Fast Food Franchise - Case Study Example

xxxxx No. 12345 TOURISM (RESTAURANT PROJECT) ABC of XYZ Department of xxxxxx 02 November, Table of Contents Contents Page No 1. Introduction 03 2. Business Idea: Fast Food Franchise 03 3. UK Fast Food Industry: Literature Review 04 4. Target Markets 05 5. Proposed Menu 07 6. Projected Estimates 08 6.1 Cash Flow Forecast 08 6.2 Balance Sheet 10 6.3 Projected Profit and Loss Statements 11 7. Proposed Policies of Control Cycle 11 8. Strength and Duty Roster 13 9. Responsibilities of CFF Staff 13 9.1 General Manager 13 9.2 Cooks 14 10. Security Issues in Fast Food Restaurant 15 Bibliography 17 1. Introduction This proposal has been prepared after making a comprehensive research and analysing various issues regarding fast food industry. The main objective of this proposed project is to highlight the critical issues for successful launching of a new fast food restaurant in Cambridge and to attain a competitive edge against well established rivalries in the market. Cambridge Fast Food Franchise (CFFF) is a small domestic fast food outlet in Cambridge which is intended to transform itself into a fast food restaurant by means of innovative and resourceful strategies towards the entitys impression and in-depth manifestation. Cambridge Fast Food Franchise (CFFF) is furnishing a mixture of wonderful foodstuff and future plan is to offer unparallel food at discount rates with entertaining environment. CFFF will address the general public for local recipes, Italian dishes, as well as Chinese and Indian food. The major aim is to offer the customers with highest quality services and products to keep them staying again and again. CFFF believes that by getting crucial financial support through its sale within first two years, it will be able to capture 10-20% of the fast food market in Cambridge. The project has estimated that it will enjoy a 37.3% profit for its investment by the end of April, 2013. 2. Business Idea: Fast Food Franchise Fast food is a foodstuff that is readily available and dished up promptly at sites known as fast-food bistros. This is the multi-billion dollar business which inturn keeps on progressing extremely fast around numerous international locations. A fast-food franchise is somewhat different from fast-food points as it is recognized from nominal service and by meals simultaneously which may be presented immediately soon after placing the order. The food items around such dining places is usually prepared in volume upfront plus preserved hot for its reuse. A lot of fast food restaurants are sections of reputable restaurants or franchises, while standard food products are supplied to every eating venue through main sites. As compared to some other food businesses, the budget fundamentals to set up a fast-food restaurant are comparatively compact in UK, especially at locations consisting of low and medium earning community. Mostly eateries wherever people sit a while and enjoy their lunch or dinner are also measured as fast food (Luffman & Sanderson, 2001). Fast Food Restaurant at Cambridge has proposed to offer the customers with a huge variety in terms of its menu products. Derived from the mentioned food items, the proposal suggests that CFF must offer low-priced combo food to its consumers. The proposed combo meal offers will contribute to increase the traffic to the restaurant. This is really appealing to undertake a sizable diversity of food products to grab an increased niche. However, in the beginning CFF must be watchful in deciding upon appropriate products containing maximum approval so that the marketing size will go over the expenses of original set up and expected income. When the restaurant will attain a regular profits in routine, additional products such as Barbeque might be added in and likewise desserts will be the most beneficial prospective. If situations call for stuff apart from the planned menus, CFF will have to come up with rapid improvements in the menus earlier than it may get under way loosing out clients. 