Case Study: A Italian Restaurant In East London

The nature of the project is starting a Italian restaurant in east London. We decided a place which is Mile end. Restaurants are one of the most highly regulated businesses. According to the National Restaurant Association, the restaurant /industry sales are expected to reach a record $537 billion in 2007 and there are approximately 935,000 restaurant-and-food service outlets. With 12.8 million employees, the industry is the largest employer. In order to open restaurant, I need to do first business plan.

Project objectives

Opening new Mezzo-Mezzo Restaurant in Mile End area will meet the following set

of objectives:

Achievement of company’s objective which includes maximisation of shareholders wealth.

Fulfil its growth organically.

Accomplishing customer’s requirement such as easy access to our Restaurant and good customer services.

Industry Analysis Although the restaurant industry is very competitive, the lifestyle changes created by modern living continue to fuel its steady growth. More and more people have less time, resources, and ability to cook for themselves. Trends are very important and this restaurant is well positioned for the current interest in lighter, healthier foods at moderate to low prices.

The Restaurant Industry Today

The food service business is the third largest industry in the country. It accounts for over $240 billion annually in sales. The independent restaurant accounts for 15% of that total. The average American spends 15% of his/her income on meals away from home. This number has been increasing for the past seven years. In the past five years the restaurant industry has out-performed the national GNP by 40%. The reasons given by the Folkney Report (November 1994) are 1) lifestyle changes, 2) economic climate, and 3) increase of product variety.

There are 600 new restaurants opening every month and over 200 more needed to keep pace with increasing demand.

Future Trends & Strategic Opportunities

The predicated growth trend is very positive both in short and long-term projections. Folkney states again that as modern living creates more demands, people will be compelled to eat more meals away from home. The DMR Industrial Report (April 1995) estimates this as high as 30% over the next five years.

In 1988 The National Restaurant Association released the Foodservice Industry 2000 report that forecasted how the industry might look in the year 2000. Some highlights from the panel’s findings:

“Consumers will spend a greater proportion of their food dollar away from home.

Independent operators and entrepreneurs will be the main source of new restaurant concepts.

Nutritional concerns will be critical at all types of foodservice operations, and food flavours will be important.

Environmental concerns will receive increased attention.”

Feasibility Study

Financial Feasibility

A Financial Feasibility study is an assessment of the financial aspects of something. This project has been assessed in terms of its financial feasibility and it viability in terms of cost and benefit analysis. The benefit that can be derived from this project will outweighs it initial cost. Taking into account performance of restaurant with similar size in Wembley area, I have used those performances as to project the expected cash flows where on average they both generate £10,000 per week. Since this will be likely because of the recent economic situation, but an am optimistic that this store will be able to general £10,000 per week.

Operational Feasibility

I recommends that this restaurant will be able to achieved these targeted payback period of five months to recoup the initial investment. This analysis has been shown below:

Revenue per month: £78,350/5 = £15,670

Revenue per staff per operating hours: £78,350/ (10*8) = £980 as part of company training policy, all staff will be well trained to deliver excellent customer service standard.

Revenue per week: £15,670/5 =£3,134

Social and Environment Feasibility

I have undertaken a market a market research and environment scanning to ascertain whether there will be interest on our restaurant, what is the demographic settlement like in terms of food. My study indicated that most people will like our food because we will provide different kind of variety.

Timescale

In order to open a restaurant, we need to prepare business plan first. It will take around 1 month. About finding location and finding restaurant name will take 1 month. Finance the business will take 2 month because sometimes it takes time. Installation of electricity and equipment will take also 1 to 2 month. And last we need to obtain business licence.

Task-1.2

SWOT Analysis

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieving that objective.

Strengths

Brand equity

The Restaurant location ( Mile End area )

Consistency of food

We will offers consumers choice, reasonable value and great service

Price is cheaper than others

We have take-away option

We have different menu items

Weakness

Quality and taste of products

Our restaurant is new and not established

Our restaurant has poor disabled facilities

We have limited funds

Opportunities

A new office complex is being built near by

A new housing development is planned

Threats

The high street brand is moving into the area

A main competitor has lowered their prices

Our operating costs are set to increase

PEST Analysis

PEST analysis stands for “Political, Economic, Social, and Technological analysis” and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

Political Factors

This relates to direct impact of political influences and it impacts our project. In the case of this project local council will support to our business because it will create jobs as well as optimize council’s tax revenue. Especially creating job is a major priority for the national government so they will be in support of the project. And also there will be less political risk that will affect this project such as government rejection of the propose moved, increased in tax at present time in very unlikely.

