Opening a Restaurant in Sacramento California - Case Study Example

Opening a Restaurant Project Project Proposal for Opening a Restaurant in Sacramento California Prepared Expressly for {Prospective Investor(s)} [Title] Organization Prepared by: [Student’s name] Tel: Fax E-mail: Date Introduction This is a project proposal to start a medium-sized restaurant in Sacramento, California with a capacity of 120 guests. The restaurant will provide fast food, hot beverages, and other American cuisine as well as outside catering services. The facility will be situated on the First Floor, Wells Fargo Center, in downtown Sacramento. The place is apparently one of the busiest in the town, a condition that will enable the project owner to effectively cash in on the great demand for restaurant services in the area and its environs. Executive Summary The proposed location of the restaurant is the building in Sacramento. The site is a prime location for business, considering the fact that it hosts big populations of revelers who visit the place for cultural events and other popular exhibitions. Most of these people have been decrying the low number of restaurants in the area to offer adequate services that meet the high demand for quality services (Brown, 2007). Most of them are prompted to drive long distances away from the downtown in order to enjoy the services. They often protest about more time lost on the way and great inconvenience. In light of the high demand for restaurant services, it is appropriate to establish a fast food restaurant in downtown Sacramento. Key among those who are likely to benefit from the facility comprise of individual corporate figures, executives from multinationals, customers of companies, individuals who are keen to attend business conferences or celebrations, white collars, family customers, young adults, and individuals who have business dealings within the downtown part of the city. The project is estimated to cost a total of US$130,000. The project team needs financing for the whole project to enable us settle the rental fee of the premises, buy new benches, chairs, drawers, cabinetry and equipment, and provide new services. Owing to the professional nature of the services, the facility will surely attract new customers and retain old ones by satisfying their cuisine needs. In light of these, the restaurant will record an increase in returns on investment, and better cash-flows. The proposed place for the restaurant measures 2,900 square feet, which is enough room to house up to 150 guests during peak hours. The high number of guests will need adequate services of 15 workers for the start, after which more staff will be added if the need arises. The restaurant is expected to run smoothly because various stakeholders of the project have successfully completed the preliminary work on the viability and necessity of starting the restaurant business, including gathering customer information, implementing customer surveys, evaluating the current market situation, and seeking the effort and contributions of some technocrats and other entities offering consultancy services (Fullen, 2005). In order to come to terms with the nature of restaurant business in the market, the stakeholders organized some open discussions with six diverse focus groups. The groups include 5 chief executives of the companies in based in Sacramento, 10 frequent corporate travelers, 12 adults who represented both genders evenly, 10 individual guests, 13 workers from other restaurants, and 6 baby boomers, three from either gender. The outcome of the discussion session gave a clearer picture of the situation on the ground, as far as the need for setting up a new restaurant in downtown Sacramento is concerned. The modern restaurants offering efficient services were located several miles from the downtown; most of the ones that already exist are not very attractive and have limited menus; there is no fine buffet being offered; and most of the restaurants serve only the American cuisine, in English, in spite of the growing need for cultural mix. The above outcomes have prompted us to seek for funds in order to enable us realize the goals of the restaurant business (Brown, 2007). Our team believes that the factors outlined above can undoubtedly motivate and enable the new business to gain significant return on investment within the first two years. Owing to the prime area where the restaurant is set to be established, it is projected that the business will generate immense profit: the main objective of the first financial year is to create a profit of US$75,000, and ensure that all the capital is returned within two years of operation. Project Description Design and Location The project involves setting up a medium-sized restaurant. The new facility, which is estimated to cost US$130,000 on completion, will be located on the First Floor, Wells Fargo Center, downtown Sacramento, California. The building was selected due to its strategic location