3. UK Fast Food Industry: Literature Review Since careful and successful market segmentation is very much supportive to the success of a new business, therefore CFF would have a special emphasis on it. Those who understand the need and trends of the market, consumer behaviour and demographic features of the area of operations certainly come on the track of success. UK fast food is the largest fast food market in Europe which is double and triple in size than Germany and French markets respectively. Consumer expenditures have been raised since the start of 21st century in UK. The food industry (including fast food) had an estimated gross value added of £73.4 billions in 2007 (http://www.whatmattersweblog.com). It had a contribution of 18.8% of national part-time employment and 8.7% of national full time employment. In terms of catering and hospitality, the burger sector is leading that had revenue of £9.33 billion in 2008. This revenue was 4.2% greater than the previous year and it was 22.2% of the total fast food market. By including the business of coffee shops, the revenue would reach £11.22 billion, greater than 4.4% of the year 2007. The global turndown of 2008 has benefited the UK fast food industry as it has increased its presence by 8% in 2009 as compared to the last year (http://www.whatmattersweblog.com). Similarly the branches of fast food restaurants have also increased by 8.2% in ten major cities of UK within one year. According to Food for Thought review, Domino’s and Eat were the most popular and successful while Burger King was the least successful brand in 2009. Burger King has to close its 11.8% of outlets in ten major cities of UK which include London, Edinburgh, Manchester and Cardiff. During 2009, pizza chain of Domino’s, healthy fast food group Eat and sandwich chain Prêt A Manger have increased their growth by 50%, 36.4% and 29.7% respectively (www.caterersearch.com). McDonalds entered in the fast food industry in 1974 and today it is the mot dominating fast food chain in the world. According to BHA’s Trends and Statistics 2007, it has more than 1300 outlets in UK. The company deals about 47 million people daily on its 31,000 worldwide fast food restaurant chain (www.mcdonalds.ca/en/aboutus/faq.aspx). KFC is the second largest fast food company operating more than 700 outlets in UK. 4. Target Markets Prior to get started the business, comprehending the target audience does not only benefit to set food; but it also support to identify the significance of area of operation, décor as well as the all around environment of eating venue. A family-style eating place which usually suits parents and small children might not be attractive to senior citizens. In contrast, a high end, noiseless eating place providing a two-hour eating out opportunity probably would not be fascinating to youngsters or families with small babies. Cambridge is a non-metropolitan district of UK that is located within the county of Cambridge-shire. The city is surrounded by many small towns and rural areas especially toward the southern side. Politically the city is governed by city council which consists of 28 Liberal Democrat councillors, 11 Labour councillors, and 01 Green, Conservative, and an Independent councillor respectively. As far as electoral intention is concerned, the city is divided into 14 wards. The UK whole population consists of 19% of age less than 16 years, 65% between 17 to 65 years and 16% of over 65%. Cambridge total population 105,162 is currently ranked as 64th in UK. The 16.4% of its population consists of under 18, 69.7% belong to age group between 19 to 60 years, while rest of 13.9% are over 60 (Statistical Profile, 2011). The strength of college and graduate students is 22,580. The per capita income in Cambridge is $67,297 (Statistical Profile, 2011). The University of Cambridge established in 1209, is the 2nd oldest university in UK and 4th oldest in the Europe. The university consists of 18396 students (undergraduate 12,018 and postgraduate 6,378) and 8614 employees. The student strength of Cambridge University is about 14.75% of the total population of the city. By 2016, the population of the county is expected to increase by 12.5% while the UK population is expected to increase by 12% in 2031. The growth is high in Cambridge-shire and second to Warwickshire (13.8%). The city of Cambridge is the most attractive place for tourists. Almost 4.58 million tourists visit this city annually out of which 29.5% are foreigners (http://www.cambridge.gov.uk). CFF Restaurant has identified the target markets consisting of customers of different categories. UK public has more appeal toward fast food on weekends because most of the leisure and mall activities are planned on these days. CFF will plan to focus on young generation as the primary target market especially the students of Cambridge University and other colleges. Cambridge University arranges permanent extra-curricular activities for students; therefore most of the students are habitual of eating their lunch inside the shopping malls or on fast food points. More than 18,000 students of Cambridge University and Anglia Ruskin University will be the main target market