Economic Factors

The general economic environment shows that spending level among some people individual will fall due to difficulty in gaining credit but most young people with relative disposable income can at least spend and these are the people we are targeting.

Social Factors

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. In this area I have undertaken a market research and environment scanning to ascertain whether there will be interest on our restaurant food. My study indicated that most people are Asian in Wembley area and will be interested in our Asian.

.

Technological Factors

Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change.

Here the impact of technological changes which we already possessed will help the company to gain competitive advantages such as e-commerce.

Stakeholder Analysis

Stakeholder Analysis is a vital tool for identifying those people, groups and organisations that have significant and legitimate interests in specific urban issues. Clear understanding of the potential roles and contributions of the many different stakeholders is a fundamental prerequisite for a successful participatory urban Governance process, and stakeholder analysis is a basic tool for achieving this understanding.

The Stakeholders are;

Customers

Suppliers

Employees

Shareholders

Customers

Each of the stakeholders will have different expectation of an organisation. They try to engage with customers. They provide sales information, monthly monitoring of views. Their customer question time meeting help to identify and respond to changing customers’ needs.

Suppliers

The relationship of interests between an organisation and its suppliers can be seen as very similar to that between the organisation and its customers, but reversed. They do regular visits, meeting and discussions with suppliers. They have direct relationships with important raw material suppliers. Suppliers stock the business with all its business supplies. Suppliers may want an increase in wages. Suppliers have an interest in ongoing and mutually beneficial business relationships, and they expect to be paid on time.

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Employees

The Company try to engage with employees. They have many ways such as internal communications including an employee magazine and regular business updates. Employees many want an increase in pay rise. Staffs have a very big interest in the business in the form of wages, bonuses, discounts and holidays pensions. Employees’ interests may be seen as the assertion of certain rights deriving from what is seen to be acceptable in the way in which employees are treated within society.

Shareholders

The Company have shareholders. They do collection of feedback questions from individual shareholders. Shareholders are the owners of a company. Their only real involvement in the organisation will be at the Annual General Meeting, when they are called upon to approve, by a vote, the overall direction of the organisation and the senior management team responsible for achieving that direction.

Oftentimes, the only difference between floating and drowning is the direction. Without restaurant financial analysis, a restaurant may be face down without even knowing it.

Restaurant financial analysis analyzes performance metrics such as profits and losses, cash flow, cost of sales and cost of labour. By assessing this data, operators can evaluate their finances and establish systems and structures to keep their restaurant afloat.

Restaurant financial analysis performance metrics

Profits and losses

Whether we are produced monthly or weekly, profit and loss statements give restaurant operators a broad overview of their sales history.

But the information only becomes useful when broken down to reflect, cost of sales, cost of labor and other overhead costs. A restaurant financial analysis assesses profits and losses with a critical eye to determine specific areas that should be improved upon.

Cost of sales

A restaurants cost of sales, sometimes referred to as cost of goods, is the sum of all expenses associated with producing the menu items.

Should food costs be running at 20 percent or 40 percent? The answer can vary depending on a restaurants positioning (fast casual, casual or upscale) and menu mix.

Restaurant financial analysis can help operators determine where their cost of sales should be by building theoretical food and beverage costs.

Cost of labour

Cost of labour is another contributor to cost of sales. A fine line exists between overstaffing a restaurant and scheduling enough employees to run a restaurant effectively.

Sensible scheduling and employee productivity are the best ways to control cost of labour. In addition, tools should be available to assess mid-shift needs.

Many restaurateurs are reluctant to phase out employees in a timely fashion. Restaurant financial analysis can review payroll reports, sales reports and customer counts to optimize scheduling and productivity and decrease cost of labour.

When to undergo restaurant financial analysis

Opening a new restaurant

When opening a restaurant, restaurateurs can use financial analysis to predict their success. A restaurant financial consultant can draft a five-year plan and financial forecast based on industry and segment standards.

Financial analysis can also be used to establish financial systems for a new restaurant. Controls for cash handling, inventory, payroll and daily sales reconciliations should be established well in advance of a restaurant opening.

By implementing these systems early in the game, a restaurant can effectively monitor them, giving it a greater chance of succeeding financially.

