WORD COUNT: 14,243
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STATEMENT OF AUTHENTICITY
I have read the University Regulations relating relati ng to plagiarism and certify that this project is all my own work and do not contain any unacknowledged work from any other sources.
Signed: OLABOYE OLUWASEUN AJAYI
th
Date: 7 September 2009
WORD COUNT: 14,243
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PROJECT ABSTRACT
The aim of this project is to develop a business plan which will be used to secure funding for the expansion plans for the company “Prashad Restaurant”. ke y player in the vegetarian “Prashad Restaurant ” key objective is to become a key segment of restaurant market by providing high quality vegetarian meals to customers at affordable prices in a friendly environment. Through the development of this project the following objectives are to be achieved: a. Product description, business mission, vision and strategic objectives. b. External analysis (macro and micro environment). c. Internal analysis (Financial, Marketing and Operations). d. Strategic growth plan for the medium term e. Conclusion. The literature review for this project will cover some of the most useful businessoriented analytical frameworks such as: a. PESTEL Analysis. b. Porter’s Five Forces Model. c. Boston Consulting Group Matrix. d. SWOT Analysis. e. Product Life Cycle f. Financing and Business Plans KEYWORDS
Business Plan
External analysis
Internal Analysis
Restaurant
PESTEL
Porter’s Five Forces
SWOT
Financing
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PRASHAD RESTAURANT A business plan for expansion.
By
OLABOYE AJAYI
Management Project submitted to the Bradford University School of Management in partial fulfilment of the requirements for the degree of Master of Business Administration
2009
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PREFACE
While considering the subject to write my MBA diss ertation, I found it difficult to settle for just one subject. I wanted something that would allow me practise most of the core subjects I learnt on the MBA course. After several consultations and advice with my lecturers and peers, I decided on writing a business plan as my Dissertat ion topic. My big break came when the management of Prashad Restaurant advertised their need for a management student to develop a business plan for Prashad’s expansion. My reason for choosing to write my dissertation on developing a business plan was influenced by: Firstly, I have had almost a year of taught courses. I wanted to do something outside the classroom that would enable me put into practice the things I had learnt. Secondly, writing a business plan allowed me combine knowledge from most of the courses I had learnt during the duration of my MBA. Thirdly, I hope to start my own consulting firm later in the future and I reasoned getting experience developing a business plan now, will help me in actualising my dream in the future. This dissertation has enabled me experience firsthand the rigours and work behind starting a new business or expanding a business while al so allowing me apply the knowledge I have acquired both on the MBA course and in my previous work experience.
The Author
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DEDICATION
This work is dedicated to Ayodele Ajayi, Olayemi Ajayi, Olabode Ajayi, Omobolanle Ajayi, Dayo Ogunsanwo and Ayoade Adeoye for making my dream a reality, for always being there and for guiding me through the rough patches of life.
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TABLE OF CONTENTS
1
2
3
INTRODUCTION................................................................................................. 13 1.1
Prashad ...........................................................................................................13
1.2
Scope/Rationale of Project ............................................................................. 13
1.3
Methodology................................................................................................... 13
COMPANY SUMMARY ..................................................................................... 15 2.1
Prashad Background ....................................................................................... 15
2.2
Motivation for Expansion ............................................................................... 16
2.3
Saltaire ............................................................................................................ 18
2.4
Why Saltaire ................................................................................................... 19
LITERATURE REVIEW...................................................................................... 20 3.1
Strategic and Analytical Models .................................................................... 20
3.2
Financing and Business Planning ................................................................... 24
3.2.1
Theoretical aspects of a business plan .................................................... 24
3.2.2
Options in financing business plans ........................................................ 25
3.2.2.1
Traditional Financing Means ........................................................... 25
3.2.2.2
Grant Financing ............................................................................... 25
3.2.2.3
Venture Capital Financing ............................................................... 26
3.2.3 4
Financing and business plans .................................................................. 27
OVERVIEW OF RESTAURANT INDUSTRY IN BRITAIN ............................ 28 4.1
Indian Restaurant Industry in Britain ............................................................. 28
4.2
British Food Culture ....................................................................................... 28
4.3
Restaurant industry ......................................................................................... 29
4.3.1
Market sectors ......................................................................................... 29
4.3.1.1
British Restaurants ........................................................................... 30
4.3.1.2
Ethnic Restaurants ........................................................................... 30
4.3.1.3
European Restaurants ...................................................................... 30
4.3.2
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Important Trends ..................................................................................... 31
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4.3.3 4.4 5
Market Size ............................................................................................. 31
Indian Restaurant Industry ............................................................................. 32
CONCEPTUAL FRAMEWORKS ....................................................................... 35 5.1
PESTEL .......................................................................................................... 35
5.1.1
Political Aspect ....................................................................................... 35
5.1.2
Economic Aspect .................................................................................... 35
5.1.3
Social Aspect ........................................................................................... 36
5.1.4
Technological Aspect .............................................................................. 36
5.1.5
Legal Aspect ............................................................................................ 37
5.2
Porter’s five forces Model and Restaurant industry ....................................... 37
5.2.1
Bargaining Power of buyer ..................................................................... 37
5.2.2
Bargaining power of supplier .................................................................. 38
5.2.3
Rivalry among existing competitors ....................................................... 38
5.2.4
Threat of new entrants ............................................................................. 38
5.2.5
Threat of substitutes ................................................................................ 38
5.3
Prashad Restaurant Life cycle ........................................................................ 40
5.3.1
Introduction ............................................................................................. 40
5.3.2
Growth..................................................................................................... 40
5.3.3
Maturity ................................................................................................... 40
5.3.4
Decline .................................................................................................... 41
5.4
Competitive Strategies.................................................................................... 42
5.4.1
Competitive advantage ............................................................................ 42
5.4.1.1
Cost Leadership ............................................................................... 42
5.4.1.2
Product Differentiation .................................................................... 43
5.4.2
Relationship between cost leadership and product differentiation ......... 43
5.4.3
Restaurant industry and Competitive strategies ...................................... 45
5.5
Prashad Restaurant SWOT Analysis .............................................................. 45
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6
OPERATIONAL PLAN ....................................................................................... 47 6.1
Restaurant Location ........................................................................................ 47
6.2
Restaurant Design ........................................................................................... 47
6.3
Operating Criteria ........................................................................................... 48
6.4
Products and Services ..................................................................................... 48
6.4.1
Product and Service Description ............................................................. 48
6.4.2
Prashad Menus ........................................................................................ 48
6.4.2.1 6.4.3 7
Specialty Drinks & Coffees ............................................................. 49
Competitive Comparison ........................................................................ 49
MARKET ANALYSIS ......................................................................................... 51 7.1
Market Segmentation...................................................................................... 52
7.2
Target Market Segment Strategy .................................................................... 53
7.3
Service Business Analysis .............................................................................. 54
7.3.1 8
Competition and Buying Patterns ........................................................... 55
STRATEGY AND IMPLEMENTATION ........................................................... 58 8.1
Competitive Edge ........................................................................................... 58
8.1.1
Competitor Analysis................................................................................ 59
8.1.2
Market Analysis Conclusion: .................................................................. 60
8.2
Marketing Strategy ......................................................................................... 60
8.2.1 8.3 9
Marketing Program ................................................................................. 62
Sales Strategy ................................................................................................. 64
MANAGEMENT SUMMARY ............................................................................ 65 9.1
Management Team ......................................................................................... 65
9.2
Personnel Plan ................................................................................................ 66
10
FINANCIAL PLAN .............................................................................................. 68
10.1
Important Assumptions ............................................................................... 69
10.2
Sales Forecast ............................................................................................. 70
10.3
Breakeven Analysis .................................................................................... 72
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10.4
Projected Profit and Loss ............................................................................ 73
10.5
Projected Cash Flow ................................................................................... 76
10.6
Projected Balance Sheet.............................................................................. 78
10.7
Business Ratios ........................................................................................... 79
10.8
Expansion, Payback & Exit Strategy .......................................................... 80
11
Conclusions and Recommendations ..................................................................... 82 I.
Bibliography ....................................................................................84
II.
Appendix 1 ....................................................................................... 88
III.
Appendix 2 ..................................................................................... 91
IV.
Appendix 3 ..................................................................................... 92
V.
Appendix 4 ...................................................................................... 93
VI.
Appendix 5 ..................................................................................... 95
VII. Appendix 6 .................................................................................... 97 VIII. IX.
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Appendix 7 .................................................................................. 99 PROJECT PROPOSAL................................................................ 100
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LIST OF TABLES & FIGURES
Table 1 - Personnel Plan ............................................................................................... 67 Table 2 - Sales Forecast ................................................................................................ 71 Table 3- Breakeven Analysis ........................................................................................ 72 Table 4 - Projected Profit and Loss ............................................................................... 73 Table 5 - Projected Cash Flow ...................................................................................... 77 Table 6 - Projected Balance Sheet ................................................................................ 78 Table 7 - Ratio Ananlysis.............................................................................................. 79 Table 8 - Prashad Historic Performance ....................................................................... 89 Table 9 - Monthly Sales Forecast.................................................................................. 91 Table 10 - Personnel...................................................................................................... 92 Table 11 - Monthly Profit and Loss .............................................................................. 93 Table 12 - Monthly Cash Flow ..................................................................................... 95 Table 13 - Monthly Balance Sheet ................................................................................ 97
Figure 1 - Prashad customers & sample of restaurant offering ..................................... 17 Figure 2- United reform Church ................................................................................... 18 Figure 3- Salt's mill ....................................................................................................... 18 Figure 4 - Sir Titus Salt ................................................................................................. 19 Figure 5 - SWOT Analysis Grid ................................................................................... 22 Figure 6 - SWOT Framework ....................................................................................... 23 Figure 7 - Origin of people granted settlement in the UK in 2004 ............................... 29 Figure 8 - The UK Restaurant market by segment ....................................................... 31 Figure 9 - UK restaurant market growth between 2000 and 2009 ................................ 32 Figure 10 - UK restaurant segments by market share ................................................... 33 Figure 11 – Percentage of customer by type of restaurants .......................................... 34 Figure 12 - Households in England by t ype, 2000-2021 .............................................. 36 Figure 13 - Porters 5 forces analysis of Indian restaurant Industry .............................. 39 Figure 14 - Product Life Cycle of Prashad Restaurant ................................................. 41 Figure 15 - Different level of product offering ............................................................. 44 Figure 16 - SWOT analysis of Prashad Restaurant ....................................................... 46 Figure 17 - Percentage of residents in Saltaire by age group........................................ 52 Figure 18- Location of restaurants within 1 mile of Sal taire ........................................ 56
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Figure 19 - Location of restaurants within 1 mile of Sal taire ....................................... 57 Figure 20 - Monthly Sales forecast ............................................................................... 70 Figure 21 - Annual Sales forecast ................................................................................. 71 Figure 22 - Breakeven analysis ..................................................................................... 72 Figure 23- Forecasted yearly profit ............................................................................... 74 Figure 24 - Forecasted Yearly Gross Margin ................................................................ 75 Figure 25 - Gross Margin Monthly ............................................................................... 75 Figure 26 - Monthly Profit ............................................................................................ 76 Figure 27 - Cash flow.................................................................................................... 77 Figure 28 - Prashad Menu ............................................................................................. 99
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1 1.1
INTRODUCTION Prashad
Prashad is a specialist Indian deli and vegetarian restaurant that specialises in bringing Yorkshire original dishes as available in North India, South India and Punjab. The company’s ethos is to never compromise on quality and to establish long relationships with customers. 1.2
Scope/Rationale of Project
Prashad is a vegetarian deli & restaurant situated in Bradford that has been operating since 1986. Current situation analysis shows that Prashad’s current location is undermining the business’ potential. This is because over the years, the demographic of the people living around the restaurant’s location has evolved to people who do not appreciate the restaurants business. As a result, the company is looking to expanding and opening a new outlet in a more favourable location. This project will review the proposed location for the business expansion and develop a business plan which will guide Prashad in its expansion plan and be used in securing appropriate finance. 1.3
Methodology
The objective of the project is to provide a Business Plan to guide Prashad in its expansion plans, measure its success and secure funding for its expansion. This will involve identifying Prashad’s competitive advantage, analysing the restaurant market, constructing a cash-flow and Profit and loss statement, then build a business plan around it. The literature review will cover the latest developments on market analysis, market offering and marketing strategy. Historic analysis of the business will also be reviewed. It will be important to discuss why Prashad is looking to expand and how it has grown over the years. Saltaire, the proposed location will be analysed. It’s history and especially analysis of suitability of demographic of people there to Prashad’s business offering. An analysis of the competition of Prashad in Saltaire will also be performed.