for CFF Restaurant. Residential population and working class of Cambridge in particular along with its neighbouring areas would be the second target market. Cambridge is full of shopping malls and super-markets and about 25,000 people work in these markets and malls. Majority of these people take their lunch from fast food restaurants or points. On weekends the residential population spends its leisure time by enjoying fast food from these restaurants. The third target market of CFF Restaurant will be the public that works in the remote areas, travels through Cambridge, and quite often stop for refreshment in fast food points or restaurants. Similarly the population that celebrates the domestic festivals or events such as mid-summer fair and Cambridge film, folk and beer festivals. Lastly, the old City of Cambridge is a special attraction for tourists throughout the world. These 4.58 million tourists are some sort of special target market for CFF. Since tourists belong to higher class of citizens, therefore more profit will be obtained through this market. 5. Proposed Menu Food Item Brand Price(₤) Broast Chicken Broast (Qtr.) 3 Chicken Broast (Half) 5 Chicken Broast (Full) 8 Sandwiches Chicken Sandwich 3 Egg Sandwich 2 Beef Sandwich 3 Club Sandwich 3 Hot & Sour Soup (2 Servings) 3 Hot & Sour Soup (4 Servings) 5 Chicken Corn Soup (2 Servings) 3 Chicken Corn Soup (4 Servings) 5 Plain Rice 2 Chicken Fried Rice 3 Vegetable Fried Rice 2 Egg Fried Rice 3 Beef Fried Rice 3 Beef Chilli (without rice) 3 Chicken Chilli (without rice) 4 Burgers Chicken Burger 3 Chicken Cheese Burger 4 Beef Burger 3 Beef Cheese Burger 3 Zinger Burger 4 Miscellaneous French Fries (per plate) 2 Soft Drinks (Large) 1 Soft Drinks (Regular) 1 Food Item Brand Price (₤) Combos Combo Deal 1 Zinger Burger / French Fries / Regular Drink 4 Combo Deal 2 Chicken Broast (Qtr.) / French Fries / Regular Drink 4 Combo Deal 3 Chicken Burger, Broast (Qtr.), French Fries, Regular Drink 5 Combo Deal 4 Club Sandwich / French Fries / Regular Drink 105 5 Family Deal 1 Full Broast / Zinger Burger / Club Sandwich / French Fries (4) / Large Drink 5 Family Deal 2 Zinger Burger (2) / Club Sandwich (2) / Broast (Half) / Large Drink / Fries (2 12 Jumbo Deal 5% discount on purchase above 20₤ 12 6. Projected Estimates (2012-2013) 6.1 Cash Flow Forecast Variables Month Wise Forecast (₤) 2012 May Jun Jul Aug Sep Oct Beginning Cash Balance 125000 8352 8379 11256 17513 26177 Sales 79445 95000 97000 102000 104000 108900 Total Cash Available 204445 103352 105379 113256 121513 135077 Cash Disbursements Manufacturing 5000 4800 4770 4800 4890 5100 Expenses 27550 22220 21850 22555 22000 23550 Depreciation 778 778 778 778 778 778 Principal 1020 1020 1015 1035 1048 1070 General And Admin 2200 1780 1410 2075 1970 2070 Staff Salaries 46500 46500 46500 46500 46500 46500 Total Cash Disbursements 83048 77098 76323 77743 77186 79068 Net Cash From Operations 121397 26254 29056 35513 44327 56009 Loans and Capital Infusion National Bank Fixtures 0 0 0 0 0 0 Capital Infusion 0 0 0 0 0 0 Other Disbursements Proprietors Draw 12000 12000 12000 12000 12000 12000 Debt Service 1100 1100 1100 1100 1100 1100 Capital Disbursements Furniture & Fixtures 66645 0 0 0 0 0 Equipment 33300 0 0 0 0 0 Net Cash Balance 8352 8379 11256 17513 26177 37409 Variables Month Wise Forecast (₤) 2012 2013 Nov Dec Jan Feb Mar Apr Beginning Cash Balance 37409 49601 50073 44830 35357 19709 Sales 111000 102000 98000 94000 88000 94000 Total Cash Available 148409 151601 148073 138830 123357 113709 Cash Disbursements Manufacturing 5325 5500 5610 5800 6100 6100 Expenses 24250 25500 26855 27125 27200 27000 Depreciation 778 778 778 778 778 778 Principal 1055 1040 1050 1055 1055 1055 General And Admin 2100 2710 2650 2615 2515 2420 Staff Salaries 46500 46500 46500 46500 46500 46500 Total Cash Disbursement 80008 82028 83443 83873 84148 83853 Net Cash From Operation 68401 69573 64630 54957 39209 29856 Loans and Capital Infusion National Bank Fixtures 0 0 0 0 0 0 Capital Infusion 0 0 0 0 0 0 Other Disbursements Proprietors Draw 12000 12000 12000 12000 12000 12000 Debt Service 1100 1100 1100 1100 1100 1100 Capital Disbursements Furniture & Fixtures 0 0 0 0 0 0 Equipment 0 0 0 0 0 0 Net Cash Balance 49601 50073 44830 35357 19709 10256 6.2 Balance Sheet Amount (₤) Assets and Liabilities Current Year 2012-13 Current Assets Cash and Equivalents 125,000 318,912 Receivables from Sales 0 87,100 Other Receivables 0 0 Prepaid Expense/Deposits 0 9,000 Total Current Assets 125,000 493,112 Fixed Assets Equipment & Machinery 33300 33300 Furniture & Fixtures 66645 66645 Net Fixed Assets 99645 99,645 