Ethnic Food Restaurant and Italian Restaurant Business Strategies - Example

Business Plan Name Institution Lecturer Course Date Table of Contents Table of Contents 2 Introduction 3 Brief Description of the Business Plans 4 Italian Restaurant Business Plan 4 Ethnic Food Restaurant Business Plan 5 Strongest Components of Each of the Two Business Plans 6 Market Analysis 6 Organisation & Management 8 Financial Projections 9 Weakest Components of Each of the Two Business Plans and what Could have been done to Improve the Business Plans 10 Italian Restaurant Business Plan 10 Executive Summary 10 Graphs 10 Business Analysis 11 Ethnic Food Restaurant Business Plan 11 Business Analysis 11 Lack of visual Representation of the Business Structure 11 Graphs and Charts 12 Challenges I Faced and How I overcame them 12 Lessons Learned about Business Planning 12 References 13 Introduction “It is estimated that some two-thirds of business start-ups don’t last beyond their third year” Butler (2014, p. 19). This is indeed shocking statistics if at all the figures are real. An intriguing question would be why such high rates of failure. Butler further gives some reasons behind such high failure rates of which lack of or poor business planning prior to startup is a primary cause of high business failure. This, therefore, attaches the importance of proper business planning, which includes proper research to identify all possible factors likely to affect the business and consequent application of strategies to maximise positive factors while establishing appropriate strategies to minimise or eradicate the effects of negative factors. As Heskett (2010) argues, the success of any organisation relies on its strategic plans and how well they are executed. As Caruth, Pane and Caruth point out, planning is all about looking at the chain of cause-effect relationships that occur over time after a decision is made today or if an intended decision was to be implemented (2009). It is, however, without doubt that several changes occur as time goes by, which makes planning a mere prediction and hoping that things will turn out as predicted. Nevertheless, as the common saying goes that a person with no direction has no destiny, business planning is extremely important. This brings in the importance of a business plan. The U.S. Small Business Administration (SBA, 2014) defines business plan as a business roadmap. A business plan is essentially the blue print that shows the intended business. DeThomas and Derammelaere (2008) assimilate a business plan to product packaging arguing that it is the first thing that intended audience especially investors want to have; as such, the business plan should be well written to include all the important details such that enables readers to have a clear understanding of the business after having a look through it. One of the most important characteristics of the business plan, as highlighted by Kasewurm and English (2008, p. 264), is the ability to convince the reader that the intended product or service will sell in the identified target market. Additionally, the business plan should be able to convince the reader that the projected business is better equipped to satisfy the needs of the target market and why it is better equipped to do so that competitors in the market. These and others are the elements of the business plan that this paper intends to highlight by comparing two business plans, Ethnic Food Restaurant Business Plan and Italian Restaurant Business Plan. The paper also provides recommendations of how each of the two business plans could have been improved. Brief Description of the Business Plans Italian Restaurant Business Plan This business plan is for a planned purchase of a restaurant business, JD Drews, which the current owner wishes to sell since it is not achieving the volumes he initially expected. The target audience of the business plan is SBA bank where JD Drews has a loan that it is unable to pay. The aim of the business plan being to allow the interested party, The Pasta House Co., to take over the loan and the business so that it can turn the business into a profit-making business. Pasta House Co. believes that this is a prime area because there is an upcoming shopping complex that will attract millions of people to the place. The target market for this business includes the upper income-level families that live in the area as well as those coming to shop in the area. Identified market competitors include O’Charles, Red Robin and Smokey Bones. This business surpasses the competitors in a number of ways making it the best in the region. Firstly, the business has a proven track record for over 40 years, it has well-trained employees, the projected business will carry along with it experienced staff from JD Drews, it is receiving immense support from the parent company, PHC Corporation and the business has established relationships with high quality product suppliers. The business wishes to use suggestive selling strategy to realise its sales growth of 4% annually for the first few years. Additionally, the business is planning to increase the number of customers through the expansion of inside space, sitting capacity and the establishment of outside