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An initial setup cost including step by step cost analysis will be prepared. A cash flow analysis and Profit & Loss statement for one year will be prepared. Sources of financing will also be researched. The project will produce a business plan and make recommendations on the choice of Saltaire as the location for Prashad’s expansion plans. This plan will guide Prashad in its expansion plans and be used as a tool to review its performance and to secure funding for the business. Data Sources Primary information •
Interviews with Prashad staff and management.
•
Interview with other restaurant owners in Saltaire.
•
Customer feedback on Prashad’s product and services.
Secondary information •
Publications on Vegetarian Restaurants
•
Publications on Saltaire
•
Publications on Customer Satisfaction
•
Current thinking on Strategic Management
•
Industry/market reports
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2 2.1
COMPANY SUMMARY Prashad Background
Prashad is a family owned establishment that has been operating for over 15 years. It operates as a specialist Indian vegetarian food business. Initially the company focussed on the Indian market and supplied sweetmeats, dry snacks from a retail outlet and also focussed on Asian wedding catering. As Prashad’s reputation started to grow and vegetarian food became more popular the company introduced a small eat-in menu with 8 covers and start ed to grow its non Asian customer base. The eat-in facility opened the doors to a new market and also a new industry. Prashad was getting a reputation for excellent food and Kaushy the head chef at the time was invited to compete in regional and national competitions. She became: •
Yorkshire Forward’s chef of the year 2004 & 2005 (Prashad online 2009)
•
SACC National Chef of the Year 2005 while competing against 3000 entrants
(SACC online 2009) •
Yorkshire Post’s Yorkshire Cooks MasterClass (Yorkshire post online 2009)
•
UKTV Food Nominated Local Food Hero (UKTV online 2009)
•
Consultant Chef for Bradford Council’s School Meals
•
Which Good Food Guide 2007, 2008 & 2009 (only 1 of 2 Asian Restaurants in
Bradford) These accolades along with the write ups in the Telegraph & Argus and Yorkshire Post, and becoming Vegetarian Society approved substantially increased awareness and customers. “Richter needs to recalibrate his scale for the earth shattering effect of the Pethis starter” Robert Cockcroft Yorkshire Post Prashad re-organised its layout and introduced a 22 cover rest aurant, this has been running and growing customer base for 5 years. Currently the restaurant averages 250 covers per week and is very often turning customers away due to shortage of space.
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The restaurant has developed a very loyal customer base and a superior brand for exceptional quality. (Sugarvine online 2009) Prashad this year has also secured an exclusive supply contract with Sodexo, they are the outsourced catering arm of Bradford University. Prashad has st arted to see lucrative hospitality orders and expects this to grow. Prashad has identified an ideal freehold property in Saltaire: 10-12 Commercial Street, Saltaire, Shipley, West Yorkshire, BD18 3SR Moving to a more demographically suited location and moving away from a residential area will allow the business to establish itself as a fully fledged licensed restaurant. The business looks to maintain all its current product offerings namely : Deli, Restaurant, Delivery, Catering and introduce further revenue streams like Alcohol, Cooking Courses, Fresh Healthy Juices, Herbal Medication. The business fully expects to see the delivery side of the business expand significantly. The new location presents a larger more lucrative delivery market. Prashad’s success has been organic and during the economic downturn the business is growing its revenue. The business is looking for finance to buy the freehold and open the new facility by November. Prashad’s future is very good and with a strong customer base, moving to a larger more purpose built location will help the company realise its true potential. Prashad works hard to keep the dishes authentic a nd real, anything ordered from the menu is widely available throughout India. Prashad has been in the good food guide for over three years. For a l ong time, Prashad was the only vegetarian restaurant in Bradford but in 2008 two other vegetarian restaurants have been opened in the Bradford area. 2.2
Motivation for Expansion
Prashad’s main purpose for expansion is growing the business. Prashad currently enjoys a high customer loyalty, good reputation in expertise for delivering exceptional
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food but the ambience around its current location is not allowing the business get maximum return on its services. •
Employ more staff, increase size and scope of business which ultimately will result in increased turnover.
•
Management is currently all about personal passion. Expansion will allow for implementing systems in the managing of the business.
•
Move to location with proper ambience to allow for maximizing of resources and getting more returns for services.
Figure 1 - Prashad customers & sample of restaurant offering
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2.3
Saltaire
Figure 2- United reform Church
Saltaire Village is near Bradford in West Yorkshire, England. It is named after Sir Titus Salt who built a textile mill and this village on the River Aire. In December 2001, Saltaire was designated a World Heritage Site by UNESCO. This status is owed to the dedicated work of people from the local community. Saltaire was a purpose-built "model" Victorian industrial village, next to Shipley and just to the north of the centre of Bradford in West Yorkshire's Bronte Country (Saltaire village, 2009). The village itself was built in the nineteenth century by the Victorian philanthropist Sir Titus Salt, to provide self-contained living space for the workers at his woollen mills, a much needed substitute to the then "dark satanic mills" of Bradford and Leeds (from the Jerusalem hymn) (Saltaire village, 2009).
Figure 3- Salt's mill
The Salt’s mill was built in 1853 and employed approximately 3000 workers. As at then, it was among the most modern mills in Europe and had many improved features such as flues to get rid of dirt and dust, improved smoke burners, and incorporating noisy machinery in the lower levels to suppress the noise. At full production capacity, the factory had 1,200 looms which could produce over 30,000 yards of cloth a day (Haworth village, 2009). Over the next 20 years Titus Salt created over 800 houses for the workers as well as shops, schools and improved health prevision; clean water and bath houses and a hospital. Gas was supplied for lighting and heating. In the 1980's Salts mill was in decline, it was purchased in 1987 by Jonathen Silver who converted it into office, shops and the 1853 Hockney art galleries (Haworth village, 2009).
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Figure 4 - Sir Titus Salt More recently Salt's Mill has been converted by the late Jonathan Silver into shops and the "1853 Gallery" which houses a collection of the works of the famous artist, David Hockney who was born in Bradford. Other buildings in the village have now been similarly transformed into shops, licensed restaurants and public houses (just a little touch of irony here as Sir Titus was a staunch abstainer) Every year the village hosts the very popular Saltaire Festival which is usually held in September (Saltai re village, 2009). 2.4
Why Saltaire
Prashad’s choice of Saltaire was based on a number of factors: •
It is centrally located, providing potential access to customers.
•
The demographic of people in Saltaire is ideal for the business
•
The ambience round Saltaire will provide good image for the business.
•
Saltaire is known for restaurants providing exceptional service.
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3 3.1
LITERATURE REVIEW Strategic and Analytical Models
The objective of this project is to develop a business plan for expansion and investigate likely sources of finance for Prashad restaurant. An analysis of the business environment is critical to the development of an effective business plan. The external analysis gives an understanding of the external business environment that Prashad will be operating in while the internal analysis provides an assessment of the internal resources which Prashad needs to ensure a successful business. This dissertation will make use of the PESTEL and Porter’s five forces f ramework to analyse the external environment. These analysis tools will help provide an understanding of the nature and dynamic of the forces that drive or shape the external environment (Sanderson et al., 2002) which Prashad will be operating in. The literature review will also look at the latest developments in financing businesses, and will investigate the theories behind the latest suggested funding sources. PESTEL analysis looks at the external business environment, thus it is an effective strategic tool for understanding the holistic picture of the environment in which a business operates, allowing a business to take advantage of the opportunities and minimize the threats faced by company’s business activities (Papers4You.Com, 2009). It provides examinations of political, economical, social and technological, environmental and legal forces externally (Oxford University press, 2007) The purpose of the PESTEL Analysis framework is to examine the interaction of the Political, Economical, Social, Technological, Environmental and Legal forces which are particular to the environment in which Prashad will carry out its activities. Although these elements constitute part of the uncontrollable environment, the use of PESTEL framework provides a key analytical exercise that Prashad may use to understand and minimise the risks and to maximise the positive effects associated with some of these forces through the formulation of appropriate strategies. According to Luffman et al. (1996), the ability to interpret the external environment is an important facilitator for firms to formulate, accomplish and/or improve its strategic and business objectives.
