Business Plan on the Innovation Solution for the DK Restaurant - Case Study Example

Business Plan On The Innovation Solution For The Dk Restaurant EXECUTIVE SUMMARY Due to the changing taste of customers, the food industry has fast turnaround. To stay with the flow, the DK Restaurants keeps on innovating in order to attract new segments of the market and to sustain its established business relations for more than a decade. Hence, this food enterprise intends to expand its market segments so that they can serve well innovatively. Another motivation of the DK Restaurant is its desire to sustain financial balance by providing effective and efficient services to its clients. To be able to achieve these, the DK Restaurants is offering the common top class restaurant services with a tech touch. Aside from this, it is offering catering services with outstanding quality and another form of service which is "we cook for you at home". The above DK Restaurants' innovations were based on the business strategies of the company. Other channels to sell will be established. Therefore, revenue will not only come with the food sale in the DK Restaurants but it will also come from the services at the customers residences.   COMPANY DESCRIPTION Legal Establishment The DK Restaurant group had become well-known since its launching in 1996 by its operator, D.K. Kodama. It has gained its outstanding credibility through the years. History True to its mission, the DK Restaurants offer high-technology food experience that offers the traditional fine dining atmosphere that with the modern touch of its new food ordering system. The DK Restaurants want to carry its good reputation into its catering service and the "we cook for you at home" service. For the DK Restaurants, not to move forward means to fall back. One of its key to success is its excellence in fulfilling the promised dining experience that is completely confidential if required as well as its reliable and hassle free booking service. Another factor for its continued success is that it is developing visibility to generate new business leads. Likewise, leveraging from a single pool of expertise into multiple revenue generation opportunities like market research, and mouth to mouth propaganda has contributed to its success. Start-up Plans DK Restaurant is a company providing high-level expertise in international cuisine, distribution strategies and marketing of high taste services. It will focus initially on providing three kinds of income generating activities. These are (1) the common top class restaurant services with a tech touch; (2) catering services with outstanding quality; and (3) we cook for you at home. On each table, the customers find an iPad to browse the menu. From the iPad, the customer can get explanations and is able to order. After the mail the tablet can be used for invoicing and payment. But it is also possible to call a waiter with the tablet to get served in the classic style. After the ordering the tablet can be used to browse the Internet, read the mail, get information and the like. It also is possible to book a private connection, to get data for a business meeting. Catering services is not a new section in the industry. But getting catered by an outstanding Restaurant is. DK restaurant group is sure that its reputation will offer it a considerable share of this local market. Booking can be done online or offline. We cook for you at home is to take the catering service a step further. Having special Guest and offering them a royal service with your own cook and service personal (you also can book our Somelier) will make it a special remembered occasion. PRODUCTS AND SERVICES AND THE CUSTOMERS' BENEFITS FROM THEM DK Restaurant is already famous for its products and services, but due to the market pressure of other competitors it is forced to develop new products, distribution channels and new market segments in new markets. Nothing beats fine dining with an excellent service. But many real competitors in the market segment know this and train their staff accordingly. One of the problems can be the ordering. To make it more fun and have no pressure by a waiter, waiting to take the order, we put an iPad at each table, which allowed a fully explained order suggestion, accepting the order, and serves after that as a means of entertainment, work, or information gadget for the customer and as an advertisement for the Restaurant. It will not only allow to order a meal, but to accept table reservations, or booking a catering or even delivery of the special wines from DK Restaurants. Booking can also be done in advance from you smart phone, Net-book or your PC at home or at work. Catering as a customer service is in demand. The DK Restaurants would like to get a share of this section of the food industry. However, it would not stop there. DK restaurant will have equipment and personal at site to cook life for your guests. DK Restaurants cook