seating area. The business also wishes to use website marketing strategy to realise the sales forecast. Ethnic Food Restaurant Business Plan This business plan is targeted to investors and financiers with the aim of securing the required money ($740,000) for launching Zara Restaurant & Lounge. Startup owners, Alex Hunte and Peter Smith will be contributing $110,000 (combined) from their personal savings. The rest, $630,000 is expected to come from a business loan ($430,000) and investors ($200,000). As such, this business plan is aimed at enabling the business owners to convince investors and banks to provide the required funding. The business owners project that the business will be able to retire the financial debt by the 7th year of operation after having reached Net Worth breakeven at the 3rd year and in the worst case scenario in the 5th year. In order to achieve this objective, the business plan highlights key success factors, which include innovation and uniqueness, product quality, appealing menu, employee retention, and cost control. The proposed business will operate as an LLC corporation under the name Zara Restaurant & Lounge, which will be located in Midtown Atlanta, and it will be featuring a number of international dishes. In order to attract customers and hence achieve the desired sales targets, the business intends to employ the best in terms of expertise and experience. The business also intends to attract customers and retain old customers by changing its menu every four months. The menu will include Zara Tapas, Zara Appetizers, Salads, Entrees, Desserts, and Specialty Drinks & Coffees. The business targets a wide customer base including tourists, business people, destination customers, couples and high-end singles especially those aged between 25 and 45 years old. The business has a unique strategy for attracting each of the aforementioned market segments. Strongest Components of Each of the Two Business Plans The U.S. Small Business Administration outlines the main components of a business plan, which will be used for evaluating the two business plans already described in the aim of identifying strong points in the two business plans. The six crucial sections of any business plan include an executive summary, company description, market analysis, organisation & Management, Service or Product Line, Marketing & Sales, Funding Request, Financial Projections and Appendix (SBA, 2014). The two business plans will be compared on three strong points, which are the inclusion of market analysis, organisation & management and financial projections in each of the two business plans. Market Analysis This includes analyzing the market including market size, customer segment analysis and competitor analysis. The two businesses have achieved this criterion, which is a major strength for the two business plans. In the Italian Restaurant business plan, the author has highlighted all the restaurants in the area of operation, Fenton area, of which there are forty eight restaurants. Having done this, the author has provided reasons as to why despite having several restaurants in the area, there is a need to establish another restaurant with one of the reasons being that the upcoming Gravois Bluff’s shopping complex will attract more customers to the area thereby requiring an additional restaurant. Further, the author has indicated that the long history and great reputation of PHC High Ridge will make the proposed business a leader in the market. The Italian Restaurant business plan has also include a section on market segmentation whereby the author has analysed the market and provided statistics in terms of households by income alongside population in terms families, non-families and group quarters after which the author settles on the upper income level family segment including people living and coming to shop in the area. The author then performs an analysis on this target market including an analysis of new and expanding restaurants in the area and which are targeting the same customer segment. The business plan also performs an analysis of competition and buying patterns whereby the author identifies the main competitors in the area alongside their strengths and weaknesses. Finally, the author evaluates the proposed business with respect to market competition and gives reasons as to why the business will be more competitive than other market players. Similarly, the Ethnic Food Restaurant business plan has included a section of market analysis whereby five market segments are identified, which include tourists, destination customers, high-end singles, couples and business people. The business plan has also identified unique ways of attracting each of the five customer segments, which also includes growth targets on the five customer segments. The author has also conducted service business analysis as well as market competition and buying patterns, which include the identification and analysis of major market competitors. Identified market competitors include The Kitchen, Lunaci, Cumulus, Cheesecake Factory, Swing Restaurant and Mumbo Jumbo. This is followed by the identification of the strengths of the proposed business (Zara) that will make it more competitive or