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Another tool used in understanding the external environment is Porter’s Five Forces framework. It considers the interaction of the forces of competition in a firm’s given external environment. Porter (1980) argues “understanding industry structure must be the starting point for strategic analysis on identifying the basic underlying characteristics of an industry”. These characteristics are responsible for defining the competitive environment in the industry. Porter suggests that the level of competition in an industry can be determined by the analysis of the five competitive. The level of competition in an industry ultimately determines its profit potential. These forces are: •
Rivalry among competitors
•
Threat of entry
•
Threat of substitution
•
Bargaining power of buyers
•
Bargaining power of suppliers
The Product-Life-Cycle (PLC) Framework will also be used to establish the stage of the PLC the Restaurant service industry occupies. The internal analysis will be used to complement the external analysis in order to determine the key resources and capabilities which Prashad should possess in order to succeed. Sanderson et al. (2002) defined these as; •
Tangible Resources: finance
•
Intangible resources: brands, reputation, culture
•
Human: skills, attitudes, knowledge.
Jobber (2007) defines the key resources and abilities needed by a company as: •
Operating Result (i.e. to know about services, customer etc. for the sale, profit
etc.) •
Strategic issue analysis (number of question such as current marketing
objective, the completive advantage of the organisation etc. this question will help to analyse the strength and weakness) •
Services Marketing Mix Effectiveness (i.e. Services, Promotion, Price, Place,
People, Physical evidence and Process)
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•
Marketing structure and system (Structure will include marketing organisation,
marketing training etc. and system will include marketing planning system, marketing controlling system etc.) A combination of the external and internal analysis will guide Prashad in the development of the strategies needed to perform and survive as a business. The SWOT model, which considers a company’s Strengths, Weaknesses, Opportunities and Threats, will be used. This framework is used to assemble both analysis and to highlight potential strategies to avoid weaknesses whilst maximising opportunities. According to Stapleton et al. (1998), external opportunities and threats can be considered through the internal strength and weakness in an integrat ed way through the SWOT analysis framework. Luffman et al. (1996) argues that a firm’s strategy should be built on strengths towards opportunities while avoiding threats and correcting weaknesses.
Figure 5 - SWOT Analysis Grid
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Figure 6 - SWOT Framework
In 1980, Michael Porter developed a set of generic competiti ve strategies to be pursued by firms depending on the competitive forces of the market they operate in. These generic strategies are: •
Cost Leadership: Providing low cost products to customers
•
Differentiation: Adding extra features to products valued by customers, for
which they are inclined to pay a premium •
Focus: Choosing to serve one segment or a small number of segments of the
market When developing the internal analysis, and the Marketing Plan of Prashad, these strategies will be explored and the most appropriate one will be developed in detail. A combination of the Product Life Cycle framework and the Boston Consulting Group Matrix, will help in establishing the product ranges with greater potential and provide direction on where the firm’s available resources should be concentrated.
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3.2
Financing and Business Planning
This section considers the theoretical aspects of a business plan, it will move on to discuss the traditional means of financing a business and will conclude by examining the role of business plans in financing a business. 3.2.1
Theoretical aspects of a business plan
It has been argued that the most important step a firm can take in ensuring its future growth is developing a business plan (Ames, 1989; Hindle, 1997; Kahrs, 1995; Maitland, 1996). This is even more important in the start-up environment because they cannot afford to be wasteful with their resources. Skripsky, (2002) argues that a firm needs to plan the distribution of its scarce resources is to plan. Little wonder that business planning is considered by experts as one of the most important factors that can ensure the success or failure of a firm (Ames, 1989). A business plan is a written document detailing how a business owner or manager will organize and implement their activities to ensure the success of the venture. According to Bracker et al. (1998) and Schwenk & Shraeder, (1993), planning helps the growth of businesses. However, Sandberg et al., (2001) point out that some small businesses only use the business plan to secure financing and dump it afterwards. Castrogiovanni, (1996) argue that the positive effects of business plan are often taken for granted. The business plan is not only useful at the start-up of a venture but also throughout the lifecycle of the venture (Hormozi et al., 2002). The business plan assists in creating competitive advantages and helps a firm’s survival through strategic planning (Harrison et al., 1994). It is understandable then why so much importance is paid to business plans. The business plan explains to the financier the direction of the business and how it hopes arrives at its destination (Hormozi et al., 2002). The correlation between financing and business planning can thus be seen and understood (Ames, 1989, Mintz, 2004, Musey, 2000).
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3.2.2
Options in financing business plans
Financing is a crucial problem to every firm regardless of their size or location in the world. Financing affects every aspect of the busines s including their life cycle and profitability (Ulrich and Cassel, 1975; Witkin, 1997). Before now, a trip to the bank was all it took to secure financing for a business but banks have become more stringent in their lending. This has paved the way for various funding schemes. 3.2.2.1 Traditional Financing Means
According to Ulrich and Cassel (1975), trade credit and bank loans are two of the most common external sources of funding for new ventures. Bank loan is important to new ventures, but they are not easy to obtain. This is because banks tend to shy away from high-risk endeavours and want assurance on the safety of their investment (Witkin, 1997). This is not good news especially for high-risk ventures, who face great problems in securing bank loans which more often than not they do not get leading to them facing Myers and Majluf (1984) pecking order theory which states that such ventures will end up paying a higher rate of return compared to the norm. 3.2.2.2 Grant Financing
Grant financing are similar to loans in all respects except that they are not repaid to the lender. According to Price (2003), grants are given to organisations with close views and beliefs as the lending organisation. Most times, grants are given to organisations whose operational methods benefit the society at lar ge. It must be said that the procedure for obtaining grants are very bureaucratic, time consuming and the granter usually have very specific requirements for organisation to qualify (Vincent Denby, 2005). As such organisations seeking grants must plan early to ensure the y meet all the granter’s requirements. The granting institution ensures that the money is used for t he original purpose usually through an overseer. According to Baliga (1995), grants between countries comes with strings attached such as spending donated money on products or services from donor country (tied aid) or demanding receiving country privatize some sectors ("conditionality").
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It is evident that grants financing are more difficult to obtain and control compared to bank loans. They are mostly used in non-profit non-profit organisations (Sandra et al., 2006) although some are given to profit oriented organisations but in small numbers. This means that just because grants are free monies does not necessarily mean that they are the best means of financing an organization. The fact that grants are free fr ee monies does not mean they are the appropriate means of financing an organisation especially because of the controlling and regulatory restrictions attached which could limit limi t the management’s ability in running an efficient company (Vincent Denby, 2005). 3.2.2.3 Venture Capital Financing
Davila et al., 2003 describes Venture capital as external funding which includes managerial and technical expertise for new, growing or struggling. Most common sources of venture capital include: group of wealth y investors, investment banks and other financial institutions (Wirbel and Wilson, Wi lson, 2005). Venture capital is common among new or growing ventures with prospects for high growth but due to operating history cannot raise funds through banks (Gupta and Poole, 1982; Terry and Dirk, 2006). Venture capitalists apart from owning equity in the company also have a sa y in its operations and this may cause problems if i f the venture capitalist and management of the company have vision (Carl, 2005; Karen and Robert, 2006). Venture capitalists also insist on planned exit usually within three to s even years as part of their thei r criteria for investment (Karen, 2006). Although venture capital seems to be answer to st art-ups, the downside is the difficulty in obtaining them because historic analysis shows that venture capitalists fund about one in every four hundred opportunities (Keith, 2002). Venture capitalists have a preference for opportunities in fast growing industries such as technology, life sciences and biotechnology because they have very high growth potential and will allow for quick return on investment and successful exit within the specified time frame (Terry and Dirk, 2006). This section has shown the different means of finance and difficulties that new ventures such as Prashad may face in i n securing appropriate finance for its expansion ex pansion plans. These range from the problems of securing loans from banks; banks; the difficulty in
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obtaining and managing funds obtained through grants, to the very high return on investment required by venture capitalists. Care should be taken when choosing an appropriate source of finance to consider the entr epreneurs vision and how the finance procedure could affect the actualization of the business plan. New ventures could be financed through various means but each method has different effect on the business and the chosen method may either ensure success or failure of the new venture (Carl, 2005). 3.2.3
Financing and business plans
The creation of a business plan as a means to securing financing is arguably the most important event in the life of the business. This is because the lender makes a decision to either finance or discard a proposal based on the information contained in the business plan. Trager (1993) argues that the true determinants of the direction a business takes are the lenders because if there is no finance, the business idea never becomes a reality (Greenfield, 1995). It is can be argued then that the ability of a venture to obtain funding is as important as the business it plans to fund. It is wise to realize that financing does not just make it possible to begin a planned business, but the type of financing may affect how the business is run and ultimately its success or failure (Vincent Denby, 2005). This is especially of great importance in venture capitalist or grant funding where the lending organization exerts considerable influence on the daily running of the business (Vincent Denby, 2005; Carl, 2005; Karen and Roberts, 2006). The business plan should be a dynamic document which is not only used to secure finance but revised and updated throughout the lifecycle of the business t o stay ahead of market trends and demands (Brown, 1996). The business plans, not only shows where you are, but where you want to get to and how to get there. Little wonder that many researchers agree that the business planning and financing are the two most important aspects of a new venture and determine the success or failure of such ventures (Bracker et al. 1998; Schwenk & Shraeder, 1993; Hormozi, 2002; Rhyne, 1986).
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4 4.1
OVERVIEW OF RESTAURANT INDUSTRY IN BRITAIN Indian Restaurant Industry in Britain
This chapter will introduce the Indian restaurant industry; explain ongoing trends and market share. Finally, problems and challenges faced b y Indian restaurant industry. th
Clermont Marot in the 16 century used the term ‘restaurant’ to refer to a broth. However it started being used in today’s context, in 1765 during Boulanger’s Boulanger’s time th
(Peter & Grove, 2006). The 20 century gave birth to the idea of Indian restaurants rest aurants in the United Kingdom. In 1960, there were only about 500 Indian restaurants in the United Kingdom and about 75percent were owned by Pakistanis. With the advent of Bangladesh’s independence in 1971, Indian restaurants in the United Kingdom steadily grew to 8,000 by year 2000 (Peter and Grove, 2006). Indian restaurants are considered a major industry in the United Kingdom with turnover of over £2 billion a year and employing around 70,000 (Peter and Grove, 2000). British people have ample range of Indian restaura nts to choose from for out-of-home eating. These are also complemented by other ethnic restaurants which can be found in almost every city in the United Kingdom leading to increasing competition within the industry. 4.2
British Food Culture
Since the 1950’s significant population of ethnic groups have been migrating into the United Kingdom to look for work or in search of the “ green land ”, ”, leading to an increasingly ethnically diverse society. societ y. India, Pakistan and Bangladesh constitute a large percentage of the migrants and each ea ch ethnic group migrated with its own culture, religion, language and cuisine.
