings may be substantial. Because Happy Pancake House only reports the proportion of customers who preferred butter, not the proportion of customers who actually asked for butter, there is no way to determine the percentage of customers who wanted butter but were accommodated by margarine, nor is there a way to know how many customers were unhappy with the change. Therefore, there is no way of knowing whether Happy Pancake House’s decision to replace butter with margarine was a wise one.

The memo states that only 2% of customers complained about Happy Pancake House’s decision to replace butter with margarine. Although this percentage may be low, it does not indicate what percentage of customers felt so strongly about butter that they refused to eat it. One method used to determine the acceptability of a policy is to ask a sample of customers if they would be willing to eat the food provided to them under this policy. If more than 20% of customers refused to eat the food, then Happy Pancake House should have doubts about the wisdom of its decision. On the other hand, if less than 20% of customers refused to eat the food, then Happy Pancake House should proceed with confidenceThe memo states that the cost savings to Happy Pancake House are substantial. The memo does not state what percentage of Happy Pancake House’s restaurants use butter, but presumably the cost savings would be greater in restaurants that use more butter. If the cost savings are negligible, then Happy Pancake House may have been better off not changing its menu. If the cost savings are substantial, then Happy Pancake House’s decision to replace butter with margarine was a sound one. But Happy Pancake House’s business manager has no way of knowing whether the cost savings are significant enough to warrant replacing butter with margarine. Therefore, to make the business manager’s decision sound, all of the information necessary must be gathered before the decision is made. If Happy Pancake House’s customers in the northeast and southeast restaurants are as amenable to the changes as those in the southwest restaurants, then Happy Pancake House should proceed with confidence. But if only a small percentage of these customers are willing to eat the substitute food, then Happy Pancake House should reevaluate its decision.