The Restaurant Group Plc: Profit Margin Analysis - Case Study Example

Finance, Funding and Legislative Frameworks For Success By Executive summary The Restaurant Group plc has registered a lot of improvement in the year 2013 and has put appropriate strategies in place to help boost continued performance. The performance indicators have revealed some of the company’s achievement in 2013 as compared to the previous years. The profit margin achieved in 2013 is estimated at 12.93 % indicating that the company will be able to gain around 12.93 pounds for every a hundred pounds of sales. The profit margin is also higher as compared to those of competitors such as Gondora. Some other notable achievement posted in 2013 includes like for like sales by 3.5%, revenue increased to 580 pounds, profit before tax increased by 72.7 million pounds with the year dividend increasing by fourteen percent per share. Despite the challenges experienced in measuring employee satisfaction and engagement, the company has fostered team work and has continued to empower the employees through training and coaching. Some of the company recommendations entail utilization of Key performance indicators to measure performance. KPI will enable the company to improve the quality and the levels of standards of its own meals and services. The company will focus on providing the customers value for their money (Trgplc.com, 2013). The approach aims at gaining more trust and confidence in the company and the products produced. The company hopes to increase number of new restaurant, meals served and the amount of revenue collection. The company should also increase the number of new restaurants in order to reach more people and increase sells. Introduction Restaurant group plc is a leading chain of public houses and restraints that is located in Britain. It is one of the companies that are listed in the London stock exchange. The company was founded in 1987 and was previously named as city centre restaurants plc with an aim of managing and owning the Garfunkel’s restaurant chain. The group opened the first Benny’s and Frankie in Leicester in the year 1995 (Restaurant Group plc, 2015). The group changed its name to the current one in the year 2004. Two years later the company was able to buy back the deep pan Pizza that had been previously purchased by the management. The group operates around three hundred public houses and restaurants under the Benny’s and Frankie, Home Counties pub restaurant, filling stations, Garfunkel’s brunning and price brands as well as coast to coast. The company’s business targets the rising casual dining part of the market. The management sells better foods coupled with friendly services that are often offered in a comfortable and friendly surrounding, where the team serves nearly forty three millions of people with meals in a year. The company’s brand has ensured the development of long term relationship with the customers visiting more than once for a variety of experiences and occasions. The focus of the company is based on continuous evolution and development of their brand to ensure that the business remains appealing and relevant to the ever-changing and fast-paced market place. Vision and strategy The key objectives of restaurant group is to raise the value of the shareholder together with the strategy directed to achieve this is to develop a business that is capable at expanding cash flows while at the same time generate the long term sustainable goals. In pursuit of the same objective, the business has focused on the rising casual eating out markets. Additionally, the company has targeted market segments which offer entry barriers, where the sales people can be able to deliver better growth in cash flows and profit and where there is potential for high returns on various investment platforms. The approach has led the group to restrategize their activity in three areas such as pub restaurants, concession and leisure (Irala, 2012). The group works towards expanding casual dining markets, with their activities proceeding to provide better value for money in surroundings that are considered comfortable and teams that are dedicated to offering excellent services. The company’s strategy is aimed at delivering extended growth through brand roll out. The group posses a robust connection of developmental sites, coupled with increased focus on continued delivery of their services and goods from the existing restaurants. The company’s concession business operates in a multifaceted and dynamic market, with management teams that are experts in the market especially in the delivery of exciting drinks and food concepts for the clients. The management teams together with the subordinates are proud to deliver excellent services and associated with the passion of the workers that has been generated among the workers. The company believes in working as a team and offering the best services to the consumers (Restaurant Group plc, 2015). Balanced scorecard The company’s internal business perspective GOAL (Restaurant Group plc, 2015) KPI (Parmenter, 2012) Target Initiatives or ACTIONS 1 Efficiency To improve efficiency in the company Efficiency ratio Improving the stock turnover as well as net asset turnover. Try to understand the needs of the customers and provide effective services. Try to increase efficiency by raising the number of selling days as well as the sales per in each day 2 Effectiveness Boost company effectiveness Liquidity measures Help to balance the gearing ratio Try to reduce the amount of money borrowed and utilize the funds that have been achieved through sales Try to ensure the new restaurants are well managed and marketed. 