Budget Planning and Control - Research Paper Example

The paper "Budget Planning and Control" is an excellent example of a research paper on finance and accounting.I work at Subway which is an American fast-food franchise that sells sandwiches and other types of food. The franchise is operated and owned by Doctors Associates. The franchise is one of the fastest developing and growing restaurants in the world. The franchise is established in 11o countries and has 43,937 restaurants. Currently, the restaurant is the largest single-brand chain as well as the largest restaurant operator in the world.

The franchise’s headquarters are found in Milford, Connecticut with five regional centers that support the restaurant's international operations. They are located in Amsterdam, Brisbane, Beirut, Miami, and Singapore. Planning and Budgeting The company is currently going through a financial crisis and this can directly be associated with the high cost of products and goods used in the restaurants. The restaurant has been using excessive funds in acquiring the supplies used in preparing food.

This is primarily because the restaurant uses supplier stores to get the products other than working with the manufacturers and producers directly. According to Simchi-Levi (2010), purchasing of suppliers from supplier stores or wholesalers can be expensive for any business as they are losing so much money that makes up for the profits for the suppliers. While making budgets, the restaurant should consider working with the producers and manufacturers as this will save more money. Financial outcomes for effective or ineffective budgeting and planning Lower prices for food and offers The prices for food at the restaurant have been high for the simple reason that the supplies used to prepare for are equally expensive.

If the cost of purchasing the suppliers is lowered, then this will also translate to the prices of the food in the restaurant. This will eventually attract more customers and ultimately help improve the franchise's revenue. According to Liozu & Hinterhuber (2014), customers will always make considerations when it comes to the product cost and quality. Customers are mostly attracted to favorable prices. The lower cost of supplies will also enable the restaurant comes up with offers and discounts for the customers.

This will help the company increase its competitive advantage in the market. Loss of customers If the restaurant fails to make the necessary changes by budgeting and working with the producers, it will mean that the food prices will continue to go higher which is a scare to customers. The low number of customers will eventually affect the operations in the franchise leading to low revenue. High-level budget plan The franchise is currently working with a very high figure and the majority of the funds are spent in the purchase of the supplies.

In the market, the majority of the supplier stores make an average profit of 20% by selling their products to retails and other consumers. If the restaurant is to start acquiring the products directly from the manufactures and producers, it will be saving the 20% and in addition, directly get the benefits like discounts and credit advantage where goods can be supplied even before payments are made. According to Burrow & Kleindl (2012), businesses do not make profits just because of the prices of their products but also the discounts they get from their suppliers.

Table 1 below is a comparison of the two budgets; current annual budget and budget with new changesTable 1Current Budget Food Supplies (Million $)9,000 Transportation (Million $)120 Operation Cost (Million $)1,000 Salaries and Wages (Million $)2,000 Total Revenue (Million $)17,000 Budget with ChangesFood Supplies (Million $)7,200 Transportation (Million $)20 Operation Cost (Million $)1,000 Salaries and Wages (Million $)3,000 Total Revenue (Million $)20,000 Cost differencesFood Supplies (Million $)1,800 Transportation (Million $)100 Operation Cost (Million $)0 Salaries and Wages (Million $) (1,000) Total Revenue (Million $)3,000 Methods to control the budget As there are different manufacturers and producers of the good used by the restaurant, it will be more effective to work with multiple producers and manufacturers other than one.

In relation to that, the restaurant purchases different types of goods and therefore it is recommended to get the best in terms of quality of products and prices. Contacts should be made to all the manufactures for them to deliver their quotation and any other services that they are willing to offer if an agreement is reached. From the list, the best prices will be used to plan and budget for the next fiscal year. This new strategy should be implemented in phases as it will not be a good picture to cancel the contracts with the entire supplier chains all at once.

This will affect the image and brand of the restaurant. According to Sethna (2013), the brand image of any business is not necessarily good for the customers but rather matters to all the stakeholders including the suppliers. Action Plan The first products to be acquired should be those that seem to be more expensive. This will help the company solve the current financial crisis within the next 12 months. After a period of 2 years, all the supplies should now be from the manufacturers. On reaching this point, the company will start to make the profits and realize the impacts of the change.

According to Klonowski (2015), financial changes in business may not necessarily be realized immediately as most of them need time to fully be implemented. New prices will be introduced with phases depending on the products that have directly been acquired from the manufacturers. The budgeting with these changes should now be focused on increasing the revenue by slightly reducing the food prices while at the same time maintaining high profits. This will be relied on the anticipated high number of customers.