for the clients at their homes. The number people enjoying the comfort of their homes are increasing. The idea is to offer a cook and waiter(s), even a hand for cleaning, and use the facilities of the customer to cook there and attend to the host and his guests. To impress the guest you can choose from our wine cellar and you also can book our Somelier. Market research is the group studies that are being done by the DK Restaurants that show that selected clients are willing to pay $1,000+ depending on the occasion. In the coming months or years, the DK Restaurants will expand their coverage by increasing the market segments that they cater, for instance, by offering their services to other restaurants and/or by putting up additional customer sections (e.g. high class meetings on the CEO/Board meeting levels). The DK Restaurant group is also studying the possibility of newsletter and/or electronic newsletter services. The DK Restaurants' unpublished market research also shows that people willing to book the catering service or the We cook for you at home will visit the DK Restaurants to get an impression of the quality of food and services. In opening to a new market, we also generate additional income for the existing section. MARKET ANALYSIS Market With the development of commercialization and globalization, enterprises face serious competition nowadays (Squicciarini & Loikkanen, 2008). Fluidity of the products had increased in the past years. Customers' Needs Companies need to update their resource and technology so as to cater the customers’ need. They need to be competent for the competition. Since the internet is universal, it is speeding up information exchange (Benedikt, 1991). The internet is uniquely independent information exchange. It is able to grow organically. It can operate reliably with little centralized management. Likewise, the internet is built entirely on common standards. DK Restaurant faces several problems. Its food is unitary. It can attract the customers’ attention. The success or fall of a restaurant business depends on the quality of food. The reason for the return of customers is that these clients want to taste and experience the meal again. Despite that the service is good, it is not the important factor. The customer is unitary. Most of the customers work in this zone. When they have break or are out of work, the restaurant is so busy. But at other times, eating at this restaurant is for leisure. There are too many similar restaurants that are close to the DK restaurant. The competition is serious. Sometimes they would reduce the price which attracts the customers. This results to reduced net profit. Location of the Customers and Ways to Reach Them The customers are easy to find. There are numerous buyers for the type of products and services that the DK is offering. The innovation is extremely urgent. How to improve the business through digital innovation is a tough task. If the problem still exists, the restaurant would not get the net profit and may close down one day. Because of the innovations, they change the direction of the business. It can create profits. It can create a new, strong customer and employee value concept in innovative ways. Any resource would put in the right place. They would create the maximum value. Pricing and Sales The DK Restaurants' food and services will be priced at the upper edge of what the market will bear. They will only be contending with other known brands. Sales Revenue Table 1. Sales revenue of the DK Restaurant Products and services 2011 2012 2013 Restaurant 400,000 650,000 1,000,000 Catering Service 500,000 800,000 900,000 Food Delivery 200,000 300,000 400,000 We cook for you at your home Service 75,000 100,000 150,000 1,175,000 1,850,000 2,450,000 Gross Margin (%) Table 2. The gross margin of the DK Restaurant Products and services 2011 2012 2013 Restaurant 85 85 85 Catering Service 85 85 85 Food Delivery 30 30 30 We cook for you at your home Service 70 70 70 Cost of Sales Table 3. The cost of sales of the DK Restaurant Products and services 2011 2012 2013 Restaurant 60,000 97,500 150,000 Catering Service 75,000 120,000 135,000 Food Delivery 140,000 210,000 280,000 We cook for you at your home Service 22,500 30,000 45,000 297,500 457,500 610,000 Break-even Analysis Table 4. Break-even analysis of the DK Restaurant 2011 2012 2013 Sales revenue 1,175,000 1,850,000 2,450,000 Cost of sales 297,500 457,500 610,000 Variable expenses, total 297,500 457,500 610,000 Personnel expenses 536,820 897,000 945,300 Other operating expenses 333,000 360,500 333,000 Depreciation of fixed assets 10,000 20,000 20,000 Financial expenses 4,900 4,425 1,061 Fixed expenses, total 884,720 1,281,925 1,299,361 Gross margin 74.7% 75.3% 75.1% Break-even sales revenue 1,184,667 1,703,096 1,730,128 Sales revenue above break-even 0 146,904 719,872 STRATEGY AND IMPLEMENTATION Management Responsibilities The management team will outline who are responsible