3 Product Quality Raising the quality of goods and services Profit margin Increase the company’s profit by increasing the sales Try to raise the number of new restaurants as well as increase the number of sales per day This can be achieved by providing better services and gaining the trust of the people 4 Production Lead Time Reduce the production lead time Customer satisfaction Make customers satisfied by reducing the production time. Try to complete the customers orders in time and reduce waiting time Reducing waiting time will boost the trust among the customers and thereby increase sales. The internal business perspective helps to identify the key that can be used to promote efficiency and effectiveness. The efficiency of the services has been boosted by the frequent training of the employees on customer service and the commitment of the team towards ensuring that the customers are able to acquire the best services and value for their money. The target of the company is to reach many more customers and to maintain their customer centered services (Restaurant Group plc, 2015). The management has to focus on team work with numerous activities aimed at motivating the employees (London Stock Exchange, 2015). The customer perspective GOAL (Restaurant Group plc, 2015) KPI (Restaurant Group plc, 2015) Target Initiatives or ACTIONS 1 Image Improving the image of the organization Customer loyalty Improving the standards and the quality of the services that are offered The company should Organize training and coaching activities to help improve the quality of the services produced 2 Responsiveness Improving the relationship between the company and the community Corporate social responsibility Contributing towards environmental sustainability as well as charity work The company should be able to Donate ten percent of the profit towards improving the environment as well as organizing charity activity 3 Reliability Improve reliability of the services to the customers Customer satisfaction Maintain customer loyalty and improve the quality of services The company should be open up new restaurant to reach more customers and expand their services 4 Selling Price To ensure the cost of the services is affordable to most of the customers Increase in cash flow and profitability Maintaining the selling price The company should maintain the selling price in order to increase customer loyalty. Maintaining the selling price help retain the customers Knowledge on customer perspective enables the company to ensure customers are able to access value for money and customer centered services. The restaurant group has directed its attention to United Kingdom markets which have high potential growths. Dining out has been observed as the current trend among the customers with most of them visiting restaurants for breakfast, supper and lunch. This trend has resulted to increased customer service aimed at promoting long term relationship between the company and its customers. There has been an increased concern on health issues from both the regulatory authorities and the customers. The group has been concerned about sugar, salt and caloric content of food as well as alcohol and smoking at the restaurant. The company has been at the forefront in ensuring the customers are able to consume healthy foods (Another year growth, 2012). Financial perspective All Financial Goals are for the corporation as a whole GOAL (Another year growth, 2015) KPI Performance L (Restaurant Group plc, 2015) Target Performance Level Initiative or Summary ACTION plan 1 Cash Flow Increase the cash flow Profitability measures Expanding the market and improving customer service. The company should be able to Open new restaurant in new markets. Carrying out market research Improving customer service through training and coaching 2 Asset Utilization Better utilization of the assets Current ratio Efficient utilization of resources Employees should be trained on how to efficiently utilize the assets belonging to the organization. Misuse of the company resources has to be discouraged at all costs. 3 Sales Revenue Growth Growing of sales revenue Trade debtor collection period. Reducing the debt collection period The company should ensure that debts are collected in time. Collection of debts in time helps to acquire the company’s capital in time and thereby planning on reinvesting it 4 Profitability Increase profitability Shareholder’s measure Improving earnings per share In order to improve earnings per share, the employees should be able to work together as a team to provide quality services and to attract more customers hence more profit. The financial perspective ensures that the company is moving in the right direction and with no debts. Financial perspective of the company will be essential in strategic planning and organization of the business over time. The financial report will be considered as an annual business report. The company recorded improved performance in various aspects such as the proposed dividend increased to 14.0p per share, EPS increased to 72.7 million pounds, EBITDA increased to 107.8 million pounds, operating margin increased to 12.9% with revenue increasing to 580 million pounds. The company has continued to work hard and boost their finances by opening new restaurants around the world. Regarding the liability and assets of the company, there are fewer changes that are experienced since the plans set in the year (The Restaurant Group, 2015). Innovation and learning perspective GOAL (Restaurant Group plc, 2015) KPI (Parmenter, 2012) Target Initiatives or ACTIONS 1 Employee motivation Improve employee motivation Employee turn over Retention of employees and recruitment of the best Employee retention will help the company save on the amount of money that can be used in training and recruitment 2 Employee Development Developing the employees Customer satisfaction Development of employees The company can develop employees can developed through training and coaching activities. 3 New domestic products Promote innovation Number of innovations Promotion of innovation The company should promote Innovations such as décor, dishes, cuisine and venuesto help attract more customers and increase the sales. 4 New Market Channels Opening up new market channels The number of new restaurants that have been opened Venturing into new markets. Venturing into new market by the company will be essential in increasing the sales as a result of reaching more customers Innovation and learning perspectives enables the company to assess the team and come with better strategies on how to develop the employees. The company should be able to able to put effective training measures in place with an intention of tapping the best out of the employees. Employee’s motivation and development will be effective in reducing employee turnover. Reduced employee turnover saves on the amount of capital that can be utilized on recruitment and hiring of new employees (Parmenter, 2012). According to the key performance indicator, the company has continued to recruit innovative and better employees with an intention of boosting development. Employees should be able to utilize e-learning systems to