Current Issues in Entrepreneurship - Fast-Food Industry - Coursework Example

YUM-YUM "A Different Kind of Fast-Food" Background Fast food Mania Currently, what is termed "fast food" means hot, freshly prepared and wrapped food items, served to customers across a counter or through a drive-up window. Better known as fast food and quick-service food in the restaurant industry, these items are commonly sold and delivered in an amount of time ranging from a few seconds to several minutes. Economical hamburgers and French fried potatoes are still the products most readily identified as fast food but the list of items sold continuously increases. Fried fish and shellfish, hot dogs, chicken, pizza, roast beef, and pasta are commonly sold at quick-service outlets. In addition to these staples, many quick-service restaurants sell an extensive menu of Western, Mexican, Greek, and Chinese foods. Some fast-food outlets offer specialty items, like sushi, clams, or ribs, and others even sell complete "home-cooked" meals over their counters. Though menus and delivery formats vary greatly, fast food's chief common denominators include immediate customer service, packaging "to go," and inexpensive pricing. However, despite the pervasive reputation of fast food in modern American culture, criticisms proliferate. Since the 1930s, articles and books have censured the industry, purportedly divulging poor sanitary conditions, unhealthy food products, environmental problems and unfair working conditions. Whether it warrants the attention or not, the fast-food industry is still regularly cited for exploiting young workers, polluting, and contributing to obesity and other serious health problems among American consumers. Specifically, American beef consumption (fast-food hamburger industry) is often blamed for the burning of the Amazon rain forests to make way for more grazing lands for beef cattle. Former enemies of fast food cited the shocking grime of many hamburger stands, in addition to the claims that the ground beef used in sandwiches was either spoiled, diseased, or simply of low quality. In fact, many critics maintained that much of the meat used in fast-food hamburgers came from horse carcasses. Likewise, the high fat content of fast food s also became sensational. Notwithstanding deceptive industry claims about the high quality and the health benefits of their products, in the 1920s and 1930s concerned nutritionists warned the public about the medical dangers of regular burger consumption. Currently, this skepticism and condemnation of fast food persists, extending even further to include ominous vigilance regarding the industry's use of genetically modified and antibiotic-laden beef products. In many major chains, these attacks have been countered by posting calorie and nutritional charts inside restaurants, advertising and claiming the use of fresh ingredients and presenting alternatives to their fried foods. Despite a few more health-conscious items on the menu, fast-food chains today assertively promote the idea that bigger is better, thus the emergence of such offerings as "super-size" or "biggie" portions of French fries, soft drinks, and milkshakes. Critics point to this marketing emphasis as a reason for an excessive and greatly increasing per-capita caloric intake among fast-food consumers, resulting in fast-growing rates of obesity in the United States and in many parts of the world. Obesity in Children Obesity is no longer just an American problem. The UK House of Commons Health Committee gave out its finding on obesity foreseeing that obesity would soon surpass smoking as the primary health problem in the United Kingdom (House of Commons Health Committee, 2004). All throughout Europe, obesity has increased by 10%-50% within the past ten years and by as much as 75% in the developing world (IOTF, 2004). Globally, over a billion adults and children are overweight and most experts have projected that today's generation of children are likely to have shorter life expectancies than their parents because of obesity. The World Health Organization's latest global policy on diet, physical activity, and health has incriminated the marketing of junk food as a significant cause of obesity. WHO called for instantaneous prohibition on the advertising of unhealthy foods to children and limitations on sugar content. Being overweight during childhood and adolescence raises the danger of developing high cholesterol, hypertension, respiratory ailments, orthopedic problems, depression and diabetes (type 2) as a youth. One disease of particular concern is Type 2 diabetes, which is associated with obesity and being overweight, has increased dramatically in children and adolescents, particularly in American Indian, African American and Hispanic/Latino populations (US Center for Disease Control and Prevention, 2004). The hospital costs alone related to childhood obesity were estimated at $127 million during 1997-1999 (in 2001 constant U.S. dollars), up from $35 million during 1979-1981 (US Center for Disease Control and Prevention, 2005). In essence, when considering long-term outcomes, overweight adolescents have a 70% chance of becoming overweight or obese as adults, which increases to 805 if one or more parent is overweight or obese (Torgan, 2002). Obesity in adulthood increases the risk of diabetes, high blood pressure, high cholesterol, asthma, arthritis, and a general poor health