Researching and Developing a New Business Venture - Essay Example

?Researching and Developing a New Business Venture Executive Summary The paper focuses on the feasibility assessment for setting up an Afro-Caribbean restaurant in Allerton, a suburb in Liverpool, United Kingdom. The paper discusses the micro-level as well as the macro-level assessment of the market for the restaurant. The paper also focuses on the micro level evaluation of the restaurant industry, with the help of Porter’s five forces model. Subsequently, the paper accentuates on the micro-level restaurant industry evaluation, with due consideration to the economic viability of the restaurant business model. The paper further confers the mission and the aspiration of the team. Finally, the paper concludes with the discussion of the rationale for the attractiveness of the new venture and cites reasons for the same. Table of Contents Executive Summary 2 Introduction 4 Micro-Level Market Assessment 5 Macro-Level Market Assessment 7 Macro-Level Industry Assessment 8 Micro-Level Industry Assessment 10 Team Assessment 13 Summary and Conclusions 15 References 16 Bibliography 19 Introduction The paper comprises of a customer feasibility assessment for setting up an Afro-Caribbean restaurant in Allerton, a suburb in Liverpool, United Kingdom. The paper initially focuses on the micro-level assessment of the market for the restaurant. This assessment is focussed on identifying the target market segment for the Afro-Caribbean restaurant, its size and growth opportunity. The assessment also accentuates on the needs of the target group and the suitability of the restaurant’s cuisines in meeting those needs. Subsequently, the paper presents the macro level evaluation of the overall market, emphasizing on its size as well as potential growth rate. The paper also focuses on the micro level evaluation of the restaurant industry, with the help of Porter’s five forces model. Following this, the paper emphasizes on the micro-level industry evaluation, which comprises of the assessment of the existence of proprietary aspects in the business as well as the economic viability of the established business model. The paper further assesses the mission and the aspiration of the team, their predisposition for risk as well as their connectedness across the value chain. Conclusively, the paper discusses the rationale for the attractiveness of the new venture and cites reasons for the same (Mullins, 2007). Micro-Level Market Assessment The potential target market for an Afro-Caribbean restaurant in Allerton, Liverpool would be the British Afro Caribbean community and other ethnic groups residing in the area as well as the British population who have a liking for Caribbean foods. The total population of Allerton has been estimated to be around 30,000 (VDC Group, 2011). It has been observed that a decent magnitude of ethnic population resides in the Allerton region and its vicinity. Bernstock (2007), had stated in his study on the meal preference of Afro-Caribbean people that a clear correlation could be identified amid the African-Caribbean populace interviewed and their consumption preference, with an obvious inclination for Afro Caribbean cooking. This was despite the fact that there have been considerable cultural and social changes that has been observed amongst the Afro Caribbean population in the United Kingdom over the years (Caterer and Hotelkeeper, 1986). Additionally, the rapidly increasing statistics of ‘Black and Minority Ethnic’ restaurants imply that there is huge potential for a restaurant business, catering Afro Caribbean foods (Bernstock 2007). This is particularly true for Allerton because this neighbourhood of Liverpool does not have any prominent eatery dedicated solely to Afro Caribbean cuisines. During the recent years, a significant market has emerged for the category of cuisine, often referred as the ‘ethnic’ food. The augmented production of ethnic food in the UK lately is partially a response to the expanding group of African and other Ethnic communities in the UK. However, the growth in the production of ethnic food is in essence a response to the exceedingly varied consumption habits of the residents of the United Kingdom. Consequently, big supermarkets, for instance, Sainsbury’s, Tesco and Asda are exceedingly acting in response to their ethnically assorted customers. Such supermarkets have also come up with definite segments for the diverse groups of inhabitants in the UK, for example, ‘Kosher’, ‘Halal’, and ‘Caribbean’ among others. It has been stated that the retail grocery market had started to act in response to ethnic miscellany when they comprehended the enormous sales potential from the ethnic population in the UK. As a result, the organizations operating in the food market of the UK started providing for the needs of these consumers belonging to the ethnic group, on a much higher extent than ever before (Bernstock 2007). Nevertheless, it can be mentioned that such strategies are generally applied by the organization, only when there exists a considerable population of a particular ethnic groups. The fact that the supermarkets and other grocery retailers have