Business Plan for Indo-Pak Meals Corner - Case Study Example

1. SECTION EXECUTIVE SUMMARY 1. BUSINESS IDEA AND GOAL The basic idea of this business is to establish a small business in retail sector in centre of city in Melbourne, Australia. The company plans to open small food outlet in the name of Indo-Pak Meals Corner that specializes in daily fresh meal take away in handy format that can be easily eaten at the best available place to sit nearby destination. The owner has a plan to start up the business with four full time employees; a chief chef, chef, helper (for grocery, cutting and cooking) and service man. It has been estimated that the business would expand and therefore more human resource would be required. Business plans expansion in domain where business will provide marinated (ready to heat) food for the target audience. The company plans to meet breakeven by year end. 1.1. MARKETING Target audience of the Indo-Pak Meals Corner would include people in Melbourne who have taste buds for Asian spices-enriched food. It shall exclusively cater residents and immigrants from India, and Pakistan and other countries of that region like Bangladesh and Sri Lanka. India is the largest exporter of its skilled worker to Australia in the year 2012 and constitutes15.7 percent of the total program for immigration (Australian education international, 2012). This growing number, along with already residing Indians shall provide good potential for business. Indians are very much into their typical home-done food and this has been taken as opportunity to attract especially immigrants to have home flavor on outside their land. Figure 1: Leading sources of migrants (Lane, 2012) Another main component of target audience, Pakistani though comprise small percentage of total Australian population but students from Pakistan are constantly growing in double digit in Australia with growth rate of 17.6 percent. Again these people are new entrants to land of Australia and are attracted to the home spices. 1.2. OPERATIONS Indo-Pak Meals Corner plans to operate with four full time employees, a chief chef, chef, helper (for grocery, cutting and cooking) and service man. Initial outlay comprises of location, licensing, fixed and other expenses as the outlet is a start-up from zero. 1.3. FINANCES Indo-Pak Meals Corner would require funds of 229,000 Australian Dollars. This amount will be used for different purpose including buying of different assets for the company. 2. SECTION 2.0: BACKGROUND 2.1. MISSION AND VISION Indo-Pak Meals Corner exists to provide people with the best blend of food from India and Pakistan flavors to any one and everyone with need of daily fresh handy meal ready to eat on their way to destination. Indo-Pak Foods has a vision to provide big taste to all living on Australian land from small corners. 2.2. HISTORY This company has no background history and a new start up. However, it plans to develop long history of tasty food. The management of the company has expertise in managing restaurant offering such spicy foods. 2.3- BUSINESS GOAL In short term the business has a goal that by year end business shall be able to meet break-even. Profit generation has also been kept as a tentative goal of first year based on the clientele response. In long run firm plans to expand initially in operations by providing people with marinated food on orders especially for occasions or festivals. This way business has planned to be part of people’s life from every day to their festive. Physical expansion will be step next to achieving mentioned goals successfully. 2.4- POINT OF DIFFERENTATION Indo-Pak Meals Corner has plans to provide differentiated food the every one who has taste bud for Indo-Pak spices. It is also differentiated product from the junk food that is growingly taking place of proper meals in daily food habits of people. It offer meal that is healthy and in a meal form that is handy so that in fast life, one can take healthy meal with almost same convenience to eat offered by junk meal. SECTION 3.0: MARKETING 3.1- MARKET RESEARCH AND ANALYSIS Market research has been conducted from various sources including: Australian Bureau of Statistics The Australian (news) Business Resource Guide for Melbourne Regional Chamber Enterprise Melbourne Open market survey from people regarding their views for such ready to eat handy meal as against junk food, and home taste for people from the mentioned part of world. a. INDUSTRY ANALYSIS Food sector of retail industry can always develop the demand if it its providing good taste with hygiene. The fast paced growing lives in cities has forced people to rely more on ready to eat meals and resulting in the large number of food chains growing their footing in far and wide of every corner. For the industry trend, given below is the reference of details from city of city of Melbourne, the State Govt. of Victoria and the Melbourne Retail Advisory Board. Figure 2: Top Five Users of Retail/ Entertainment Space The trend shows that retail trade; pubs, café and restaurants and culture and recreation area all are growing in space acquisition therefore, spending on food is showing a positive trend. To add, though these statistics are of eight years back, Melbourne