Restaurant Management - Outline Example

Feasibility Study for a New Restaurant in Cheltenham of the of the Q. Carry out a feasibility study for a new restaurant in Cheltenham. 1.0 Introduction The opening of any sort of business enterprise in today’s environment is not without risk. Though one might surmise that a food and drink related business like a restaurant would be readily accepted by the local and visiting clientele of any area of London, tastes and traditions differ and one has to account for the different wishes and requirements of various social groups. For example, the pricing of the items must be kept such that the customers can afford a meal now and then, with continuing attractions like foreign cuisine and local celebrations being the focus of attention for the new and existing customers. The success of any business venture is based on the mix of new and old customers returning to the restaurant again and again to partake of the old and new offerings and add to its list of loyal customers. At the same time, cooking, presentation and quality standards must be ensured, coupled with an ambience and service the makes the customer want to make this one of their favourite haunts for the weekend, or indeed any day of the month. Conducting a feasibility study for developing a new business requires analysis of present and likely future market conditions. Local market conditions have a significant impact on the profitability of a new restaurant. The location and look of the restaurant, proximity to public shopping areas, internal ambience and quality of meals and service, as well as a variety of good ideas to keep the customers interested are key factors of success. All this will impact on the number of customers you can expect to visit, the quality of service delivery, menu design, facilities and price that can be charged to customers. This report attempts to do a feasibility study on opening and running a new restaurant in Cheltenham, UK. 2.0 Type and Style of My Restaurant Concept Of the various types of restaurants available in the market, the best choice would be opening an Ethnic Restaurant. My plan is to cater to Indian Cuisine, since much of the population in the Cheltenham area are first or second generation Indians. The name of the restaurant will be Sweet & Spicy. The restaurant will cater to all age groups. We can serve fast food or traditional mild curries to attract the kids. For service delivery I plan on using the latest technology available in the market, i.e. Epos, coupled with an attractive website with online order and payment system. Presentation of the food and menu choices will also be different. I will include some exclusive curry dishes which are not served in Cheltenham area to achieve a sustainable competitive advantage. Services will include takeaway, with free home delivery within four mile radius, discount for group booking, catering for family events and special menu for the kids including English food. The facilities will include very neat and clean washroom for men and women, free WiFi, Kids Corner and free car parking. As regards the menu, I will implement Ala Carte menu in Sweet and Spicy restaurant. We will use separate menu for desserts and coffees/teas/juices. For starters, we will offer a variety of selections- this includes Vegetables, chicken, lamb and fish. Regarding main menu, customer can choose from vegetables, chicken, lamb and a wide range of fish (Prawn, King Prawn, Salmon, Trout and Roopchanda). For kids menu, we can have Prawn & mango puree, Scampi, Sweet rice, Cheese Samosa, Scampi, Fried chicken, chips and omelette with mushroom, prawn, peas. Coming to drinks, we will serve soft drinks, juices, selection of wines (white, red and rose) and champagne. There will also be a selection of desserts available in our restaurant. The restaurant will be open from 12:00 noon till 12:00 midnight on weekdays and till 2 a.m. on weekends and public holidays. Providing quality service at low price is my first strategy in order to win the competition, it will help me to create awareness for my restaurant in Cheltenham area. Therefore I propose that Lunch be priced at £9:00 while for Dinner price will vary according to choice. To keep the customer entertained we will provide Audio Music, have Cultural Nights and even a Banqueting Night on weekends. 3.0 Emerging Trends in the Food Service Industry Changing consumer demands and expectations are changing the outlook of the hospitality and leisure sector in the UK. Thus understanding the Hospitality Consumer presents a distinctive perspective on consumer behaviour in the hospitality sector. It focuses on the role of consumption in hospitality and to examine our understanding of its place in the contemporary industry. It concentrates on understanding and determining recent customer needs, relevant factors in consumer buying behaviour and the effectiveness of todays hospitality business operation. So when we think about a new restaurant we should consider the external dynamics and consumer trends which have a great impact on demand and sustainability of business (BHA, 2012). Ethnic food is more popular in the UK. It is estimated that UK has more than 60% of total European ethnic restaurants. Now consumers are more educated and health conscious. Diabetes, heart disease, cancer and childhood obesity are the key issues in consumer minds. Vegetarian cuisine, gluten, lactose, casein free food and decaf are more popular in today’s food market. Government health media and different social media encourage people for healthy eating. Competition has increased within the hospitality industry, while bargaining power of the customer has increased due to more choices available to the customer than