better suited to serve the needs of the identified market segments. Organisation & Management This section outlines the organisational structure that the business will adopt (if it is a new startup) or is using (if it a business seeking expansion). The Italian Restaurant business plan has outlined the organisational structure as follows: Dennis Boldt (owner) will be the president while Vince Laratta will be the general manager, who will be reporting to the president. Denice Shaw will be the dining room manager/kitchen manager, who will be reporting to the general manager. Under Denice Shaw will be two assistant managers, one will be the dining room manager while the other one will be the kitchen manager, both of whom will be reporting to Denice Shaw. However, the author has not provided a visual representation of the organisational structure, which would have been good if they provided. The Ethnic Food Restaurant business plan also has this crucial element of a business plan whereby the proposed structure of the business provided. Alex Hunte (co-owner) will head the operations, marketing, financial and business development functions of the business while Peter Smith (co-owner) will be the executive chef, who will also head restaurant operations of the business. Under the executive chef, there will be an assistant chef, a Sou chef, cooks, prep cooks and restaurant cleaners. Financial Projections This is especially important for business plans that are targeted at financiers to secure the required funding. However, financial projections are important in any business plan since they act as performance measures once the business has started operating (SBA, 2014). The Italian Restaurant business plan has provided financial projections that are presented in the form of tables, graphs and figures. This presentation makes it easy to visualise the target values for ease of understanding. Financial projections given in this business plan, some of which are provided in the appendix section, include monthly profits, annual profits, monthly and annual gross margins, pro forma profit and loss, total cost of sales, projected cash flow (including net cash flow and cash balance), pro forma cash flow, pro forma balance sheet, ratio analysis, sales forecast and personnel plan. The Ethnic Food Restaurant business plan has also included this vital component of the business plan. In this business plan, sales forecast is provided in terms of monthly sales forecast for the first 12 months and annually for the first five years, which is presented graphically and in table format. The other financial projection presented in this business plan is personnel plan that highlights projected growth in payroll for the first five years from $399,588 for the first year to $432,728 in the fifth year. Other projections provided in the appendix include pro forma profit and loss, breakeven analysis, pro forma cash flow (net cash flow and cash balance), pro forma balance sheet and ratio analysis, which have been presented in the form of tables and graphs. Weakest Components of Each of the Two Business Plans and what Could have been done to Improve the Business Plans Italian Restaurant Business Plan Executive Summary The executive summary has some weaknesses in that it is missing some key components. According to Swinburne University of Technology, the executive summary is supposed to provide a snapshot of the entire business plan such that a person with no much time can understand the entire business plan after reading the executive summary (2014). In this business plan, the author has provided some of the key items of the executive summary but failed to highlight on analyses done and the results or conclusions made on those analyses. As such, the mention of the target market in the executive summary without highlighting the analysis done to come up with the target market will leave a person relying on the executive summary with some questions (Swinburne University of Technology, 2014). To improve the business plan, the author could have included brief statements on how they did the analyses and the conclusions they made after the analyses. Particularly, the author could have indicated market segmentation and why they narrowed down to the indicated target market. Graphs The author of this business plan used 3D graphs that make it hard for the reader to estimate the value presented by a graph. The upper part of the graph has two horizontal lines and it is hard for one to know which the author intends to use to indicate the required estimate. Additionally, the graphs have too large scale with one having a scale of 0-200,000. This means that it will be extremely difficult to provide an accurate estimation of a value of 10,000. I tend to believe that a simple graph would have been much better. Additionally, the author could have used smaller scales that give accurate readings. This could have been further improved by using minor gridlines that guide a reader for more accurate readings. Business Analysis I tend to believe that insufficient analysis of this business was done because the business plan tends to focus too much on the strengths of the business without indicating business weaknesses. In other words, insufficient