Strategy Development for South Australia Chinese Restaurant - Example

Business Plan for a New Restaurant in South Australia Name ID Lecturer Date 1. COVER LETTER The need to open a Chinese restaurant in North Adelaide is informed by a combination of factors, which include the absence of a similar restaurant in the region and the explosion of interest in Chinese cuisine in Australia. Based on the foregoing, the idea of a Chinese restaurant in the region makes good business sense. According to Brown (2007) and Lee-Ross (2012), an investment makes sound business sense when it is financially successful. As South Australia Tourism Commission (2005) notes, investors can exploit the opportunities in the hospitality sector by identifying ways of satisfying the ever increasing demand therein. Information released by the Australian Bureau of Statistics (2012) further supports investors who may be interested in the South Australian market by indicating that incomes in the region are steadily increasing, hence enhancing consumer spending power. 2. TITLE PAGE The South Australia Chinese Restaurant Business Plan 2013/2014/2015 TABLE OF CONTENTS a.Background and Description 6 a.Vision statement 6 b.Mission statement 6 c.Objectives 6 e.Balance sheet 15 APPENDIX 17 3. EXECUTIVE SUMMARY This Business Plan justifies the case of establishing a Chinese Restaurant (aptly named South Australia Chinese restaurant) in North Adelaide. The plan notes that while there are other Chinese restaurants in Adelaide, the northern part is still underserved by Chinese cuisine providers. Additionally, the plan notes that the explosion of interest in Chinese food in Australia is a clear indication that Australians are opening up to foods from other cultures. Above all however, the business venture is promising, and as indicated in the plan, it is likely to break-even by the third year of operation. In other words, by the third year of operation, the restaurant will be making enough revenues to offset expenses and the initial investment. 4. THE BUSINESS a. Background and Description The appeal of Chinese food in Australia has exploded in the recent past if information released by Cairns Dining (2012) is anything to go by. The popularity of Chinese food in the country has been brought about by a mix of factors key among them being an increase in people of Chinese origin residing in Australia. Additionally, Chinese food is rated as healthy based on the balanced diet ingredients that make most dishes and the unique food preparation methods that make them retain most of the healthy dietary components. Apart from the healthy nature of the Chinese food, dining the Chinese way also exposes people to a unique culture, where instead of using knives and forks, diners are introduced to the world of using chopsticks. The decision to open the South Australian Chinese restaurant was thus inspired by the need to serve an increasing consumer market that was interested in Chinese food. Additionally, the opening of the restaurant was inspired by the need to offer Chinese nationals in Australia an easy transition from their home country into Australia by offering them cuisines that they are familiar with. Additionally, the restaurant offers Australians an adventurous way of experiencing the Chinese cuisine and culture without having to leave the country. a. Vision statement The South Australian Chinese Restaurant is committed to set the bar in providing quality and nutritious Chinese food in Australia. The restaurant will provide authentic Chinese food and drinks, and wishes to specifically provide a platform where people can experience China away from China. b. Mission statement To be the leading Chinese restaurant in Australia, providing authentic Chinese cuisine, a touch of the Chinese culture and superior customer service to all patrons. c. Objectives Attract and retain at least 50 daily customers in the first three months of operation Become a leading restaurant in Chinese food in South Australia through providing authentic Chinese cuisines buoyed by well-serviced and assisted dining experience Offer quality customer services that will keep customers coming back Provide customers with a combination of quality food, good prices and good customer services in order to encourage repeat diners. Financially, the restaurant has an objective of breaking-even by the third year of being in business. 5. INDUSTRY ANALYSIS a. Trends and characteristics South Australian Chinese restaurant will be a relatively large restaurant (with a capacity of 100 customers at one sitting) located at the heart of South Australia. The menu will consist of an array of classic Chinese dishes such as Xiao Long Bao (a vegetable bun) and Yum Cha among many others. The restaurant will be modelled to suit groups and families who wish to experience Chinese foods together. The restaurant will try to encourage Chinese mealtime customs which encourage togetherness and cooperation. As indicated by Food by Country (2013, n.pag.), a dish in China’s culture is “never served to just one person either at home or in a restaurant”; rather, people sitting on the same table share food, although each such person has their own plate. b. Gaps in the market The targeted market (North Adelaide) does not have a Chinese restaurant despite the increasing popularity of Chinese foods. While Chinese customers may perfectly understand