for the implementation efforts. Theses are the account officers who are the point of contact for the plan. These people are those who will manage the implementation actions and those who will manage the resources. So customers are busy doing their respective jobs. Some of them do not have time to prepare the food for their kids or some special family members even. What is the opportunity for the restaurant business? Developing their digital business is a key factor. The online order service does not only deliver the food to the homes of the customers. The foodservice/restaurant can also send in their workers to make the food in their house. More and more people want to hold a party at home but they do not want to make the food by themselves. So, the customer can invite the chef to service the food at home. Firstly, customer can book online through the website and then add any information that they wish the restaurant to do for them. The organizer needs to collect the information online. Among the information and data that need to be cleared are the numbers of persons who will eat at the party, the types of the food that they want like vegetarian food, seafood, or others. The type of presentation of food needs to be determined like if it is buffet or not. The customer would choose the schedule, the time of the entrée service, as well as the main course. If there is a need for the stage to be set up, it will be decided on by the DK Restaurant and the customer. The materials that need to be prepared will be identified too. This is a special task since everything will be done online. Service will be provided to the customers who want to hold a party, those that do not have time to prepare food. The second is the product chain changes. According to the order, the DK Restaurants start to prepare the food or use the left food from the lunch that it cannot use out in order to optimize the resource. This aspect is increasing the human resource efficiency. Second is setting-up a website. The DK Restaurants' website will be one of the communication channels between the DK Restaurants and customers. At the same time, it will also be one of the marketing and promotion tools of the DK Restaurants. The third is training. All staff needs to be trained. Everyone involved should be informed and be prepared on what they have to do. It is easy to find. The DK Restaurants will be able to implement the necessary seminars and training for at least three months. The manager needs to set-up several computers in the restaurant. The company needs to produce a form to take the orders down. They also need to invite some part-time chef if the orders are too many. According to the order, the food will be prepared. Any tools that the party need, such as balloon, cake, candles and others have to be ready. Marketing Strategy DK restaurant will be focusing on high-class consumers including manufacturing, financial and information technology companies. Most of these are larger companies. Occasionally, however, some are medium-sized companies. The DK Restaurants' most significant crowd of possible clients are upper management and decision-makers in larger companies. These are general managers, marketing managers, sales managers, and the like. They are sometimes charged with international focus. Sometimes, they are charged with market channel focus. These are the types who do not prefer to squander their time. They also do not want to risk their fund trying to acquaire questionable services or bargain information. Market Segmentation The DK Restaurants' most important market segment is the large corporations. These large companies will be getting the products and services of the DK Restaurants for their functions and activities that are better rolled off rather than handled in-house. With the medium-sized growth companies, the DK Restaurant will be able to offer an attractive fun alternative. This will make the young generation of high rank employees  in the company give something to talk about and be proud and be outstanding. Competition The competition comes in several forms such as (1) other first class restaurants in the fine dining section and fun food restaurants; (2) quality catering services; and (3) the third general kind of competitor. WEB PLAN SUMMARY The Website The staff can go to the website, checking the order, preparing the order, determining the source where they need to buy. Deciding on the system requires power thinking that will take good effort to make it work and maintains it. To accomplish the innovation, it needs to spend some time. Set up the website then test the website if it works or not. Development Costs Budget will be allocated to complete this setting-up of the DK Restaurants web project. This cost involves design, development and the cost of delivering a complete web project with a fair amount of success. Operations The DK Restaurants will let the public know of the type of service that the