Total Assets 224,645 592,757 Liabilities Current Liabilities Trade Payables 0 18,624 Income Tax Payable 0 25,360 Short Term Notes 0 7,125 Total Current Liabilities 0 51,109 Long Term Liabilities Notes Payable, Bank 224,645 558,000 Notes Payable, Others 0 0 Other Liabilities 0 0 Total Long Term Liabilities 224,645 558,000 Total Liabilities 224,645 609,109 Proprietors Account Owners Equity 224,645 10,000 Less Withdrawals 0 6192 Total Net Worth 224,645 16,352 Total Net Worth and Liabilities 224,645 592,757 Current Ratio 10.2 Quick Ratio 8.1 Return on Investment 2.2 6.3 Projected Profit and Loss Statements The following graphical data displays our estimated profit and loss in first years. Cost 2012 Sales 11,71,900 Direct Cost of Sales 297,655 Other 125,000 Total Cost of Sales 422,655 Gross Margin 949225 Gross Margin % 63.9% Expenses Payroll 608400 Sales and Marketing and Other Expenses 191,525 Depreciation 81633 Utilities 26000 Insurance 40,000 Miscellaneous 5000 Total Operating Expenses 952,558 Profit Before Interest and Taxes 201,374 EBITDA 284,912 Interest Expense 25,360 Taxes Incurred 85,585 Net Profit 355,327 Net Profit/Sales 37.3% 7. Proposed Policies of Control Cycle Control cycle is a continuous and repeated process in any organization which involves planning, execution, measuring, analysing, correcting, and improving plans and standard operating procedures (http://www.businessdictionary.com/definition/control-cycle.html). The most beneficial aspect of control cycle is to assist the managers in comparing the actual results with respect to planned or desired results. Purchasing is that facet of the fast food operations which shows the overall approach of the restaurant and deals with the activity of obtaining high quality and standardized products from suppliers with respect to market trends (Ninemeier, 2009). Both manual and digital techniques can be applied to carry out this important aspect of operations. Starting from placing an order till recording and preserving of commodities can be held through purchasing software. CFF will introduce a ranking system of suppliers to review the process for future references. Purchasing system will be integrated with inspection system and special requirements. Receiving is the next step which CFF staff will deal with the purchased items. It will involve the actions like examining of items with respect to purchase order, specifications, and desired quality, model and quantity of products, care of damage during movement, and completion of recording documentation etc. CFF intends to purchase computerized software to execute the receiving of items as it will support to check the quality, specification, and prices more rapidly. Storing of items will deal with the management of product move to suitable places, maintaining of quality for future use, and information displayed on stored items especially the expiry dates of foodstuff (Ninemeier, 2009 & Hamblin, 1974). CFF will apply manual surprise checks by managing directors or general mangers as well as it will maintain ledger regarding balance of running and new stock. In order to gain a good reputation in consumer market and to increase its market capitalization, CFF will introduce innovative style of preparation of food and its serving. A sound training program will be executed for cooks to learn different styles of recipes and cooking. The role of waiters to serve the placed order is very crucial because they are part of shareholders of the CFF which will have direct interaction with customers. In terms of providing services, a friendly, amiable, and instantaneous response from waiters and parking boy will be very significant to keep the customers stayed with CFF. Additionally, CFF have the plans to provide light entertainment to youngsters and amusing conditions for children as well. 8. Strength and Duty Roster Position Strength in 1st Shift Timings Strength in 2nd Shift Timings Total Strength Start Timings (AM) End Timings (PM) Start Timings (AM) End Timings (PM) Managing Director 01 0800 1800 - - - 01 General Manager - - - 01 1800 0700 01 Shift Manager 01 0800 2000 01 2000 0800 02 Accountants 01 0800 2000 02 2000 0800 03 Receptionist 02 0800 2000 02 2000 0800 04 Facilities Management 02 0800 1700 03 2000 0500 05 Kitchen Staff 03 0800 2000 06 2000 0800 09 Waiters 08 0800 2000 08 2000 0800 16 Security Staff 02 0800 2000 02 2000 0800 04 Parking Boys 01 0800 2000 01 2000 0800 02 Sanitary Workers 01 0800 2000 02 2000 0800 03 Grand Total 22 - - 28 - - 50 9. Responsibilities of CFF Staff 9.1 General Manager The man who is highly responsible for the success or failure of a