the dining customs in their home country, patrons of Australian origin may not be well acquainted with the same. As such, the restaurant will prepare leaflets that will orient new customers with the Chinese dining customs, the use of chopsticks, the use of bowls, sharing of food among friends and family sitting at the same table, and typical components that they can order for a meal. Drinks will include tea, which is a favourite among Chinese and Chinese alcoholic drinks, which include beer, fruit liquor, medicinal liquor, white wine, and yellow rice wine. 6. THE MARKET a. Market description Australia has a reputation for having world class restaurants (JK Wine 2008). The different cuisines offered in Australia include: modern Australia (36.1%), Chinese (14.5%), seafood (9.2%), Italian (9.1%), among others like Thai, French, Japanese, Malaysian, and Greek (JK Wine 2008). Statistics gathered in the 2006/2007 period indicate that in South Australia (SA) alone, the average restaurant gets at least 794 customers per week. By offering Chinese cuisine, the SA Chinese Restaurant will be targeting a niche market, which is likely to attract a higher number of patrons each day. The niche market will consist of Chinese nationals studying, working or visiting Australia, their friends and/or families interested in the Chinese cuisine, and Australians who are willing to explore the Chinese food and culture. The food will be averagely priced and this means that the restaurant will be targeting people within different spending powers. Assuming that all the 150 seating spaces are occupied each day, the restaurant will average 1,050 customers per week. According to JK Wine (2008), 50 percent of all Australians were by 2010 relying on cafes, restaurants and take-away outlets to cater for their meals. This is partly because the busy lifestyles are making it harder for most Australians to prepare home-made meals. The foregoing means that investing in a restaurant business is arguably a good business choice. b. Customer segments The restaurant industry is heavily regulated with GST, and taxes and charges levied by the government are some of the major obstacles faced by investors in the industry (JK Wine 2008). The industry also faces challenges in human resource management, competition and operating costs, which include payroll and rent costs. Regulation wise, the business has to register a name, get the development approval and submit the applicable fees. c. Competitors The main competitors for SA Chinese restaurant include Ying Chow, Ky Chow, and Evergreen restaurants. Ying Chow has been cited as a restaurant that has delicious food, but has been accused of poor customer service, which means that patrons wait to be attended for long (Lonely Planet 2013a). Ky Chow on the other hand has fast service; but is only open for lunch on weekdays – i.e. Monday to Friday – but offers dinner throughout the week (Lonely planet 2013b). On its part, the Evergreen restaurant has been cited as having 182 items on its menu. Additionally, it only offers lunch from Monday to Saturday and dinner throughout the week (Lonely Planet 2013c). While all three identified hotels would appear to be doing well, a person who does not know (or understand the significance of their names in the case of Ying Chow and Ky Chow) would bypass their services as Chinese restaurants. To compete against them in terms of branding therefore, our restaurant will be named South Australia’s Chinese Restaurant. The foregoing name is straightforward and enables new customers understand that the restaurant offers Chinese cuisines. Additionally, the SA Chinese Restaurant will offer superior customer service hence presenting an alternative to customers who feel dissatisfied about Ying Chow’s long queues. Another competitive advantage for SA Chinese restaurant will be pegged on the restaurant’s 7-day operation a week for both lunch and dinner. Both Evergreen and Ying Chow restaurants do not offer lunch on Sundays and this is arguably a great inconvenience for families who prefer eating out on that particular day. By offering lunch on weekends as well as weekdays, the SA Chinese Restaurant will be proving to customers that it is willing to engage in what no other restaurant is doing, just to keep the customers satisfied. Notably, the fact that customers flock at Ying Chow despite the slow service is evidence that Chinese cuisine is in great demand in SA. As such, combining superior customer service with great Chinese food offers is likely to guarantee the proposed business success in future and a competitive advantage over restaurants that have already been established. d. SWOT Strengths Rising interest in Chinese food Increasing spending power in the region Pioneer Chinese restaurant in North Adelaide Opportunities Likely to attract Chinese national in North Adelaide Likely to attract Australians and visitors who have a liking for Chinese cuisine Weakness Some Australians may not like the Chinese cuisines Threats Existing hotels in North Adelaide may pose significant competition e. Marketing strategies (4Ps ) and differentiation As indicated above, SA Chinese Restaurant has chosen a name that is forthright with the customers; the name speaks directly to customers informing them that the restaurant offers Chinese food. Such forthright communication is meant to appeal to customers who