ever before. Ethnic restaurants may be risky due to tighter immigration laws. There is awareness among the consumers to protect and preserve the environment. Environment and social friendly organisations are easily achieving sustainable competitive advantages. Demand for Organic food is increasing 4.0 Strengths and Weaknesses of the Competition The restaurants that already exist in the market can provide valuable information to analyse the opportunities and threats. It is important to identify how many restaurant in the area, then those restaurants that appeal to the same customers (market segment) you want to serve. It is also crucial to identify any restaurant closed in the market area and for what reason (Rutherford & O’Fallon, 2003, 63). There are 13 Indian Restaurants in Cheltenham which will compete with Sweet and Spicy for business. Online research shows that most of them are doing traditional business as far as 20 years back. Although they have been price wars between them however there is no innovation of new product or service as in variety of menu served. Some of the restaurants have problems with cleanliness. Fish is known as healthy food but only few restaurants offer variety of fish. None of them serve the great fish Roopchanda (Barbecued) which is famous for its taste. Strengths: All the experience I have working in different successful restaurants is a great strength for my company. I have gained experience in operation management of restaurant, supply chain management, complaint management and use of modern technology. None of my competitors have online order and payment facility. Use of modern technology (Epos), online booking, order payment and tracking delivery order will differentiate Sweet and Spicy from others. Free WiFi will attract students, officials and children to choose Sweet and Spicy among all Indian restaurants in Cheltenham. No ethnic restaurant has Kids Corner in Cheltenham- so this new concept will help to switch customers to my restaurant. Afternoon coffee in ethnic restaurant is also a new concept in Cheltenham area. Free afternoon coffee for registered customers on every Saturday will create great awareness within my target market and will help me to win over from the competition (Kotler & Keller, 2011, 57). Only two direct competitors offer a variety of fish dishes. No other Indian restaurant offers organic food. Availability of organic food (chicken and egg) upon 12 hour request will give us competitive advantages. The location of Sweet and Spicy on the main road makes the premises easily accessible. Free Car Parking facility gives us a competitive advantage. Offering milder curries with English Brunch on weekends coupled with persuasive marketing will help to build loyalty among the consumers. Excellent service, quality food and cleanliness will also help in competitive advantage. Weaknesses There are already 8 Indian restaurants that have been successfully doing business. It would need very hard work from Sweet and Spicy to attract the existing customers. We will also go for new customers and families. To establish our name, it may require lots of money for promotional activities. Immigration tightening and smoking ban pose challenges to today’s restaurant business. 5.0 Location The proposed location of the restaurant is very near to Cheltenham Town Centre, Gloucestershire, GL51 5XQ. This premises is now being used as a pub, but due to rising costs and taxes on hard drinks, the owners want to close down the business. Since the place is already in the customer’s mind, it will not hurt for me to use this location to set up my concept Indian style restaurant. The plans for the restaurant include a seating capacity of 80 guests. Toilet facilities for men and women, 20 car parking spaces, an outside bar overlooking a public park and a fixed kitchen area are necessary elements for a successful restaurant business operation. The seller has asked for a rent of £40,000 which I will be negotiating down to £ 35,000, since the location is not of prime real estate. I would also need to pay the business rate set by local council which is £ 2,400. Some type of modernisation would also be required to the flooring, false ceiling and to add some more extra facilities. The sign, logo and creation of website could cost another £6,000 (Cabinet office, 2012). The property holds a prominent location at the centre of the village and has extensive roadside frontage to draw customer’s attention. The location is within proximate distance to my target customer. Proposed property is three miles away from Cheltenham Spa rail station and it is only 2.5 miles away from University of Gloucestershire. During peak season a large number of tourists and local people pass this road. The property is easily accessible and clearly visible from the road. 6.0 Does the Restaurant Meet a New Niche or Fulfil an Unspecified Need? I have already determined there are 13 restaurants in the Cheltenham area, of which 8 are Indian themed restaurants. Given that most of them have been operating on the region for at least 20 years, I would definitely have to come up with some new ideas and concepts to attract new and existing customers from the nearly locality. To target the new age customers, Internet savvy teenagers and office workers, the concept of afternoon coffee, WiFi and Epos ordering and takeaway system has already been touched upon. None of the other Indian restaurants are offering free deliveries, so we can also capitalise on this. I know that Indians love Thaali, vegetarian fare like idli, dossas, vadas and paani puri, so even these can be offered as snacks. Desserts could include kaju barfi, laddoos, rabri and other items. My chef has a special expertise in vegetarian