Making a Decision Based on Demand Forecasting

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Making Decisions Based on Demand and Forecasting – Domino’s Pizza Introduction Domino’s Pizza is an American franchise pizza delivery corporation headquartered in Ann Arbor, Michigan. The company was founded in 1960 and is the second largest pizza chain, after Pizza Hut (dominosbiz.com). In 2010, Domino’s opened its 9000th location and currently 95% of their store locations are franchise-owned. Domino’s delivers over 1 million pizzas a day worldwide, with Super Bowl Sunday being their busiest day of the year, and the demand continues to drive the opening of addition store locations (Wikipedia.org). In determining whether to open a new location, it is prudent to conduct a thorough demand analysis to determine if the need in a particular area can sustain an additional store presence. For this assignment, we will analyze the demand for pizza in Raleigh, North Carolina, and determine if opening a Domino’s Pizza franchise location in the Brier Creek area would be a good business decision. Description of the Variables Analyzed The variables used to conduct the demand analysis will be price, population size, median household income, price of competing products, and price of complementary products. Therefore, the demand function will resemble: QD = ƒ(P, Ps, Pc, Y, N), where P = price of pizza, Ps= price of substitute goods, Pc= price of complementary goods, Y = median household income and N = population size. Price is the most important variable to consider in this demand function. If the price is too high, the demand will be lower than expected and the new venture will fail. If the price is too low, the franchise will not make enough money to sustain growth, and will also fail. The relationship between price of complementary goods and quantity demanded is expected to be inversely related. Population size is being considered for this analysis because

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