already have an existing liking for Chinese food, and those who would like to savour the same for the first time. Another point of difference is that SA Chinese Restaurant will open throughout the week for both lunch and dinner offers. Additionally, the restaurant will offer a combination of great food and superior customer services (including free parking and a leaflet explaining the Chinese dining customs), which is something that the above indicated customers have not thought of doing yet. Initial marketing will include a launch that will involve inviting the media (and especially restaurant reviewers). Like most restaurants, the proprietors believe that superior food service will encourage word-of-mouth marketing by customers, and this would not only guarantee that the restaurant will have repeat customers, but also new customers. 7. THE ORGANISATION a. Legal and organisational structure SA Chinese restaurant will be established as a partnership between Jim Clarke and me with a 49 percent and 51 percent contribution and equity respectively. As co-owners, Jim and I will be responsible for business finances and will also be the ultimate decision makers. We will also provide direction to the business. We will however employ a general manager (GM) who will oversee the daily operations of the business in matters such as recruitment, training and supervising staff. The GM will further be charged with the responsibility of ensuring the restaurant is operating in the right conditions and that all legal requirements are met. The GM will communicate to the business owner and will work with an assistant whose responsibilities will include totalling daily receipts and submitting a report to the owners. The restaurant will also hire a food and beverage manager (FBM) whose responsibilities will involve ensuring that the customers receive impeccable service and that the food and drinks are delivered as requested. The FBM will also be responsible for coordinating customer service attendants whose role will be to wait on customers. The Executive Chef with a deep understanding of Chinese cuisine will also be hired and charged with the responsibility of creating menu items, recruiting and training employees to work with him/her in the kitchen, identifying ingredients for use in the kitchen, and will also work with the owners to determine the prices for different meals based on their complexity of preparation and cost of ingredients. b. HRM and personnel According to Smith (2013, para. 8) employees are not the most important asset in a business, “the right” employees are. Based on the foregoing, SA Chinese restaurant will target hiring the right people, who apart from including the three above identified people, will also include 10 waiters to attend to customers, four chefs, a cleaner, a store keeper and an accountant. The personnel will be employed as per Australian regulations for the employment of permanent, casual and/or part-time workers. Their salaries and allowances will match what is provided for in Modern Awards, but as the restaurant progresses, it will consider revising employment arrangements upwards in order to enhance employee retention especially for high-performing employees. The HRM function will be the responsibility of the GM and the Executive Chef. c. Key suppliers A Chinese supplier (Yong & Sons) will be contracted to supply dry Chinese food ingredients from China, while a local supplier (Green Groceries Limited) will be contracted to provide fresh produce for the restaurants. d. Location SA Chinese restaurant will be located in North Adelaide specifically because there is no Chinese restaurant in that area. Most of the Chinese restaurants are concentrated in Adelaide’s central business district and that means that the people living in the northern side of the city are not well catered for. Considering that most of the hotels and pubs are heritage listed, introducing a Chinese restaurant in the area will bring about a difference that is likely to be appreciated by many consumers. Additionally, the restaurant will offer the residents of North Adelaide greater choice when selecting where to dine. 8. THE FINANCIALS a. Start-up costs The two co-owners have successfully raised the full amount required for start-up through private means. As such, they will not have any debts or liabilities by the time of going to business. Particulars Costs ($) Rent 36,000 Restaurant utilities 8,000 Operating licences 2,000 Location improvement 8,000 Tables and furniture 20,000 Bar equipment, kitchen equipment, and table wear 10,000 Health permits 4,000 Legal Fees 1,400 Initial market (brochures) and marketing team 3,000 Initial kitchen supplies (food and beverages) 3,000 Insurance 3,000 Ordering and payment system 5,000 Menus (designing and printing) 1,500 Restaurant launch 3,000 Marketing 10,000 Administrative expenses 5,000 Totals 122,900 b. Sales forecasts1 and break-even analysis Sales forecast ($) Sales 2013 2014 2015 Individuals 100,000 130,000 155,000 Families 120,000 140,000 170,000 Total Sales 220,000 270,000 325,000 Direct Cost of Sales2 Individuals 42,000 48,000 61,000 Families 46,000 60,000 69,000 Total direct cost of sales 88,000 108,000 130,000 Gross annual profits( total sales (-) total direct costs of sales 132,000 162,000 195,000 According to MBDA (2012), the break-even point is attained by dividing the estimated annual