restaurant offers. When the customers come to their restaurant, the manager can introduce the service or give them a handbill. Moreover, they will mail the potential customers or send across the marketing and promotion aspects of the DK Restaurants online. ' Sales and Marketing Strategies The strategy of the DK Restaurant group is providing the customers a combination of interesting and excellent foods and food preparations that appeals to a wide and varied group of people as well as convenience by offering its sumptuous foods inside the restaurants or at the comfort of their desired venues or homes. These sales and marketing strategies will all be captured in the DK Restaurants' website. Each aspect will be featured on the internet to reach out to more customers. MANAGEMEN TEAM The Organization and its Key Management Team Members The initial management team and working staff, will not be replaced but gets additional education to comply with the new demands. As we grow we may take on additional consulting help, for graphic/editorial, sales, and marketing. The DK Restaurant should be mainly managed by working partners/franchisee. The DK Restaurant' organization has to be flat, with each of the key management players that is responsible for his or her own work and management. The DK Restaurants group wants an exceptionally far above the ground intensity of cooking and service expertise and experiences. This means that the DK Restaurants will not be easily leveragable in the ordinary food industry. Collaborators will inevitebly be concerned in the discharge of the foundation business scheme. They will be supplying the contacts to the customers. The preliminary personnel plan is still provisional. For the personnel, there should be around three to five partners. The services of the consultants will be tapped. One strong marketing person will help in the desired success of the organization. An office manager will also play key roles for the company. Later, we will add more partners, consultants and sales staff. The DK Restaurants plan to train stuff, but not employ them, but use then in case the demand cannot me met by the regular stuff. For the annual personal estimates, the table below shows them. Headcount Table 6. Headcount Personnel 2011 2012 2013 Cooks 4 4 5 Waiters 2 4 4 Kitchen staff 1 1 Guards 2 2 Stand-by staff 1 Office manager 1 1 1 9 13 13 Monthly Salary Table 7. Monthly Salary, in U.S. Dollars Personnel 2011 2012 2013 Partners 4,200 5,500 6,000 Consultants 5,100 5,200 5,300 Marketing manager 4,600 4,700 4,800 Sales representatives 4,200 4,400 4,600 Office manager 3,100 3,200 3,300 Personnel Expenses Table 8. Personnel expenses, in U.S. Dollars 2011 2012 2013 Wages and salaries 466,800 780,000 822,000 Social security costs 70,020 117,000 123,300 Personnel expenses 536,820 897,000 945,300 REVENUES 1,175,000 1,850,000 2,450,000 Personnel expenses to revenues 45.7% 48.5% 38.6% FINANCIAL ANALYSIS Major Financial Measures For the financial analysis, listed below are the DK Restaurants' main financial measures. Table 9. Major Financial Measures 2011 2012 2013 Cash 46,212 61,475 465,802 Sales revenue 1,175,000 1,850,000 2,450,000 Net profit for financial year -6,498 99,517 486,575 Operating margin -0.55% 5.38% 19.9% Owners' equity 53,502 153,019 589,594 Return on equity p.a. -12.1% 65.0% 82.5% Total start-up expense includes the branding costs, legal costs, stationery cost as well as other one-time expenses. This comes to $50,000. For the yearly overhead expense estimates, these can be seen at the table below. Start-up fived assets needed $75,000. These are the computer sets, software, furniture, fixtures as well as several other tools and equipment. Other Operating Expenses (USD) Table 10. Other Operating Expenses, in U.S. Dollars Other operating expenses 2011 2012 2013 Startup expenses 50,000 0 0 Marketing 50,000 50,000 50,000 Travel 150,000 200,000 200,000 Office rent and utilities 75,000 100,000 75,000 Insurance 3,000 3,000 3,000 Other fixed expenses 5,000 7,500 5,000 333,000 360,500 333,000 Asset Purchases Table 11. Asset Purchases, in U.S. D Fixed assets 2011 2012 2013 Startup fixed assets (equipment) 50,000 0 0 New equipment 0 50,000 0 50,000 50,000 0 Financial Projections The paid-in capital from investors will be $120,000. A total of $50,000 annuity loan will be secured from a bank in two years. Performance Measures (USD) Table 12. Performance measures, in U.S. Dollars 2011 2012 2013 Sales revenue 1,175,000 1,850,000 2,450,000 Cost of sales 297,500 457,500 610,000 Gross profit 877,500 1,392,500 1,840,000 Other operating revenue and expenses 0 0 0 Other operating expenses 333,000 360,500 333,000 Personnel expenses 536,820 897,000 945,300 Depreciation of fixed assets 10,000 20,000 20,000 Operating profit -2,320 115,000 541,700 EBITDA 7,680 135,000 561,700 Financial income and expenses -4,900 -4,425 -1,061 Profit before income tax -7,220 110,575 540,639 Income tax expense -722 11,057 