government has also used this trend to of growth for devising strategy to take Melbourne to future and what renowned state it is in year 2012. Figure 3: Industry Structure of Central City Retailing Among the growth of various industries, specialized food retailing has also gained strong positive momentum and the growth of immigrants. Hence, industry has all the capacity to give space to small enterprise that will specially designed to cater with it its differentiated food service not specifically for leisure but to maintain healthy dietary habits which gets badly disturbed in daily busy routine with junk food being the last resort. b. COMPETITORS Indo-Pak Meals Corner will be facing competition from different local restaurants in the city as well as international restaurants operating in the city. Some of the local restaurants in the region where Indo-Pak Meals Corner will be located are Burger Edge, Zam Zam Café, Bail Bagus, Nelayan Indonesian Restaurant, Reddy Kitchen, and others. These restaurants can be considered as the direct competitors as they are offering Asian foods and in particular Indian food. However there are other big international brands in the region as well where Indo-Pak Meals Corner is located. For instance, Nando’s is in that particular region, McDonalds is also not far away and so as Domino’s Pizza. Indo-Pak Meals Corner with location almost exactly in the between the cluster of these giants will carve its own niche that are more interested in getting daily fresh meal, which is home made and has taste of their country. It is very close and direct competitor in terms of type of product will be “Flavor of India” named food outlet that as the name suggest provide product similar to this business. Sonic drive-In is also a close competitor based business model or ready to take handy meals. Therefore it can be said that there are some restaurants offering similar variety of foods and in that particular region, however Indo-Pak Meals Corner would focus on offering variety with quality and with exceptional customer services to make its mark. C. SWOT ANALYSIS Table 1: SWOT Analysis POTENTIAL STRENGTHS Industry Strength (5) A diversity of retail offerings from large department stores to boutiques. Laneways and above awning retail and one-off shops not found in other locations add to the retail experience Company Strength: Ready to eat handy daily fresh food with special flavors from India and Pakistan and less people small scale business will initially be maintain strict cost control. POTENTIAL WEAKNESSES Direct Competition from Flavors of India and drive-away of other large established food chains. POTENTIAL OPPORTUNITIES Spices from India and Pakistan have all potential to fetch back client who once taste provided quality is maintained and prices are affordable. POTENTIAL THREATS Small number of people managing business may hamper performance to cater larger clientele a day. Chef leaving with short notice. No experience of business in Australian environment. 3.2- MARKETING PLAN A. PRODUCT: Ready to eat daily fresh Indian and Pakistan food with single, double and group servings. Also food cooked on order for 50 to 100 people servings for large gathering on festivals and other family events in Indian and Pakistani Nationals. B. TARGET MARKET: Market in centre of Melbourne, anybody with taste bud for such spices, those residents and immigrants who prefer local (their national) food taste. Eaters looking for such food at competitive and affordable prices as compare to other food chains. C. CUSTOMER BUYING MOTIVES: more concerned to but food that supports healthy dietary habits and who unlikely have to opt for junk food in case handy hurry or dependent on self cooking. Wish to enjoy their (Indian and Pakistani food) local food at festive or other nationals to enjoy international flavors. 3.3- PLACEMENT It is planned to open an outlet in central Melbourne. This place has been selected with the basic aim to be in limelight. It is also so planned for being accessible for customers who in hurry prefer to take away from those food outlets that fall in their drive route. For workers it should be easily accessible especially cook. This location will also suit to company needs of accessing daily grocery for business from central location. This placement will support to fetch client who visit large number of food retailers in cluster in central Melbourne. Existence among these will also serve the purpose of marketing. Though this place will be costly as compare to location surrounding of central Melbourne but this one time investment is necessary for achieving the due position among the competitors as well as accessibility motive for clients. 