fixed costs by the gross margin percentage. In this case, our gross profit margin percentages across the three years will be: In the first year, the restaurant gross profit percentage will be (132,000 ÷ 220,000) x 100 = 60 percent. To break-even, SA Chinese restaurant would need to generate the following revenue: 88,000 x 60 percent, which would amount to $146, 666 for 2013; $180,000 for 2014, and $216,600 for 2015. In other words, the business would have to make the foregoing amounts of money to break-even in the three years. Any profits would be made only if the cited amounts were exceeded. c. Income statements Sales forecast ($) 2013 2014 2015 Sales 220,000 270,000 325,000 Direct cost of sales (inc. Salaries) 88,000 108,000 130,000 Gross margin profits 132,000 162,000 195,000 Expenses Marketing 10,000 10,000 10,000 Administrative expenses 5,000 5,000 5,000 Rent 36,000 36,000 36,000 Restaurant utilities 8, 000 14,000 14,000 Operating licences 2,000 2,000 2,000 Location improvement 8,000 2,000 2,000 Tables and Furniture 20,000 - - Bar equipment, kitchen equipment, and table wear 10,000 - - Health permits 4,000 - - Legal Fees 1,400 - - Restaurant launch 3,000 - - Initial market (brochures) and marketing team 3,000 - - Initial kitchen supplies (food and beverages) 3,000 - - Insurance 3,000 - - Ordering and payment system 5,000 - - Menus (designing and printing) 1,500 - - Total operating expenses 122, 900 69,000 69,000 Profit before Tax 9,100 93,000 126,000 taxes 2,730 27,900 37,800 Net Profit 6,370 65,100 88, 200 d. Cash flow forecasts 2013 2014 2015 Cash received ($) Cash sales 220,000 270,000 325,000 Total cash received 220,000 270,000 325,000 Expenditure Cash spending 33,900 69,000 69,000 Payment of bills 88,000 - - Total spent on operations 122,900 69,000 69,000 Net cash flow 97,000 201,000 256,000 Cash balance 97,000 298,000 554,000 e. Balance sheet 2013 2014 2015 Assets Current assets Cash 97,000 298,000 554,000 Other current assets 0 0 0 Total current assets 97,000 298,000 554,000 Long-term assets Accumulated depreciation 0 0 0 Total long-term assets 0 0 0 Total assets 97,000 298,000 554,000 Liabilities Current liabilities Accounts payable 33,900 69,000 69,000 Current borrowing 0 0 0 Other current liabilities 0 0 0 Total current liabilities 33,900 69,000 69,000 Long-term liabilities Total liabilities Paid-in capital 20,000 20,000 20,000 Retained earnings 97,000 201,000 256,000 Earnings 220,000 270,000 325,000 Total capital 114,900 114,900 114,900 Total liabilities and capital 148,800 183,900 183,900 Net worth 63,100 229,000 485,000 f. Critical risks Having been financed solely from the proprietors side (without any input from a third party), the business runs the risk of inadequate capital should an expected event that needs capital input occur. Closely related to the foregoing is the risk of excessive workload for employees, who will be working full days at the beginning until a time when the restaurants is able to hire on a shift basis. The location (North Adelaide) also presents a critical risk to the business because although the area does not have a Chinese restaurant, other hotels offering Australian cuisine may expose the restaurant to stiff competition. g. Assumptions This business plan assumes that the proprietors will get an operation permit, a health certification and a liquor license The business plan further assumes that the two proprietors will be able to raise the necessary start-up capital in good time It is further assumed that the SA economy will remain vibrant and that people will uphold their preference for eating in restaurants over home-cooked meals. APPENDIX OWNERS’ RESUME Jim Clarke (proprietor) Jim Clarke an experienced businessman with interest in the hospitality industry. Jim has successfully run other Chinese restaurant in New Zealand and is hoping to replicate the success he had in New Zealand in SA. Jim is has a graduate of business management, and is currently pursuing an MBA. Ike Fulham (Proprietor) Ike is a graduate in operations management. He has an interest in the hospitality industry having run a successful mixed cuisine restaurant in his home village in the Northern Territory. Ike hopes to contribute his operations management knowledge to the successful running of the SA Chinese Restaurant. REFERENCES Australian Bureau of Statistics 2012, ‘South Australia demographics’, viewed 11 June 2013, Brown, D 2007, The restaurants manager’s handbook: how to set up, operate, and manage a financially successful food service operation, Atlantic Publishing, MA. Cairns Dining 2013, ‘Chinese restaurants’, viewed 11 June 2013, . Food by Country 2013, ‘China’, viewed 11 June 2013, . JK Wine Tourism and Hospitality Services 2008, ‘Starting a restaurant/café/ take-away: a step-by-step guide’, Government of South Australia, pp. 1-28. Lee-Ross, D. C 2012, Entrepreneurship and small business management in the hospitality industry, Routledge, London. Lonely Planet 2013a, ‘Ying Chow’, viewed 11 June 2013, Lonely Planet 2013b, ‘Ky Chow’, viewed 11 June 2013, Lonely Planet 2013c, ‘Evergreen’, viewed 11 June 2013, MBDA 2012, ‘Breakeven analysis: know when you can expect a profit”, viewed 11 June 2013, . Smith, G. P 2013, ‘Customer service success’, About.com, viewed 11 June 2013, . South Australia Tourism Commission 2005, In and around Adelaide: A souvenir guide, Wakefield Press, Adelaide. Read More