Feasibility of Airport Cafe - Case Study Example

Type the company name] Feasibility Report of a business Feasibility report of Airport Café user [Pick the date] Executive Summary The paper presents a business plan for Airport Café where a new café which serves beverages and food will be opened in terminal 5 of Heathrow airport. The different feasibility which the business needs to look at has been brought forward in the report. The market feasibility shows that the business is competitive but provides an opportunity to capture the market as it is expected to grow by over 10%. The technical feasibility shows that the business will use technology for procuring raw materials and training the employees. This will help to improve the degree of service and ensure that customer satisfaction can be better met. The financial analysis shows that the business will be able to garner profits from the business and will be able to maintain the required liquidity which the business requires. Further, the business will be able to ensure that breakeven is achieved and the overall future financial need will be met. The human resource feasibility shows that the business will hire the required employees through which quality services will be delivered. Thus, the overall feasibility analysis shows that opening up a café will help to increase the revenues for the owner. The overall business is feasible and would ensure that the future prospect of the business can be further improved by working on the same business dimensions. Table of Contents Introduction 3 About the Business 3 Market Feasibility 3 Technical Feasibility 5 Financial Feasibility 6 Human Resource Feasibility 10 Conclusion 11 References 13 Appendix 14 Introduction The paper provides a business plan for opening up a café in an airport which will be fully owned by the owners. The paper will present an entire business report which will work on different feasibility study. The paper will consist of four major parts which are financial feasibility, market feasibility, technical feasibility and human resource feasibility. In addition to it the paper will provide information pertaining to the business idea and the manner in which it will look to work. This will thereby help to bring about an understanding of the new venture and would guide the user to work on the required areas. Working on the different areas which the business plan would provide would increase the chances of being successful and would help to develop the business in a better way. About the business The business will be carried out under the name of Airport Café and will start at a terminal 5 in Heathrow airport. The Café will be situated at a place which is at cross proximity with the other food court and ensures maximum footfall of people. The prime reason for choosing the business is that a similar café at terminal 3 has witnessed a growth of 10% and with no café at terminal 5 will provide an opportunity to capture a bigger market. The café will be open 7 days a week and will open at 5 am and close at 11 pm. The business is expected to be price the different products between $8.89 to $15.64. The café will have around 20 seats for customer with another 10 which can be added if the need arises. The restaurant will serve beverages and food items. To maximize customer experience the café will provide newspaper and magazine for people to read at the café. The business will look to ensure maximum customer satisfaction and fast service especially during flight time, delayed flights, flight transit and during lunch and dinner time so that more and more people can be served. Market Feasibility The airport dining restaurant market is over $100 million industry and is growing at a pace of more than 10%. Since, more and more people are using airways to travel and prefer to eat before they travel so the demand for food products and consumables are bound to grow. Further, more than 500,000 people use terminal 5 every year so opening a café at the terminal would provide an opportunity to tap a big market. Further, the business looks to be set at near exit gates so that more and more people can be attracted as the location would provide ease of attracting more and more people. It is further seen that the UK restaurant industry is going to grow by 15% and the airport business is estimated to grow by 10% every year. This provides an opportunity to attract more and more people as lack of proper café at terminal 5 will provide an opportunity through which people can be attracted. This will ensure that the sale for café will grow at a minimum of 10% every year. In addition to it the economic indicators highlight that the disposable income of people is increasing which would increase the number of people visiting terminal 5 and would thereby provide an opportunity to serve a large base of customers. The general trend of people at airport is that they prefer at a minimum beer and spirit. The same will be served in the café which would thereby ensure more and more people being attracted. Studies have shown that on an average people spend $12.54 so that restaurant will be able to attract people as they have aimed to price the product between $8.89 to $15.64 (Alan, Sakhi, Arabella, Elizabeth, Karen, 2009). The other factor which supports the business is the growth in business and leisure travellers. This section of the people generally prefers to dine in café which provide quick services and enjoy the different facilities provided by them. This will thereby help the café to ensure that they are able to grow at a rate higher than 10% which would thereby enable the restaurant to capture a big market. Further, the degree of competition which the café has to face is quite high as there are already 5 dining restaurant in terminal 5. The terminal lacks a café which is being opened but the other players also provide similar products and services