A fast food chain makes the decision to rebrand itself as a need range adult café instead of a cheap care, friendly restaurant. This change will involve using higher quality ingredients and renovating to remove children’s playground. What is the opportunity cost in this scenario above?
The opportunity cost in this scenario refers to the value of the next best alternative that is being forgone or given up when the fast food chain decides to rebrand itself as a high-end adult café instead of maintaining its current cheap, family-friendly restaurant concept.
In this case, the opportunity cost can be analyzed in two aspects:
1. Cost of higher quality ingredients: By choosing to use higher quality ingredients, the fast food chain will incur additional expenses. This cost includes sourcing ingredients from different suppliers, potentially increasing prices, and investing in quality control measures. The opportunity cost here is the potential financial benefit that could have been achieved by continuing to use cheaper ingredients.
2. Renovation and removal of children's playground: Removing the children's playground requires renovating the existing space to cater to the new target market. This may involve substantial remodeling costs, including redesigning the interior layout, installing new furniture, and removing or replacing play equipment. The opportunity cost here is the potential revenue and customer base that could have been retained by maintaining the family-friendly environment.
Overall, the opportunity cost in this scenario is the potential financial benefits and customer base from the cheap, family-friendly restaurant concept that is being given up in favor of a higher-end, adult-oriented café approach.