3.4- PROMOTION AND ADVERTISEMENT Starting business as a food retailer in central location is itself a promotion as the outlet of the company will act as a marketing tool but it would not be enough as competitors are of large scale, long time established and moreover, food require retailer require active promotion to be in minds of customers. For promotion, therefore, following tactics will be used: Advertisements to community centers of India and Pakistan. Flyers SMS forwarding contest about the outlets and free vouchers for winners. Social media like using Facebook and Twitter. Websites Emails etc Maintaining a blog in which description about the company, its rich food, healthy dietary habits that can be promoted by selecting this product over junk food etc. Interior and other promotional activities to celebrate special of the two specific countries providing them point to remember home ambiance etc. Emotional attachment to people of two countries with certain food will be given prime importance etc. 3.5- PRICING POLICY Pricing will be done following two criteria: Competitive price for daily food (handy meal) Royal Food for Royal Experience (premium price for food items from India and Pakistan that are considered specialty etc) Discounts on large orders on events. Daily food items can be bought on day to day basis or monthly or annual subscription that will give them incentive, large order payable in advance. 3.6- MARKETING EVALUATION Marketing strategies will be evaluated on monthly basis and can be updated as and when needed. SECTION- 4.0 OPERATIONS 4.1- PREMISES: Business will be located in central Melbourne. The management of Indo-Pak Meals Corner has decided to select a location where customers are able to easily access and at the same time, many customers are attracted because of the location. Considering the requirements, the management has decided to open its outlet in the Melbourne Central, 211 La Trobe Street, Melbourne. This would allow the outlet of the company to be in the central part of the city and thus customers from all over the city would be attracted. 4.2- EQUIPMENT NEEDS Table 2: Budgeted Cost Budgeted Cost ($)     Kitchen Equipment 35,000 Merchandising 6,000 Inventory 5,000 Furniture and renovation 100,000 Stores and Spares 2,000 Cash Requirement 18,000     Total 166,000 4.3- HUMAN RESOURCE Initially it will be based on three personnel human resource. a. The owner who will see the counter, overall operations, marketing and other concerned affairs. b. Chief Chef and chef will be in-charge of cooking. c. Helper will help and assist the cook as well as handing delivery to the client. The requirement of human resource is expected to increase after 2 years. 4.4- PROCEDURE Procedure for the conduct of the business will be designed before starting the business it will be followed as Standard Operating Process. It will account all details from grocery process and days to handing the delivery to client and taking feedback. It will be updated after a month then 3 month for any improvement required and will be finalized accordingly. 4.5- THE MANAGEMENT The management has experience of managing restaurants in the country. The operations of the Indo-Pak Meals Corner will be lead by an individual that has been involved in the food industry for more than 10 years. Moreover, the head chef of the Indo-Pak Meals Corner is a specialized chef in making different types of dishes including Indian, Pakistani, Bangladeshi, Sri Lankan, Indonesian, Chinese and other dishes. Therefore the overall management has experience in such business and thus it would be helpful in ensuring the success of the Indo-Pak Meals Corner. 4.5- CONTINGENCY PLAN Most critical resource to the business is its cook and the entire plan to fetch the clientele is based on special taste that is usually secreting recipe of cook. Initial business plan start up with single chef was already altered in light of this risk. In case chef leaves on urgent or no notice basis, then other chef shall take charge meanwhile other one is hired. Less business in initial days will be met by focusing on group orders from community centers on discounts. Contingency plan for other emergencies will be met up with insurance and other arrangements. 5.0. SECTION: FINANCIAL PROJECTIONS Given below is the detailed financial projection for five years for restaurant. Restaurant will be able to achieve its profit in the next year from its inception whereas cash flows will turn positive third year. Business has been found feasible with positive net present value and its internal rate of return being 43 percent. A- SALES FORECASTING In order to forecast the sales of the company, two important factors have been considered. One of the factors is the industry growth which is estimated to be 25% and the other factor that would increase the sales of the company is the growth rate of the company itself as more people will be aware about the company and thus the restaurant will be able to attract new customers as well as retain some of its customers therefore the company growth rate has been estimated to be around 20%. The company will be able to attract customers from its location. Moreover, the company will be using different marketing techniques including traditional marketing techniques as well as new marketing techniques like social media marketing, viral marketing, search engine optimization etc to create awareness as well as attract different people to taste the Indo-Pak food. The company will be distributing pamphlets, flyers to different areas particularly in the near regions so that everyone is able to know about the restaurant. Moreover, the company will be marketing on different high traffic websites to attract people. Also it would be offering free delivery of meals so that more customers