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Figure 7 - Origin of people granted settlement in the UK in 2004
Source: office for national statistics (2006) UK Indian foods began to be popular in the United Kingdom around 1960. Today, a large number of Indian, Pakistani and Bangladeshi restaurant are se rve their local distinct dishes. Birmingham was heart of this cultural transition and were followed in quick succession by Manchester and Bradford. The Indian cuisine is now considered an integral part of British food and a few Indian-origin dishes such as Chicken tikka massala is now considered as one of England’s most popular. 4.3
Restaurant industry
The term restaurant refers to a place supplying food for consumption to customers on the premises (Keynotes, 2005). The restaurant industry in the United Kingdom consists of a mix of family owned, branded restaurants chains, individual and independent outlets. The restaurant industry can be classified into different sectors based on type and market share. 4.3.1
Market sectors
United Kingdom restaurant industry is classified into three major sectors as: •
British Restaurants
•
Ethnic Restaurants
•
European Restaurants
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These three classes can be further grouped into Asian, Chicken, Continental, Fast food, Pizza/Pasta, Pubs and hotels, Roadside and other general menus restaurants. 4.3.1.1 British Restaurants
This sector is made up public houses, public houses-restaurant, and hotels and they serve traditional English food. The typical British food sold as t ake-outs are Fish and chips. 4.3.1.2 Ethnic Restaurants
The number of ethnic restaurants serving traditional Indian and Chinese cuisine is in the thousands. Competition is also on the rise in this sector with the introduction of newer concepts like the American, Japanese and Thai cuisines. (Keynotes, 2006). 4.3.1.3 European Restaurants
The formation of the European Union resulted in increased migration of thousands of people into the United Kingdom especially from countries such as Poland & Hungary. These migrants introduced the regional cuisines of their native countries. According to keynote (2005) English city restaurant available to public are: •
25 to 30% - Restaurants (pubs or hotels)
•
15 to 20% - Traditional English restaurant (cafes or tea places with domestic
theme) •
15 to 20% - Traditional Indian restaurant (curry houses or Chinese res taurants)
•
15 to 20% - National chains (burgers, pizza, and fried chicken)
•
15 to 20% - Regional European restaurants (French, Italian)
•
5 to 10% - Other foreign cultures restaurants (Greek, Turkish and Thai).
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Figure 8 - The UK Restaurant market by segment
Soruce: Data from key notes (2005): UK Restaurant value by restaurant t ype 20022006 in
₤ Million
The availability of restaurants depend at any place depend upon socio-economic factors. Ethnic minority concentrated areas as Bradford and Birmingham likely to have restaurant that are own an5d run by member of that minority. Another important factor that influences availability of any restaurant is tourism. 4.3.2
Important Trends
•
Rising trend of dual income household leading to reduced time for cooking and
increase rate of eating out which is supported by wide variety of restaurants. •
Increasing ethnic diverse society and the introduction of foreign cuisines to
British people leading to availability regional food in large cities. •
Restaurants forced to introduce healthy food choices due to ris ing level of
obesity and increase health awareness among consumers. •
Restaurant industry player affected by ban on smoking in public places and
legislation on the sale of alcohol. 4.3.3
Market Size
In 2007, the Indian restaurant industry was estimated at ₤13.25bn (Keynotes, 2008) and is continuing to grow. Industry growth from 2000 to 2005 and then from 2005 to 2009 expected growth is:
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Figure 9 - UK restaurant market growth between 2000 and 2009
Market £m Year
16,000
Market £m
14,000
2000
10,797
12,000
2001
11,136
10,000
2002
11,678
8,000
2003
12,000
Market £m
6,000
2004
12,000
4,000
2005
12,250
2,000
2006
13,000
2007
13,650
2008
14,400
2009
15,000
0 0 0 0 2
1 0 0 2
2 0 0 2
3 0 0 2
4 0 0 2
5 0 0 2
6 0 0 2
7 0 0 2
8 0 0 2
9 0 0 2
Source: Data compiled from Keynotes (2005) Market Growth from 2000 to 2009 4.4
Indian Restaurant Industry
The increasing ethnic diversity of Britain also led to rapid growth of ethnic restaurants. The 1950s and 1960s was a period of rapid growth of the Indian restaurant industry especially in London and South East which are responsible for housing about 45% of Indian restaurants. The concept of Indian restaura nts spread from there to all over Britain. (Peter and Colleen Grove, 2006).
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Figure 10 - UK restaurant segments by market share
Source: Data compiled from Keynote (2007) The growth in British fish and Chips takeaways and other ethnic r estaurants (Chinese, American and Thai) have increased the competition faced b y Indian restaurants. The Indian restaurants lost about 2% of their market share in 2003, while the Asian market industry gained 7.8% market share. The Asian Business Federation in 2006, record shows that more than 400 restaurants closed down between 2000 and 2004. The Indian restaurant industry is the dominant ethnic restaur ant. Figure below shows that 31% of consumers visit public houses while 22% visit Indian restaurants. keynote (2005).
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Figure 11 – Percentage of customer by type of restaurants
Source: Data compiled from keynotes 2005
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5
CONCEPTUAL FRAMEWORKS
5.1
PESTEL
The macro-environment has an effect on a firm’s decision making thus influencing its operations. The PESTEL analysis will be used to examine the United Kingdom’s restaurant market in the Political, Economic, Social, Technological, Environmental and Legal aspects, and the effect on Prashad’s decision making.
5.1.1
Political Aspect
The Hospitality Training Foundation (HTF) was re -launched in May 2004, with focus on People to mark its shift into the Sector Skills Council for the hospitality, leisure, travel and tourism industries. ( KeyNote, 2005) The government have been advised by health advocates to use regulations in adjusting the food industry in order to combat the increasing health problem of obesity and excess weight gain among the British population. Examples of the advised mechanisms include taxing soft drinks and restrict ing snack and food advertising to children 5.1.2
Economic Aspect
The United kingdom economy commenced a slump after 14years of growth and the growth in 2008 and 2009 forecasted at 1.6% and 1.8% respectively. Analysis show that some external and environmental factors have weakened the industry especially within Gastro pubs: the smoking bans and tax raise on alcohol dramaticall y affecting sales (Guardian business, 23/05/08). The reduced level of tourists entering the country which fell by 3.9 percent in 2008 also resulted in a decrease in the rate of eating out. The rising cost of fuel has had an effect on the transportation cost of food leading to increased cost price for food. This coupled with the increase cost of money has reduced the demand for eating out and ultimately makes the s ituation harder for restaurants to maintain their margin. The increase in the supply of restaurants leads to fiercer competition with the result being a tough economic climate especially for struggling restaurants.
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On a more positive side, the restaurant industry has been described as a safer investment compared with the newer industries. 5.1.3
Social Aspect
The working hours of the British are longer compared to their European counterparts. An average worker in the EU works for 40hours per week compared to British 44 hours per week. Also there is a high proportion of part-time jobs which are filled mostly by women leading to increase in number of women working (Data monitor 2005). All these lead to less time at lunchtime and after work to prepare or cook meals and preference for out-of-home eating in restaurants. Also there is an increase in the proportion of single person house-holds in the UK and since single adults are more unlikely to cook while the social lifestyle of young singles does not leave much time for cooking, a viable option is eating out in restaurants. Figure 12 - Households in England by type, 2000-2021
Source: from keynote 2005 5.1.4
Technological Aspect
Technology has not been seen as a key aspect of the restaurant industry but its relevance has been increasing especially since its use as an effective marketing channel. Most businesses also now have provision for customers to make reservations and order for food online.
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5.1.5
Legal Aspect
There have been efforts by the government to improve the diet of the nation. To this effect a lot of government legislation has impacted the restaurant industry over the years. Thus Healthy Eating has become front page news, a factor surely contributing to the rise of premium casual restaurants. There has been increase in the duty on alcohol. This may encourage in-home drinking or influence more people to spend more time in restaurants rather than public houses. In 2007, the smoking ban was put into effect. This has made restaurants a more attractive eating place for customers due to the separation between smoking and eating The rise in national minimum wage did not reduce restaurant margins dramatically because restaurants made up by using the tip system. The government has changed this loophole and restaurants may feel the rise in minimum wage. (The Guardian, 2008) In summary, there exist both opportunities and challenges from the United Kingdom restaurant industry as identified using the PESTEL analysis. Prashad however has an edge especially in its offering of healthy vegetarian food. The pressures of the environment will undoubtedly lead to increased competition. 5.2
Porter’s five forces Model and Restaurant industry
There is already literature on competitive strategies for small businesses. Michael Porter (1980, 1985) competitive model or five forces model is agreed as one of the best tools for developing competitive strategies. 5.2.1
Bargaining Power of buyer
Bargaining power of buyer refers to buyer’s ability to for ce down prices, demand better quality and service. In the restaurant industry, buyers are more concentrated than sellers. This coupled with readily available sources of supply and no switching cost gives buyers high bargaining power.
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5.2.2
Bargaining power of supplier
Bargaining power of Suppliers refers to supplier’s abili ty to augment raw material, and increase product delivery prices while keeping its customers. Few substitutes for ingredients coupled with geographical isolation, gives some power to supplier (Bharath and Prema, 2004). In the Indian restaurant industry, supplier bargaining power is on the decline due to increasing European and Chinese restaurants and English fish and chips takeaways. 5.2.3
Rivalry among existing competitors
Rivalry among existing competitor refers a firm’s response to actions taken by their competing or rival firm. Competitors are evenly balanced in the Indian restaurant industry due to low growth, low product differentiation and high exit barriers which are the hallmarks of a highly competitive industry. (Bharath and Prema, 2004) 5.2.4
Threat of new entrants
Threat of new entrants refers to possibility of new players into the industry. In the restaurant business, there is low barrier to new player’s entry due to the relatively low investments, availability of new and existing distribution channels and low differentiation. 5.2.5
Threat of substitutes
Threat of substitutes refers to product and services which is not direct competition but which consumers may use to satisfy similar needs. The rising number of other ethnic restaurants (Chinese and Italian) and increasing interests poses a high level of threat to Indian restaurants (Bharath and Prema, 2004).
