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Tuesday, November 10, 2009

How an MBA will view buffalo wings and other potentially irritating habits

We went out to dinner at the newest location of a local buffalo wing restaurant called Fire on the Mountain. The Grateful Dead reference, variety of food, local beer on tap, and comfortable northwest atmosphere all made it an enjoyable outing. I also used to play against the owner in some pick up Ultimate frisbee games. One of the highlights of my Ultimate career was forcing a stall with my lock down goal line defense against him. As you can guess from that highlight, my Ultimate frisbee career was not very illustrious.

We had previously been to their first location which was smaller and located in a transitional part of town. Given the size and central location of their new restaurant, we ventured that wing business was booming and Fire on the Mountain was doing well. Like any good Pavlovian conditioned MBA, I immediately started thinking about how the business model drove success. Just like a Peace Corps Volunteer becomes conditioned to salivate over the local bitter tea or gut rot grain alcohol, MBA's become conditioned to view the world in terms of margins and cost structures.

While dipping a french fly in blue cheese dressing, I wondered what the margins were like on buffalo wings. Given that places will give them a way for a nickel each, the gross margins must be incredible. $6 for 6 wings must be at least an 80% gross margin even if they bought from the farmer spent extra on free range chickens that were given cello lessons and yoga balls to sit! All right, that doesn't include the blue cheese dressing but we're still looking pretty good. They also don't need the most upscale kitchen or chefs to primarily make buffalo wings so the kitchen operations is probably pretty low cost. While wings look like a good business, the margins are probably as good if not better on their beer.

While those margins are great, there is only so many $6 wings or $4 beers that can be sold in a day. It's a similar problem that coffee stores face since there is only so many $3 coffee drinks that can be sold. While the new location looks great, I don't know if it was financed by loan shark debt or could be considered a rounding error in their bank account. At this point in the conversation, the rest of my dining mates had tuned me out in favor of the Trivial Pursuit cards, football game, and dipping their french fries in my water glass (the age of my dinner mates varied). As you can tell, this is that glamorous post-MBA life that you hear about.

Post-MBA life, you too will view the world in the context of gross margins, variable costs, and fixed costs. You may even try to bargain at closing time by trying to pay slightly above variable costs for the wings that will otherwise be thrown away.

While bargaining based on business model is rooted in the time honored tradition of haggling, I'll ask MBA's to avoid a more annoying post-MBA habit of talking about "operational efficiency." Invariably, when food takes a long time to arrive at a restaurant or the line is longer than some would like, one of your classmates will say, "They could really improve the operational efficiency in this place." The problem with that statement is the only operational improvement skills that any MBA learns is the newspaper vendor model and timing someone with a stop watch. That's really it. We really have no clue how to motivate an hourly cashier to move quicker when it has no impact on their salary or personal satisfaction. We have no great insight on how a waiter can prioritize a drink order, new table being sat, and soup being ready at the same time. Our knowledge of business process redesign is limited to key stroke short cuts on Excel. Talking about improving the operational efficiency is just a fancier and extremely irritating way of saying, "I'm bored/hungry/in a hurry/about to start eating my groceries in line, please hurry." That is why the FedEx commercial is still so popular.

Fellow MBA's, the sooner that we embrace the fact that we have no clue how to make someone unload a moving trucker faster than anyone else without using a Taser, the less annoying we will be to the world at large. That is a goal with an excellent business model.

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