restaurant is the manager. The CFF project will demand expert managers not only having professional knowledge and qualification but also the leadership skills, supervision proficiency, and creativity minded approach must be the salient features of their profile. The role of fast food manager is diversified as it ranges from operational involvement to administration of internal and external issues. Some brief responsibilities of a general manager are listed below. (a) Operational duties are concerned with food consumption, arranging orders with suppliers, and ensuring in time delivery of food and beverages to customers. (b) Ensuring the quality and quantity of food and maintaining customers’ satisfaction (c) Resolving of customers’ complains (d) Human resource management like preparation of payroll, leave management, and performance measurement. (e) Maintaining budget and record keeping with the help of accountants (f) Meeting with suppliers and sales representatives to ensure in time delivery of products and new hardware items for dinning hall, parking or washrooms. (g) Guide, direct and train the workforce whenever required (h) Decision making in coordination with MD regarding menu, staff, and services 9.2 Cooks At the start of the restaurant, CFF will require sixteen cooks for two shifts, eight in each shift. The strength may be increased depending upon the traffic. Cook is the human resource whose role will be the key success factor for CFF. The salient features of cooks’ responsibilities are listed below. (a) Innovative and customers’ demanding taste in food (b) Maintaining and improving the quality and standards of fast food (c) Ensuring the cleanliness of cooking, washing, and preserving areas (d) Instant response just after receiving the order but no compromise on cooking quality (e) Keen to improve the cooking (f) Cooks must consider the hygiene factors in their cooking (g) Assist the general managers in terms of improving the standards of food and menu 10. Security Issues in Fast Food Restaurant Like all other restaurants, CFF will also face the challenges of security because restaurants are most vulnerable to robbery and theft. It has been observed that opening and closing of restaurant is the most critical time for any armed robbery, therefore it would be advisable for CFF that cash must be minimum at the restaurant. Irrespective of designation, no one should be allowed to stay alone in the restaurant. ‘Buddy System’ must be used on all employees at the time of entering or leaving. The most common and frequent criminal event in a restaurant is the employee theft because they have easy access to all assets of restaurant and awareness about the security measures and restaurant’s operational activities. Extraordinary trust on staff which deals with cash also becomes a weak area. Manipulation of cash and transactions as well as misuse of gift certificates, credit cards, and coupons is also a form of theft and a serious concern for top management. The occurrence of any kind of violence is also security concern for the reputation of the restaurant. The presence or frequent visit of manager in dinning hall is generally a good move to keep a firm control on any misconduct. Intrusion detection devices would be installed in CFF to deter burglars. Regular arrangement of practical lectures will train the workers to understand the concept of security and its demands. In terms of physical security, CFF will place CCTV near cash counters. Video recorder should be out of sight. Not all but a fair amount of employees must be trained to operate on CCTV systems. A comprehensive alarm and communication system would be essential in all rooms of CFF. As an overall perspective, CFF will need an honest, trained, and motivated workforce to achieve the main goals of restaurant. A safe and secured working environment will enhance the confidence level of customer on CFF. Bibliography Hamblin, A. C. (1974). Evaluation and Control of Training. Maidenhead: McGraw-Hill Book Company http://www.businessdictionary.com/definition/control-cycle.htm Luffman, G.A. & Sanderson, S.M. (2001) ‘Strategic Planning and Environmental Analysis’, European Journal of Marketing, Vol. 22(2), pp. 14-27. OFallon, M. J., and Rutherford, D. G. (2010). Hotel Management and Operations, John Wiley and Sons, 5th Edition Ninemeier, Jack D., (2009), Planning and control for food and beverage operations, 7th ed. Michigan USA: American Hotel & Lodging Educational Institute, pp. 38-52 Statistical Profile, Demographic, Socioeconomic, Land Use, Education, Cambridge Community Development Department: 2011 Read More