Market Evaluation for New Lakes Restaurant - Assignment Example

BUSINESS PLAN (Name) (Instructor/Tutor) (Course/Subject) (Institution/ University) (City, State) (Date) Table of Contents Table of Contents 2 Section 1: Executive summary 3 Section 2: Market Evaluation for the Restaurant 3 The Business and its Management 3 Restaurant’s Food or Services 5 Market and Competitors 6 Competitor Business Strategy 8 Section 3: Operation Plan 10 Selling 10 Production 11 Intellectual Property 12 Business controls 13 Section 4: Financial Projections 14 Forecasts and financial Data 14 Table 1: Projected Profit and loss statement 14 Table 2: projected cash flow statement 15 Table 3: Projected Balance Sheet Statement 16 Risk Management 17 Financing Requirements 18 References 20 Section 1: Executive summary The proposed New Lakes restaurant will be located in the city of Portsmouth in the region of Finger Lakes. The project is intended to begin its operations in April 2013. New Lakes will be a full service restaurant that is dedicated to provide best customer satisfaction food and services. It will be rendering quality food and accommodation services, pleasant atmosphere, and any other services as it may be required by the customers. All these will be at an affordable price. In addition, New Lakes restaurant will maintain favorable work environment, that respects diversity, hard work, and ready to accept new business ideas from the staff members. The annual revenue of the restaurant is projected to be 508,000 sterling pounds in the first year, and it is expected to go up by 10% in the following year. The proceedings in the subsequent years will be determined by the operations and trends of the restaurant. To set up a restaurant, it needs sufficient initial capital that will be obtained through loan and credit. A loan of 40,000 sterling pounds will be obtained to cater for the purchase of assets and complete lease holds. The loan to be acquired will have a 5 years term. Additionally, credit of 8,000 sterling pounds will be acquired from a financial institution (Liu, 2012). The reason of acquiring credit is to cater for working capital shortfalls that are likely to be experienced in the project. The loan and credit interests will be paid from the outstanding balances. Section 2: Market Evaluation for the Restaurant The Business and its Management The setting up of this restaurant in the region will be a unique concept because there has not been a restaurant of the same class previously. The idea of restaurant business came up after a comprehensive research on business opportunities in the region. A research finding proves that Finger Lake region is an excellent place to locate the projected restaurant. New Lakes restaurant is designed to offer a wide range of foods and customer services. The restaurant’s food and services will be available at affordable prices. Besides this, the restaurant will also be providing entertainment to its customers. New Lakes restaurant’s mission is to provide high quality services and products that will exceed the expectations of its clients. It will provide services that are pleasurable and adequate according to the demands of our clients. Our business environment and food will designed in a manner that will be pleases our clients’ taste, touch, hearing, and sight. In addition, New Lakes restaurant’s vision is that, its employees will receive training that will facilitate them to offer quality services to our clients. The main objectives of the restaurant include the meeting the needs of our customers, providing quality services and food, maintaining superior working conditions, adhering to the restaurant operating standards, having a competitive advantage to its competitors, and achieving the projected revenues (Liu, 2012). All these objectives are to be achieved through a well organized management systems and team work. In addition, the management will be consulting restaurant professionals or other experts with momentous experience in restaurant operations. On legal matters, New Lakes restaurant will be operated in compliant with the set rules and regulation. These rules and regulations are set to regulate the operations of restaurants. The management of the restaurant will obtain the business license from an authorized regulatory department. If the restaurant will enter into contracts with third parties, contractual agreements will be obtained from an authorized law office. In order to carry out its operations, New Lake restaurant will require a business license, liquor license, and health inspection. New Lakes restaurant’s management team will be made of three key individuals. This team will include the general manager, restaurant supervisor, and the kitchen supervisor. The general manager will be responsible in the overall management, training, and operations of the restaurant. Restaurant supervisor will be responsible in service staff like the waiters. The kitchen supervisor will be responsible in kitchen staff and all the kitchen operations. Restaurant’s Food or Services New Lakes restaurant has set and put into consideration four major keys that will lead to it to success. These major keys include location, environment, convenience and reputation. In terms of location, the restaurant will be situated at a strategic region that will make it to be easily accessed by customers. In environment, the restaurant will be providing environmental conditions that will be conducive and pleasant both to its customers and workers. In terms of convenience, the restaurant will be offering a variety of services and food to its customers. Finally, New Lakes restaurant will ensure that its well regarded reputation