54,064 Profit -6,498 99,517 486,575 Operating margin -0.55% 5.38% 19.9% Gross margin 74.7% 75.3% 75.1% Sales per employee 130,556 142,308 188,462 Added value 544,500 1,032,000 1,507,000 Added value per employee 60,500 79,385 115,923 Return on equity per annum -12.1% 65.0% 82.5% Quick ratio 1.16 2.63 22.3 Current ratio 1.16 2.63 22.3 ISCR 1.57 30.5 529 DSCR 1.57 1.54 16.2 Debt to equity ratio 1.31 0.24 0.00 Debt to capitalization 56.7% 19.3% 0.49% Receivables collection period, days 15.0 15.0 15.0 Payable period, days 15.0 15.0 15.0 Inventory period, days 0 0 0 Income Statements Table 13. Income Statements, U.S. Dollars 2011 2012 2013 Sales revenue 1,175,000 1,850,000 2,450,000 Export sales 0 0 0 Other operating revenue 0 0 0 Cost of sales 297,500 457,500 610,000 Other operating expenses 333,000 360,500 333,000 Personnel expenses Wages and salaries 466,800 780,000 822,000 Social security costs 70,020 117,000 123,300 Total personnel expenses 536,820 897,000 945,300 Depreciation of fixed assets 10,000 20,000 20,000 Operating profit -2,320 115,000 541,700 Financial expenses Interest expense 4,900 4,425 1,061 Total financial expenses 4,900 4,425 1,061 Profit before income tax -7,220 110,575 540,639 Income tax expense -722 11,057 54,064 Net profit for financial year -6,498 99,517 486,575 Balance Sheets Table 14. Balance Sheets, in U.S. Dollars 2011 2012 2013 ASSETS Current assets Cash 46,212 61,475 465,802 Debts and prepayments Trade receivables 48,968 77,093 102,087 Prepaid and deferred taxes 722 0 0 Other short-term receivables 0 0 0 Inventories Inventories 0 0 0 Total current assets 95,901 138,568 567,889 Fixed assets Tangible assets Tangible assets 50,000 100,000 100,000 Less: Accumulated depreciation -10,000 -30,000 -50,000 Total 40,000 70,000 50,000 Total fixed assets 40,000 70,000 50,000 Total assets 135,901 208,568 617,889 LIABILITIES and OWNERS' EQUITY Liabilities Current liabilities Loan liabilities Short-term loans and notes 0 0 0 Current portion of long-term loan liabilities 70,000 33,607 0 Total 70,000 33,607 0 Debts and prepayments Trade creditors, goods 12,399 19,064 25,418 Trade creditors, other 0 0 0 Employee-related liabilities 0 0 0 VAT (GST) 0 0 0 Total 12,399 19,064 25,418 Total current liabilities 82,399 52,671 25,418 Long-term liabilities Long-term loan liabilities Loans, notes and financial lease payables 0 2,877 2,877 Deferred grant revenue 0 0 0 Total long-term liabilities 0 2,877 2,877 Total liabilities 82,399 55,549 28,295 Owners' equity Share capital (nominal value) 60,000 60,000 60,000 Share premium 0 0 0 Retained profit/loss 0 -6,498 43,019 Current year profit -6,498 99,517 486,575 Total owners' equity 53,502 153,019 589,594 Total liabilities and owners' equity 135,901 208,568 617,889 Cash Flow Statements Table 15. Cash Flow Statements (1-4 years, in USD) 2011 2012 2013 CASH FLOWS FROM OPERATING ACTIVITIES Inflows Payments from customers 1,126,033 1,821,875 2,425,006 Receipt of other operating revenue 0 0 0 Total 1,126,033 1,821,875 2,425,006 Outflows Payments to vendors (goods) 285,101 450,835 603,646 Payment of salaries and wages 466,800 780,000 822,000 Social security costs 70,020 117,000 123,300 Payments to vendors (operating expenses) 333,000 360,500 333,000 Total 1,154,921 1,708,335 1,881,946 Net cash flow from operating activities -28,888 113,540 543,060 CASH FLOWS FROM INVESTING ACTIVITIES Receipt of grant financing (assets) 0 0 0 Total 0 0 0 Outflows Payments to vendors (assets) 50,000 50,000 0 Total 50,000 50,000 0 Net cash flow from investing activities -50,000 -50,000 0 CASH FLOWS FROM FINANCING ACTIVITIES Inflows Inflows of nominal value 60,000 0 0 Inflows of share premium 0 0 0 Loan amounts received 70,000 50,000 0 Total 130,000 50,000 0 Outflows Principal repayments 0 83,516 33,607 Interest expense 4,900 4,425 1,061 Dividends (net to shareholders) 0 0 50,000 Payment of corporate income tax 0 10,335 54,064 Corporate income tax (on dividends) 0 0 0 VAT Return 0 0 0 Total 4,900 98,277 138,732 Net cash flow from financing activities 125,100 -48,277 -138,732 Net change in cash and cash equivalents 46,212 15,263 404,327 Cash and cash equivalents at the beginning 0 46,212 61,475 Cash and cash equivalents at the end 46,212 61,475 465,802 Based on the above, it is evident that as the DK Restaurants go into markets looking at new opportunities, they are very sensitive to risking their company's name and reputation. After all the careful planning and smooth operation, one of DK Restaurant's new challenges will be to sustain its reached status of being a reputable company establishing itself as a "real quality with fun" company which is positioned at a relatively risk-free corporate market segment. References Benedikt, Michael. 1991. Cyberspace: First Steps. The MIT Press. Squicciarini, Mariagrazia and Loikkanen, Torsti. 2008. Going Global: The Challenges for Knowledge-based Economies. Ministry of Employment and the Economy. Munich Personal RePEc Archive. . Read More