status. In 2000, the total cost of obesity for children and adults in the United States was estimated to be $117 billion ($61 billion in direct medical costs). ---- BUSINESS PLAN ---- The Business An establishment that caters to children and advocates healthy living, YumYum serves food designed for kids with busy parents who desire to provide their children with healthy and tasty foodstuffs but do not have ample time to prepare meals from scratch. This children's food store will be manned by a team composed of dieticians and award winning chefs as well as a pediatric nutritionist with the objective of providing quick takeouts of different mix-and-match varieties, that is, from healthy baby food to delectable fares appealing even to 11 year olds. Everything in its menu is made from fresh food and vegetables made interesting and appealing not just to the eyes but most importantly to customers' taste buds. Food fares include, among other things, mouth-watering honey BBQ chicken, colorful cheese raps, turkey meatballs and yogurt. Available too are food boxes or "food-to-go" packaged in colorful wrappers and with coded boxes to determine a kid's age range. The business will be located at _____________________, Central London. A prime location, YumYum is at the heart of London where foot traffic is heavy and means of transportation is accessible subsequently making it convenient for commuters to stop and pick up lunch/snacks/dinner on their way home from their jobs. It is also where the bigger competitors are securely situated; standing side by side with established food outlets will provide an opportunity for Yumyum to show how different it is from the other fast food joints. The facility YumYum owners will use is a _________sq/ft, stand-alone building. About ________square feet will comprise the cooking and storage area. The remaining ________ square feet will be designated for the counter line and for 5 four-person tables. Outdoor seating will consist of six circular picnic tables covered with umbrellas located just outside the main entrance. The intended hours of operation will be from 7:00 A.M. to 11:00 P.M., seven (7) days a week, four (4) weeks a month. Mission / Objective People behind Yumyum believe that healthy doesn't have to mean boring. We believe that we can provide a healthy lunch, snacks or dinner to kids in a way that doesn't turn them off to good food choices. We believe that it's about time we get creative and stay healthy. YumYum aims to give children delicious and healthy food that resembles fast food in the sense that it can be prepared instantaneously and can be taken out but without the high-calorie content substances that causes obesity in children and leads them to unhealthy eating habits and lifestyle. Yumyum has established three firm objectives it wishes to achieve in the next three years: 1. Ten (10) Drive-thru locations and four fully booked Mobile Cafes by the end of the third year. 2. Gross Margin of 45% or more. 3. Net After-tax Profit above 15% of Sales. Likewise, its company mission is three-fold, with each being as integral to its success. Product Mission - Provide customers the finest food and beverages in the most efficient time. Community Mission - Provide community support through customer involvement. Economic Mission - Operate and grow at a profitable rate through sound economic decisions. Keys to Success Management believes there are four keys to success in this business, three of which are virtually the same as any foodservice endeavor. It is our fourth key--the Community Mission--that will give YumYum that extra measure of respect in the public eye. 1. The greatest locations - visibility, high traffic pattern, convenient access. 2. The best products - freshest vegetables/bread/meat, cleanest equipment, premium serving containers, consistent flavor. 3. The friendliest servers - cheerful, skilled, professional, articulate. 4. The finest reputation - word-of-mouth advertising, promotion of our community mission of charitable giving. Start-up Summary (please substitute figures; some entries are optional) YumYum's food store start-up expenses total just $370,170. The majority of these funds--roughly $300,000--will be used to build the first facility, pay deposits, and provide capital for six months of operating expenses. Another $35,000 will be used for the initial inventory and other one-time expenses. The store's management anticipates the need for roughly $30,000 in operating capital for the first few months of operation. Start-up Requirements Start-up Expenses Legal $3,500 Office Equipment $4,950 Drive-thru Labor (6 months) $65,000 Drive-thru Finance Payment (6 months) $12,300 Drive-thru expenses (6 months) $8,520 Land Lease (6 months) $7,200 Vehicle Finance (6 months) $3,700 Administration Labor (6 months) $54,000 Website Development & Hosting $5,600 Identity/Logos/Stationary $4,000 Other $5,000 Total Start-up Expenses $173,770 Start-up Assets Cash Required $25,500 Start-up Inventory $35,000 Other Current Assets $0 Long-term Assets $131,400 Total Assets $191,900 Total Requirements $365,670 Start-up Funding Start-up Funding Start-up Expenses to Fund $173,770 Start-up Assets to Fund $191,900 Total Funding Required $365,670 Assets Non-cash Assets from Start-up $166,400 Cash Requirements from Start-up $25,500 Additional Cash Raised $0 Cash Balance on Starting Date $25,500 Total Assets $191,900 Liabilities and Capital Liabilities