which thereby increases the degree of competition. Further, the market is posed to grow at a rate of 10% which would ensure that the overall growth rate which the restaurant can garner will be higher than that. On the whole it is seen that the market is competitive but terminal 5 still provides an opportunity to open a café as the number of commuters using terminal 5 is expected to grow by over 10%. This will provide an opportunity for Airport Café to grow as there is a demand for such café in the terminal. Technical Feasibility Airport Café will look at using technology to the maximum possible extent so that the quality of service improves. The restaurant will use technology for procuring raw materials and providing training to the employees. The focus of the business is on satisfying the needs of the customers as the business will rely on point of service where the employees will come in direct contact with the customer (Baker, 2002). This will require understanding the needs of the customer and ensuring that the products and services are delivered in the best possible manner. The café will look to provide different facilities like free Wi-Fi service, newspaper and magazines so that people can spend their time in a proper manner. In addition to it technology will be used to procure raw materials after ensuring that the standard which the raw material requires is easily met (Kotler, Armstrong & Wong, 2008). The raw materials will be procured after bargaining with the different suppliers which supplies products to other restaurants in the airport. Based on their rate and offerings the quality of standard will be checked through technological process (Bodenhorst, Brevis & Cant, 2009). This will ensure that the customers will be offered quality products and services. Further, to meet the expectations of the customers the business will focus on providing training to the employees. Technology will be used while training employees so that they can render better services (Dreezens, Martijn, Tenbu¨lt Kok, & Vries, 2005). The process of training will be carried out at appropriate time and using technology will help to improve the overall mechanism through which different training is provided to the employees. Thus, technology will be used by Airport Café and would help to simplify the overall prospect of carrying out business (Schlegelmilch & Keegan, 2001). This will help to improve the opportunity which the business presents and would help to improve the quality of service. Integrating technology in business would help the business to grow and would provide the dimensions through which the café will be able to grow. Financial Feasibility The café has to look at ensuring smooth financing so that the business can be carried out without any problems. One of the major considerations which need to be given is inventory. The restaurant looks at having inventory at appropriate levels so that the risk of loss through spoilage is minimized. The business also aims towards having a profit of 14% before interest and taxes. The business looks to raise 50,000 as capital from the owner and another 50,000 will be financed through loan. This will be the capital based on which the business will start and the business aims to meet all its expenses through working capital which will be procured during the course of the business through sales (Paganetto, 2003). The café looks at achieving the required breakeven so that all the daily expenses can be met out of daily income and the business will be able to ensure proper opportunities of growth. The break even analysis is as Break Even Analysis Monthly revenue 156101 Assumption Average variable cost in percentage 62% Average monthly fixed cost 46841 The break even analysis shows that the business will have to achieve sales of 156101 on an average selling of 12.54 per person. This will help the café to meet the monthly fixed expense of 46481 and a average variable cost of 5.70. To ensure more profits the business will have to ensure more sales so that the returns to the owner can be maximized. The business also look towards earning profits over due course of business and the details are provided in the profit and loss statement Profit & Loss Statement Year 1 Year 2 Year 3 Sales 686601 761541 833024 Cost of Sales 290196 327010 360860 Gross Margin 396405 434531 472164 Gross Margin % 57.73 57.06 56.68 Expenses Salaries & Wages 241000 251000 261000 Insurance 17000 20000 23000 Staff training 5000 0 2000 Rent 33000 33000 36000 Sales & Marketing Expenses 4000 4000 4000 Depreciation 8000 9000 10000 Leased equipments 1600 1600 1600 Utilities 4000 4000 4000 Other 6681 6715 12341 Profit Before Interest and taxes 320381 329315 353941 Interest 8095 6298 4442 Taxes 15675 17021 19254 Dividend 10000 40000 40000 Retained earnings after dividend 42354 41897 54527 The profit and loss statement shows that the business has been able to earn profit in the first year itself. This is a good sing and will ensure that the owners will be compensated fairly for the risk undertaken. This will ensure good reason to carry on the business in the future as the future profits are bound to increase further which would ensure better returns. The cash flow statement for the business is as Profit & Loss Statement Year 1 Year 2 Year 3 Sales 686601 761541 833024 Loan 50000 0 0 Owner equity 50000 0 0 Cash spending 290196 331010 364860 Inventory purchase 38671 0 0 Operating expenses 312281 320315 343941 Interest payment 8095 6298 4442 Tax 15675 17021 19254 Loan repaid 0 10000 10000 Asset purchased 60000 20000 20000 Drawings 25000 25000 0 Dividend 10000 40000 40000 Total cash outflow 759918 769644 802497 Net Cash inflow 26683 (8103) 30527 Opening Balance (10000) 16683 8580 Net cash inflow 26683 (8103) 30527 Closing Balance 16683 8580 39107 The cash flow statement highlights that the business is having sufficient liquidity which would enable