Food and Beverage Management - Olive Tree Restaurant - Essay Example

? Food and Beverage Management Case study) Answer Six key strengths of ‘the Olive Tree’ can be identified as per the following Delicious food’. The customers are quite satisfied with the food quality served in the restaurant. 2. ‘Swift service’. Customers are fascinated with the quick service provided at the restaurant. 3. ‘Warm hospitality’ has made it possible to have several loyal customers. 4. Keeping operational expenses low (such as rent) is an advantage for ‘The Olive Tree’. 5. ‘Low-cost good quality lunch’ is the big strength of ‘The Olive Tree’. 6. ‘The Olive Tree’ can roll new items without much of the operational hurdle commonly found in the large chains. Six weaknesses can be identified as per the following. 1. ‘Resource limitation’, the company cannot spend much on creating its own unique brand. 2. The company does not have much leverage on large menu additions. 3. ‘No brand promotion’ to compete with large companies. 4. No market research possibility for introducing new menu items. 5. Owner is the sole guiding force; no other competent staff that can replace him at the time of emergency. 6. Low equity holding does not allow easy expansion at other locations. Answer 2 Critical Evaluation of the Restaurant The below mentioned table shows all important parameters such as total sales, gross profit, net profit, average spend per head, food versus drink sale, % gross profit for food and drink, % net profit for food and drink, total gross profit combined for food and drink that are necessary to judge the company performance. The Oliver Tree’s performance (Calculated) for the year 2012-13 April May June July Aug Sept Oct Nov Dec Jan Feb March Total Sales 49,660 51,194 53,204 54,505 55,403 53,191 49,240 48,070 49,046 41,628 41,280 42,077 Gross Profit (Food) 23,115 23,864 24,252 25,643 25,842 25,176 23,525 22,901 20,292 17,644 18,181 20,033 Gross Profit (Food) % 68.29 67.09 67.19 68.20 66.39 67.70 68.09 67.40 63.50 60.26 62.10 65.70 Gross Profit (Drink) 11,450 11,034 11,706 11,783 12,462 12,386 10,272 10,202 10,800 8,065 8,414 7,668 Gross Profit (Drink) % 72.4 70.6 68.40 69.70 75.60 77.40 69.90 72.40 63.19 65.30 70.09 66.2 Total Gross Profit (F+D) 34,565 34.898 35,955 37,426 38,304. 37,562, 33,797, 33,103 31,092 25,709 26,595 27,701 Net Profit 21,455 23,574 23,612 24,018 22,293 21,498 20,897 20,653 18,929 14,777 14,966 15,794 Net Profit % 43.2 46.04 44.38 44.0 40.23 40.42 42.43 42.96 38.6 35.5 36.25 37.53 Avg. spend (?) per head 8.76 8.67 8.86 9.06 9.30 9.33 9.55 9.82 10.81 8.46 8.76 8.79 Trading Position First five months of ‘The Olive Tree’ show a consistent rising trend as far as the trading position is concerned; however, thereafter a slowdown has been observed with a major fall seen in last quarter. Trades between June and September show higher revenue earnings with weekly sales remaining above ?12,000 throughout. Sales February is the slack-month for the company registering sales of only ? 41,280 while August is the boom period for the company recording sales at ? 55,403. The difference between these two months is over 30 percent. It is important to analyze the fall in last quarter for remedial measures. Value-wise, the company's sales on drink constitute over 30 percent of the total and percentage profit margin from drinks is higher than food items. Average spend per Head As calculated and mentioned in the above mentioned table, average-spend per head vary between ? 8.46 and ? 10.81. The lowest spend is found at ? 8.46 in month of February while highest spend is registered in month of December at ? 10.81. Food Gross Profit The highest food gross profit is registered in month of August at ? 25,842 and the lowest profit is in month of February at ?17,644. It is pretty clear that profit in winter is on lower side compared to profit earned in summer months. Wages Wage bill varies between ?10,932 and ?16,064 per month. Again, the lowest bill has been registered in February and highest has been registered in the month of September. This indicates that wage bill is higher in summer months and lower in winter months. Summary of the Restaurant’s Position ‘The Olive Tree’ started its restaurant business in April 2012 catering quality foods and drinks to its customers. After having served in the Pizza Express for seven years, a highly experienced owner cum manager, Ian Mandrake, has embarked on this business in the true entrepreneurial spirit. Ian is an able entrepreneur and knows nitty-gritty of the restaurant business thoroughly. Currently, the Olive Tree competes with large and small restaurants in the area. He chose this strategic location for its lower rent to keep his expenses at minimum. Perhaps, he is well aware about break-even concept of the new business that says keeping fixed expense at its lowest so as to break-even at lesser volume (Investopedia 2013). He knows that people would always prefer good cuisine even if they have to travel little far. At full occupancy, the restaurant can serve 104 customers. The menu contains traditional and popular food items along with specialities that are not available within a half mile distance. This menu selection gave a good boost to trade initially. Recently, one more competitor has arrived under the name of Bel Piatoo and focusing on the same market that Oliver has been serving currently. Ian's focus is on quality and freshness. Salad bar and wine varieties that Ian has started offering to the customers is essentially to