is maintained through offering superior services and quality food. In the restaurant, menus will be made available for the customers. The menus will consist of a wide range of items that will be available for customers in the day. They will contain items available for breakfast, lunch time, and for dinner. The management will ensure that adjustments of menus are done regularly to respond to the customer’s demands. Besides the foods, the restaurant will also have special rooms for accommodation and meeting rooms. Accommodation will be provided to those guests who will wish for spending some of their time within the restaurant’s premises. In order to enhance satisfactory services, the management will ensure that there are enough and well trained employees in the restaurant. Because of the common shortage of well qualified people in this field, the management will hire 40% of qualified staff and 60% of under qualified staff (Liu, 2012). The under qualified individuals will undergo training. The training exercise will be performed by the management together with other professionals. The management will be required to outsource staff if it runs a shortage in occasions where demand and number of customers will increase suddenly. In order to attract more customers, it is the responsibility of the management to employ well established advertising and marketing strategies for the restaurant’s services and foods products. Advertisements will be made in the news papers and other media houses. The restaurant has a provision for future shift in food products and services. The shift will be as a result of changes in customer demands and the introduction of new food products in the market. The shift will be crucial because it will enable the restaurant to maintain its royal customers and reputation. The maintenance of customer royalty will help in improving the restaurant’s competitive advantage. Market and Competitors In the market, restaurant business has various categories of customers. Restaurant’s management must ensure that each category or segments of customers are able to receive satisfactory services and quality food products. These categories of customers include businesses, seniors, families, travelers and tourism (tourism category contains all ages), and executives. The demand by each segment is different. Therefore, to counter competition from major competitors, New Lakes restaurant will be able to provide food and other service to the general population regardless the appetite or age. Through a well organized restaurant management and budgeting, the restaurant will be able to meet customer needs. The management will set the restaurant in a unique way from other restaurants in the city. It will be offering a variety of services and food products. This will increase its competitive advantages. Besides the services and food, a suggestion box will be available to gather clients’ reactions on the restaurant’s operations. Suggestion boxes will be located at strategic positions for easier access. Information that will be received from the suggestion box will assist the management in superior decision making. There are many restaurants within Portsmouth city that their class is the same as that of the projected New Lakes restaurant, but their locations are high income regions of the city. In addition, most of them target high income earners. New Lakes restaurant’s intentions will not to compete with them. The restaurant’s food and services will mainly target middle class individuals. Pleasant atmospheric conditions within the restaurant will play a role in customer attraction and satisfaction and also improve its competitive advantage. The restaurant will mostly rely on a simple marketing strategy that will be aiming at customer satisfaction. We shall be ensuring that, our clients are able to be provided with quality food and any service that they will need before they leave the restaurant’s premises. Therefore, he or she will go out broadcasting the restaurant’s name and our quality services to the public. This marketing strategy will lead to an increase in number of new customers. In spite of using this marketing strategy, we shall also be using other strategies to market the name and food quality of the restaurant. Another marketing strategy for the restaurant’s food and name that we will be using is advertisement. Advertisements will be made in the news papers and other media houses. Besides this, yellow pages and posters will be used in passing our message to the public. Boards and visible signage will also be used to advertise the restaurant. Boards will be erected along the highways and near to the restaurant’s main gate. They will be used to attract both the highway traffic and the local people. For additional relations to the public, the restaurant will be organizing and sponsoring charity events. In the restaurant industry there exist only three categories or lines of classification that restaurants compete in. These categories include fine dining, family restaurants, and fast food. Fast food restaurants are major franchises. They mostly target people who are hurry, people who are constrained or have a fixed budget, highway traffic, and children. Family restaurants are privately owned and have few franchises. They mostly target middle class people and families, highway traffic, but this depend on the location, and local population. Fine dinning restaurants are privately owned and have few franchises. They mostly target high income earners, travelers, and special occasions. Competitor Business Strategy The restaurant is set to provide two-part services and food strategy in order to attract more customers. These