Current Borrowing $9,000 Long-term Liabilities $131,400 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities $0 Total Liabilities $140,400 Capital Planned Investment Partner 1 $10,000 Partner 2 $10,000 Partner 3 $10,000 Partner 4 $10,000 Partner 5 $11,500 Partner 6 $10,000 Partner 7 $11,500 Partner 8 $10,000 Partner 9 $11,500 Partner 10 $10,000 Partner 11 $11,500 Partner 12 $11,500 Other $97,770 Additional Investment Requirement $0 Total Planned Investment $225,270 Loss at Start-up (Start-up Expenses) ($173,770) Total Capital $51,500 Total Capital and Liabilities $191,900 Total Funding $365,670 Description of Products People behind YumYum have developed several recipes for flavored yogurt, BBQ chicken, sandwiches, bread combinations, fruit juices and healthful pastas. Since kids simply love variations and surprises, instead of using the same white bread everyday, Yumyum will be using different varieties of bread like whole wheat bread, multi-grain bread, omega 3 and flax bread. Further, there will also be bagels and dinner rolls. Likewise, the restaurant will opt for whole grains because of its rich source of fiber, vitamins and antioxidants. In addition, instead of having processed luncheon meat everyday, YumYum will create a healthy lunch idea by using leftover meat from the night before, like, there will be chopped up leftover chicken to make a chicken salad sandwich. Indeed, any kind of sandwich with leftover meat dishes can be created, for instance, a teriyaki chicken breast steak sandwich or a grilled salmon fillet sandwich can be very tasty and nutritious. Another reality that Yumyum will not forget is the fact that kids love making their own foods, so a burrito or a pita pocket will make a fun yet healthy lunch option. With prepared shredded vegetables, meat and sauce, kids can assemble their own lunch. This is like shooting two birds with one stone - the parent gets to control the food intake of their kids, at the same time, kiddies get to choose and eat what they want. Adding to the list are various healthy dip choices. Kids just love to dip! There will be prepared diced or julienned produce to go along with small containers of dipping sauce. Also, Yumyum will have simply packed easy-to-carry fruit and vegetables like apples, pears, bananas, baby carrots, cherry tomatoes and grapes and low fat yogurt or sour cream, hummus as well as tzatziki. YumYum also has a controlled healthy trail mix as snacks with nuts, crunchy whole grain cereals and dried fruits such as raisins, apricots and prunes. Water and milk are recommended beverage choice for kids so another healthy lunch box option is soy milk in tetra pack. Market Description / Analysis Valued at a projected retail selling prices 8.38bn in 2004, the UK fast-food/takeaway and home delivery market showed a sales growth of 3.9% over the previous year. The rate of growth in the market accelerated in 2004 following a sales increase of just 3% in 2003. Basically, most of the consumers are looking for ease and expediency in their food purchases, while busier working lives have also benefited fast-food sales. The opportunities to purchase fast food are also extending, with a wider range of outlets now serving sandwiches, snacks and hot food. Traditional high-street sites have been joined by more outlets in transport terminals, by the roadside, in leisure venues and shopping centres. Standalone sites from the global fast-food brands are also facing growing competition from sales in supermarkets, high-street stores, convenience stores and petrol forecourts. Major obstacles to sales growth during 2004 have been growing concerns about obesity and the negative media coverage of the fast-food industry. Sandwiches form the largest market segment contributing 36.5% of all sales in 2004. Sandwich sales have benefited from the trends towards shorter lunch breaks and the corresponding demands for light lunches and snacks. Rapid expansion of chains such as Subway and Benjys has also helped sales, along with more variety in the fillings and bread types available. The second-largest segment is burgers, which is recovering after a year of poor sales in 2001. Menu diversification means that traditional burgers now take a smaller share of sales. Burger outlets, in particular, have tried to counteract the negative publicity associated with obesity by introducing healthier foods such as salads, fruits, more vegetarian options and healthier breakfasts. The strongest growth in 2004 occurred in the pizza market driven by increased sales in the home delivery category. New product developments (NPDs) have also helped sales. The sales performance of the chicken sector was weaker in 2004 than in 2003, but outlets continue to gain from some customers switching from burger restaurants. Sales growth in the fish and chips sector remains limited. The other fast-food and takeaway sector includes a variety of outlets, such as coffee shops, Indian and Chinese outlets, sushi and noodle bars, soup bars, salad bars, organic food outlets, and doughnut and muffin shops. Traditional market segments, such as Chinese and Indian, are mature sectors experiencing little growth, but the coffee shop segment continues to exhibit healthy growth. Several menus in coffee shops are diversifying. Over 54% of all adults have used a fast-food outlet in the year 2003/2004 so penetration is relatively high. Sales growth in the period 2005 to 2009 is forecast