to high business activities in the downtown. The facility will occupy an area of about 2900 square feet with a capacity to hold up to 150 guests during special occasions. It will be properly designed to a modern style as described below: The decoration of the room will be properly done to reflect modern styles. The ventilation and illumination will be unique and smart for attraction. Proper sanitation of the facility will be prioritized New Facilities The restaurant will be equipped with modern furniture that are stylish. These include desks, seats, couches, attractive tableware. The kitchen will also have new cooking and storage equipment such as modern cabinetry, refrigerators and deep freezers, cookers, and utensils. Three large refrigerators, centrally-placed air-conditioners and a set of music and television will also be fitted. Services The restaurant will offer a wide range of American foods. Hot beverages such as Coffee and Tea will be served as per the customer requests. Buffet dinner will be offered on weekends, and also during public holidays. The restaurant will also offer supplementary services in the form of outside catering. The cuisine offered at the restaurant will remain superior to those of rival eateries, in order to get a quicker return on investment. The price will be optimal in order to achieve a competitive edge and maintain profitability. The eatery will grant repeat customers membership status that will enable them to discount on the items they purchase. Service will be provided in English, French, and Spanish languages to enable foreign customers, especially from Latin America to feel welcome. Work Breakdown Structure The restaurant’s design process involves a series of processes and activities, which start with carrying out a market research on the setting up of the business, designing it, and setting up appropriate equipment and furniture for the successful running of the business. The following is a proposed Work Breakdown Structure (WBS) for setting up the restaurant. A. Market Research 1. Determining market feasibility to establish the viability of the restaurant in downtown Sacramento. 2. Carrying out surveys to establish the level of demand for a new restaurant facility. 3. Carrying out open discussions involving diverse groups to take care of their unique interests of the consumer. 4. Consultation of various technocrats 5. The market will be tested for profitability. 6. If all of the market research yields positive outcomes, the project will proceed to the next stage of concept feasibility. B. Concept Feasibility 1. A study of the current American cuisine will be carried out to determine the existing trends, and whether the new restaurant will be able to satisfy the customer demand. 2. Chefs will be interviewed just to be sure important resources are available for project completion. 3. The project will be evaluated against customer tastes, and preferences. The process will focus on the restaurant design, cuisine, and accessibility. 4. The concept will be tested for feasibility: if the required personnel are available, the acquired space will be set for design and development. C. Design and Construction 1. A review of the customer requirements based on the tastes and preferences will be done. 2. Refinement and finalization of the customer requirements regarding the design of the restaurant will then follow. 3. A group of architects will be mandated to design the available room for construction. 4. Confirmation that the required construction materials are available and meet the construction thresholds of quality, will pave way for the construction process to begin. 5. The construction process begins: plumbing, electricals, walling and flooring will follow the customer requirements and modern architectural designs. 6. Fitting of the various kitchen equipment and furniture will follow according to the best designs as agreed upon by various stakeholders. 7. Furnishings and decorations to follow. D. PRODUCT TESTING 1. The new product will be tested to establish that it meets all the construction requirements. 2. The piping system, electricals, ventilations, cookers, refrigerators, and the HI-FI will be tested for efficiency. 3. Successful testing of the product will pave way for obtaining the necessary documents and licenses for operation. 