Food and Beverage Barket at Melbourne Airport - Business Plan Example

Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Executive summary The Toothsome Café Ltd is a privately owned business registered under Australian company’s act. The café is located at Melbourne Airport. The business deals with food and beverages for the passengers and airport staff. The company expects market growth of 9% yearly for the next three years. The financial performance records profit and grows annually at a rate of approximately 5% annually. The company experiences positive cash flow and thus financially feasible to undertake the venture. The initial capital is enough to run the business for the first four months and any shortfall after the fourth month is expected to be financed by bank overdraft. Table of Contents Executive summary ii Table of Contents iii 1.0 Introduction 1 1.1 Business Description 1 1.2 Business Location and Address 1 1.3 Business Objective 2 2.0 Market Feasibility 3 2.1 Market overview 3 2.2 Consumer base 4 2.3 Marketing Mix analysis 5 3.0 Technical feasibility 7 4.0 Financial Feasibility 9 4.1 Introduction 9 4.2 Initial capital breakdown 9 4.3 Projected cash flow 9 4.5 Projected statement of financial performance 10 4.6 Projected statement of financial position 11 4.7 Break-even analysis 11 5.0 Human Resource Feasibility 13 5.1 Organisation structure 13 5.2 Recruitment and selection 14 5.3 Remuneration and Incentives 14 5.4 Human resource development 15 5.5 Promotions 15 6.0 Conclusion 16 Reference: 17 Appendix 18 1.0 Introduction 1.1 Business Description The Toothsome Café is privately registered entity located at Melbourne Airport. The Café is located in an excellent position since it is near entry and exit of the main airport terminal. The other food retailers are almost 50meters from Toothsome Café giving it an upfront in attracting customers to buy from it. The café is newly formed business thus requiring aggressive marketing and sound strategies to gain and expand its customer share in the airport. The company opens for seven days in a week and operates for 24hours to serve customers at all times. A great proportion of the customers spend $7.87-$24.45 giving an average of $16.16 per customer. 1.2 Business Location and Address The Toothsome Café is located at Melbourne Airport. The company has developed its presence on social media prior official opening to act as a medium of creating awareness among potential customers. The company address is as shown below; The Toothsome Café Ltd, Melbourne-Victoria, Australia, 3045 Tel: + 61 5 4380 9329 Email address: Café@toothsomecafé.com.au Website: toothsomecafe.com.au 1.3 Business Objective The core aim of incorporating The Toothsome Café Ltd is to achieve the following; To bring in café business in an exciting way to Melbourne Airport. To create employment opportunities both directly and indirectly. To be part of those organisation steering hospitality industry in Melbourne and Australian in general. To put into practice the knowledge of running a business venture into profitability. To create a plan of giving back to the community by engaging in charity and community empowerment activities (Carroll and Buchholtz, 2003). To reduce congestion in other restaurants within the airport. 2.0 Market Feasibility 2.1 Market overview The food and beverage market at Melbourne Airport is large and shows a potential of growing since the number of passengers keeps increasing annually. The airport is planning to undertake the expansion of the airport thus showing excellent prospects for the company. The current businesses operating in our line of business earn an average of $1,200,670 AUD per annum. The lowest earns $950,450 and highest earns $1,450,890 AUD. Therefore, it is clear that the business idea is viable and the market is expected to grow. The Toothless Café targets to grow at an average of 6% per annum but subject to factors such as inflation, employment and travelling policies (Oates, 2004). The target customers are airport customers, staff and people who come to pick or bid their loved ones at the airport. The pricing accommodates middle and high-income earners since the café makes food and beverage suited to each class. The market is still big, and it is expected to grow in future due to current expansion of the airport and improved world’s economic condition (Oates, 2004). Therefore, venturing into the hospitality industry has a great potential in turning into a profitable venture. The analysis demonstrates the following status in food and beverage market at Melbourne Airport; Large consumer base for present and potential consumers. The need for food and beverage is recurrent thus demand is ever present. The Airport has strict rules of allowing business thus few competitors. The market experience a high consumer growth averaged at 8% annually. 