Final answer:
Reducing sales discounts likely results in the highest flow-through percentage because it increases revenue without proportionally increasing variable costs. Whereas increasing dine-in guests, add-on sales, and to-go guests could potentially bring in higher variable costs, which could lower the flow-through percentage.
Step-by-step explanation:
The question relates to understanding which type of incremental sales will generate the highest flow-through percentage. Flow-through% is a measure of profitability that indicates what percentage of each additional sales dollar contributes to profit. When considering the options provided, increasing sales through reducing sales discounts would likely generate the highest flow-through percentage.
This is because reducing sales discounts directly impacts the revenue line without necessarily increasing variable costs. By offering fewer discounts, the selling price per unit remains higher. In comparison, increasing dine-in guests, add-on sales, and to-go guests are likely to incur additional variable costs such as food supplies and labor, which may reduce the flow-through percentage to some extent.
For example, if a restaurant reduces sales discounts, it maintains higher revenue per sale without significantly increasing costs. Conversely, adding more dine-in or to-go guests may require more staff, ingredients, or packaging, which all add to costs. Similarly, add-on sales may increase revenue but also come with additional product costs. Therefore, reducing discounts is more likely to result in a higher percentage of revenue flowing through to the bottom line as profit.