further their skills. Strategy map Strategic map for Restaurant group plc Financial Perspective   Customer Perspective   Internal Perspective   Learning Perspective   The company’s strategic map covers all the perspectives such as internal perspective, learning and growth perspective, customer perspective as well as financial perspective. The learning and growth perspective, the company will be able focus on teamwork, alignment, culture and effective leadership in order to direct the team towards prosperity. On internal perspective, innovation processes, operation management processes, customer management processes and corporal social responsibility will ensure that operations are being run in the right manner while at the same time creating a long lasting relationship with the community. Basing on customer perspective, the company should be concerned on issues such as selection, functionality, price and quality of service in order to ensure most of the customers are retained. In addition the brand of the company should be protected and promoted at all costs. The company’s strategic map aims at growing the values of the stakeholders which is done through building a business that is capable of producing sustainable long term and growing cash flows. Despite the economic times, the company has to maintain the prices for the services offered or reduced it in order to maintain and attract more customers. The move will pay off with an increased percentage of employee retention (Olsen & Zhao, 2008). On financial perspective, the company should be able improve how assets are utilized with an intension of maximizing on it to enhance performance. Improving the cost structure will also ensure enable the company to monitor utilization of capital and thereby promoting good planning. Increasing the values of customers and looking for new revenue sources will spur the company to better performance (McManus & Miles, 2010). Recommendation The company should be able to come up with strategic plans and a scalable business model focused on expanding casual eating market. The company should target areas that will provide good returns to the company as well as those regions that offer distinct barriers to entry. The company should continue to monitor customer feedbacks, training and mystery diner visits to enable the employees provide brand standard and service for money services. The company should also analyze staff turnover, benchmark for remuneration package and review systems to retain the existing talents (Annualreports.co.uk, 2015). This will help prevent loss of experienced personnel. Regular external and internal auditing, auditing of suppliers and the supply chain as well as health and safety precautions will help retain the brand image and propel the company toward prosperity. The company should continue to liaise with other relevant authorities such as food standard agency to increase regulation of their products. Evaluation The company has registered extensive performance when compared to the previous year. The return to shareholder’s funds improved from 29.91% to 33. 76%. However the return of net assets declined from 36.13% to 34.68%, while the profit margin was estimated to have increased by 0.45%. The result indicated performance on nearly all the sectors. With the increase in the number of restaurants opened by the company, the revenue increased to around 580 million pounds with the operating margin rising to 12.9%. Additionally, EPS also rose to around 28.0 p per share. The company operation was strongly cash generative. The company’s employees a decade ago were mainly female (Olsen & Zhao, 2008). However, the current board of management has focused on ensuring gender diversity. The company registered an improvement in like for like sales of around 3.5% that was an improvement compared to the past. The company has continued to focus on corporate social responsibilities with an aim of impacting positively to the environment. Conclusion The restaurant group plc deals with serving beverages, drinks, and meals. The company has continued to post better performance each financial year. This has been witnessed as a result of increasing the number of new restaurants as well as amount of revenue collected by the group each financial year. Utilization of the key performance indicator will enable the company to assess organizational performance in areas such as creation of customer loyalty as well as promoting standardization. In addition, it will offer assistance in developing long term and accurate prediction (Olsen & Zhao, 2008). The approach will enable the company to be prepared in order to deal with the risks that they may encounter in the process. The key performance indicator will enable the restaurant to raise the quality and levels of the standards and enhance the quality of the services that will be delivered. The involvement of the company in the corporate social responsibility such as environmental improvement will boost their image among the customers thereby increasing the number of customers seeking their services. References Annualreports.co.uk, .2015. Restaurant Group Plc - Annualreports.Co.Uk [online] available from [28 February 2015] Another year growth .2012. – , Restaurant Group plc , Available: www.trgplc.com/sites/default/files/file/TRG_AR12.pdf Another year growth .2012. Key Performance Indicators Manual: A Practical Guide for the Best Practice Development, Implementation and Use of KPIs.Crows Nest: Allen & Unwin. Irala, D.2012. Performance Measurement Using Balanced Score Card. SSRN Journal. doi:10.2139/ssrn.980691 London Stock Exchange .2015. Restaurant Group PLC, Available: McManus, P., & Miles, R. 2010. United Kingdom: focusing on the market. Museum International, 45(2), 26-32. doi:10.1111/j.1468-0033.1993.tb01101.x Olsen, M. D., & Zhao, J. 2008. The restaurant revolution-growth, change and strategy in the international foodservice industry. Journal of Restaurant & Foodservice Marketing, 4(3), 1-34. Parmenter, D. 2012. Key Performance Indicators for Government and Non Profit Agencies: Implementing Winning KPIs. Hoboken, New Jersey: John Wiley & Sons. Restaurant Group plc .2015. Markets Data, Available: http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=rtn:lse (Accessed 27th February 2015) The Restaurant Group .2015. available from [25 February 2015]  Trgplc.com, 2015. Home | The Restaurant Group [online] available from [28 February 2015] Read More