can enjoy the food. So Sales forecast has been made with 25% industry growth and 20 percent company growth and this is multiplied by the number of expected sales of each of the product. This has been followed for the first year only and from second to fifth year company growth of 20 percent has been applied. Therefore using these assumptions, the sales forecasting of different products of the company are below: Table 3: Sales Forecasting B- INCOME STATEMENT : Table 4: Income Statement   Year 1 Year 2 Year 3 Year 4 Year 5 Revenue 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556 COGS 1,117,963 2,150,489 2,816,698 3,681,481 4,844,419 Gross PROFIT 380,402 739,276 980,772 1,267,061 1,691,136 Expenses   Marketing Expense* 25,000 30,000 36,000 43,200 51,840 Salaries expense** 432,000 475,200 522,720 574,992 632,491 Utilities expense*** 15,000 18,000 21,600 25,920 31,104 Rent expense**** 96,000 105,600 116,160 127,776 140,554 Depreciation expense ***** 16,600 16,600 16,600 17,015 17,015 Total Expenses 584,600 645,400 713,080 788,903 873,004 Net Income (204,198) 93,876 267,692 478,158 818,132 * Marketing exp. are expected to increase by 20% yearly   ** Salaries are expected to grow by 10% from third year  *** Utilities expenses are increased at rate of 20% from second year  ****Rent expense is increased at rate of 10% from second year   ***** Depreciation is charged on equal basis for first 3 years and added 0.25 percent in last two years. c- BREAK EVEN ANALYSIS Table 5: Break Even Analysis BREAK EVEN ANALYSIS Break even   Sales 1,498,365 Fixed Costs 584,600 Variable Cost 1,117,963 Contribution Margin 70%   835,143 D- CASH FLOWS: Table 6: Cash Flow Statement                   CASH FLOWS           Year 1 Year 2 Year 3 Year 4 Year 5   Receipts           Total Cash sales 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556 19,669,697 Cash from investors             Total Receipts 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556 19,669,697               Payments             Salaries and wages 432,000 475,200 522,720 574,992 632,491 2,637,403 Cost of goods 1,117,963 2,150,489 2,816,698 3,681,481 4,844,419 14,611,050 Marketing/promotion 25,000 30,000 36,000 43,200 51,840 186,040 Utilities expense 15,000 18,000 21,600 25,920 31,104 111,624 Rent expense 96,000 105,600 116,160 127,776 140,554 586,090 Payment of equipment   4,000         Total Payments 1,685,963 2,779,289 3,513,178 4,453,369 5,700,408 18,132,207               Cashflow Surplus/Deficit (-) (187,598) 110,476 284,292 495,173 835,147 1,537,491               Opening Cash Balance 63,000 (124,598) (14,122) 270,171 765,343   Closing Cash Balance (124,598) (14,122) 270,171 765,343 1,600,491   E- INVESTMENT DECISION ANALYSIS NET PRESENT VALUE AND INTERNAL RATE OF RETURN Table 7: NPV and IRR NET PRESENT VALUE AND IRR       Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Income -250,000 (204,198) 93,876 267,692 478,158 818,132 NPV 434,415    IRR 42.57%   As the NPV of the project is positive therefore the project should be accepted. Moreover the IRR of the project is high, therefore the project should be accepted. D- BALANCE SHEET Table 8: Balance Sheet Balance Sheet   Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Assets       Cash 63,000 (124,598) (14,122) 270,171 765,343 1,600,491 Fixed Assets 166,000 166,000 166,000 183,430 183,430 183,430 Accumulated Depreciation   (16,600) (16,600) (16,600) (17,015) (17,015) Net Fixed Assets   149,400 132,800 116,200 99,185 82,170                   Total Assets 229,000 24,802 118,678 386,371 864,528 1,682,661     Equity   Share Capital 250,000 250,000 250,000 250,000 250,000 250,000 Retained Earnings - (204,198) (110,322) 157,371 635,528 1,453,661 Total equity 250,000 45,802 139,678 407,371 885,528 1,703,661 Total Liabilities & Equity 229,000 24,802 118,678 386,371 864,528 1,682,661 F- RATIOS Table 9: Financial Ratios   Financial Ratios     Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5   Net Profit Margin (%) -13.63% 3.25% 7.05% 9.66% 12.52%               Net Profit -204,198 93,876 267,692 478,158 818,132   Sales 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556               Return On Equity -445.82% 67.21% 65.71% 54.00% 48.02%                 Net Profit -204,198 93,876 267,692 478,158 818,132   Average Equity 45,802 139,678 407,371 885,528 1,703,661                 Return On Investment -445.82% 67.21% 65.71% 54.00% 48.02%                 Net Profit -204,198 93,876 267,692 478,158 818,132   Total Investment 45,802 139,678 407,371 885,528 1,703,661                 Total Asset Turnover Ratio 60.412 24.350 9.829 5.724 3.884               Sales 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556   Average Total Assets 24,802 118,678 386,371 864,528 1,682,661               Equity Turnover 3271.38% 2068.87% 932.19% 558.82% 383.62%               Sales 1,498,365 2,889,765 3,797,470 4,948,542 6,535,556   Average Equity 45,802 139,678 407,371 885,528 1,703,661                 Return on Assets -823.30% 79.10% 69.28% 55.31% 48.62%               Net Profit -204,198 93,876 267,692 478,158 818,132   Average Total Assets 24,802 118,678 386,371 864,528 1,682,661               Net profit margin will increase every year. 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