to be less than the previous 5 years, partly due to concerns over healthy eating issues, increased competition from other outlets and saturation in some market segments. Fast food chain restaurants such as McDonalds, Burger King, Subway, and Checkers are also competitors. While they do not offer the same products, they still compete for the same market share. These stores have the advantage of national marketing campaigns and are relatively inexpensive. Gross incomes of these stores vary substantially. Marketing Strategy Target Market The major target market of YumYum will compose kids with ages ranging from 1 year old up to 12 year olds, these will also include the parents who may not have the time to prepare home-cooked meals and will just opt to eat outside with their children. Aside from the kiddies group, the business will also actively compete in the market for young teenagers and young professionals. Although, the establishment's main fare is made up of food stuff normally eaten by young people, the mature segment of society can also be included since YumYum is offering high-quality nutritious food which are acceptable even to older people who might have health problems. Positioning Although the company is a neophyte in the industry, it can position itself well in the community since not so many outlets offer this kind of package - healthy fast food. There are several establishments in the area who also offers health-conscious foodstuff but they are not presented or prepared in the "fast food way." In effect, YumYum is unique and therefore is assured of good positioning as far as competition is concerned. Its products are very attractive most especially to parents who do not have the time to go into complicated food preparations or are so time-constrained that purchasing ready-to-eat food is the only alternative so that their children can have food. Since nowadays, people have become so health-conscious, YumYum can be a place to go to for these people. Pricing Much as it is new to the "read-to-eat" business, it doesn't need to sacrifice its prices, meaning, it doesn't have to stoop so low just to attract customers. YumYum is offering a very attractive package, a nutritious food-to-go, therefore a decent price is only fair. People are willing to pay a price for a purchase as long as they are assured of value and quality. Advertising and Promotions Management intends to allocate a good amount of money for its advertising and promotion. Basically, positive feedback from customers and word of mouth is already good advertising for any product, nevertheless, in a playing field where big players also abound, it is a must to also focus attention on promotions and exert effort in getting the customers' awareness of the product. Research & Development Even when a product is already good, it needs to be better and constant improvement must be the mantra for its creators. With YumYum, it intends to seek for better ways to make its food better tasting, with more quality, more attractive and appealing especially to young minds and eyes. Likewise, with big players around, the only way to vie for a position in the eyes of buyers is to be unique and to be better compared to the ones that are already well-established and one good way to accomplish this is constant study and research. Competition There are several types and make of "ready-to-eat" food available in mainstream retail outlets and all of these varieties are produced by large players, such as McDonalds and Burger King, and still others that specializes in so-called "healthy conscious' food. The strength of these products is their market share and distribution channels since they have already gained strong market acceptance. Operational Strategies / Capabilities On the operational front, YumYum's quest for excellence will be reflected right from the start as it undertakes the construction of its very first outlet. The company will utilize pre-fabricated material to construct store, hence saving a considerable amount of time and money. The owners themselves will handle activities such as raw material and ingredient planning, warehousing, manufacturing of processed foods, distribution and logistics. All these activities will be automated and the company aims to continuously incorporate new technologies to improve its production and food processing endeavors. Customer Service At YumYum, customer service will be given utmost importance following the traditional clich that "the customer is king." In consonance with this philosophy, management will ensure that everyone, from cooks to service crew to cashiers, customer satisfaction and comfort will be the primary concern. Therefore, customer satisfaction will mean quality-controlled meat/vegetables/fruits/pastries and beverages; it will also mean spic and span pantry and cooking utensils; likewise, it means a "constantly smiling face" from the service crew. Employee Relations In this establishment, employees will constantly receive extensive training so that they could learn the corporate values of integrity, humility and the philosophy that business is not all about profits. Yumyum endeavors to maintain a "family-like" atmosphere at work, to give employees a sense of belonging and camaraderie. Corporate Responsibility YumYum aims to support social causes in and out of central London. It will work various government sectors to provide services to community members. Through