initiated production of a separate section particularly targeting the African Caribbean population, indicate that there is increasingly high potential in this market segment (Bernstock, 2007). Accordingly, the UK food market is acting in response to the assorted consumption preferences in two ways. Primarily, the organizations and the market as a whole are reflecting the changing trends in consumption preferences for ethnic foods amongst the general population. Subsequently, they are acting in response to the eating habits of the African and other minority ethnic communities in regions where they encompass a moderately noteworthy percentage of the overall population, in addition to the existence of considerable numbers from that particular community. The market research agency named Mintel Marketing Intelligence, had recognized the possibility for significant augmentation in the segment of ethnic foods. On the other hand, the agency had stated that there is a restricted prospect for the growth of Caribbean food in the UK as it is consumed particularly by Caribbean population. This trend is unlike the other ethnic foods such as the ‘Cajun’ food of the Acadians, which is projected to have risen above the ethnic boundaries (Mintel Marketing Intelligence, 1999). In this context, it can be observed that there are enormous options to grow the restaurant business into other ethic food segments in the long run, in addition to Afro-Caribbean cuisines. This diversification strategy would broaden the target market of the restaurant and ensure its future growth. Macro-Level Market Assessment According to the UK Restaurants Market Development Report, the worth of the restaurant industry in the UK had been expected to amplify to ?5449 million in the next three to four years (Eat Out Magazine, 2009). The restaurant business across the United Kingdom did not demonstrate any significant impact owing to the latest financial crisis. Thus, it is apparent that the people are not willing to sacrifice dining out. As of 2009, the average cost of dining out in London was around ?40.73 per person (Telegraph, 2009). According to the editor of Restaurant Magazine, William Drew, the UK restaurant segment is at present in the early phase of an exhilarating expedition. Regardless of the extensively observed depressing economic conditions in the recent couple of years, quality restaurants, comprising of independent food outlets to nationwide chains, fast-casual formats to food-led pubs, are flourishing once again. Furthermore, conceivably the UK restaurant industry has learnt certain vital lessons, impelled by increasingly discerning customers. It is at present additionally apparent than ever before that consumer focus is principal. The restaurant industry has acknowledged that quality and value are not mutually exclusive, and hence operational efficiency as well as vigilant cost-conscious sourcing is indispensable in accomplishing the consumers’ demands. As a result, the quality of the UK restaurants on the whole has risen appreciably. In addition to quality enhancement, there has been added innovation and exhilarating initiatives in the restaurant sector than ever before. And there’s plenty more to come: more opportunities for growth and more appetite for new ideas (Restaurant Magazine, 2011). Hence, the macro-trends examination of the restaurant industry illustrates that there is enormous potential of upcoming market growth in the sector. Macro-Level Industry Assessment This segment of the report focuses on the assessment of the attractiveness of the restaurant industry on the basis of Porter’s five forces model. The bargaining power of suppliers is considerably low in this industry, though it has a significant impact on the pricing of the offerings. Majority of the restaurants within the UK purchase their raw food materials and other required items from a range of farmers, butchers and packaging companies. Since there are large numbers of suppliers in the market, a restaurant has ample alternatives to choose from and this would influence the prices at which the suppliers would vend their goods (National Restaurant Association, 1998; Ohio Dominican University, n.d.). Within the restaurant business, the bargaining power of consumers plays a significant role. The present-day consumers demand superior quality food and an exclusive experience, in addition to a reasonable price. Thus, the restaurants could possibly raise prices after ample considerations so that its price range does not significantly exceed than of competitors or go against the consumers’ expectations (Ohio Dominican University, n.d.). The threat of new entrants is tremendously elevated in the restaurant segment. It is moderately less expensive to commence a restaurant business, making it relatively simple for individuals to get hold of the funds to start their own restaurant. The restaurant industry is highly dependent on the quality of food as well as the experience provided. Thus, if a particular entrant can revolutionize the experience, it would be considerably unproblematic to position itself in the industry (Ohio Dominican University, n.d.). There is tough competition among the participants of the