cuisine and sweetmeats and I have sponsored his stay for this very reason. In fact samosas and curries are becoming part of international cuisine and even some English people have developed a taste for the milder varieties. By allowing for both Continental and Indian items on the menu, I will have definitely created a new niche or met some hitherto unspecified needs of the Cheltenham residents (Gordon & Brezinski, 2008). Demographic and economic data are very significant to determine potential restaurant sales in the market, by evaluation this information I can find out the strength of my local market area. Average gross weekly earnings in Cheltenham are 504.80. Self employment rate in Cheltenham is around 10.82% which is slightly lower than national rate. Education level of the Cheltenham residents is also very high. In 2008 39.97% held degree or equivalent qualification compared with national average 29.01%. The number of people claiming benefits is also very low in Cheltenham (only 50 people claim unemployment benefits per 1000 residents). Cheltenham is the second smallest town among the six Gloucestershire districts and it has second largest population 113,900 (Borough Council, 2010). In Cheltenham, 81 percent working age residents are employed, with average total earning per year at £25,200 (Borough Council, 2012). 7.0 Projected Financial Statements The final step for the feasibility study of Sweet and Spicy is Pro forma Financial Statements. The pro forma financial statement shows the estimated projected income and costs for a proposed restaurant businesses for a certain time period in future. So a financial analysis will answer the question Can we earn money from this restaurant?. Financial analysis also provides the quantitative assessment of site potential Larkin, 2009, 51). There are four steps to develop a pro forma of financial statement for Sweet and Spicy which are revenue generating criteria such as proposed price and opening hours, estimate average checks and revenues, estimate expenses, analyze and interpret the income statement. The same way expenses can be calculated. The expenses for the new restaurant such as payroll, employee benefits, direct operating costs, marketing, administrative costs, entertainment, maintenance and uncontrolled cost like rent, business rates and taxes can help estimate whether the new restaurant can generate a profit or not (Schaefer, 2012).   Projected Customer Volume: Day Lunch Dinner Total Monday 40 80 120 Tuesday 40 80 120 Wednesday 40 80 120 Thursday 40 80 120 Friday 40 110 150 Saturday 60 120 180 Sunday 80 80 160 Weekly Total 340 630 970 Yearly Growth Rate: We estimate that Sweet and Spicy will take about 6 months to establish itself and one year to break even, after this the growth rate will be 2 percent for Year 2, 3 percent for Year 3, and 4 percent for years 4 and 5. Based upon these assumptions, the Projected Income Statement is as follows: Item Description Year 1 £ Year 2 £ Year 3 £ Year 4 £ Year 5 £ Sales 1,059,000 1,280,180 1,312,580 1,457,080 1,503,360 Cost of Sales 706,000 853,454 875,054 931,387 1,002,240 Gross Margin 353,000 426,726 437,526 485,693 501,120 Expenses: Depreciation 7,060 8,534 8,750 9,313 10,002 Marketing 3,540 4,446 5,250 6,687 5,998 Leased Equip. 3,000 3,000 3,000 3,000 3,000 Licence & Pmts 500 550 600 650 700 Actg. & Legal 1,000 1,200 1,400 1,800 2,000 Cutlery & Rep. 2,000 2,200 2,400 2,600 2,800 Payroll & Tax 24,000 28,000 32,000 36,000 40,000 Total Exps. 41,100 52,380 53,400 60,050 64,500 Net Profit 311,900 374,346 384,126 425,643 436,620 Thus we can see the net profit margin averages around 30 percent for the restaurant business, which is quite good and if we are assured a good and regular clientele, there is no reason why Sweet & Spicy cannot hold its own among the other restaurants in Cheltenham (Porter, 1998, 37). 8.0 Conclusion The above analysis and figures clearly show that there is room for my setting up an Indian themed restaurant in Cheltenham area. I plan to capitalize on free home delivery, computerised POS ordering system, local culture, traditional delicacies, kids corner, free parking and good locale and outdoor eating habits of Cheltenham residents, which I am confident will make this venture a resounding success. References Author Unknown (2012). How to start a Restaurant Business. . Accessed on 27 April 2012 at www.allfoodbusiness.com/starting_your_own_business.php British Hospitality Association (2012, April 26). The Guest Experience in Hospitality is Mixed! Accessed on 27 April 2012 at http://www.bha.org.uk/2012/04/26/the-guest-experience-in-hospitality-is-mixed/ Cabinet Office Website (2012). Roundtable 2: Patents and Licensing. Accessed on 27 April 2012 at http://openstandardsroundtable2.eventbrite.co.uk/ Cheltenham Borough Council (2012). The Cheltenham Economy. Accessed on 27 April 2012 at http://www.cheltenham.gov.uk/info/347/local_economy-development/216/the_cheltenham_economy/2 Cheltenham Borough Council (2012). Cheltenham Economic Report 2011. Accessed on 27 April 2012 at http://www.cheltenham.gov.uk/site/scripts/download_info.php?downloadID=273&fileID=2132 Gordon, R. & Brezinski, M.(2008). The Complete Restaurant Management Guide. M.E Sharpe Ltd. Kotler, P. & Keller, K (2011). Marketing Management, 14th edition. Prentice Hall. Porter. M.E.(1998). Competitive Advantage: Achieving and Sustaining Superior Performance. The Free Press. Larkin, E. (2009). How to Run a Great Hotel. How to Books Ltd. Rutherford, D. and O’Fallon, M. (2006). Restaurant Management & Operations. John Wiley & Sons. Schaefer, P. The seven pitfalls of business failure and how to avoid them. Accessed on 27 April 2012 at http://www.businessknowhow.com/startup/business-failure.htm Read More