Purchasing an existing restaurant

Before purchasing an existing restaurant concept, restaurateurs should conduct financial analysis and feasibility studies to determine the profitability potential of the operation.

This can be estimated by evaluating patterns and trends in the restaurants past performance and estimating the effect of anticipated changes.

Running an operating restaurant

Restaurant financial analysis is not just for new operations. Generally, it is most beneficial for restaurants already in operation.

Whether a restaurant has been in business for a year or 20, financial analysis can help identify losses and hidden costs.

That information will help establish appropriate financial systems or refine existing ones to keep money from slipping through the cracks.

Who can perform a restaurant financial analysis?

Restaurant financial analysis shouldn’t be performed by just any financial consultant. It is best to work with a consultant that specializes within the restaurant industry.

The main goal of restaurant financial analysis is to help operators understand how their restaurant can become more profitable.

A restaurant-specific consultant can explain the analysis process and their findings in terms that restaurant operators will understand.

A financial consultant will know the target performance metrics for specific restaurant categories and the industry as a whole. They can provide guidance for the selection and implementation of point-of-sale and accounting systems and show operators how to get optimum results from these systems.

A financial consultant can help restaurant operators build the necessary tools to pull and analyze their own financial reports. Ultimately, financial analysis should be ongoing, becoming an everyday part of a restaurants thinking.

Restaurant financial analysis doesn’t just keep a restaurant afloat, it helps their business soar.

Task-1.3

Market Competitively and Activity

This project will fit the business strategic of the restaurant because it will help gain competitive advantage, create new market for potential customers, gain market share in as well as responding to changes in business environment, increase profitability, establish local branch, obtaining new customers, expansion of business and improve company’s image which could be achieved since there is an existing market gap which we can fill via Ansoff’s matrix.

Marketing Analysis shows that this project will make the business more competitive in the following ways:

Demographic population: In west London area, the population is very high. There are many Asian restaurants available in the area. And the all restaurants provide good services and good food.

Food variety: The social society will be interested in our food because we will provide variety in the food along with music.

Market gap: the economic feasibility have highlighted that our competitors are doing well in these area.

Industry Trends

Studying industry trends is one of the first steps in conducting a market analysis. It will help you identify opportunities and threats in the industry that may affect your profitability. Consider the following Food Service Industry 2000 Trends, reported by the National Restaurant Association:

Consumers will spend a greater portion of their food dollars away from home;

Competition in the food service industry will be more intense as growth continues;

Major food service chains will increase their shares of both sales and units;

Independent operators will be the main source of new restaurant concepts;

Nutritional concerns will be critical at all types of food service operations; and

Service will become a more important point of differentiation.

Industry Tends Checklists:

Growth in Industry Sales

Quick-service vs. table-service

Chain vs. Independent

Types of restaurants (steakhouses, ethnic…)

Catering

Deli, bakery and takeout operations

Monthly/seasonal dining out patterns

Industry sales outlook

Market Demand

Economic trends

Consumer confidence

Demographic trends

“Food away from home” trends

Factors that motivate one to dine out Eating habits of different market segments

Menu Preferences

Appetizers/soups

Entrees

Sandwiches

Desserts

Nutritional concerns

Menu pricing

Alcoholic beverage consumption

Vegetarian trends

Restaurant Success Factors

New and popular concepts/themes

Customer service innovations

Pricing practices

Food production methods

Labour saving techniques

Debt-to-Sales ratios and other statistics

Legislative and Regulatory Issues

Business meal tax deductibility

Health insurance

Wage and hour requirements

Americans with Disabilities Act

Competitive Strategy

There are three major ways in which we will create an advantage over our competitors;

product identity, quality, and novelty

high employee motivation and good sales attitude

Innovative and aggressive service options

The restaurant will be the only restaurant among all the competition which focuses the entire menu on healthy, low-fat cooking. Each of the competitors offers at least one “healthy” selection on their menu. The target market will perceive the restaurant as the destination location for healthy, low-fat cooking.

The main points are Pricing, Location, Reputation, Image/Brand, Choice/Variety, Service and Atmosphere.

References

www.essortment.com

www.awib.org

www.mplans.com

www.virtualrestaurant.com

http://www.bplans.co.uk/steak_buffet_restaurant_business_plan/financial_plan_fc.cfm

Part 2

Task 2.1

Resources

Materials: Rented property from an individual landlord in west London as a perfect location for the new restaurant to be open, this is critical factor in terms of visibility and easy access of the restaurant for our customers.