4. A review of the operation and construction requirements by various issuers of licenses for compliance, will prompt closer cooperation on the part of the project owner 5. Successful issuing of the licenses will usher in the enlistment of new personnel 6. Sales teams swing into action to market the new restaurant 7. Taking of the first orders will take place 8. Then the restaurant will be open for full operation Cost Breakdown (Per year) A. Construction Costs 1. Rental fee: 12,000.00 2. Design Costs 2,000.00 3. Labor Costs 14,000.00 4. Windows 1,500.00 5. Ceiling 3,500.00 6. Painting 1,200.00 7. Cement 3,800.00 8. Lighting 1,800.00 9. Plumbing 2,500.00 10. Furnishings 2,000.00 Total Construction Cost + Rental fee = $44,300.00 B. Equipment costs 1. Kitchen cookers 11,000.00 2. Refrigerators 7,800.00 3. Kitchenware 3,000.00 4. Restaurant furniture 10,000.00 5. Painting & curtain 2,000.00 6. Cash register, computer & printer 2,500.00 7. Air conditioners 3,500.00 8. Office furniture 3,900.00 9. Computer, Printer and Photocopier 3,000.00 10. Stationery 1,500.00 Total Equipment Cost = $48,200.00 C. Operating budget 1. Wages 25,000.00 2. Utilities 3,000.00 3. Equipment Maintenance 800.00 4. Advertisement 500.00 5. Consultancy 1,500.00 6. Staff training 1,700.00 Total Operating Budget = $ 32,500.00 Total Cost of Project (5 years) 1. Construction Cost: 32,300.00 2. Equipment Cost : 48,500.00 Sub-Total : 80,800.00 Recurrent costs: 1. Rental fee : 12,000.00 (Per year) X 5 years = $60,000 2. Operating budget: 32,500.00 X 5 years = $162,500 Total Cost of Project = (Construction Cost + Equipment Cost + Operating Budget + Rental fee (5 years) Total Cost of Project = $(32,300 + 48,200 + 162,500 + 60,000) Total Cost of Project = $303,000 Advanced Cost Estimating Technique Estimated Value of the Project: $130,000 Most optimistic cost estimate = Construction Cost + Equipment Cost + Operating Budget = $125,000 Pessimistic estimate = $140,000 Values: A = 125,000 M = 130,000 B = 140,000 E = ? Solution: E = (a+4m+b) / 6 E = ${125,000 + 4(130,000) + 140,000}/6 E = $(125,000 + 520,000 + 140,000)/6 E = $(785000/6) E = $130,833.30 Cost Assumptions The cost of construction materials will remain unchanged The labor cost will remain the same while the project is underway The amount of capital available will be enough to complete the whole project Financial Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Revenue (10,000s) 6 6.5 6.9 7.1 7.5 Expenditure (10,000s) 13 7.7 7.7 7.9 8 Table 1. Showing the expenditure and revenue during the first 5 years The first year is likely to see an escalation in cost of establishing the business, occasioned by the purchase of construction materials, and equipment. However, the expenditure is expected to reduce by almost half in the subsequent years, since the project is already complete (Graph 1 and 2). A slight increase in expenditures caused by the likelihood of rising inflation rates is expected to take toll on the project from the second year. However, the increase in costs is not expected to affect the smooth running of the business, as the business will be generating revenue (Graph 1 and 2). Schedule The project will take three months to complete a. By the end of week two Identification, deliberation and signing of the rental agreement for the premises; and designing the layout of the restaurant will be complete. b. By the end of Week Four Decoration work complete New manager, two chefs and a consultant recruited. Designing menus, regulations and management charts complete. c. By the end of Week Six Purchasing new equipment, and furniture, and other materials for use in the restaurant to be completed. d. By the end of Week Eight Enlisting new staff Approval of management charts Orienting new staff Checking and endorsing menus, and pricing as well as printing of management charts e. By the end of Week Ten Preparation of menus Checking and accepting the decoration work Fitting a banner indicating when the restaurant will be open on the front part of the restaurant. f. By the end of Week Twelve Installation of the new equipment and furniture Cleaning the eatery Fitting management posters, charts and menus Making sure everything is in its rightful place and condition. Advertising when the restaurant will be fully operational on the local media Opening the restaurant officially in a ceremony. Summary This proposal is for the construction of a medium sized restaurant in Sacramento, California. The location was selected because it is a prime business area that will pay-off. Although, the total budget for the project is set to be US$130,000, the amount of revenue collection is expected to surpass the investment capital within a period of three years of operation. The level of expenditure is expected to reduce, even as revenues increase over time as shown in the graphs, since the expensive part of setting up the project will be solved once and for all. More and more visits by customers to the restaurant will translate into more revenue. Appendices Graph 1 showing an increase in revenue as cost remain almost constant x-axis: Time in years Y-axis: rate of decline in 10,000s Graph 2 showing a decline in expenditure over a period of 5 years x-axis: Time in years Y-axis: rate of decline in 10,000s References Brown, D.R. (2007). The Restaurant Managers Handbook: How to Set Up, Operate, and Manage a Financially Successful Food Service Operation. New York: Atlantic Publishing Company. Fullen, S.L. (2005). Opening a Restaurant Or Other Food Business Starter Kit: How to Prepare a Restaurant Business Plan & Feasibility Study: with Companion CD-ROM. New York: Atlantic Publishing Company. Read More