2. Fritos Food (FF)
Fritos Food (FF) is a restaurant started by Friya Shah that offers a range of fast food. FF’s customers have high brand loyalty, and demand is increasing. Friya is considering expansion, and she has identified three options, which are shown in Table 1.
Table 1: Estimated financial data relating to the three expansion options
| Cost ($) | Probability | Expected revenue ($) | |
|---|---|---|---|
| Option 1: Renovate the existing restaurant | 35 000 | High returns (0.7) <br> Low returns (0.3) | 80 000 <br> 20 000 |
| Option 2: Invest in a new restaurant with the existing product range | 150 000 | High returns (0.7) <br> Low returns (0.3) | 200 000 <br> 50 000 |
| Option 3: Invest in a new restaurant and develop a new product range | 190 000 | High returns (0.7) <br> Low returns (0.3) | 320 000 <br> 50 000 |
(a) State two advantages for a business of having customers with high brand loyalty. [2]
(b) Using Table 1, construct a fully labelled decision tree and identify the best option for FF (show all your working). [6]
(c) Explain one advantage for Friya of using a decision tree. [2]