Investigation of a Hospitality Operation - Case Study Example

Investigation of a Hospitality Operation - Feasibility Report Facilitator Table of Contents 0 INTRODUCTION 3 2.0 Expansion Findings 3 2.1 Competitor Analysis 3 2.2 Demand patterns in the area 4 2.3 Business Analysis (The proposed Customers) 5 2.4 Factors affecting the average spend in the restaurant 6 2.5 Stages in developing and establishing the restaurant 6 2.6 Consumer analysis 7 2.7 Opportunities for the Restaurant 8 2.8 Risks affecting the business 9 2.9 Marketing Objectives of the restaurant 10 2.10 Pricing strategies of the business 10 2.11 Factors that will affect the revenue of the business 11 2.12 Factors that may affect profitability of the restaurant 11 3.0 Conclusion 12 Self-Evaluation 12 Reference List 14 1.0 INTRODUCTION Sambal Express Kitchen Dinner & Restaurant in South Harrow is a Sri Lankan restaurant, which offers delicious food and social meals to families and parties in the area. The restaurant offers stylish foods with modern menus suitable for to the working people and professionals. The restaurant also offers at least 40 dinners per day, meaning the sales are well towering. Most of the people who dine in the restaurant are Sri Lankan, although there is intense marketing and word of mouth to ensure a global face in the consumption of food in the restaurant. Starting a new restaurant is challenging especially bearing in mind that the people have their preferences with the existing restaurants in the area. However, the management embraced the challenge, with the research helping in understanding of the market and the factors that play in the development of the new market. The research mainly analyzed the factors that would either facilitate or hinder the development of a new restaurant in the area. The case study included analysis of the existing restaurants as part of the competition to understand the strategies that should be used attain the best market share in the area. More so, the research analyzed the pricing strategies used by the competition to understand the behavioral preferences and reactions of the people in the area in relation to the price of commodities. 2.0 Expansion Findings 2.1 Competitor Analysis Other restaurants in the area are competitors of the new restaurant. The main competitors include Blueprint Restaurant and Delicacy restaurant. Their main market are the students in the area who consume their services at the peak of their consumption. Essentially, the restaurants have peak sales periods and low sales seasons due to the financial nature of the students and their irregular spending habits (Adams, 2009, p. 19). The restaurants also offer after sales services to the customers as a way of making them loyal and retaining them in their businesses. The restaurants understand that customer retention, especially when dealing with the students is tricky hence they try their level best to retain their business through after sales services. Due to the nature of their markets, the businesses have structured their promotional strategies to fit the students and their markets. The restaurants undertake seasonal adverts on the student televisions and radios, and use banners and posters to attract them to their services. The restaurants also offer discounts to the students, although they do not advance credit due to the nature of credit reliability of the university students (Zinkewicz, 1998, p. 68). However, the hotels have failed in developing premium services for part of the market, composed of workingindividuals living in the area’s residential homes. 2.2 Demand patterns in the area The demand in the area is hard to determine due to the nature of the existing population. The student population has a seasonal demand pattern. At the start of their learning sessions, they demand and consume a lot due to the high seasonal supply of money. Seasonal demand comes with specific hours of service to the students. They mostly go for their meals at specific times includingbreakfast, lunch and dinner, meaning throughout the other period; they are not consuming. However, the students demand for services from the restaurants is in high quantities and they are highly selective in terms of the quality of food that they like. The demand for services is fairly elastic among the students, which is mostly affected by the income disparities among them. For the working people residing in the area, their demand is highly seasonal, but fairly inelastic. They mostly demand breakfast and dinner for majority of the time except weekends and holidays. This makes them reliable customers for the business. The trends in the behavior of the customers is affected by a number of factors. Economic factors including the income of the people, income distribution and the economic conditions in the country affect the behavior of the customers (Nottingham, 1996, p. 11). Religious factors affect the behavior of the customers although at a very low level. However, social factors including friendships and social groups greatly affect the behavior of the consumers. 