restaurant industry. This is because there are large numbers of restaurants and each of them is attempting to gain a competitive advantage over the others in the industry. Restaurants generally accomplish their competitive advantage by employing one or more of the following strategies: altering prices, enhancing product differentiation, resourcefully utilizing channels of distribution and taking advantage of associations with suppliers. The rationale for the intense rivalry in the restaurant industry is that a large number of restaurants are competing amongst themselves for the same group of consumers. Furthermore, there is a very low switching cost for consumers if they would to shift from one restaurant to another. This creates immense rivalry within the restaurant industry. The rising numbers of restaurants have ensured that a consumer is almost always in the vicinity to a dining establishment. This elevates the level of competition amongst all the segments of restaurants in the industry. However, there are few restaurants that are exclusively designed for providing ethnic foods such as Afro-Caribbean. In this context, there is relatively very less competition in terms of product variety (Ohio Dominican University, n.d.). An intimidation of substitutes is present during situations when the demand of a product is influenced by an alteration in the price of a substitute product. The risk of substitutes for restaurants comes into effect when customers decide to go to a fast food eatery or eat at home. As an outcome of a large number of alternatives available to the customers now days, the impact of substitute products is reasonably high (Walker, 2005). With the introduction of Caribbean food products in the supermarkets and grocery stores of the UK, the British African-Caribbean population can easily prepare an ethnic meal at home. Hence, it can be comprehended from the analysis that though there is much competition in the general restaurant industry, there is enough opportunity for an African-Caribbean restaurant to operate and develop in Allerton as well as sustain itself in the long run. Micro-Level Industry Assessment The establishment of an African-Caribbean restaurant providing ethnic and traditional Caribbean cuisine would be an exclusive concept in Allerton. In order to ascertain that other restaurants in the area are not able to duplicate the concept of the African-Caribbean restaurant, it is important that the restaurant develops certain proficiencies or capabilities that distinguish it from the others. In this context, it can be stated that Afro-Caribbean restaurant would endeavour to provide traditional African and Caribbean ambiance inside the restaurant. The most important aspect that keeps apart a particular restaurant from the others is the taste of its foods. This is particularly true for restaurants offering traditional cuisines for ethnic groups or communities. The main goal of the restaurant is to attract the African-Caribbean population in an around Allerton, in addition to British people as well as people from other ethnic groups, who would like to taste traditional Caribbean cuisine. Hence, considering this goal, the restaurant would employ people having African background so as to ensure that the food served at the restaurant bears the authenticity of traditional African and Caribbean food (Andrews, 2003; Fullen, 2005). The economic feasibility of the restaurant business can be established with the help of revenue forecast, estimation of expenses and time required to acquire and retain customers. Additionally, it is important to estimate the capital investment necessary to build the business as well as its breakeven point. The initial capital for setting up the business would be required for furniture, furnishings, equipments, and utensils among others. The capital investment required in the preliminary stage of the business can be estimated to be around ?50,000. Revenue Estimation for Year 1 January ?5050 February ?5000 March ?5100 April ?5500 May ?5400 June ?5500 July ?6000 August ?6350 September ?6550 October ?6550 November ?6500 December ?6500 The restaurant expects to charge ?20 per meal, wherein the cost per meal for the restaurant is expected to be ?12. Furthermore, the operating the restaurant business would entail certain amount of fixed expenses in the form of rent and staff salary among others. Assuming that the fixed expenses of the restaurant would be ?2000 per month, the breakeven point for the business would be, Break Even Point = Fixed Costs / (selling price - variable costs) Break Even Point = ?2000 / (?20-?12) Break Even Point = ?2000 / ?8 Break Even Point = 250 This implies the fact that in order to break even, the restaurant would have to sell 250 units per month. The profit of the restaurant for a particular month can be computed by deducting the summation of fixed and variable expenses from the revenue figure of that month. For instance, taking into account the forecasted value of revenue in December (?6500), and deducting the fixed cost of ?2000 and the variable expenses for the month (325 * ?12)= ?3900, the gross profit for the month would be ?600. Hence, the gross margin for December is