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Figure 13 - Porters 5 forces analysis of Indian restaurant Industry
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5.3
Prashad Restaurant Life cycle
Jobber and Fahy (2003) argue that the product lifecycle (PLC) consist of four stages. According to them, there is need to review market ing objectives and strategies at each stage because changes there are changes in market and competitive forces at each stage. 5.3.1
Introduction
The introductory stage is characterised by losses from development and promotional cost and low sales growth. Management monitors the product and may terminate if it proves disappointing. (Jobber and Fahy, 2003) Introduction stage of Prashad was at its Bradford branch opening in 1986. This proved successful because the demographics surrounding their location were favourable to the business. 5.3.2
Growth
The Growth stage is characterised by faster sales and profit growth normally due to market acceptance and repeat purchasing (Jobber and Fahy, 2003). Towards the latter part of growth stage, profits decline due to entrants of new rivals. The objective during this stage is building sales and market share. Prashad restaurant enjoyed increase in sales and turnover within the first couple of years of opening and began to build a loyal customer base. 5.3.3
Maturity
The maturity stage is characterised by stabilisation of sales due to saturation and completion. There are few new users to win over. (Jobber and Fahy, 2003). The impact of brand building and customer loyalty is most obvious at this stage and it i s businesses with good brands and loyal customers that retain their business at this stage. Prashad restaurant is currently at its maturity stage and this is shown in figure 14. This was brought about mainly due to change in demographics around its current location hence Prashad’s effort at expanding to a more favourable l ocation.
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5.3.4
Decline
The decline stage is characterised by reduced demand for product leading to fall in sales and profit. This is mostly brought about by new technology introduction or change in consumer taste. (Jobber and Fahy 2003). Businesses may respond by closing out or reducing operational budgets and product offerings. Prashad restaurant has not reached this stage.
Figure 14 - Product Life Cycle of Prashad Restaurant
As shown in (Figure 5) and mentioned above, Prashad’s current position with regards to the PLC is at the maturity stage. The restaurant already has established customers at the Bradford branch and is facing increasing diffic ulty in winning more people because the demographics around its current location is not favourable to t he business.
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5.4
Competitive Strategies
Developing efficient and effective strategies to gain and maintain competitive advantage has always been and will continue to be the most important concern for business leaders. The focus of competitive strategy used to be on large firms but the decline of manufacturing companies has turned the focus towards how small businesses can compete in this highly competitive environment. Porter (1980) provided the foundation for most discussion on firm strategy. Michael Porter (1980) defines competitive strategy as the search for and sustenance of desirable and favourable competitive position within an industry. Porter (1980) argues that the aim of a firm’s competitive strategy if to identify and keep a position within its industry where it can defend itself against the five competitive forces or influences them in its favour. 5.4.1
Competitive advantage
Porter (1980) defines firm competitive advantage as the value created by a firm for its buyers which exceeds the cost of creating it. Porter identified two major routes to gaining competitive advantage: •
Cost leadership
•
Differentiation
5.4.1.1 Cost Leadership
To gain competitive advantage through cost leadership, a firm will focus on becoming the lowest cost producer in the industry Porter (1985). Firms concentrate on controlling production cost, maximizing capacity and minimizing all other cost including promotional costs in order to pursue a cost leadership s trategy. According to Porter (1980), all firms would like to reduce operational cost so as to maintain a desired profit margin and keep their customers. Firms can pursue a cost leadership strategy if they have: •
Access to low-cost resources
•
Well-organized delivery channels
•
Efficient and effective production procedures
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When firms possess these resources and skills, they can reduce production, distribution and marketing cost and pursue a cost leadership strategy. 5.4.1.2 Product Differentiation
Product is defined as “A complexity of tangible and intangible attributes including functional, social, and psychological utilities or benefits, a product can be an idea, service, a good or any combination of these.” Differentiation strategy aims to augment product and services and deliver them to customers, and for this customers are willing to pay a premium. According to Porter (1985), differentiation strategy can be pursued by a firm when it seeks uniqueness in an industry where these differentiating attributes are appreciated by consumers. Differentiation can be in the product, delivery, services or other factors and it is characterised by quality, innovation and customer service. Firms pursuing this strategy aim to make the differentiated product valuable to the consumers. There are three levels of product: •
Core product
•
Expected product
•
Augmented product
5.4.2
Relationship between cost leadership and product differentiation
A question that readily comes to mind is if it is possible to pursue both strategies simultaneously. Porter (1985) initially argued that firms cannot pursue both strate gies simultaneously. However in 1991, Porter amended his earlier argument and stated that firms can pursue either of these strategies or a combination of both in gaining competitive advantage.
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Figure 15 - Different level of product offering
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5.4.3
Restaurant industry and Competitive strategies
Eating at restaurants is no longer considered as a luxury but as part of daily living. Restaurants are facing increasing competition due to increased choice, augmented level of services, and superior value for money. Also it is becoming increasingly difficult for consumers to differentiate between products from different restaurant. It has become vital that restaurants seek competitive advantage to survive and succeed. Due to the difficulty in pursuing a differentiation strategy, the most common strategies pursued by restaurants are: •
Cost leadership
•
Customer loyalty through products services quality
These two strategies have been effective in gaining competitive advantage and increasing market share. The adoption of price discounts i s not a sustainable strategy and will impact profitability in the long run. Gaining customer loyalty has become fundamental in gaining competitive advantage in the restaurant industry.
5.5
Prashad Restaurant SWOT Analysis
SWOT analysis of Prashad restaurant is carried out to discover Prashad’s internal weaknesses and strengths and the restaurant industry’s external opportunities and threats.
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Figure 16 - SWOT analysis of Prashad Restaurant
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6 6.1
OPERATIONAL PLAN Restaurant Location
Saltaire, Shipley is the location selected for the Prashad concept. The outlook for the future of Saltaire district is exceptionally positive and known for its concentration of restaurants providing quality service. Saltaire’s na ming by UNESCO as a world heritage site also brings a constant influx of tourists to Saltaire. Developments are still ongoing in the area. Prashad will enjoy first mover advantage being the first and only Indian restaurant and Deli in Saltaire. The Saltaire market was carefully chosen for the demographics and the consumer dining pattern which are needed to make the profitabilit y goals of Prashad a reality. The busy Saltaire commercial/residential location has been chosen based upon a successful demographic model. The immediate neighbourhood of the restaurant location has over 1541 residents and the whole Bradford local authority has over 493,108 residents as at 2006 population estimates. (Source: National office of statistics). Over 33% of the restaurants current clientele reside in Saltaire and these travel over 5 km to come and dine at the Prashad’s old location . In the Old location, Prashad
averages 250 covers per week in a 22 cover restaurant. 6.2
Restaurant Design
Double-Level Design Concept: Prashad restaurant will have a friendly and welcoming design concept. The dining area will seat 66 patrons, the dining bar 22 patrons, and an extra conference or party enclosed area with 40 seats. The Prashad restaurant will cater to a total of 128 seated customers. Consideration has also been given to incorporate a parking space. Prashad will be the only restaurant in Saltaire with parking space for customers.
Optional Patio: During the summer months, customers have the option of sitting outside in the patio and Prashad will offer a special summer menu which will feature lighter fare, exotic drinks, and non-alcoholic offerings. The summer crowd will enjoy a free and fun atmosphere in the patio.
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6.3
Operating Criteria
The restaurant’s location will be at the centre of Saltaire with lunch and dinner offerings during the weekdays and weekends except on Monday when it will be closed throughout. The restaurant will capitalize on Saltaire’s busy street traffic and entertainment establishments around by operating during the peak service ti me and after hours. The restaurant doors will be open during: Lunch: Thursday to Sunday, 11 a.m. -3:00 p.m. Dinner: Tuesday to Sunday, 6:00 p.m. -12 midnights Mondays – Closed all day. 6.4 6.4.1
Products and Services Product and Service Description
Prashad restaurant product offerings include international vegetarian dishes, an eclectic ambiance, and superior customer service. Food of the highest qualit y will be prepared with exotic flare. Having satisfied customers has been the secret behind Prashad’s success and this will be further developed. Food portions will be garnished to create attractive presentations. Prashad will present a modest wine list along with a moderate beer selection. The bar will also contain a wide range of local and international spirits. The kitchen staff will comprise of people with a love for cooking and prior work experience in preparing dishes the “Prashad way”. Their creative talents will complement one another. The restaurant staff will offer customers with extraordinary and satisfying dining experience. 6.4.2
Prashad Menus
Prashad's menu will feature Indian vegetarian re gional flavours. The menu items will complementary each other. Normal eating will have an Appetizer selection. The menu will also be coded to allow for customers on special diets such as diabetics. Prashad’s
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Chef will finalize the menu and pair it with the wine menu. Prashad have carefully picked a excellent wine, beer, and alcohol product lists, and from these, modest rotating selection will be chosen. Prashad's marketing will focus on vegetarian foods, but the operating hours, target customers, and choice of location will yield a lot of alcoholic beverage sales. See appendix 7 for curre nt food list. 6.4.2.1 Specialty Drinks & Coffees
Sales from alcohol and from the bar will be a huge source of revenue for Prashad restaurant. Prashad aims to provide healthy and exotic drinks to customers and this will be presented on a different menu. The drinks menu will feature huge collection of both alcoholic and non-alcoholic drinks. Past experience has shown that customers drink more after work during dinner than at lunch. Prashad hope to capitalize on this with their operation hours favouring the evening and after work hours. The prices of bar offerings will be competitive ranging from £2.00 to 3.00 and non-alcoholic drinks will cost between £0.90 and 2.00. 6.4.3
Competitive Comparison
Prashad’s casual friendly atmosphere, variety of product offerings and competitive price ranges will increase their appeal to customers. Prashad will not only compete with the vegetarian segment restaurants, but also with the meat restaurants. In competing against the vegetarian and other theme restaurants, Prashad will have the following advantages: •
Lower price point for a complete meal, compared to other theme restaurant.
•
Customers will be served instantly and won’t have to wait long.
•
Food will be in the right portions: not too small and not too big.
•
Customers will have more variety to choose from compared to other
restaurants. This ensures that every customer will always find something that suits them. In competing against the meat restaurants, Prashad will have the following advantages: •
Prashad will serve high quality food.
•
Prashad will offer products at competitive prices compared to competition.
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•
The ambience and surrounding of Prashad restaurant will be more entertaining
compared to competition. •
Prashad prides itself on serving fresh food and its offerings will be fresher than
competition. •
Prashad customers will enjoy excellent service from Prashad staff.
Sales literature Currently, there are no sales literature produced for Prashad restaurant, however three different literatures will be produced at the new location. The literatures will be designed internally with the use of desk-top publishing software. The sales literature Prashad plans to produce includes: 1.
Table Toppers --will provide information about job opportunities, operating
hours, and explain the Prashad concept. 2.
Brochures/Handouts --will be a medium of informing potential customers
about extra services Prashad offers such as parties, banquets and catering services. 3.
