Joint demand and capacity management in a restaurant system

Abstract

This paper studies the demand and capacity management problem in a restaurant system. A queueing-based optimization model with underlying quasi birth-and-death process and state-dependent functions is developed to address the dynamic and nonlinearity difficulties. In particular, our model explicitly captures the demand changes with respect to the system congestion state on a near real-time dynamic basis. With this framework, we empirically examine the relative performance of commonly used strategies for the case of a local restaurant. The study shows that a strategy that balances service quality and cost yields maximum profit. The result indicates that the traditional view of the conflict between service quality and cost can be overcome by using an interdisciplinary perspective of marketing and operations. Both perspectives should be embraced in academic research and industrial practice in capacity planning decisions for services.