include family dining and fine dining. Family dining will offer quality food, quality services, large portions menu, and entertainment. All these will be provided at an affordable price. Fine dining will provide the customers with gourmet foods, unique entertainment, and elegant atmosphere that will ensure a pleasurable mood to the customers. The restaurant’s general prices will be slightly less than those of our main competitors so as to maintain and attract more customers. Promotional plans will be the responsibility of a special team of individuals that will be established by the management. The team will be responsible in researching on the effectiveness of the restaurant’s means of promotion that will be put in place. They will also be monitoring the competitors’ promotion strategies and their effects in the market. The team will also play a role in advising the management on the superior restaurant operations in the decision making processes. It is through promotions that the restaurant will perform to its expectations. Thorough the research on a business opportunity in the region, the region proved to be an excellent place to locate a restaurant. This is because the people’s population is high and a large number of these people are of middle class. Besides this, the restaurant will be located along a busy highway and therefore, strategic and accessible to highway traffic. The major targeted class of customers by the restaurant will be the middle class people and traffic. The location of the restaurant will enable it to attract many and potential customers. In market share, we project that the restaurant will control around 40% of the market in the region. We shall ensure this through extensive promotions and advertisements we will be able to attract a large number of customers. In addition, we shall ensure that the restaurant offers quality services and products and friendly atmospheric conditions. These steps will increase the restaurant’s comparative advantage over other competing restaurants in the region. The annual sales of the restaurant are projected to be 528,000 sterling pounds in the first year, 547,000 sterling pounds in the second year, and 569,000 sterling pounds in the third year and the sale for the subsequent years will depend on market forces. The estimates are based on the researched analysis on the existing restaurants’ financial performance over the recent years. Section 3: Operation Plan Selling The proposed selling method of the restaurant will be on cash basis. This means that all services and food will be provided to our customers on cash basis. This will enable us avoid losses that are always experienced from bad debtors while businesses are carried out on credit. The method will also enable us to maintain our stock level and services because the restaurant will not experience cash shortage. The costs of our products will be calculated based on the various costs incurred in the restaurant’s operations. We shall include costs incurred in direct labor, freight, materials, insurance, and other directly related expenses on the purchase of the restaurant’s goods that are to be sold out. In the operations of the restaurant, our services and other processes will involve particular groups of individuals. These individuals include chefs, waiters, hosts, and bussing. The major role of the chefs will be to prepare food in the restaurant. The kind of food to be prepared will be designed according to the restaurant’s specified styles. Waiters will be serving the restaurant’s customers. They will be required to offer satisfactory and superior services to the clients. The role of hosts will be that of welcoming and directing customers within the restaurant’s premises. Finally, the role of the bussing will be that of clearing tables. In addition, they will be required to offer additional services to the clients when there is need. For superior and competent services to our clients, the restaurant’s management will hire 40% of qualified staff and 60% of under qualified staff. An employee training and development program shall be established to provide training to our staff members. This will ensure that the under trained individuals are provided with required working skills relating to the restaurant industry. In occasions where the number of clients will be high than our expectations, we shall outsource more staff from other institutions. Production The restaurant is designed to be offering a wide range of food to its customers. New Lakes restaurant will mostly be offering food, liquor and other kinds of drinks. Food ingredients shall be bought and then prepared or transformed into various kinds of foods by the restaurant’s chefs. In the process of production, only high quality raw food shall be used. This will lead to high quality food. The management shall also consider an option of buying some ready made products that are not produced in the restaurant. The products to be bought are soft drinks and liquor. Local people will be contracted to supply raw food. The quantity of food to be prepared will not be constant. This is because the numbers of customers at all times fluctuate through out the year. The number of customers is always high during the month of December and therefore more foods will be prepared during this period of time. Besides the quantity of production, high standards and quality of production will be maintained. The quality of the restaurant’s food and drinks shall be checked by the responsible individuals before they will be served to the customers. High quality products and services will play a great role in customer maintenance and attraction. The operations of the restaurant