Equipments: Different kinds of restaurant will require different kinds of equipment. Typically equipment needed to open a restaurant includes a service kitchen (oven, microwave, heat lamps, prep tables and dish washer, fryers, boilers, refrigerators (table, chairs, spoon, glasses and cash registers).

Labour: Ten staff normal standard hours (8 hours per day) and contractors the fixed day of work for one month.

Finance: Most banks and lenders require you to put some of your own money into the business and contrary to popular belief, they do lend money for businesses. The project financed can be source from long term borrowing from bank in Iceland of £50,000 to finance the project deliverables.

Cost Associated With Resources

These are one-off capital cost required immediately to deliver project deliverables.

Materials: property rent in west London area will requires a normal rental agreement with the landlord. A deposit of £15,550 plus one month’s rent in advance including council tax will be require total £32,350.

Equipments: Kitchen equipment will cost £10,000, boiler will cost £2000, till and it maintenance will cost £12000 and general things e.g. tables, chairs will coat £8000.

Labour: External contractors for refurbishment are expected at £12,500 this will includes: electrician, refurbishing the restaurant and painting the restaurant.

Sources of Finance

The project financed can be source from long term borrowing from bank of £78,350 to finance the project deliverables. They could be approach on the based that this project will recoup its initial investment within four months time; and that revenue generate can be used to pay of principal loan plus interest.

Budget for the Project

This project has been budgeted on the grounds of Zero based budgeting which involves identification of tasks to be performed and then funding resources to complete the task independent of current resourcing it ensure that resources are efficiently allocated. The project budgets have been made on this bases with each cost justify in terms of their usage in the project:

Resources£ CostMaterials32,350Equipments32,000Labour12,500Miscellaneous expenses1,500Total78,350

Cost Benefit Analysis

Cost Benefit Analysis is typically used by governments to evaluate the desirability of a given intervention; it is an analysis of the cost effectiveness of different alternatives in order to see whether the benefits outweigh the costs. The aim is to gauge the efficiency of the intervention relative to the status quo. The costs and benefits of the impacts of an intervention are evaluated in terms of the public’s willingness to pay for them (benefits) or willingness to pay to avoid them (costs). Inputs are typically measured in terms of opportunity costs the value in their best alternative use. The guiding principle is to list all of the parties affected by an intervention, and place a monetary value of the effect it has on their welfare as it would be valued by them.

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Years0123Present value78,3503,90,1801,090,8601,072,163Probability50%50%50%Certainty equivalent1,95,0905,45,4305,36,082D.F 9%1.0000.8800.9450.820Present value(75,000)1,71,6795,15,4314,39,587NPV£10,51,697The project is viable because it will yields to shareholder wealth creation of about £2.01 million in three years time. However incorporating rick to the cash flows using certainty equivalent, and for the fact that current economic climate in terms of spending will affect all industries, I am certain that the 50% of the cash flows will be generated in each of the years. This is show below:

Most restaurants use a system of 12-month or 13 four-week periods to track their annual budget. By breaking the budget down into these types of sections, it is easier to see when money is moving in and out of the restaurant.

Anticipate Your Costs

In the restaurant, budgeting is often a game of balancing costs and income. In fact, a budget is much like a profit and loss (P&L) statement extended over a longer period of time. Be prepared to account for the following costs in your annual budget:

Rent or mortgage payments

Taxes

Insurance

Labor/payroll

Utilities

Loan payments

Operational supplies

Repairs and maintenance

Marketing

Training

Food service professionals suggest that you plan to spend about 30 percent of your budget on food, 25 percent on labour, 10 percent on rent or mortgage, and 3 percent on utilities.1 The rest goes in small parts to operational expenses, marketing, taxes, maintenance and other variable costs. These are simply estimated guidelines to follow, as every restaurant’s expenses and budget are different. Look below for a graphical representation of these suggested expenditures:

Know Your Breakeven Point

. It is the bare minimum amount of sales the restaurant operation needs to bring in to survive. It is important to know your restaurants breakeven point so that future financial decisions can be made in hopes of making a reasonable profit.