Direct Mail Piece --will inform customers about Prashad offerings, price list,
special offers, and provide pictorial representation of the Prashad experience. Technology Prashad already has a website which provides up to date information to customers. Prashad will invest in a computer with efficient internet connection which will also serve the cash registers. This computer will be used by customers to write comments and feedback on restaurant industry websites such as ”sugarvine” after a thoroughly satisfying Prashad experience. Prashad will also send out monthly electronic newsletters to loyal customers. Future Product and Services Prashad conservative plan includes slow growth plan during the initial start-up phase. After three years of successful operations, expansion plans will be considered. The expansion plans will follow a clustered development where the first three units will be within the Yorkshire area. These areas will be chosen based on future market trends.
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7
MARKET ANALYSIS
Consumer Insight Over the years, Prashad has gathered valuable ins ight from its customer base. The Prashad concept kept evolving in line with customer needs. As such, Prashad’s current operations is very much in line with consumer needs, this has been a key factor to their growth despite being located in an unfavourable location. It is because Prashad excels at understanding consumer needs that over 30% of their customer base travel over 5km to get to Prashad’s current location to enjoy their Prashad experience. Some the issues considered by customers as important to an enjoyable dining experience include: The Dining Experience: Customer satisfaction is especially dependent on the quality of food and service they receive. Apart from these two basic factors, customers have also identified decorations, lighting, bar and some other factors as a key determinant in their choice of location for out-of-home dining. Prashad has already taken all these factors into consideration in the development of its new site and plans to further improve on its excellent the food quality and service rendered t o customers. Reasonable Prices: The current economic climate has made customers demand of value for money more important. Prashad’s menu is competitively priced at a medium level. Parking Space: Some customers commented that the lack of availability of parking space discourages repeat patronisation of Prashad restaurant. This situation is common in the United Kingdom where parking gives drivers problems. Prashad has taken care of this in the new location with provision of parking spaces for customers. “Prashad will be the only restaurant in Saltaire that offers parking space for customers”
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7.1
Market Segmentation
Figure 17 - Percentage of residents in Saltaire by age group
Prashad plans to serve a wide client base. Prashad wants everyone to feel welcome and entertained. The following groups have been defined as targeted segments that contribute to growth projections: •
The Business Person
•
Saltaire and Bradford Couples
•
The Destination Customer
•
High-End Singles
•
Tourists
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These market segments are aged between 25 to 45 years old (over 50% of the Saltaire district population falls within this group see fig 17), they have disposable income, and are always on the look for comfortable restaurant with good quality food and excellent customer service. They are the description of typical diners at other restaurants in the Saltaire district. As shown in earlier chapters, the British people have an open cult ure to trying new foods, and this category fit that descri ption because they are open to trying new food and will undoubtedly embrace the Prashad cuisine. Over 30% of Prashad’s current clientele reside in Saltaire and have been loyal over the years. These existing customers who had usually found it difficult referring people to Prashad because of the distance will find it very convenient to recommend people to Prashad once it opens in their neighbourhood. 7.2
Target Market Segment Strategy
The Business Person: Business people work all day and are oftentimes on the lookout for a friendly establishment with high quality food and excellent cust omer service to dine at rather than go home to face the dreary job of cooking. Previous chapter that analysed the environment showed that more people consider out-of-home eating a part of normal life rather than a luxury. These classes of people have enough disposable income to spend on after hour drinking and eating as a form of relaxation. Prashad’s proposed location and concept will provide an ideal place for such people to indulge themselves while ensuring that they are eating healthy meals. Saltaire and Bradford Couples: Prashad’s proposed location will provide an intimate setting for couples who want to have a special evening out. Prashad will be known as the place to be to treat your date to a special night out. Also young couples fall into the social group who favour eating out on a regular basis rather than cook at home. Prashad will capitalize on this social trend by capturing these rising market segment through its food, offering, excellent service and friendly atmosphere. The Destination Customer: Prashad plans to create awareness in surrounding cities and draw customers to visit Saltaire thus making Prashad a destination restaurant. This is not a foreign task to Prashad since over 30% of their current clientele are destination customer who have to travel a great distance to come and enjoy the ”Prashad
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experience”. Prashad's will position itself to be attractive to married couples seeking to spend a night out away from the children. High-end Singles: Prashad will be described as “the place to be” in Saltaire and surrounding areas. This will be achieved through the restaurant la yout, excellent service, striking decor, excellent menu and entertainment. All these combined will give the desired effect as the place to be and be attractive to the high end singles who pride themselves on being in “the place to be” so as to socialize and create or maintain their image. Tourists: Saltaire attracts many tourists all year round. The naming of Saltaire by UNESCO as a world heritage site is responsible for this. Telephone interview conducted among restaurants in and around Saltaire confirm the positive impact the naming by UNESCO has on their businesses. Most confirmed that most of their customers are tourists. Prashad's will be the place to dine, with its attractive atmosphere, and moderately priced menu. A huge section of tourist who visit Saltaire are vacationing people who would like to socialize and be entertained. 7.3
Service Business Analysis
The restaurant industry is high risk and very competitive. Gottlieb (2004) identified the most important factors responsible for a restaurant’s success. These are location, service quality, and management. A greater percentage of newly opened restaurants fold up within the initial three years of opening due to inexperienced mana gement, but chances of success are higher with restaurants launched on an understanding of the food industry, good management of food inventory and excellent staff. The chances of success are even better when these qualities are complemented by experience in running a restaurant. Prashad has been operating since 1986 as a Deli a nd since 2003 as a restaurant. They enjoy a high customer loyalty due to the high quality of service and grew due to good management. Restaurants make profit by combining relatively cheap ingredients in creative ways, cooking them properly, presenting them in attractive ways and selling them at high price. Waste or loss occurs through wasting ingredients in the kitchen, wasting time in seating customers and taking orders, or during food preparation. Inexperienced entrepreneurial restaurateurs’ think a successful restaurant is based only
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on vibrant concept and good location, Prashad management with its years of operating successful restaurant despite poor location knows that in addition to these, you need: “an understanding of the risks and financial conditions, the ability to handle enormous pressure, and the organizational skills to bring off what is essentially a giant catered party, two to three times a day” (Paloalto 2007). 7.3.1
Competition and Buying Patterns
There are currently 16 restaurants within 1 mile of Saltaire. These range from public houses to British restaurants to Ethnic themed Restaurants. They all enjoy a good location which is currently what is benefitting their businesses. Prashad’s competitors are moving in the correct direction, however only Prashad has a concept based on objective market research in the local market, market consumer insight and well planned strategy. Bradford consumers are seeking value for money, parking space and new ex periences. As important as the location is, uniqueness and atmosphere are also important. Prashad’s challenge is to make it unique and be distinct from its competitors. This is not an easy task as pointed out in the five forces analysis of the restaurant industry which showed that it is extremely difficult for restaurants to distinguish themselves from one another which is the reason why most restaurants do not pursue a differentiation strategy to gain competitive advantage. Prashad needs t o be distinct not only because it is the "new" restaurant, but though offering variety in food menu, gigh quality food, great customer service and a thoroughly enjoyable atmosphere. Prashad already has an edge because it is the only restaurant with parking space in Saltaire. For Prashad to succeed in distinguishing itself, it requires great marketing strategies.
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Figure 18- Location of restaurants within 1 mile of Saltaire
1 Zaara's Authentic Indian cuisine 2 Shama Restaurant 3 The Cut Waterside restaurant 4 Rajpoot Restaurant 5 Zaara's Restaurant 6 Shimla Spice 7 The Old Tramshead 8 Adaab Balti Restaurant 9 Pan Choice Cantonese Buffet 10 Aagrah Restaurant
Figure 18 - Map of Restaurants within 1mile of Saltaire. Source (www.yell.co.uk)
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Figure 19 - Location of restaurants within 1 mile of Saltaire
1 La Rue Restaurant 2 Yo yo Bar and Restauran 3 The Connection 4 McDonald's Restaurant 5 The Hockney 6 Thai Fever
Figure 19- Map of Restaurants within 1mile of Saltaire. Source (www.yell.co.uk)
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8
STRATEGY AND IMPLEMENTATION
Prashad strategy borne from thorough environmental analysis and Prashad resources and skills is to give customers a combination of high quality interesting food with excellent customer service in an atmosphere which is attractive to various groups of successful adults. Prashad will focus on building on established strong identity in the Bradford community with a grand opening in Saltaire. This will be preceded by an appearance at the upcoming Saltaire festival in September by taking a stal l and creating awareness for the grand opening. After the grand opening, the marketing will focus on creating and increasing customer awareness in Saltaire and surrounding neighbourhoods. Prashad’s marketing tactics and programs will be aimed at explaining who Prashad is and what Prashad does. Prashad will eventually be rel ying on word of mouth as the major marketing force and will need to keep its excellent standards and creating and enjoyable customer experience to sustain the word of mouth marketing force. Execution of the Prashad concept is a critical factor of the plan as Prashad aims to be the talk of Saltaire through its friendly environment, high quality food and competitive pricing. Prashad’s aim is not to be the cheapest restaurant in the area, but to offer exceptional experience at competitive prices, as such the menu items are averagely priced for the Saltaire area. 8.1
Competitive Edge
Prashad’s competitive edges are: 1.
Thorough understanding and experience opening and running restaurants
2.
An exceptional contemporary design and layout of restaurant
3.
Unique layout with optional patio and parking space
4.
Saltaire and surrounding area marketing campaign to draw customers
5.
Provision of healthy meals in a creative and attractive presentation
6.
A thorough understanding of customer needs and excellent reputation resulting
in high customer loyalty
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8.1.1
Competitor Analysis
Below are selections from the competitive analysis study. 1. Aagrah (Direct Competitor): Prashad concept and positioning was refined through some learning from studying Aagrah restaurant. These are: 1) Offer high food quality at modest prices. Prashad plans to keep product offering prices under £12 2) Saltaire is an ideal location for a restaurant. 3) Customers want after hours dining and are ready to travel to places which satisfy their wants. 2. Mumtaz (Direct Competitor) This popularity of this restaurant has been on the ris e for a number of years. Prashad has learnt that the bar is a considerable revenue stream and greatl y affects a restaurant’s profitability. The Mumtaz bar attracts a sizable number of people and some customers come just to sit at the bar and purchase drinks without dining at the restaurant. Mumtaz has some elements which has contributed to it s success. Prashad can learn a few things from watching and studying Mumtaz. 3. McDonalds (Indirect Competitor): Although McDonalds is not a direct competitor of Prashad and it’s not located in Saltaire, the analysis of the success factors for McDonalds in Shipley offered some learning which Prashad could adopt: 1) High quality food at moderate prices resulted in customer satisfaction. 2) Its location in a popular area for residential and business human traffic allowed capitalization on the demographics.