2.3 Business Analysis (The proposed Customers) The business intends to take a different angle in the area. As much as majority of the people in this area are students, the restaurant will focus on provision of services for the minority group in the area who are the non-students. The customs of the business will thus be divided into three categories. First, the unemployed non-students people residing in the area are low income-earners. They consume on a regular basis, although their activities yield low revenue to the business (Goins, 1996, p. 1). The second group is the employed people, working outside the academic institutions. This category of people mainly includes people who are in the area during mornings and the evenings. This means that their demand will be highly seasonal and overreliance on them may push the restaurant out of business. The third group of customers are the employees who work within the academic institutions. Like the first category, they consumethe services of the restaurant on a regular basis. However, just like the second group, they also demand services that yield high revenue to the business. All the customers expect that the business will take care of their needs optimally as opposed to the other restaurants that are more aligned to the students and sort of avoiding the working people. They also expect that the new restaurant will offer high quality accommodation services. 2.4 Factors affecting the average spend in the restaurant The average spend in the restaurant is a result of a number of features. First, the quality of the services is a major factor. Providing high quality services is extremely costly (Barrett-Bressack, 2009, p. 70). However, in the long run, it is effective in attracting the people and ensuring that they buy more. The average spend in the restaurant is also determined by the auxiliary services that the restaurant offers to the people. Many people make their decisions based on the after sales services that they get, more than the real purchases that they make in the business. This means that for the business to increase the average spend in the restaurant, high quality after sales services should be offered to the people. Internal decorations also attract people to the restaurant and create a false sense of security (Moore, 2001, p. 65). Human beings naturally like beauty. It is therefore imperative that they will be attracted to environments that are nicely decorated and they will want to spend more time there. In the age of technological development, the people will enjoy emotional attachment to the restaurant through the photos and videos that they will take in the restaurant. 2.5 Stages in developing and establishing the restaurant Idea origination The idea for opening a new restaurant has already been conceived. The main source of the idea was that a similar business set up in another locationis working well, and the potential of expansion could be seen in the new markets. Nevertheless, there are several methods of idea origination. It may be from brainstorming, discussions, previous success, gap filling, and support. Gathering information The second stage is research, which involves gathering information that will be important in the establishment and running of the new business. This stage collects information about different elements, which are elementary to the business. They include competition, pricing policies, consumer analysis, supply chain analysis, and evaluation of sources of supply. Information gathering helps in solving some of the challenges ahead of time. Writing the business plan The next stage involves development of a business plan for the venture. This mainly involves development of strategies and techniques that help in making the business successful in the future (Read, S. 2006, p. 85). It includes drawing the strategies and identifying key resources and partners for the business. Implementation The fourth stage is implementation. The essence of the thirds stage is drawing a road map that can help in the implementation of the project plan. In the fourth stage, the implementation is enslaved by the plan, although it is open to a number of changes and suggestions. This involves putting the business in place, selecting the management and ensuring that the business is well run for the benefit of all people. Review In the final stage, the restaurant will be reviewed to see whether it is a worthy venture. The business may not have made profit by the time of evaluation. However, this is important in delivering the services required and prevention of further losses. 2.6 Consumer analysis The perceptions of the consumer on the restaurant will be affected by many internal and external factors. The Sambal Express is a stylish restaurant, which offers home-cooked food, which mainly includes curries and rice for reheating at home or in the shop. The food is displayed in Prime ware’s yellow and black Multi-Portion dishes. The bright color of the dishes against the food makes a striking contrast helping to entice customers to make their selection from around the 40 dishes available with the assistance of the knowledgeable staff.The food production methods are essential because of the emphasis of the local people and their health issues. More so, the taste of the food will affect their views of the restaurant (Boen, 2008, P. 56). It is easy for the people to form opinions and convince others based on the quality of the food. Aside from the quality, the people will greatly be affected by the ingredient used and the type of menus provided. Electronic and hard copy menus will neutralize the situation. More so, the people are likely to make up their minds based on the types of food made and the profiling of the food during product promotion. Sambal Express Kitchen Dinner & Restaurant menu clearly explains what is in each dish and where the dish has originated. Staff in the restaurant will further advice clients on menu selection. Popular menu items include Hoppers, a pancake style rice dish and Kothu. The choices made by people will also be hugely affected by their previous experiences in the competitor restaurants. This is the reason the company must do adequate research in the hotels around and strive to outdo the competitors. 