its business practices, it aims to reflect the company's desire to take care of the environment and promote healthy living. Marketing Plan Yumyum will use a variety of methods to advertise including direct mailings, flyers, mailer coupons, and door hanger menus. Initially, each customer will receive a coupon for discounts of future purchases. This establishment plans a creative customer survey card and/or visitor log that will enable it to set up a database of customers to be used for generating mailing lists. This will enable YumYum's to send direct mail coupons to previous customers. This is the most effective method of advertising because it hits families that are more likely to purchase nutritious and healthy foods from YumYum. The management plans to mail out 1000 pieces per month at a cost of approximately $200 per 1000. Another advertising approach that will be used is the utilization of door hangers with "YumYum's Tasty Bites Menu" written on it accompanied with flyers to be used in local neighborhoods where local zoning laws allow. This is very cost-effective since the only expense is the marketing pieces themselves. Management anticipates distributing 2000 of these pieces per month at a total cost of $220. The third principal domain of marketing effort will be store's participation in the Mailbox Mailer coupon program. Mailbox Mailer sends a variety of coupons in the mail to 15,000 homes per month. The cost is $600 per month with a one-year contract. Other areas of marketing/advertising will be implemented after the business has become more established. Management plans to sponsor events at local schools and social functions as well as distribute menus to the area hotels whenever possible. Obviously, quality customer service with quality product is an extremely important aspect of any food business's ability to attract and keep customers. Inside YumYum, the employees will be mentally and physically focused on producing a quality product and satisfying the customer. Management and Personnel Owner/Operator - (name of owner) _______________ will be responsible for the day to day operations of YumYum's Food Store. He will perform such duties as purchasing, budgeting, record management, payroll, and quality assurance. (name of owner) graduated from the University of _____________ and completed a degree in _________. After working some time with (name of company or government agency), he thought of venturing into his own and put up a business in the food industry. (name) intends to make a name for YumYum and hopes to put up other branches in other cities in the years to come. Assistant Manager - (Name) _____________ will be responsible for personnel management including scheduling, training, and hiring. He/she will also handle some records management and payroll. _____________has known___________(name of owner) for over (number) of years and he/she has had some experience in the food management business for quite a while now. Other Staff - YumYum will also hire 6 part-time cooks and 8 part-time cashiers. These positions will only require that the employee be 16 years of age. Recruitment efforts will be high as turnover for these positions is frequent. These employees will receive between $_________ and $_______ per hour depending on work shifts and experience. Team of Professional Advisors Accountant __________, CPA Attorney _______________ Business Consultant _________________ Restaurant Advisor ________________ Consultant Chef __________________ Financial Information Sources and Uses of Funds Sources (Please fill up) Owner's Capital _____________ Investor Capital ________________ Bank Loan ____________________ --Total ______________________ Uses Remodel Facility ____________________ Purchase Equipment ______________________ Purchase Small wares ______________________ Security System ___________________ Initial Inventory ________________ Office Supplies __________________ Rent Deposit _______________________ Electric Deposit ____________________ Water and Sewer Deposit __________________ Gas Deposit __________________ Telephone Deposit ______________________ First Payroll _______________________ Liability Insurance ____________________ Grand Opening Advertising ____________________ Legal and Professional Fees ____________________ Miscellaneous Expenses _______________________ Working Capital ____________________________ Total _______________________________ References / Readings House of Commons Health Committee. (2004). Obesity. London: Stationery Office. Available at www.publications.parliament.uk/pa/cm200304/cmselect/cmhealth/23/23.pdf International Obesity Task Force. (2004). Task force about obesity. http://www.iotf.org (accessed 28 May 2004). Centers for Disease Control and Prevention. National diabetes fact sheet: general information and national estimates on diabetes in the United States, 2003. Rev ed. Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2004. Centers for Disease Control and Prevention. "Preventing Obesity and Chronic Diseases Through Good Nutrition and Physical Activity" Downloaded from: http://www.cdc.gov/nccdphp/pe_factsheets/pe_pa.htm Torgan, C. (2002). Childhood obesity on the rise. The NIH Word on Health. Downloaded from: http://www.nih.gov/news/WordonHealth/jun2002/childhoodobesity.htm Centers for Disease Control and Prevention. Overweight and Obesity Health Consequences. 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