SSR is a small social enterprise located in a low-income inner city area. SSR employs young people who have not been successful at school. It aims to teach them valuable work skills and to help them gain qualifications, so that they have more chance of getting full-time employment elsewhere. SSR's customers are very supportive of this social enterprise. They are willing to accept a slower service and a simpler menu in exchange for the chance to help disadvantaged young people gain qualifications. The current average price for a meal at his restaurant is $5.50, which is lower than local competitors. Sadiq, who manages SSR, wants to increase its size by opening a second restaurant so that he can help more young people. He relies on local schools and colleges to recommend young people for his enterprise. He has been told that there would be government grants available to pay for induction and training. Sadiq has identified two possible locations that he can rent for the second restaurant. Start-up capital would be from retained earnings and an overdraft facility from his bank. Table 2.1 shows forecast data about each of the locations. Table 2.1: Forecast data for each location | | City centre | Edge of city | | :------------------------------------- | :---------- | :----------- | | Start-up capital costs | $5000 | $10000 | | Monthly fixed costs | $1000 | $375 | | Average cost of ingredients (per meal) | $1.50 | $1.50 | | Other variable costs (per meal) | $2.25 | $1.30 | | Expected number of customers (per month) | 1000 | 750 | Table 2.2 shows additional information taken from Sadiq's research. Table 2.2: Additional information for each location | City centre | Edge of city | | :----------------------------------- | :--------------------------------------- | | • Previously used as a restaurant | • Previously a non-food shop but has permission to convert to a restaurant | | • A range of other restaurants nearby | • No other competition | | • No parking facilities | • Large car park |

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2019). The mark or mark type is shown in brackets.

1. [2] A correct definition
2. [1] A partial, vague or unfocused definition
3. [0] No credible content
4. Note: Do not reward 'training' as it is too generic
5. A correct definition could cover the following:
6. • Introduction to the business rules, regulations and procedures (or an example)
7. • Provided when first joining a business
8. Exemplar: A general introduction to the business rules provided to all new starters [2] Two elements covered
9. Exemplar: Generic training such as fire safety provided to new employees [2] Two elements covered
10. [1] A Understanding of social enterprise – main aim/objective is to fulfil a social need/not maximisation profit
11. [1] B Profits are reinvested in order to meet the organisations aim or a loss allowed to meet aims of organisation
12. [1] C Example or some other way of showing good understanding – triple bottom line, not a charity, people, planet and profit
13. The organisations aim is to make a profit not for the shareholders but to meet a social or environmental need. It is often referred to as the triple bottom line.
14. Exemplar: Business making a profit to meet the social needs of a section of society, often called the triple bottom line [3] All three elements
15. Exemplar: Business venture whose main aim is to help a social need (A) rather than make a personal profit (C) [2] All and C only
16. [3] 2 (APP) Correct calculation (with or without working and/or $)
17. [2] 1b (KK) Correct process
18. [1] 1a (K) Correct formula or correct calculation of VC ($3.75)
19. [0] 0 mark No credible content
20. SSR uses cost-based pricing to add 60% to variable costs when pricing each meal.
21. Total price = Total variable costs × 1 + mark-up OR Total variable costs / 100 × 60 + TVC
22. City Centre = ($1.50 + $2.25) = $3.75 (1) × 1.6 (1) = $6.00 (3)
23. Allow full marks for a correct answer with or without working or $ (3)
24. Common incorrect/incomplete answers: $6 [3] Correct answer
25. Common incorrect/incomplete answers: ($1.50 + $1.30) x 1.6 =$4.48 [2] Edge of city figures (correct process but wrong figures – one mistake)
26. [3] 2 (APP) Explanation of 1 or more advantages to SSR of using cost-based pricing
27. [2] 1b (KK) Explanation of 1 or more generic advantages of cost based pricing
28. [1] 1a (K) Knowledge of cost based pricing
29. [0] 0 No creditable content
30. Context is likely to come from:
31. • Food is seasonal and prices change so ensures a suitable profit margin is kept
32. • Customers are happy that they are paying reasonable prices based on what they are eating/ not being charged premium prices
33. Level 2: Shows knowledge of two stakeholders in context [4 marks for K&A], Developed analysis of two impacts of success of the second restaurant on two stakeholder groups in context [4 marks for A&E]
34. Level 1: Shows knowledge of two stakeholder groups [2 marks for K&A], Limited analysis of two impacts of success on two stakeholder groups [2 marks for A&E]
35. Note: Do not allow analysis of the impact on any stakeholder group of the factors in Tables 2.1 and 2.2. This question is about the impact of SUCCESS not the location.
36. Major stakeholders: customers, local education provider, local government, employees, competition, investors, suppliers, job centre (any reasonable answer accepted)
37. Contextual analysis likely to come from:
38. • Government – increased size of training scheme impacts on jobless figures which is good for job seekers payments
39. • Customers – more seating/bigger restaurant means more availability for local customers means lower waiting time
40. • Employees - more jobs means that more young people will be able to work and gain new skills leading to better chances of gaining future employment
41. • Suppliers - two successful restaurants lead to more orders and in turn increased profit.
42. Level 7: A justified recommendation based on a developed argument of both options [7 marks for A&E]
43. Level 6: A developed recommendation based on a developed argument of both options [6 marks for A&E]
44. Level 5: A basic recommendation/judgement based on a developed argument of both options [5 marks for A&E]
45. Level 4: Shows understanding of decision making factors for city centre AND out of town location for SSR restaurant [4 marks for K&A], Developed argument based on factors for city centre AND out of town location for SSR restaurant [4 marks for A&E]
46. Level 3: Shows understanding of decision making factor(s) for city centre OR out of town location for SSR restaurant [3 marks for K&A], Developed argument based on factor(s) for city centre OR out of town location for SSR restaurant [3 marks for A&E]
47. Level 2: Shows knowledge of two factors affecting location [2 marks for K&A], Limited analysis of two factors affecting location [2 marks for A&E]
48. Level 1: Shows knowledge of one factor affecting location [1 mark for K&A], Limited analysis of one factor affecting location [1 mark for A&E]
49. Content/context and analysis: City Centre:
50. • Already has restaurant layout > less initial investment but no personal touch?
51. • Competition from established restaurants > might reduce custom but a popular location for new customers?
52. • Lack of parking > might impact on ability of people to visit but may be well serviced by public transport
53. • Higher average price per mean $6
54. • Higher sales revenue per month = $6000
55. • Higher net profit per month = $1750
56. Content/context and analysis: Edge of city:
57. • Permission to convert > can create personalised style but expensive
58. • Location has fewer potential customers but less competition – captive audience
59. • Lower monthly fixed costs – less pressure on the finances
60. • Lower average price per mean $4.48 better for a social enterprise?
61. • Lower forecast sales revenue per month = $3360
62. • Lower forecast (net) profit per month = $885