distinguish itself from other competitors. It is pertinent to note that the first half of the Oliver, revenue and profit wise, in 2012-13 has been much superior to the second half. The Ian has earmarked at least 15% rise in sales for the year 2013-14 with at least 5 % rise in its selling price. Answer 3 Facts Comparison As per general yardstick, for the reasonable good performance, the gross profit requires to be 50 percent of the sales generated for food and drinks. For Oliver, it has been found that gross profit for food is in the range of 60% and 68 % that by all means a stupendous performance. Similarly, gross profit for drink trade has been found between 63% and 77%; that is, again, a superb performance for the company. Even overall net profit that ranges between 35% and 46% is certainly commendable from the operational point of view. Wage bill is reasonable and has not eaten away the net profit of the company. On gross and net profit measures, Ian's operational skill is clearly evident. Answer 4 Based on the first year’s performance and with the given background of the company, the following recommendation can be suggested for performance improvement and future growth of the company. 1. Applegate and Harreld (2009) argue that innovation is the key for survival and growth. The company needs to add at least one menu item every month so as to keep charm in its offering. This is essential for keeping competition encroaching Oliver’s territory. Simultaneously, less popular item can be eliminated from the menu. 2. Product differentiation is an important concept in the marketing that has been enumerated by Kotler & Keller (2009). Similarly, product positioning is a good strategy for regular customers. Low-cost quality lunch has been admired by the customer and that is a good positioning strategy. In the same way, it is highly recommended to add quality dinner at affordable cost for the regular customers. This will help Oliver in enhancing its revenue. 3. It is highly recommended that Oliver starts brand building exercise. Keller et al. (2011) emphasise brand building with suitable brand management strategies to help build the reputation of the organisation. The company must have its logo to begin with so that customers will be able to distinguish it from other non-branded restaurants or food outlets. In the long run, this may payoff significantly. 4. The company must start home delivery service within a few kilometers distance. This way, the company will be able to expand not only its business but will be able to penetrate among discerning customers. This could be a good move in the wake of resource constraints that the company is facing. 5. Wilson (2011) suggests several ways of promoting products and services thorough website. Website can give interesting information to the customers that how Oliver prepares healthy food for their customers using herbs and spices that not only enhance taste and flavor of the food served by the Oliver but keep people free from the common ailments such as diabetes, obesity, indigestion, and hypertension. Website is the most economical way for brand building and value enhancement in the long run. For providing home service to the customers, the company needs to build its website where customer can see all menu items, its rates and also pay online for home service orders. Answer 5 Advising Ian on opening another restaurant When going is tough due to difficult market conditions, it is beneficial to go for the new restaurant models. The model that needs lesser resources and provide more versatility will be a good fit for ‘The Olive Tree’. The bricks and mortar restaurant will easily cost ? 400,000 and upwards and Ian does not have that kind of equity to venture out. Johnson (2011) suggests a new kind of restaurant-on-wheels model; he states "in a recession, street food makes financial sense". While consumers are squeezing their restaurant budgets, a mobile van with ready to serve fresh and affordable lunches and dinners could do wonders on revenue and profit earnings for ‘the Olive Tree’. And investment could be just a fraction of what is required in opening a traditional restaurant and that is too with very little risk. Even large food chains such as Taco Bell, Sizzler, or Subway have gone mobile. In the UK, Byron – the burger chain is also on wheel (Johnson, 2011). The biggest advantage is one can try different venues increasing visibility and creating brand value of ‘the Olive Tree’ in the larger area in a short period of time. Reference List Applegate, L. M.; Harreld, B. (2009). Don’t Just Survive—Thrive: Leading Innovation in Good Times and Bad. Harvard Business School. [Online] Available from http://www.hbs.edu/faculty/Publication%20Files/09-127.pdf [Accessed 22 May, 2013] Investopedia (2013). Break-Even Analysis. [Online] Available from http://www.investopedia.com/terms/b/breakevenanalysis.asp [Accessed 22 May, 2013] Johnson, Richard (2011). Street food: the latest rage. guardian.co.uk. [Online] Available from http://www.guardian.co.uk/lifeandstyle/2011/jun/19/street-food-recipes [Accessed 27 May, 2013] Keller, K. L.; Aperia, T. and Georgson, M. (2011). Strategic Brand Management: A European Perspective. Pearson Education. Harlow, Essex Kotler P. & Keller, K (2009). Marketing Management. Prentice Hall. New York. Wilson, R. (2011). The Web Marketing Checklist: 37 Ways to Promote Your Website. webmarketingtoday.com [Online] Available from http://webmarketingtoday.com/articles/checklist/ [Accessed 23 May, 2013] Read More