Accounting

Group Case: Mazud’s Meal Delivery
Mazud is a BC resident who has been involved with a part time entrepreneurship activity for the past
two years. He maintains good relations with certain local restaurants and his customers to sustain a
business involving picking up meals and delivering them to people. Being employed as a software
engineer by profession, Mazud works from home with flexible employment hours which permitted him
to sustain a side business. However, he is now finding it more difficult to find adequate leisure and rest
time between his software engineering and his meal pick-up and delivery business.
The Beginning
It all started with his cousin Farnoosh’s new restaurant. As Mazud was helping advertise Farny’s Wraps,
he realized a lot of customers were asking about food delivery. Since Farnoosh was hesitant to register
with DoorDash, Uber Eats, or SkiptheDishes prior to getting the business rolling, Mazud asked him if he
was okay with delivering meals for a small fee (most of the interested customers were within a 5 km
radius, so $2 to $3 fees were sufficient). Farnoosh agreed this was a great way to boost sales and he
trusted Mazud, so they went ahead with the idea. Mazud would pay for the order when he picked it up
and kept the money the customer gave him (for the order, delivery fee, and potentially a tip).
Accounting Meets Marketing
Many of Mazud’s customers are older, so they appreciated his attention to detail with their orders and
his friendliness. He gave them fillable weekly paper schedules to complete, which was a lot easier than
having to call the store and place orders each time. This allowed them to pre-order meals and select
delivery times, days, or weeks in advance. Plus, Mazud was always available on the phone and willing to
pick up what they wanted. Mazud found that some customers appreciated him so much that their tips
sometimes exceeded his delivery fees! By printing newsletters and putting them into local mailboxes
(monthly cost of $50), Mazud has been able to steadily grow his customer base. He is wondering if other
forms of advertising would help attract a broader customer demographic, in addition to the elderly
customers he served. He requests your help in considering three different types of advertising he
could use to increase usage of his service, specifically with young adults, and families with young
children. He would like you to provide three options, their pros, cons, and how he might go about
implementing each style of advertising to his business. Mazud would like you to conclude on which of
the three might be the most impactful, considering the two demographics he is targeting.
Over time, Mazud was able to convince other small restaurants in the area to use his services. With
more cuisine options, several of Mazud’s customers decided to get all (or almost all) of their meals
delivered by him! However, that meant multiple hours being spent in the morning, mid-day, and
evening commuting between various restaurants and customers. Being so busy with a side job has
resulted in Mazud regularly falling behind in his full-time job. To get a better understanding of Mazud’s
current meal pick up and delivery business, he asks that you prepare a SWOT analysis to help him
identify his current strengths, weaknesses, opportunities, and threats. He would like you to come up
with three points under each of these categories.
Mazud’s Crossroads…
Year 1
In his first year of business, Mazud delivered an average of 12.5 meals per day (all Farny’s Wraps) with
an average delivery fee of $2.33 and tip of $1.20. Mazud owned an older car at the time, so those car
related expenses amounted to about 30% of revenues. Mazud estimated he spent about 1.5 hours daily
on deliveries in the first year. No calculations or analysis need be performed using year 1 figures. They
have been provided for comparative and informational purposes.
Year 2
In the second year, the daily average delivery volume doubled, with an average delivery fee of $2.48 and
tip of $1.18. With a newer vehicle in his second year, Mazud was able to reduce expenses to 25% of
revenues (expected to be sustainable for five more years). Mazud estimates he worked an average of 3
hours a day in the past year. Mazud worked 365 days this year. If he were to make deliveries as a driver
with UberEats, his hourly wage (labour cost) would be $15.00 an hour.
Mazud is looking at a couple of options going forward:
Option #1
The simplest solution would be to request his current employer to cut his working hours in half, which
would result in a salary of $30,000 annually instead of the current $60,000. Mazud is strongly
considering this option because he believes his employer will accept the deal. Also, Mazud hasn’t gotten
a salary increase in three years and isn’t expecting any significant raises in the near term. This option will
allow him to continue operating his food delivery business at 100% capacity while working part time for
the software engineering company.
Option #2
Another option is for Mazud to hire his friend, Sameera. She works as a DoorDash driver so the training
would be minimal. Additionally, she decides her own work hours so serving Mazud’s customers well
with precise timing wouldn’t be an issue. Since Mazud’s engineering work is slow in the morning and
evening, he would continue to take care of breakfasts and dinners, while Sameera would handle lunch.
To keep things simple (and fair), Mazud is considering letting Sameera keep all revenues for her
deliveries since her help will allow him to continue running his service all day long. Sameera is ambitious
and prioritizes efficiency over customer service, so she hopes to help Mazud increase the number of
deliveries per day by cutting down on conversation time with his current clientele. Historically, lunch
time has made up 40% of Mazud’s total revenues. If he hires Sameera, Mazud is planning to continue
making all deliveries on weekends (breakfast, lunch, and dinner). In this alternative, Mazud would be
able to keep his $60,000 annual salary.
Your Analysis
Mazud wants you to provide a financial analysis of these two options and provide a detailed pros and
cons list of these two options. Please use Mazud’s Year 2 financial figures above for the purpose of
these two calculations and ignore the financial information below for the purpose of this issue. Please
recommend and conclude on which of the two options you believe makes the most sense from a
quantitative and qualitative perspective.
Forecasting & Budgetary Analysis
As things got busier, Mazud slightly increased his delivery rates. Hence, he is projecting an average
delivery fee of $2.75 in the upcoming year and tip of $1.25. He is also expecting the number of orders
per day to increase to 30 on average. If he did all deliveries himself, it would amount to four hours of
work per day. For the following five years (after next year), Mazud expects the daily order volume to
grow at a rate of 10% per year (with no change in average delivery fees and tips). He also anticipates
that each year, the average amount of delivery time per day will increase by 0.5 hours. Mazud intends
on working 310 days a year over the next five years, on average. Mazud wants to see some
trend/budgetary analysis on these numbers. He’d like you to compare his potential earnings over the
next five years working in food delivery full-time, net of any costs or expenses (his labour included), to
his potential earnings as a full-time software engineer (this means he would stop his side job in
delivery). Which of the two alternatives makes the most financial sense over the next five years: working
full-time in food delivery or full-time as a software engineer?
Taxation Queries
Mazud is interested in learning more about tax impacts, as he simply hands his sales numbers and
expense receipts to his accountant each April without knowing any details about how his tax
calculations are performed. What kind of tax return does he file? Is he currently considered a soleproprietor, corporation, or trust? What kind of deductions can he make for tax purposes (think of 3 or 4
deductions, NOT tax credits)? Mazud is also wondering if it makes more sense to operate as a sole
proprietor or as a corporation. Please tell him 2-3 benefits of each, and 1-2 cons of each.
Required:
Business Report
Advise Mazud on his career path and the current and five-year outlooks of the meal delivery business.
Produce a business report, like the one you produced for Sky, including an executive summary, issue
identification, comprehensive analysis, and recommendations for each distinct issue or ask Mazud has
for you.
PowerPoint Presentation
Later in March 2022, you will meet with Mazud via a virtual meeting and he has asked that you put the
contents of this report into a PowerPoint presentation, starting with a summary of his current situation,
addressing each of his questions and concerns while providing answers and recommendations, and
advising him of what his next steps are, consistent with your analysis. Your presentation will last 10-15
minutes, followed by 2-3 minutes of Q&A (question and answer period). He expects to hear each
member of your team present part of your presentation.