2.2 Consumer base The estimated market size is based on the number of passengers to who use Melbourne Airport since they form part of the potential customers for the business. The following table shows a breakdown of the growth of potential customer base; Past Trend Current and Future Forecast Detail 2014 2015 2016 2017 2018 2019 Business Travellers 240345 252362 264980 278229 292141 306748 Holiday Travellers 210348 229279 249914 272407 296923 323646 Airport staff 12760 13143 13537 13943 14361 14792 The following chart shows the growth and market share of business travellers, holiday travellers and airport staff segments; The graph shows a potential increase in the consumer base. The estimation is arrived at by using historical changes of passengers and airport staff. From the chart, it is evident that all the segments will experience growth but holiday travellers has the highest growth of 9% per annum followed by business travellers at 5% per annum. The increase of airport staff is the slowest since it grows at 2% per annum. The growth is associated with automation of various processes in the airport thus high growth in the customer base does not necessarily mean high growth in the number of staff (Oates, 2004). 2.3 Marketing Mix analysis The Toothsome Café uses some marketing mix tools to gain and maintain market share in the Airport food and beverage sector. The strategies include enhancing sales by ensuring that the café position itself as one of the primary food and beverage business at Melbourne Airport. The travellers are the café’s priority and thus some improvements target to improve the quality of services and make customers happy from delicious and affordable products and services. The second in priority list is utilising the available capacity to serve airport staff and other potential customers such as those escorting or receiving the travellers. The current number of airport staff is at 13,537 and expected to grow at the rate of 2% annually. The airport staff provides an excellent market for repeat purchases and thus necessary for the café to improve customer loyalty. The staffs are given cards which are swiped for every purchase to earn them loyalty point (Skogen and Sjøvoll, 2010). The loyalty points are redeemable for cash or make a purchase in the café. The loyalty card is not designated for airport staff only but also frequent travellers who wish to obtain the card. The points are awarded according to the size of purchase, for example, every one dollar is equivalent to one point. The points are converted to cash by assuming that every point is equivalent to $0.04. The products are made affordable for middle and higher class consumers. The café ensures that the price and value of the experience remain attractive to improve its competitiveness in the already dominated market. The following is a breakdown of forecasted demand for each segment of our products; Detail Price range ($AUD) Demand (%) Food 8-50 57 Beverages 5-25 33 Others 5-40 10 The Toothsome Café aims at promoting the company name and label in every product sold. The promotion positively correlates with company success. The successful branding increases awareness and opportunity to increase café chains in some of the major airports in Australia and across the world (Skogen and Sjøvoll, 2010). The MacDonald’s and Java are among the successful business brands worldwide and thus using the same marketing strategy is appropriate. 3.0 Technical feasibility The Toothsome Café concentrates at serving customers food and beverages of high quality and provides the service at the highest satisfaction level. The development of high-quality food or beverage starts at the lowest level of procuring essential raw materials from the farmer. The raw materials required include milk, vegetables, flour, cooking oil, fruits, coffee, tea leaves and other products required in preparation of food and beverages. The café has purchased cooking utensils and other equipment used in the kitchen to prepare food and beverages. The business purchased sophisticated kitchen equipment and utensils to increase customer appeal and improve efficiency in the kitchen (Mealey, 2016). The table at appendix 1 shows a summary of the café’s utensils, furniture and equipment purchased. The legal compliance to start and operate a food and beverage business is among the top priorities of the firm. The full compliance is advantageous since the firm can avoid litigation or penalties for non-compliance. The Toothsome Café complied with operating registered business, food and beverage handling license (Hanrahan, Ramsay and Stapledon, 2006). The café complies with