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3) Excellent customer service 8.1.2
Market Analysis Conclusion:
Every establishment involved in the sale of prepared food in the Saltaire district is either a direct or indirect competitor to Prashad. To be more specific however, the two main competitions in the restaurant industry are the casual dining restaurant and premium dining restaurant. This provides a paradox, because the food quality is li kely better at a premium restaurant, but the economic downturn has made customers demand value for money. So the question is where are customers going to turn to? Although there is no straight answer to that question but the correct answer may fall in the range of a combination of high quality food at competitive prices with an excellent customer service which is the core of the Prashad business model. 8.2
Marketing Strategy
Prashad’s marketing strategy will focus on the promotion of its exciting concept, excellent service and high quality food so as to attract and retain customers. The marketing actions will be centred on: Building and Signage : The new building exterior and newly designed signage are very important marketing tools. A large part of the budget is towards renovations and decor to create the artistic appeal of Prashad. Customer Service: Prashad has been able to build a loyal customer base through its excellent customer service. It is this excellent service that converts one time customers to repeat customers. As such Prashad demands that waiting staff ensure that customers enjoy their Prashad dining experience. The waiting staffs are of the highest calibre and they are appraised ever y 90 days. Customer comments constitute part of the appraisal Advertising and Promotion: Prashad’s advertising Plan involves direct targeting of potential customers through local media aimed at singles, couples and destination customers.
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Prashad management has identified media promotion as a key pillar of success at the launch of the new restaurant. This will be embarked upon in an aggressive manner. Prashad will build on established relationships with pressmen to publicize its move to the new location. The marketing program is detailed below: Media Objectives and Strategy: Establish Prashad image as a restaurant with distinct excellent service, value for money, and high quality food presented in an attractive manner in a friendly environment. The selection and scheduling of advertisement will be made more efficient through: •
The selection of publications with high market penetration which reach the
target customers such as Sugarvine and Bradford Telegraph. •
Place advertisements beside food related editorial.
•
Directing customers to Prashad website for reservations, and media
promotions. •
Maximizing advert lifespan using monthly and weekly publications.
Prashad will also develop a consistent reach all year round which is targeted at specific customer groups within Saltaire and surrounding neighbourhoods. Promotional Campaign: Prashad has considerable newspaper presence and t his will be further entrenched with public announcements and newsletters. The Prashad website will also greet visistors with media presentations of the restaurant highlights, Prashad news, upcoming events and Prashad menu. There will be customer surveys at regular intervals and weekly evaluations of the sal es to understand the most effective advertising medium. Prashad aims to better understand its customers, evaluate its marketing activities and channel them into routes to increase efficiency if necessary. Publicity Strategy: Prashad’s publicity strategy includes: •
Develop and maintain relations with local restaurant publications.
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•
Develop an updated media package for major media houses to keep them
informed of new happenings and events at Prashad including menu updates. •
Cultivate relationship with industry publications editors so as to be included in
food comparisons among restaurants in the local area. •
Develop a publication of Prashad’s history and menu offering. This will be
included in press kits and also serve as the main public relation tools with press men. Press Release/Grand Opening: Prashad restaurant management will make press releases on the day of the launch. Editorial Visitation: After the launch, Prashad will extend invitations to the most influential editors to experience the Prashad concept and review the menu, service and environment. Publicity Revenues: Since a considerable amount of revenue will be attributable to publicity, Prashad plans to send media packs to local publications on a periodic basis. Saltaire Community: Prashad will partner with local community organizations and continually seek out ways to participate in efforts which allow Prashad give back to the local community. This will ensure a good rapport between Prashad and community leaders and will ensure Prashad gets good publicity at the periodic Saltaire magazine. Prashad plans to create awareness during the upcoming Saltaire festival in September. 8.2.1
Marketing Program
To actualize Prashad marketing strategy, Prashad has selected three means of creating and increasing awareness among customers: Word of mouth, Public Relations Marketing, and Media Marketing. The word of mouth is the most important of this since it is the most sustainable, effective and cheapest form of marketing. Word-of-mouth •
Restaurant Night: Prashad will meet with other restaurant owners in the
Saltaire district on a periodic basis to discuss market trends and together create a concerted effort to promote the Saltaire district. This will have an overall effect of increasing Saltaire visibility and patronage which will be beneficial to all restaurant business and cheaper compared to individual efforts.
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•
Wait Area Marketing: Waiting staff will be courteous and serve mild
refreshments to customers in the waiting area. •
Special Events
•
Valentine's Day
•
Wine tasting weekend
•
New Year's Eve party
Public Relations Marketing •
Brochures: Prashad will make brochures which will be strategically placed at
the hotels, motels, and popular business establishments for them to give to their guests and customers. These brochures will showcase Prashad pictures, foods offers and prices. •
Government Relations and Private functions: Prashad will approach the various
government and organisational businesses around to introduce its catering business for their private parties and luncheons. Even if this does not yield immediate results, it will offer Prashad visibility and when such occasions requiring cate ring arises, Prashad will be easily remembered. This will also provide an opportunity to make them aware of Prashad’s service offerings and they could refer this to other people because word of mouth is an important means within the business environment. . Media Marketing •
Newspaper campaign: A campaign to feature in newspaper in their living and
food columns. •
Restaurant and Special Events Website: Prashad have existing contract with
design teams to constantly update its website so that it is easy to navigate and provide high quality vibrant and entertaining contents. •
Media Relations: Prashad will market the restaurant through the use of media
relations teams. •
Saltaire and Neighbouring District Marketing : Prashad plans to attract
customers from neighbouring districts.
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8.3
Sales Strategy
Prashad’s strategy is simply to offer customers high quality food, with excellent customer service in a friendly and appealing environment. This is Prashad’s hallmark and will be given to every customer whether on a firs t “Prashad experience” or on his/her thousandth. Prashad marketing strategies are targeted on getting potential customers into the restaurant, and the sales strategy act as follow on to make first time customers into repeat customers and turn them into ambassadors of Prashad by informing their friends and acquaintances about their Prashad experience. Prashad's sales strategy which needs a consistent presentation of high quality food and excellent service to customers in a friendly and welcoming atmosphere will be achieved through: •
Hiring dedicated employees with a love for food preparation.
•
Continuous and constant assessment of the elements of the Prashad concept
and addressing any problems identified. •
Management interaction with customers to make them realize that their
comments get to the right people and that their custom is appreciated •
Evaluating the menu and identifying the popular food choices.
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9
MANAGEMENT SUMMARY
Prashad success is directly correlated to the strength of its management staff. Prashad management team comprises of a team with experience and expertise in all areas necessary to ensure the success of running a restaurant and marketing. The owners Bobby Patel (Managing Partner) and Minal Patel (Executive Chef) have enormous work experience running a restaurant. This Prashad Management team have been steeped in restaurant management and have developed hands on experience to ensure this new venture is an astounding success. 9.1
Management Team
Prashad Restaurant management have over 20 years of experienc e between the key officers. Daily operational decisions and management wil l be handled by Bobby Patel and Minal Patel, as hands on managers. Ownership & Management Together, Bobby Patel and Minal Patel contribute over two decades of experience in the restaurant and food industry to Prashad’s new venture. Bobby Patel: Managing Partner
(Operations, Marketing, Financial and Business Development) Bobby with a degree in Business management was a high fl ying executive in London up until 1995 when he resigned to join in the management of the Prashad restaurant business. Under his leadership, he has seen the company grow and focussed the business to concentrate on profitable products. Minal Patel: Managing Partner
(Executive Chef and Restaurant Operations) Wife of oldest son Bobby, Minal came to England in 2004 and got involved with the business straight away. Whilst in India she dreamt of running her own restaurant one day and is now living the dream. Minal loves to cook and never tires from creating new dishes. She studied cooking in India and has continued to develop her skills. Currently studying part time Professional Cookery at Bradford College. She has
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aspirations to push her academic qualifications as high as possible with the aim to incorporate them into Prashad. Managing Partner Responsibilities Including the management of daily restaurant operations, both managers will: •
Manage working capital which includes inventory and cash.
•
Develop financial forecasts and external financing requirements.
•
Prepare financial analyses and reports which will serve as a guide for
operational decisions. These reports include Prashad's income, expenses, and earnings. •
Oversee budget preparations and financial forecasts. They will also arrange for
an audit of Prashad’s accounts. 9.2
Personnel Plan
The personnel plan is sufficient to manage and run the size of the new Prashad restaurant and ensure the projected revenues are met. They will include 5 full-time employees and 4 part-time employees. Kitchen:
The Executive Chef will be assisted by: •
Assistant Chef (1).
•
Cooks that work directly with Minal (2).
•
Prep cooks/dishwasher (1).
Restaurant Operations: Bobby will manage the Financial Management, Bookkeeping, PR/Media Advertising, and Investor Services. Bobby Patel will also manage the dail y Restaurant Operations. •
Servers that work part time (2).
•
Full-time bartender (1).
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Table 1 - Personnel Plan Personnel Plan FY 2010
FY 2011
FY 2012
General Manager + Chef
£38,928
£38,928
£38,928
Management
£13,464
£13,464
£13,464
Other Staff
£89,760
£89,760
£89,760
9
9
9
£142,152
£142,152
£142,152
Total People
Total Payroll
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10 FINANCIAL PLAN
The Financial Plan includes: •
Important Assumptions
•
Risk Analysis & Mitigation Plan
•
Sales Forecast
•
Break Even Analysis
•
Profit and Loss Statement
•
Cash Flow Statement
•
Balance Sheet
Prashad’s financial model is based on "Planning for the Worst scenario, but Managing for the Best scenario." The First year projections plan for sales volume below average, low seat turn, and high food and beverage cost. This will allow for a fi nancial planning which accommodates a worst case scenario. Set Up cost for the new site is
£160,500
Freehold Purchase price is
£274,950
Total Project Cost
£435450
Required Investment
£435450
Annual interest repayment @ 7%
£30,481.50
Prashad is seeking investment for purchasing the building, furniture, liquor license, renovations, kitchen equipment, food & restaurant supplies, working capital, legal fees, and marketing.