internal and external analysis was done, which may create the wrong impression that the business is viable. The author out to have conducted deep analysis using analysis tools, such as SWOT, PESTLE, Porter’s five force and competitor analysis. Ethnic Food Restaurant Business Plan Business Analysis Similar to the Italian Restaurant business plan, insufficient internal and external business analysis was done in this business plan since the author does not report all the internal and external factors likely to affect the business. To improve the business plan, the author ought to have used SWOT, PESTLE, Porter’s five forces and competitor analysis among other business analysis tools to analyse the internal and external business environment and then report the results of the analysis. Lack of visual Representation of the Business Structure Although the author of the business plan made the effort of describing the business structure, failure to provide a chart showing the business structure makes it hard for readers to understand the business structure. As such, in order to improve the business plan, the author could have provided a chart showing the business structure including the command line. This way, it could have made it easy for readers to read and understand the proposed business structure. Graphs and Charts Similar to the Italian Restaurant business plan, this business plan also used 3D graphs that have large (un-proportional scales) without minor gridlines for accurate reading. As such, it is difficult for readers to interpret the graphs since accurate reading of the graphs is not possible. To improve on this component, the author could have used simple graphs that have reasonable scales and which have minor gridlines to direct readers for accurate reading. Challenges I Faced and How I overcame them The first challenge was getting good business plans to review and compare. Databases having good business plans required membership, which had a subscription fee. I searched through the website and managed to get two business plans from one database. The second challenge was actual comparison of the business plans especially in finding strong and weak points of the business plans. This challenge was based on the fact that some business people strive to make their business plans unique by adding or subtracting some components. To overcome this challenge, I decided to establish evaluation criteria using scholarly sources that provide the main features of a good business plan. The source I found and used was the U.S. Small Business Administration that discusses the components of a good business plan. Lessons Learned about Business Planning This task helped be to learn a lot about business planning. Firstly, I learned that a business plan is essentially the business package, which plays a major role in convincing financiers (investors and financial institutions) to provide the required funds. As such, an entrepreneur should provide a detailed and well organised business plan that provides all the required information to sufficiently convince financiers. I also learned that there are some crucial components of a business plan that every business plan should have for it to be effective in achieving its intended purpose. As such, writing a business plan is all about filling the required sections correctly and appropriately. Of importance is carrying out necessary research in order to provide accurate figures. Overall, the greatest lesson I learned is how to make a business plan. I believe that I can now write a winning business plan through conducting proper market and product research, which will not only convince financiers to provide the required funding, but also ensure that the business will be successful. References Bplans (2014). Italian Restaurant Business Plan. Retrieved from http://www.bplans.com/italian_restaurant_business_plan/executive_summary_fc.php Bplans (2014a). Ethnic Food Restaurant Business Plan. Retrieved from http://www.bplans.com/ethnic_food_restaurant_business_plan/executive_summary_fc.php Butler, F. D. (2014). Business Planning for New Ventures: A Guide for New Start-up and New Innovations. New York, NY: Routledge. Caruth, D. L., Pane, S. S. & Caruth, G. D. (2009). Staffing the Contemporary Organisation: A Guide to Planning, Recruiting, and Selecting for Human Resource Professionals (3rd Ed.). Westport, CT: Praeger Publishers. DeThomas, A. & Derammelare, S. (2008). Writing a Convincing Business Plan (3rd Ed.). Hauppauge, New York: Barron’s Educational Series, Inc. Heskett, J. (2010). How Do You Weigh Strategy, Execution, and Culture in an Organisation’s Success? Retrieved from http://hbswk.hbs.edu/item/6433.html Kasewurm, G. A. & English, K. (2008). Supervision. In H. Hosford-Dunn., R. J. Roeser & M. Valente (Eds). Audiology: Practice Management (pp. 246-258) (2nd Ed.). New York, NY: Thieme Medical Publishers, Inc. Swinburne University of Technology (25 February 2014). Evaluation Criteria: Business Plan Evaluation Criteria. Retrieved from http://www.swinburne.edu.au/corporate/knowledge/venturecup/evaluation.htm The U.S. Small Business Administration (2014). Create Your Business Plan. Retrieved from http://www.sba.gov/writing-business-plan Read More