2.7 Opportunities for the Restaurant The restaurant possesses the opportunity to solely serve the people residing in the neighborhood residential houses who may not like the services offered by the other restaurants that target students. The services offered in the other restaurants are based on the students’ social and economical status of (Choi, 2007, p. 46). This means that the restaurant can capitalize on offering the best services to other people in the area. The restaurant hasan opportunity to expand in the area by offering services that are not provided by other restaurants in the locality. It will offer accommodation facilities that are hugely expensive in other facilities within the region. However, by offering accommodation, people can hold conferences or meetings within the hotel and spend on other services provided, such as food. By so doing, the businesses opens up its doors for people from other areas outside its locality. 2.8 Risks affecting the business Being in the hospitality industry, the restaurant is affected by a number of risks. First, staffing is a risk to the business because hotels are associated with a high staff turnover (Gillette, 2012, p. 26). The business is in its initialstages meaning the customers will be highly sensitive to how they are treated while in the premises (Gillette, 2012, p. 26). It is therefore imperative to employ people who will not treat customers in a manner that may lead to loss of business for the restaurant. However, it may prove difficult to find employees who are customer-friendly, fast, and efficient and serve the customers diligently. Location of the business is also a risk. The main target of the restaurant is not the students. However, in a move to find an ideal location for the business, it should not so far from the students, as some of them can afford the services offered (Fitzmorris, 1992, p. 22). It is tricky to find a location that serves both the student and the residential population, mainly made up of the working people. It is important to find a location that is not too intimidating to the students and also that the residents feelis non-intrusive. Legislation is another risk that may face the business. Being in the hospitality industry, there many laws that affect their operations. Most of the products are affected by hygiene laws, production laws and personal liability laws, which creates a legal risk. 2.9 Marketing Objectives of the restaurant The restaurant will undertake marketing with a view of creating awareness about the business. People in the area need to know more about the new business including the location, and products andservices it will offer. Marketing also aims at boosting the demand for the new restaurant through dispensing the right information. Indeed, the new restaurant aims at developing a brand that non- student residents’ in the area can identify with. It implies that marketing will act as a platform to reach this particular market segment in the area. More so, it will help in developing the image of the business and promoting loyalty among the customers. 2.10 Pricing strategies of the business At the initial stages of the business, pricing is important in setting the tone for the business in the area. It will employ a cost-plus pricing policy that ensures that the price of a product includes all the costs incurred on the product and a mark-up for the profits of the business (Birch, 2000, p. 37). Through this method, the business will always covers its costs, thereby eliminating the chances of failure. Another option is the price-plus policy, which ensures that all the prices of the business reflect the purchase price and a mark-up price. The business may adopt this policy to guarantee that the purchase prices reflect the purchase of the raw materials and a markup for profit (Haman, J. 1992, p. 60). The last pricing method that can be possibly applied is standard pricing, which guarantees that there are standard preset prices for the services that are offered in the restaurant. Professionally, the cost plus method is the best method because the business will always make a profit on all the sales made. 2.11 Factors that will affect the revenue of the business The revenue for the restaurant will be affected by its pricing. In case the prices are too high, people will limit their consumption and this will greatly affect the revenue flows. Pricing affects revenues because socialand psychologicalfactors play a critical role in the selection of an eating place. Other factors that will affect cash flow of the business are the after sales services offered. After sales services ensure that the customers are satisfied and they can use the services again or even recommend other people. This means that the business must do very well on after sales services convince the