expected to be (?600/?6500), which is equal to 9.23%. Team Assessment The team’s mission is to develop the Afro-Caribbean restaurant into the Allerton's restaurant of choice, offering a paramount value for fresh as well as wholesome Caribbean food, pioneering and traditional African-Caribbean menu range in addition to outstanding service and experience. The aspiration of the team is to make the restaurant a multi-faceted accomplishment. One of the major objectives of the team is to attain the financial welfare of the restaurant (Reference for Business, 2011). The team aspires to accomplish this goal while keeping into consideration the following factors: 1) the effect of the restaurant’s cuisine on the health and the well-fare of the consumers as well as the staff, 2) the consequence that the restaurant’s business practices along with its choices might have on the surroundings, and 3) the compliance of high quality of service provided by the management and the staff. The consideration and acknowledgement of all these aspects in addition to responsible behaviour of the team is expected to give the endeavour a sense of purpose and meaning beyond the fundamental financial goals. Furthermore, the team aims to build the Afro-Caribbean restaurant business in Allerton after a comprehensive and extensive assessment of the market, rather than establishing the business on the basis of certain preconceived idea. The findings from the thorough analysis of the restaurant industry as well as the target market would enable the team to build the concept of the restaurant around the consumers. To put it other words, this comprehensive approach would ensure that the restaurant is built to cater the ‘unmet wants’ of the inhabitants of Allerton. Summary and Conclusions The extensive assessment of the market as well as the overall industry prior to the establishment of the Afro-Caribbean restaurant has revealed certain imperative information. The analysis illustrates that during the recent years, there has been an augmented demand for ethnic food in the UK in response to the growing faction of African and other ethnic communities in the UK. Furthermore, the demand for ethnic food is also owing to exceedingly varied consumption habits of the people in the United Kingdom. This indicates that there is ample requirement for an outlet providing authentic and traditional Afro-Caribbean food in Allerton, considering the fact that there is almost no exclusive restaurant catering this segment. The industry analysis also depicted that there are sufficient opportunities for this business concept of setting up an Afro-Caribbean restaurant in the Allertion area. Hence, the rising demand for Afro-Caribbean food in the region as a result of growing number of ethnic populace and the increasingly diverse eating habits of the general population in the UK is the foremost rationale for setting up the restaurant. The other important factor that justifies this rationale is the comparatively low initial capital requirement of this business. Conclusively, it can be stated that the feasibility assessment reveals that it is viable to set up an Afro-Caribbean Restaurant in Allerton, Liverpool. References Andrews, L. 2003. Buying & Selling A Restaurant Business: For Maximum Profit. Atlantic Publishing Company. Bernstock, P., 2007. State Versus Market: Is the market more responsive to differentiated need than bureaucratically planned services? A case study of meals provision for older 'African Caribbean' People in eight London Authorities. Social & Public Policy Review, Vol.1, 1. Caterer and Hotelkeeper, 1986, Challenge of Feeding Ethnic Minorities. Caterer and Hotelkeeper, Vol. 30, 1, pp. 66-67. Eat Out Magazine, 2009. Restaurant Industry Will Return To Growth In 2010. News. [Online] Available at: http://www.eatoutmagazine.co.uk/online_article/Restaurant-industry-will-return-to-growth-in-2010/6241 [Accessed November 23, 2011]. Fullen, S. 2005. Opening A Restaurant Or Other Food Business Starter Kit: How To Prepare A Restaurant Business Plan & Feasibility Study. Atlantic Publishing Company. Mintel Marketing Intelligence, 1999. Thai, Mexican and Emerging Ethnic Foods. Mintel Marketing Intelligence, June, pp. 2-40. Mullins, J. W., 2007. The New Business Road Test. Pearson Education.   National Restaurant Association, l998. Conducting a Feasibility Study For A New Restaurant. National Restaurant Association. Ohio Dominican University, No Date. Application of Porter’s Five Forces Model Paper. Library. [Online] Available at: http://www.ohiodominican.edu/uploadedFiles/Library/CoursePages/Courses/Bus/Bus498/Application-PortersFiveForcesModelPaperExample.pdf [Accessed November 23, 2011]. Restaurant Magazine, 2011. The Definitive Guide to the Restaurant Business. Media Pack. [Online] Available at: http://www.william-reed.co.uk/Files/media_pack/Restaurant%20Media%20Pack%202011.pdf [Accessed November 23, 2011]. Reference For Business, 2000. Restaurant.  Business Plan. [Online] Available at: http://www.referenceforbusiness.com/business-plans/Business-Plans-Volume-05/Restaurant-Business-Plan-v1.html#b [Accessed November 23, 2011]. Telegraph, 2009. 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