FSANZ guidelines that demonstrate on food safety practices and general requirements. Also, the company has complied with structural conditions of the premises and equipment (FSANZ, 2015). The company uses point of sales system in making sales where customers can pay using cash, credit cards and master cards. The POS is integrated with a sophisticated application that generates various business statements required for recording and analysis (Skogen and Sjøvoll, 2010). The café provides free Wi-Fi for the customers as an added advantage service for making a purchase. The internet access enables customers to send emails and other internet related activities (Skogen and Sjøvoll, 2010). The following shows production flow chart for the products quality and standards confirmation; 4.0 Financial Feasibility 4.1 Introduction The financial resource is one of the primary requirements for starting a business. The prudence in spending and budgeting for the resource is important (Horngren, 1999). The major tool in planning for the financial resource is budgeting and projection of future cash flows. The following are the assumption made during financial analysis; The economy maintains a steady growth without recession or depression. There are no foreseen changes in the level of technology. The amount of capital is enough to keep the business liquid. The business idea requires an initial capital of $1,000,000 AUD. Equity and debt finance the project in the ratio of 1:1. The cost of debt is adjusted to 3.3% and repaid for 3years. 4.2 Initial capital breakdown Details Amount ($AUD) Lease (Building) 800,000 Equipment 90,000 Furniture 23,450 Staff training 4,550 Advertisement 2,300 Working capital (4 Months) 30,700 Inventory 45,560 Recruitment and selection 3,440 Total 1,000,000 4.3 Projected cash flow The projected cash flow shows the expected cash in and out of business for three years. Details 2016 2017 2018 Cash flow from operating activities: $AUD $AUD $AUD Net income after tax 870,450 931,382 996,578 (+) Depreciation 12,340 12,340 12,340 (i)Net cash from operating activities 882,790 943,722 1,008,918 Cash flow from investing activities: Initial cost of project 969,300 (ii)Net cash from investing activities 969,300 Cash flow from financing activities: Increase in equity 500,000 Increase in term loan 500,000 Repayment of loan -200,000 -200,000 -200,000 (iii)Net cash from financing activities 800,000 -200,000 -200,000 (iv)Net increase/decrease in cash 2,652,090 743,722 808,918 (v)Opening cash balance 30,700 2,682,790 3,426,512 (vi)Closing cash balance (iv+v) 2,682,790 3,426,512 4,235,430 4.5 Projected statement of financial performance Details 2016 2017 2018 Sales 1,230,450 1353495 1488845 Cost of Sales 124340 128070.2 131912.3 Gross profit 1,106,110 1,225,425 1,356,932 Gross Margin 90% 91% 91% Expenses Payroll 171,160 174583.2 178074.9 Staff training and recruitment 6,500 6630 6762.60 Advertisment 2450.00 2523.50 2599.21 Depreciation 12000 9600 7680 Utilities 1200 1224 1248.48 Insurance 1020 1050.60 1082.12 Sundry expenses 2,300 2392 2487.68 196,630 198,003 199,935 Profit Before Interest and tax 909,480 1,027,422 1,156,997 Interest Expense 10434 9390.6 8451.54 Taxes Incurred 269713.8 305409.3 344563.7 Net Profit after tax 629,332 712,622 803,982 4.6 Projected statement of financial position Fixed Assets 2016 2017 2018 Fixed assets 545320 654384 785260.8 Lease premium 847,875 654,747 447,749 Accumulated Depreciation 12000 13440 15052.8 Total Fixed Assets 1405195 1322571 1248063 Current Assets Cash 30,700 21490 15043 Inventory 45,560 51027.2 57150.46 Total Current Assets 76,260 72,517 72,193 Current Liabilities Creditors 15340 15800.2 16274.21 Bank overdraft 3,450 0 0 Total Current Liabilities 18790 15800.2 16274.21 Net current asset 57,470 56,717 55,919 1,462,665 1,379,288 1,303,982 Long-term Liabilities 333,333 166,666 0 Equity 500,000 500,000 500,000 Retained earnings 629,332 712,622 803,982 1,462,665 1,379,288 1,303,982 4.7 Break-even analysis The breakeven analysis shows the point at which the sales and expenses incurred is equal and thus profit or loss is zero. The company breakeven sale is as shown by the calculation below; Assume fixed cost is 59% of the total cost Total cost = 55,450 Fixed cost = 32715.5 Sales = 1,230,450 Break-even units =  =  = 37.6units 5.0 Human Resource Feasibility Three boards of directors govern The Toothsome café. Company executive officer (CEO) manages the restaurant on behalf of director or owners of the business. The CEO implements medium and long term strategies formulated by the board of governance. 