customers that they have the best services compared other existing restaurants in the area. 2.12 Factors that may affect profitability of the restaurant Profitability of the restaurant depends on two factors. First, the revenue of the business will hugely affect its profitability. No doubt, the higher the revenue that the business generates from its activities, the higher the profit. This implies that for the business to have a huge profit margin, the revenue of the business must be high enough to cover the costs of running it. The profits of the restaurant will also be affected by the costs incurred by the business (JHSTJ, 1998). Overall, the costs of the business in the first year will be high because of the initial installation and settlement costs of the business. However, in the following months, the costs will be generally lower allowing the profit to increase. This essentially means the lower the costs, the higher the profits. Profitability is also affected by the consistency of the customers. Consistent and repeat customers create stability in the business. With the number of return customers on the rise, it is possible to lower on advertisement and still increase the sales, as well as profits. 3.0 Conclusion The restaurantwill also offer after sales services to the customers as a way of making them loyal and retaining them in the businesses. Moreover, the business understands that customer retention, especially when dealing with the students, is tricky hence they try their level best to retain this market segment through after sales services. In addition, the demand in the area is hard to determine due to the nature of the populations. The student population has a seasonal demand pattern. At the start of their learning sessions, they demand and consume a lot due to the high seasonal supply of money. Internal decorations also attract people to the restaurant and create ambience. It is therefore imperative that they will be attracted to environments that are nicely decorated and they will want to spend more time there. Price-plus policy can also be used which ensures that all the prices of the business reflect the purchase price and a mark-up price. The business may adopt this policy to ensure that the purchase prices reflect the purchase of the raw materials and a markup for profit. The demand for services is fairly elastic among the students, which is mostly affected by the income disparities among them. For the working people residing in the area, their demand is highly seasonal, but fairly inelastic. The average spend in the restaurant is a result of a number of features. First, the quality of the services is a major factor. Providing high quality services is extremely costly. However, in the long run, it is effective in attracting the people and ensuring that they buy more. Self-Evaluation Grade: Distinction Justification: I have undertaken an all-round research on all the areas highlighted for the case study and provided the references which helped me in the research process. I have also included factual information about the case study hence I deserve the distinction My information is provided in a clear and concise manner with a table of contents to guide in accessing the information. What I have learnt I have learnt the importance of conducting a research and feasibility study in the business world. It helps in gathering enough information that can help in maximizing revenue and minimizing chances of failure. Reference List Adams, D. 2009. Starting a new business takes planning: But there is free advice available locally for people who want to try their hands at entrepreneurship, Washington. Barrett-Bressack, C. 2009.Mexican restaurant in Utah celebrates 30 years in business.Nations Restaurant News, 43(34), pp. 70. Birch, A.D. 2000. Exploring the feasibility of a reusable container and bulk product dispenser system in supermarkets. Dalhousie University: Canada. Boen, J.L. 2008.Local VA feasibility study complete: Rep. Souder says the report will be reviewed by the VA for technical accuracy, Washington. Choi, J. 2007. Developing restaurant industry business cycle model and analyzing industry turning point. Journal of Global Business and Technology, 3(1), pp. 40-48. Fitzmorris, T. 1992. The restaurant business: Heres a breakdown of the dining dollar. New Orleans CityBusiness, 13(9), pp. 22. Gillette, B. 2012. Small business spotlight: Oxbow Restaurant shows you can revitalize without spending millions.The Mississippi Business Journal (pre-Aug 20, 2012), 34 (23), pp. 26. Goins, D. 1996. New Baja-style restaurant says business going great. The Idaho Business Review, 15(21), pp. 1. Haman, J. 1992. The American dream: starting a new business is not for the weak at heart but it still can work out. Arkansas Business, 9 (32), pp. 16. Janie Hainey Special to The,Journal Record 1998.State offers new guide for starting a business, Oklahoma City: Okla. Moore, P. 2001. Feasibility report on new coal plant delayed. The Denver Business Journal, 53, (7) pp. 14A. Nottingham, N. 1996.Jade Palace Restaurant earns SBAs top minority business award, Billings: Mont. Read, S. 2006.Developer gives city analysis: ANTIOCH: Report on feasibility of downtown project should be available for public review Friday, Washington. Zinkewicz, P. 1998. Confronting the risks of the restaurant business.Rough Notes, 141 (4), pp. 68-70. Read More