Part A Using data on all 60 stores currently open,

Part A

Using data on all 60 stores currently open, build a regression model that explains earnings, using the principles discussed in class.

·         What is the R² of your model?  Include the regression model (the output from StatTools or other software) and mark it as Exhibit A.

·         Did you use transformations/interactions¹?  If not, please briefly explain why not.  If you did, please create a short exhibit (one page maximum) that explains the reasoning behind including the transformation(s) interactions.  Please include the exhibit as Exhibit A Extra.

Part B

Michel thinks that a good way to validate the model obtained with data from the 60 stores is to see how a similar model, obtained from the 50 stores opened before 1994, would have performed in predicting the performance of the last ten stores opened.

·         Step back one year prior to the opening of the last ten restaurants. Update the model you have developed using only the data from the first fifty.

·         Attach your resulting regression model and mark it as Exhibit B.

·         Using Croq’Pain’s performance ratio target of 26%, which of the ten stores (if any) would you have opened in 1994?

Part C

Looking forward, evaluate the ten potential store locations for 1996 (see Exhibit 5). Which of these locations would you select? Base your selection on a model built on all 60 stores currently open.

Create a small exhibit that shows how you evaluate the new stores. Include the exhibit as Exhibit C. Which stores (if any) do you recommend that Croq’Pain open?