5.1 Organisation structure The Toothsome Café Ltd assumes the organisation structure below; The Café uses the diagonal, horizontal and vertical flow of information from one department to another or from one employee to another (Dessler, 2000). The employees report to whoever is at the top of each department, for example, accounting clerk reports to the administrative department who then reports to CEO of the company. 5.2 Recruitment and selection The directors and external human resource firm recruit and selects the chief executive officer of the company through a free, fair and competitive process. The post is based on merit and more so experience in hotel industry. The CEO appointed is tasked with recruiting, selecting and employing other employees of the company. Moreover, the CEO has the power to dismiss or suck employee based on human resource guidelines of the enterprise. The CEO must advertise the position with job description two weeks prior selection date. The advertisement must be made public through media such as TV or Radio stations to attract a large pool of qualified personnel (Dessler, 2000). 5.3 Remuneration and Incentives The company remunerates its employees on a fixed rate and allowances such as overtime or holiday compensation. The following structures shows café’s monthly payroll; Details No of employees Pay ($AUD) CEO 1 30,000 Managers 4 48,000 Head chef 2 14,400 + Allowance Assistant Chef 6 36,000 + Allowance Waiting staff 9 43,200 + Tip + Allowance Total Payroll Minus allowance and Tips 171,600 The company employs other part-time assistant chefs and waiters during peak session or when permanent employees are not able to work during the public holiday. The remuneration is done on a daily basis at the end of their shifts and payment is negotiated. The payment is recorded with petty cash and thus not included in the payroll of the company. 5.4 Human resource development The company empowers its employees by introducing human resource development programs to improve satisfaction and reduce staff turnover (Dessler, 2000). The development of employees includes organising seminars, educational sponsorship, and other vocational training courses. 5.5 Promotions The employee promotion is a very crucial element in the organisation (Dessler, 2000). The promotion is based on the performance of individual employee as shown in the quarterly appraisal form. The CEO appraises managers and managers evaluate other members of staff in their departments. The promotion or demotion is at the discretion of CEO of the company. 6.0 Conclusion According to the analysis of financial, human resource, technical and marketing feasibility the business shows good prospects both currently and in future. The investment is able to payback within the first and half years of operation. Consequently, the expansion of airport and increase in human traffic in the area provide more reason of ploughing in resources in the venture. Reference: Burt, D., Petcavage, S., Pinkerton, R. and Burt, D. (2010). Supply management. Boston: McGraw-Hill Irwin. Carroll, A. and Buchholtz, A. (2003). Business & society. Mason, Ohio: Thomson/South-Western. Dessler, G. (2000). Human resource management. Upper Saddle River, NJ: Prentice Hall. FSANZ, (2015). Food safety standards (Australia only). [online] Foodstandards.gov.au. Available at: http://www.foodstandards.gov.au/industry/safetystandards/pages/default.aspx [Accessed 4 Oct. 2016]. Hanrahan, P., Ramsay, I. and Stapledon, G. (2006). Commercial applications of company law. North Ryde, N.S.W.: CCH Australia. Horngren, C. (1999). Management and cost accounting. London: Prentice Hall Europe. Mealey, L. (2016). Everything You Need for Your Restaurant Kitchen. [online] The Balance. Available at: https://www.thebalance.com/commercial-kitchen-equipment-checklist-2888867 [Accessed 4 Oct. 2016]. Oates, D. (2004). A Guide to Entepreneurship. Mumbai: Jaico Pub. House. Reuvid, J. (2011). Start up and run your own business. Philadelphia: Kogan Page Ltd. Skogen, K. and Sjøvoll, J. (2010). Creativity and innovation. Trondheim: Tapir Academic Press. Appendix Item Units Equipment for the Restaurant Tables 25 Chairs 85 Couches 15 TV’S 3 Wi-Fi Router 1 Printers 2 Computers 3 Radio 1 Kitchen utensils and equipments Oven 4 Deep-fryer 3 Grill 2 Range 2 Fire extinguisher 6 Tongs Freezer (either a chest, upright or walk-in) 1 Baking pans 6 Pizza screens 4 Baking sheets 5 Sauce pans 6 Sauté pans 4 Walk-in cooler 1 Reach-in cooler 1 Stock/soup pots 4 Hand soap/ sanitizer dispenser 6 Rubber floor mats 2 Cleaning Rags 4 Plastic shelves for walk-in cooler 7 Dessert Plates 100 Salad plates 100 Appetizer plates 100 Entrée plates 100 Steam table 3 Pasta bowls 100 Plastic inserts for coolers 15 Whisks 5 Pizza paddle 5 Mixing bowls 17 Chef’s knives 10 Ladles 12 Spatulas 13 Potato Masher 2 Citrus Juicer 4 Salad Spinner 2 Garlic press 2 Honing steel 1 Knife sharpener 2 Colander 3 Read More