will be lead by three individuals in the management. These categories include the general manager, the restaurant supervisor, and the kitchen supervisor. The general manager will have the overall management responsibilities within the restaurant. The restaurant supervisor will have the responsibility of monitoring and guiding staff member under him (hosts, and waiters), planning for the front-end operations, inventory control, and employee training. The kitchen supervisor will have the responsibility of supervising kitchen staff, kitchen operations planning and scheduling, kitchen inventory control, and offering training to the kitchen staff. Intellectual Property In growing the restaurant’s business and protecting our unique image, the management of the restaurant will have the responsibility of ensure that its legal powers and intellectual property is protected from the competitors. There are various intellectual properties that are valuable for legal protection. Therefore, for the restaurant to strengthen its brands and value it must protect these assets of intellectual property. Some of the properties it will protect include its name, its menus, recipes, its methods of operating business, its trademark, and its way of advertisements through the social and the websites. The restaurant’ recipes that will be written or created by the chefs while they are working or they are employees of the restaurant, then these recipes’ copyright will belong to the restaurant. The management worked hard to come up with the name and the trademark of the restaurant New Lakes). The trademark or name will be crucial in distinguishing and identifying our food and services from those of other restaurants (Stumer, 2012). Therefore, the management will make sure that this name or trade mark is protected and no other restaurant uses it. In protecting the restaurant’s trading secretes, all employees, restaurant executives and managers will have to sign a confidentiality agreement. The confidentiality agreement form will state the restaurant’s trade secrets information and that any disclosure or use of the restaurant’s trade secrets, other than it is stipulated by an employer, an executive, or a manager, shall be considered to be a breach of the agreement. Any breach of agreement shall subject one to legal action (Stumer, 2012). Business controls The restaurant shall have an inventory control system. The system will have the responsibility of buying and controlling the level of inventory in the restaurant. The restaurant will carry an inventory of between 7,000 sterling pounds and 11,000 sterling pounds. Inventory turn over of the restaurant is expected to be high because of the high demand for meats and fresh produce. The projection also allow for a 14,000 sterling pounds inventory during periods of high demands. Overall manager and the two supervisors will control the production process of the restaurant. They will make production decisions based on the market trends and demand. In addition the supervisors will ensure that high quality of production is maintained. The restaurant’s accountant will be responsible in all financial matters and controls. He will ensure that all the operations are performed according to the budget. He will also, make and keep the restaurant’s financial records. The New Lakes management shall employ a sales and marketing system. This system will be responsible in setting and implementing favorable marketing strategies. They will evaluate the various marketing strategies so as to identify the most efficient and effective method. Section 4: Financial Projections Forecasts and financial Data The annual sales projected are 528,000 sterling pounds in the first year, 547,000 sterling pounds in the second year, and 569,000 sterling pounds the sales for the subsequent year will depend on the market forces. The estimates are based on the researched analysis on the existing restaurants’ financial performance over the recent years. Net income for the restaurant in one financial year is projected at 54,005 sterling pounds in year one, 55,402 sterling pounds is projected in year two and 58,429 sterling pounds in year three. Financial forecast is made assuming that there will be no negative forces that will affect the performance of the restaurant (Liu, 2012). Table 1: Projected Profit and loss statement year 1 year2 year 3 (pounds) (pounds) (pounds) Total sales 528,000 547,000 569,000 Cost of sales 245000 260000 282000 Gross profit 283000 287000 287000 Expenses Accounting 1,200 1,350 1,400 Advertisement 3,500 3,550 3,560 Business license 150 200 250 Delivery 4,000 4,100 4,150 Management wages and salaries 27,000 27,500 27,000 Employee salaries 96,000 95,000 93,000 Utilities 34,000 34,100 34,000 Repairs and maintenance 10,000 11,000 10,000 Property tax expenses 6,000 6,050 6,100 Insurance 2,000 2,000 2,010 Office suppliers 5,000 4,500 3,000 Depreciation 8,000 9,000 9,000 Water bills 1,000 1,055 1,060 Electricity bills 8,000 8,500 9,000 Total Expenses 205,850 207,855 203,530 Net income before tax 77,150 79,145 83,470 Less tax 23,145 23,744 25,041 Net Income 54,005 55,402 58,429 Table 2: projected cash flow statement The restaurant business is expected to generate enough money that will be used to cover its expenses. Cash flow generation will be as a result of superior management of cash flows. Year 1 Year 2 Year 3 (pounds) (pounds) (pounds) Total sales 528,000 547,000 569,000 Cash sales 528,000 547,000 560,000 Contributed cash 80,000 85,000 90,000 Loan/leases proceeds 190,000 190,000 190,000 Depreciation 8,000 9,000 9,000 Increase in accounts payable 165,000 170,000 173,000 Total Cash in 971,000 1,001,000 1,022,000 Less: Inventory purchases 130,000 143,000 148,000 Assets purchases 220,000 240,000 237,000 Non-cash Expenses 9,000 9,500 10,000 Cash expenses 205,850 207,855 203,530 loan interests 750 150 50 Income tax paid 23,145 23,744 25,041 Total cash out 588,745 624,249 623,621 Net cash Gain/loss 382,255 376,751 398,379 Surplus cash 382,255 376,751 398,379 Table 3: Projected Balance Sheet Statement As it is shown in the balance sheet, the performance of the restaurant will be considerably growing over the three years. This is observed on the growth of the business’s net worth. Year 1 Year 2 Year 3 $ $ $ CURRENT ASSETS Cash/ bank 382,255 376,751 398,855 Accounts receivable 8,750 10,000 15,000 Inventory 12,500 13,700 13,900 Other current assets 2,000 5,704 5,479 TOTAL CURRENT ASSETS 405,505 406,155 433,455 FIXED ASSETS Building 160,000 159,500 159,000 Furniture 99,000 105,000 106,000 Equipments 45,000 47,000 47,500 Accumulated depreciation 8,000 9,000 9,000 TOTAL ASSETS 717,505 726,655 754,955 CURRENT LIABILITIES Accounts payable 16,300 17,450 18,500 TOTAL CURRENT ASSETS 16,300 17,450 18,500 LON TERM LIABILITIES loans 380,500 320,000 300,000 Capital 320,705 389,205 436,455 TOTAL CAPITAL AND LIABILITIES 717,505 726,655 754,455 Risk Management Like any kind of business, restaurants are associated with various risks. It is very essential for the management of the restaurant to be aware of the major restaurant risks and prepare or be ready to take action in order to mitigate any chances of risk occurrence. The restaurant will establish a risk management team that will carry out the risk control and reduction responsibilities. Some of the risks that are associated to restaurant operation include restaurant failure, fire, frivolous lawsuits, natural hazards, restaurant crimes (theft from customers and staff), accidents, and food wastes (Lumley Insurance, 2012). The risk management team will have to take various steps to protect the restaurants from risks that might lead to restaurant failure. These steps include; by ensuring there is regular maintenance and cleaning in the restaurants. All equipments and machines that are used in the operations of a restaurant must be maintained and cleaned. This will improve the efficiency of these equipments and machines. Id addition, the equipments and machines used in food preparation are cleaned to avoid food contamination. Fire extinguishing equipments will be installed in the restaurant. They will be mounted on the wall at strategic and accessible positions where they will be reached easily. The fire extinguishing equipments that will be installed will be portable and easier to use. Fire exit signs will be put so as to direct people in case of fire out break. The emergency exits will be available and they will not be obstructed or locked (Lumley Insurance, 2012). There will be adequate lights, the surface and stairs will be of good conditions to avoid accident and for easier movements. The floor surfaces will be kept clean and spills thoroughly cleaned to avoid slippery, all the time. Location and maintenance of furniture will be done regularly. Chairs and tables will be inspected throughout the restaurant’s operations to ensure that they are stable and located at a required position. Any unstable and damaged items will be removed and repaired. This step will protect the customers from falling while seating on unstable chair (Lumley Insurance, 2012). Food preparations, handling, storage, and serving will be done by following appropriate safety procedures. To protect the restaurant from elements of cash handling risk, the duties and responsibilities of dealing with cash will be assigned to specified people. Cash that will be retained at the selling point will be limited to avoid theft. Cash takings will not be taken in a place that is of direct view from the public (Lumley Insurance, 2012). There will be a special room where cash counting takings will be carried out. Financing Requirements Before the start of the restaurant’s operations, we shall acquire a loan that will finance the operations of the restaurant. The amount of loan that will be acquired will be in the amount of 380.670 sterling pounds. The loan’ term will be of 6 years at an 8.00% of interest rate. This loan will be used as starting capital and to purchase the required equipments and other facilities. In addition, the loan will be used for leasehold improvement of the project. Income that will be generated from the operations of the restaurant will be used to service this loan. Another source of initial capital for the restaurant will be from owners’ contributions. It is expected to be of 80,000 sterling pounds. The money contributed and the money received through loan will be used to purchase land and building the restaurant’s structures. The money will also be used to purchase inventory. On the restaurant’s operations, the management will ensure that it maintains a strong and positive cash flow generation. The generated cash shall be used to cover the restaurant’s expenses and improve its operations. References Liu, K. &. (2012). Sample Restaurant Business Plan. Retrieved November 21, 2012, from http://www.onagon.com/docs/sample_reports/Sample_Restaurant_Business_Plan-08-27-2011_21-09-21_Assembled.pdf LumleyInsurance. (2012). Restaurant and Café Risk Management Guide Overview. Retrieved November 24, 2012, from http://www.lumley.com.au/sites/LumleyInsurance/Intermediaries/Products/Documents/PLRMG800_Cafe%20and%20Restaurant%20Risk%20Mangaement%20Guide.pdf Stumer, M. (2012). Archive for the 'Intellectual Property' Category . Retrieved November 24, 2012, from http://www.restaurantlawyerblog.com/category/intellectual-property/ Read More