them to meet all the financial needs. Having a positive cash flow statement will ensure that the business won’t fall in a liquidity crunch and would be able to meet the expenses easily (Schmitt, 2003). This will help the business to carry out the daily work in an effective manner and would act as a guide through which all the cost will be covered. The financial analysis shows a sound liquidity position and highlights the ability of the business to earn profits and achieve the required break even. The business venture seems to be a profitable one and the manner in which the overall industry is growing the future prospect will further improve which would thereby tend to ensure better returns. Human Resource Feasibility The Airport Café will be a proprietorship business where both the husband and wife will have 50% share. Since, the business follows a model where customer satisfaction has to be achieved and point of sale will act as a main determinant in the success of business. This will require that the manpower which will help to deliver the required degree of service is hired so that overall quality is improved (Larreche, 2008). The restaurant will require both experienced and skilled and unskilled employees to carry out the different responsibilities. The restaurant will look to have around 12 to 15 employees which include both full time and part time employees. The working time for each permanent employee will be 126 hours which matches the standard which has been determined by other organization and the government (Levinson, 2007). The organization will have two shift manager, two deputy shift manager, one chef, three assistant chef and four waiting staff. In case the business requires additional employees they will be hired on part time basis so that the different needs of the business can be easily met (Albaum & Duerr, 2008). The salary which the employees will be given has been determined based on industry standards and is as Position Salary Shift manager 26000 Deputy shift manager 19000 Chef 26000 Assistant chef 19000 Waiting staff 17000 + tips The overall cost which the business would thereby incur and the estimate for the next three years on personnel is as Personnel Need Year 1 Year 2 Year 3 Shift manager 52000 54000 56000 Deputy shift manager 38000 40000 42000 Chef 26000 28000 30000 Assistant chef 57000 59000 61000 Waiting staff 68000 70000 72000 Total employee 12 12 12 Payroll 241000 251000 261000 Apart from the above mentioned personnel needs the business will look to have part time employee from time to time as per the need of the business (Albaum, Strandskov & Duerr, 2001). The owner will also look to carry out certain roles and responsibilities during time when the business requires additional employees. Thus, the business looks towards understanding the need of the business and will look at having the required manpower through which the different functions can be carried out easily (Mitchell & Coles, 2003). Having skilled and unskilled employees will help Airport Café to carry out the different functions and activities so that the different needs of the customer can be met and better services can be provided. Conclusion The paper presents a business plan for Airport Café where a new café which serves beverages and food will be opened in terminal 5 of Heathrow airport. The different feasibility which the business needs to look at has been brought forward in the report. The market feasibility shows that the business is competitive but provides an opportunity to capture the market as it is expected to grow by over 10%. The technical feasibility shows that the business will use technology for procuring raw materials and training the employees. This will help to improve the degree of service and ensure that customer satisfaction can be better met. The financial analysis shows that the business will be able to garner profits from the business and will be able to maintain the required liquidity which the business requires (Rea & Kerzner, 2007). Further, the business will be able to ensure that breakeven is achieved and the overall future financial need will be met. The human resource feasibility shows that the business will hire the required employees through which quality services will be delivered. Thus, the overall feasibility analysis shows that opening up a café will help to increase the revenues for the owner. The overall business is feasible and would ensure that the future prospect of the business can be further improved by working on the same business dimensions. References Alan, D., Sakhi, K., Arabella, H., Elizabeth, A., Karen, L., 2009. Nutritional quality of organic foods: a systematic review. 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The ultimate competitive advantage. San Francisco, CA: Berrett-Koehler. Paganetto, L. 2003. The Knowledge Economy, Information Technologies and Growth, 1st edition, Ashgate Publishing, pp. 429-430 Rea, P. & Kerzner, H. 2007. Strategic Planning, A Practical Guide, A Practical Guide for Managers, no edition, John Wiley and Sons, p. 311 Robin & Susan, 2003. In search of Strategic Management Accounting. Social Science Research Network, Vol. 14, No. 3, 29-37 Schlegelmilch, B. & Keegan, W. 2001. Global Marketing Management, A European Perspective, no edition, Prentice Hall International, p. 260 Schmitt, B.H. 2003. Customer experience management: A revolutionary approach to connecting with your customers. Hoboken, NJ: Wiley. Taylor, H. & Cooper, C.L. 2008. Organisational Change: Threat or Challenge? The Role of Individual Differences in the Managing of Stress, Journal of Organizational Change Management, Vol. 1, no. 1, pp. 1-19 Appendix Start Up Source of cash Owner 50000 Loan 50000 Total 100000 Use of cash Equipment 60000 Working capital 20000 Staff training 1500 Marketing & sales promotion 2000 Recruitment 1500 Initial inventory 15000 Total 100000 Read More