Bleu Lavande

On June 24, 2015, one week before Bleu Lavande was opened to the public, Adrien Dubois, maitre
dhotel and manager of the new restaurant, faced the problem of determining final prices of the menu. Dubois did
not believe he could relinquish the task of setting prices to a subordinate or an accountant, for it required the
delicate balancing of factors of profitability, volume, and restaurant image. Because the prices were printed on a large,
artistic menu which was both difficult and expensive to reprint, the prices A. Dubois determined in July would have
to stand, except for extremely minor alterations, for at least six months. The initial six months of a restaurant's
operation were known to be crucial in determining its reputation and the size of its clientele for months and years to
come.
Bleu Lavande was the major showpiece restaurant of the Hotel Britannique, a brand-new luxury hotel in
downtown Toronto, which would open its doors in July 2015 in anticipation of the Toronto 2015 Pan Am &
Parapan American Games. The Hotel Britannique was owned by a consortium of European investors, mainly French,
and was managed by L'Union des Grands Hotels (UGH), a highly respected French hotel chain which had a
substantial equity investment in the enterprise.
Adrien Dubois, 33, was a long-time employee of UGH with ten years of experience in European
restaurants of the first rank. He was generally recognized as having a bright future in restaurant and hotel
management with a flair for atmosphere and presentation as well as the ability to work within a budget and make
profits.
To facilitate the pricing of individual items on the menu, A. Dubois prepared (with the cooperation of M.
Bernard Fortin, the chef, as well as Gilles and Roger, the sous-chefs) the menu fact sheet shown in Exhibit 1. The
fact sheet held for each dish on the menu an estimate of (1) cost of raw materials, (2) preparation time (time for a
moderately experienced chef to prepare a batch of the dish in question), (3) minimum number of servings per
preparation (the nature of some dishes made it impossible to prepare a single serving although there was usually
no problem in stretching the number of servings per batch), and (4) difficulty - rated from least difficult to most
difficult on a scale from 1 to 5.
In conversation with A. Dubois on the subject of the fact sheet, chef Fortin emphasized two points. First, the
cost of raw materials shown was a normalized estimate of the target cost of an individual dish, as of July 2015. In
general, the cost of food varies greatly from week to week and month to month. Some fluctuations are
seasonally determined and predictable, others are random: Fortin's estimates took into account foreseeable
fluctuations from July to December (i.e., they were normalized over the six months starting July 2015). Fortin's
normalized estimates were further idealized in that they reflected the theoretical cost of the food content of an
individual serving. In practice, raw food usage, and therefore cost, would be increased by waste in preparation,
imperfections in measurement, fix-ups (usually necessitating the addition of butter or cream to a recipe), and
simple mistakes. Even after adjustment for such considerations, the total cost of food served would understate the
restaurant's total expenditure on food, since provision would have to be made for feeding the kitchen and dining
staffs, spoilage, and pilfering. Chef Fortin had indicated with extreme vehemence that management of food,
including forecasts, purchasing, utilization of leftovers, and food control, was a major responsibility of the chef
and an extremely important dimension of his skill.
Chef Fortin's second point with regard to the fact sheet was that preparation time as shown represented
time spent on an individual dish and did not take into account time spent on prior preparations. In any wellmanaged restaurant, to minimize final preparation time, the kitchen keeps on hand many intermediate
preparations - stocks, sauces, dough, etc. These preparations are made in large quantities at times when the kitchen
is relatively free and are used in numerous dishes. Chef Fortin felt it almost impossible to include time spent on
prior preparations in the estimates of preparation time for individual dishes. When pressed by A. Dubois, the chef
indicated that as much as 30% of his staffs time would be spent on prior preparations.
This case was adapted from La Grande Alliance Restaurant Francaise, prepared by Research Assisstant Carliss Y. Baldwin (under the
direction of Assistant Professor B. Malone).
Copyright 1975 by the President and Fellows of Harvard College. Harvard Business School case 175-255.

Bleu Lavande could seat 100 people at one time in the Salle Bordeaux and Salle Rouen dining rooms
combined. Given its location near the center of the shopping and financial districts of downtown Toronto, A.
Dubois and executives of the Hotel Britannique felt they could expect to serve 1 seatings (150 people) at lunch
on every working day. For dinner (including Sunday dinner at noon), they expected to accommodate, on average,
700 people per week; but they expected that the pattern of weekly usage would on average be as follows:
Day
Sunday (noon)
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday

Number of Meals Served

60
85
85
85
85
150
150
700

Thus, plans and budgets for Bleu Lavande were based on volume projections of 750 lunches and 700
dinners served per week, 4.3 weeks per month. A rough rule of thumb which A. Dubois felt could be applied in
Toronto held that in the customers eyes, lunch is half of dinner; in other words, that people generally spend one
half as much on lunch as they would in the same restaurant on a full-course dinner. A. Dubois was of the opinion
that, as a fine restaurant in a sophisticated urban setting, Bleu Lavande could aim for an average check of $120.00
for dinner and $60.00 for lunch (not including liquor). (Lunch and dinner menus were separate and substantially
different at Bleu Lavande; the dinner menu alone is the subject of this case.)
When making the menu price decision in June 2015, A. Dubois had already received from the hotel's
accounting department the restaurant's projected expense budget for July 2015 (Exhibit 2). The budget, which had been
drawn up by the accounting department in consultation with A. Dubois, reflected the restaurant's present staffing (as of
the day it opened) and projected raw food costs based on forecast number of meals served. The budget also
included charges for breakage and supply replacement, depreciation of kitchen equipment (brand-new), and an
assessment for advertising and for general overhead. As part of a large hotel establishment, Bleu Lavande did not pay
directly for a number of services shared with other hotel areas (e.g., laundry, cleaning); thus the overhead assessment was naturally quite large.
The budget did not provide for the cost of sommeliers (wine waiters) nor for the cost of wine and liquor
served in the restaurant. It was standard UGH practice for the wine cellar to be managed by the beverage
department, which also managed all liquor inventories and the hotel bars. Although Bleu Lavande would receive a
partial credit for wine and whiskey sold through the restaurant, it was not within A. Dubois's power (except as a
consultant) to determine either the wine list or wine prices. It was Dubois's goal, therefore, that Bleu Lavande be
sustained (financially, that is) by food alone - that the restaurant would not use food as a loss leader in the purveyance
of liquor.
Although Bleu Lavande was a new restaurant in a new hotel, the internal accounting staff of UGH had
considerable experience in budgeting for restaurants within hotels. A. Dubois had been consulted in detail on the
preparation of the budget and believed it to be fair. Dubois was willing that the profitability of Bleu Lavande as
well as his own success as maitre dhotel and manager of the restaurant be measured according to the budgeted
format.
In reviewing the pricing strategy, A. Dubois was aware of two not mutually exclusive goals. First he was
ambitious to run a profitable centre within the UGH establishment. Second, he was eager that Bleu Lavande be
known as the finest restaurant in Toronto.
Required:
Prepare the dinner menu for Bleu Lavande. You are required to include a five-page report (double-spaced, 1
margin, font size 11) on the strategic analysis and pricing decisions recommended. An analysis on Porters Five
Forces related to the restaurant industry and the restaurants SWOT (Strengths, Weaknesses, Opportunities and
Threats) should be used in support of Bleu Lavandes strategy. You may include as many as three one-page exhibits
(double-spaced, 1 margin, font size 11) to support the analysis.

EXHIBIT 1
BLEU LAVANDE

Selected Menu Costs - Dinner

Recipe
Cost of raw
Recipe
number of
materials per preparation time servings per
serving
in minutes
preparation

Difficult
(1-5)

Appetizers
Artichoke Hearts Biarritz
** Quiche Lorraine
Escargots a la Bourguignonne (6)
Oyster Cocktail (6)
**Pate de Foie en Brioche

$4.15
3.85
7.55
5.00
4.55

30
20
5
10
45

10
10
1
1
15

3
2
1
2
4

Soups
Consomme a la Royale (hot)
Soupe a 1'Oignon, Gratinee (hot)
Creme Vichyssoise Glacee (cold)

3.55
3.55
3.55

10
35
3

20*
20*
20*

2
3
2

Entrees
Filet of Sole Duglere
"Crab Creole en Casserole
"Coquilles St. Jacques Florentine
Poulet Poche a 1'Estragon
** Duckling, Sauce Bigarde
Escalope de Veau Parisien
**Lamb Ragout Printaniere
Tournedos Rossini
"Roast Filet de Boeuf, Beamaise

12.05
14.30
13.25
10.90
13.25
15.80
14.25
20.05
18.90

40
20
30
40
40
10
60
10
20

6
1*
1*
10
2*
1*
10*
1*
10*

2
2
2
4
4
3
4
2
2

All entrees include:

Salad
Potato
Vegetable

3.40
3.40
3.60

15
15
10

10*
10*
10*

1
3
2

Desserts
Strawberries Parisienne
Creme Bavaroise
Pastry assortment
Bananes Flambees

3.55
3.00
4.15
3.65

Purchased
from outside supplier
5

*Up to three or four recipes of these items may be prepared with no additional preparation time.
**These items require prior preparation.

EXHIBIT 2
BLEU LAVANDE
Monthly Expense Budget
Sales
700 dinners1
750 lunches2
Cost of food3
700 dinners
750 lunches
Gross profits
Salaries
1 chef @ $8,000
2 sous-chefs @ $5,000
2 apprentice chefs @ $3,000
1 maitre dhotel @ $4,500
2 captains $3,000
8 waiters @ $2,5004
2.5 busboys @ $2,2005
3 dishwashers @ $2,000
Materials, breakage, and supplies
Depreciation of kitchen equipment
Advertising of promotion (first six months)6
Allocation for general overhead:
Includes charges for laundry, cleaning, heat
electricity, maintenance, depreciation (on
building), and general administration
Total expenses
Profits before taxes
Net investment in restaurant

$352,170
188,658
$117,390
62,886

$8,000
10,000
6,000
4,500
6,000
20,000
5,500
6,000

$540,828

180,276
$360,552

66,000

$7,200
8,000
40,000

65,000

120,200
$186,200
$174,352
$1,500,000

Assumes 4.3 weeks per month, average dinner check $120.00.

Assumes 4.3 weeks per month, average lunch check $60.00.
3
Assumes raw food cost to average one-third of sales.
4
The restaurants average one waiter to every 10 or 15 customers.
5
Busboys are hired on a part-time basis. Their schedules may be made to coincide with the restaurants busiest hours.
6
For the first six months of its operation, Hotel Britannique was committed to a nationwide advertising and promotion
campaign, a portion of which expense was allocated to Le Gavroche. The restaurant had also been given discretional funds
for local advertising. As the hotel became well established, both national and local advertising would decrease (A. Dubois
believed) to an average of $4,000 per month.
2