Analyze Your Financials Every Period

Examining your P&L and your budget on a weekly and monthly basis will help you keep your bases covered in terms of realizing your expenses and income. Evaluate your budgeted operating expenses and your actual expenses, as well as the net profit you anticipated and what your restaurant actually made. Make a note of any areas in which your expenses exceeded your budgeted amount.

When budgeting for the year, especially if you are doing so for the first time, it helps to have a budget worksheet. Download a sample budget worksheet to your own back office computer.

Cost of Goods Sold — The cost of goods sold was determined by taking actual Profit and Loss statements from various restaurant concepts and then using our pricing structure and guest counts to arrive at costs.

Management Payroll — Figures are based upon the use of five managers per unit at our maximum bonus and salary levels. If we use four managers per restaurant, this will lower our payroll.

Fixed and Variable Expenses — The various fixed and variable expenses were determined by taking actual numbers from several different restaurant concepts.

Marketing Fees — These funds will be used for the production of various marketing materials.

Advertising — These funds will be used, if necessary, to maintain our sales at projected levels. If we are running significantly ahead of our sales projections, then these funds may not be necessary.

Management Fees — We will use these pounds for accounting and payroll services of our firm. As we grow in size, this cost burden will shrink per store due to efficiencies in volume.

Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendix. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:

We assume a strong economy, without a major recession.

We assume, of course, that there are no unforeseen changes in consumers’ tastes or interests to make our concept less competitive.

Introduction

This report is concerned staff training and development it related cost associated to this project. The company sales force plays a vital role in delivering better customer services and each member have different training needs depending our their position. The company’s their future depends on nurturing great individual talent and providing an environment where staff can flourish personally and professionally. Successful training will help to develop the following skills.

Deliver excellent customers

Well motivated

Increase morale

Improved job and staff performance.

Recruitment takes place from the point when a business decides that it needs to employ somebody up to the point where a pile of completed application forms has arrived in the post. Selection then involves choosing an appropriate candidate through a range of ways of sorting out suitable candidates leading to interviews and other tests. Training involves providing a range of planned activities that enable an employee to develop the skills, attitudes and knowledge required by the organisation and the work required.

A job description is also helpful because it sets out:

The job description can be sent out to potential candidates along with a person specification, which sets out the desirable and essential characteristics that someone will need to have to be appointed to the post.

A variety of media will be used to attract applications e.g. national newspapers for national jobs, and local papers and media for local posts.

Objectives of Training and Development

The main objectives of staff training and development are to improve the qualities of the trainee, formulation of objectives for different needs and ways of achieving it. The training objective is very important because it determines the designed and content of the training programmes. Contents of the training remain the same no matter the type of training involved. It is to increase personnel efficiency, professional growth and smooth and more effective organization’s operations.

Methods of Training and Development

On the job training/coaching: This relates to formal training on the job. A worker becomes experienced on the job over time due to modification of job behaviours at the point of training or acquisition of skills.

Induction/orientation: This is carried out for new entrants on the job to make them familiar with the total corporate requirements like norms, ethics, values, rules and regulations.

Apprenticeship: A method of training where an unskilled person understudies a skilled person.

Demonstration: Teaching by example, whereby the skilled worker performs the job and the unskilled closely observes so as to understand the job.

Vestibule: This is done through industrial attachment for the purpose of skills and technology transfer. It is therefore achieved through placement of an individual within another area of relevant work or organization. The effect is the acquisition of practical and specialized skills.

Formal Training: A practical and theoretical teaching process which could be done within or outside an organization. When training is carried out inside an organization, it is called an in-house training. Off-house training is carried out in professionalized training areas like: Universities, Polytechnics and Professional Institutes.

Cost of Training and Development

The cost of training will be the time of each individual at their contracted hourly rate for the two days which will last for three hours a day. .

However management training will cost the company in terms of travelling, refreshments, days attended, guaranteed hours of eight hours.

Plan and Agreed Timescale for this Project

The plan and agreed timescale for the management and implementation of the project, services and process are detail below using Gantt chart below:

The Plan and Implementation of this Project is show in chart below:

Activities

Obtain business licence

Installation of electricity

No. Of MonthsTask to be Achieved1 Prepare business plan1Finding a location2Finance the business1Finding restaurant name1Installation of Equipment1Installation of electricity and CCTV1Obtain business licence Installation of equipment and CCTV

Finding restaurant name

Finance the business

Finding a location

Prepare a business plan

1 2 3 4 5 6

Months

Prepare Business Plan

To prepare for