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10.1 Important Assumptions
The financial plan is based on some important assumptions which are detailed in the following statements. The financial plans are ver y conservative. The key assumptions include: Assumptions •
Prashad Restaurant will increase its covers to 550 per week
•
Deli and catering business in yr 1 is £1275 per week, a drop of £750 from
existing. •
Delivery Business generating £850 per week, approx 55 deliveries
•
The financials presented are inclusive of value val ue added tax (VAT). This is
because the price charged on the menu is VAT inclusive. Economy: A slow economic recovery from the current economic recessionar y climate is expected. Annual Growth Rate Percentage: The financials take the following projections about growth rate into consideration: •
Year 2: 2%
•
Year 3: 2%
Weekly Sales Variance: In line with industry norms, Saturday will be the best sales day of each week. Pricing & Cost Control Competitive Pricing Model: Revenue estimations were arrived at taking into consideration Prashad experience in running a restaurant and competitive price comparisons which currently obtains in the restaurant industry in and around Saltaire. Basic assumptions on average customer spend and average se at turn is given below: Average spend for a meal is £12 for food and £5 on drinks. Seat turn averages are conservatively estimated at:
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•
Lunch: 0.50
•
Dinner: 0.81
Cost Control: Cost of goods sold (COGS) have been estimated based on Prashad’s experience at running a restaurant and have been estimated as a percentage of sales. They will be closely monitored to ensure they are kept between 30 -35% for food and 28 -31% for drinks. Focusing on cost control will take about 6 months to be perfected. Inventory turnover and Accounts Payable . Prashad operates Prashad operates a cash only basis, as such the turnover for accounts receivable is estimated es timated to be 0days. The inventory takes 7 days to be turned and 30days was projected for accounts payable. 10.2 Sales Forecast
Although Prashad plans to cater for government and local businesses, payments will be made on delivery. Monthly forecasted sales of £44,479 split between restaurant sales, bar sales, deliveries and Takeaway with the restaurant as the highest hi ghest contributor to sales. Sales figures are ar e inclusive of VAT which are paid to the government and shown in the projected cash flow statement. Figure 20 - Monthly Sales forecast
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Figure 21 - Annual Sales forecast
Table 2 - Sales Forecast Sales Forecast FY 2010
FY 2011
FY 2012
Restaurant - Food
£336,600
£343,332
£350,199
Restaurant - Bar
£99,456
£101,445
£103,474
Deliveries
£43,345
£44,211
£45,096
Takeaway & Catering
£65,028
£66,328
£67,655
£544,428
£555,316
£566,423
FY 2010
FY 2011
FY 2012
Food
£155,740
£158,855
£162,032
Bar
£29,837
£30,433
£31,042
£185,577
£189,288
£193,074
Sales
Total Sales
Direct Cost of Sales
Subtotal Direct Cost of Sales
Appendix 1 shows Prashad’s historical performance while appendix 2 shows weekly sales forecast.
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10.3 Breakeven Analysis Figure 22 - Breakeven analysis
Table 3- Breakeven Analysis
Break-even Analysis
Monthly Revenue Break-even
£29,901
Assumptions: Average Percent Variable Cost
34%
Estimated Monthly Fixed Cost
£19,709
Prashad has an average running fixed costs of £19,709 per month which comprises of full payroll, utilities, and projected estimate of other running costs. With the COGS at 35% of sales, the monthly break-even point is £29,901. Prashad breaks even each month.
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As the business exits the start-up phase, focus will be on controlling costs so as t o force the Cost of Goods Sold (COGS) down resulting in a drop in the break-even value and an increase in Gross Margin. 10.4 Projected Profit and Loss
The gross margin is the most important aspect of the projected profit and loss statement. There is an adjusted increase in sales in year 2 onwards as the business exits its start-up phase but we project the recessionary climate will not allow for much growth. Prashad restaurant will develop its customer base and reputation and although growth is normal in the second and third year of business, this plans shows no growth in its attempt at conservativeness due to the recessionary climate. Monthly assumptions for Profit and Loss are included in the appendices. Table 4 - Projected Profit and Loss Pro Forma Profit and Loss FY 2010
FY 2011
FY 2012
Sales
£544,428
£555,316
£566,423
Direct Cost of Sales
£185,577
£189,288
£193,074
Other Costs of Sales
£0
Total Cost of Sales
£185,577
£189,288
£193,074
Gross Margin
£358,851
£366,028
£373,348
65.91%
65.91%
65.91%
£142,152
£142,152
£142,152
£10,500
£10,500
£10,500
£0
£0
£0
Utilities
£15,996
£15,996
£15,996
General Administrative
£28,548
£46,068
£46,068
Repairs and Maintenance
£3,504
£3,504
£3,504
Direct Operating Expenses
£14,304
£14,304
£14,304
Occupancy Costs
£11,004
£11,004
£11,004
Investment Repayments
£10,500
£10,500
£10,500
Total Operating Expenses
£236,508
£254,028
£254,028
Profit Before Interest and Taxes
£122,343
£112,000
£119,320
Gross Margin %
Expenses Payroll Marketing/Promotion Depreciation
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EBITDA
£122,343
£112,000
£119,320
Interest Expense
£44,162
£39,988
£35,634
Taxes Incurred
£23,454
£21,603
£25,106
Net Profit
£54,727
£50,408
£58,581
Net Profit/Sales
10.05%
9.08%
10.34%
Figure 23- Forecasted yearly profit
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Figure 24 - Forecasted Yearly Gross Margin
Figure 25 - Gross Margin Monthly
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Figure 26 - Monthly Profit
10.5 Projected Cash Flow
The cash flow is based on inventory turnover assumptions and payment days. The cash flow shows no tracking of account receivable because Prashad does not of fer credit sales. In the restaurant industry, same day collection (no credit sales) is the norm and critical to most restaurant operations. Apart from the initial investments, no additional financial support is expected.
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Figure 27 - Cash flow
Table 5 - Projected Cash Flow Pro Forma Cash Flow FY 2010
FY 2011
FY 2012
Cash Sales
£544,428
£555,316
£566,423
Subtotal Cash from Operations
£544,428
£555,316
£566,423
£81,664
£83,297
£84,963
New Current Borrowing
£0
£0
£0
New Other Liabilities (interest-free)
£0
£0
£0
£435,450
£0
£0
Sales of Other Current Assets
£0
£0
£0
Sales of Long-term Assets
£0
£0
£0
New Investment Received
£0
£0
£0
£1,061,542
£638,614
£651,386
FY 2010
FY 2011
FY 2012
Cash Spending
£489,701
£504,908
£507,842
Subtotal Spent on Operations
£489,701
£504,908
£507,842
Cash Received
Cash from Operations
Additional Cash Received Sales Tax, VAT, HST/GST Received
New Long-term Liabilities
Subtotal Cash Received
Expenditures
Expenditures from Operations
Additional Cash Spent
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Sales Tax, VAT, HST/GST Paid Out
£81,664
£83,297
£84,963
Principal Repayment of Current Borrowing
£0
£0
£0
Other Liabilities Principal Repayment
£0
£0
£0
Long-term Liabilities Principal Repayment
£43,548
£43,548
£43,548
Purchase Other Current Assets
£93,500
£0
£0
£341,950
£0
£0
£0
£0
£0
£1,050,363
£631,753
£636,353
Net Cash Flow
£11,179
£6,860
£15,033
Cash Balance
£12,745
£19,606
£34,639
Purchase Long-term Assets Dividends Subtotal Cash Spent
10.6 Projected Balance Sheet
The projected balance sheet shows that Prashad does not foresee any problems in meeting its financial obligations to fund lenders as long as the goals earlier outlined in this plan are achieved. Prashad restaurant has a positive Net Worth beginning in Year 1. Table 6 - Projected Balance Sheet Pro Forma Balance Sheet FY 2010
FY 2011
FY 2012
Cash
£12,745
£19,606
£34,639
Other Current Assets
£98,749
£98,749
£98,749
Total Current Assets
£111,494
£118,355
£133,388
£423,280
£423,280
£423,280
£9,583
£9,583
£9,583
Total Long-term Assets
£413,697
£413,697
£413,697
Total Assets
£525,191
£532,052
£547,085
FY 2010
FY 2011
FY 2012
Current Borrowing
£29,756
£29,756
£29,756
Other Current Liabilities
£21,958
£21,958
£21,959
Subtotal Current Liabilities
£51,714
£51,714
£51,715
Assets
Current Assets
Long-term Assets Long-term Assets Accumulated Depreciation
Liabilities and Capital
Current Liabilities
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Long-term Liabilities
£391,902
£348,354
£304,806
Total Liabilities
£443,616
£400,069
£356,521
Paid-in Capital
£10
£10
£10
Retained Earnings
£26,838
£81,565
£131,973
Earnings
£54,727
£50,408
£58,581
Total Capital
£81,575
£131,983
£190,564
£525,191
£532,052
£547,085
£81,575
£131,983
£190,564
Total Liabilities and Capital
Net Wort h
10.7 Business Ratios
Business ratios for the years of this plan are shown below. Table 7 - Ratio Ananlysis Ratio Analysis FY 2010
FY 2011
FY 2012
196.47%
2.00%
2.00%
Other Current Assets
18.80%
18.56%
18.05%
Total Current Assets
21.23%
22.24%
24.38%
Long-term Assets
78.77%
77.76%
75.62%
100.00%
100.00%
100.00%
9.85%
9.72%
9.45%
Long-term Liabilities
74.62%
65.47%
55.71%
Total Liabilities
84.47%
75.19%
65.17%
Net Worth
15.53%
24.81%
34.83%
100.00%
100.00%
100.00%
Gross Margin
65.91%
65.91%
65.91%
Selling, General & Administrative
55.86%
56.84%
55.57%
1.93%
1.89%
1.85%
22.47%
20.17%
21.07%
Current
2.16
2.29
2.58
Quick
2.16
2.29
2.58
84.47%
75.19%
65.17%
Sales Growth
Percent of Total Assets
Total Assets
Current Liabilities
Percent of Sales Sales
Expenses Advertising Expenses Profit Before Interest and Taxes
Main Ratios
Total Debt to Total Assets
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Pre-tax Return on Net Worth
95.84%
54.56%
43.92%
Pre-tax Return on Assets
14.89%
13.53%
15.30%
Additional Ratios
FY 2010
FY 2011
FY 2012
Net Profit Margin
10.05%
9.08%
10.34%
Return on Equity
67.09%
38.19%
30.74%
12.46
12.17
12.17
1.04
1.04
1.04
Debt to Net Worth
5.44
3.03
1.87
Current Liab. to Liab.
0.12
0.13
0.15
£59,780
£66,640
£81,673
2.77
2.80
3.35
Assets to Sales
0.96
0.96
0.97
Current Debt/Total Assets
10%
10%
9%
Acid Test
2.16
2.29
2.58
Sales/Net Worth
6.67
4.21
2.97
Dividend Payout
0.00
0.00
0.00
Activity Ratios Accounts Payable Turnover Total Asset Turnover
Debt Ratios
Liquidity Ratios Net Working Capital Interest Coverage
Additional Ratios
10.8 Expansion, Payback & Exit Strategy
The Exit Strategy is a definition of Prashad’s business vision and goals, and a plan in event that the venture fails to meet profitability plans. This question has been dealt with at several levels: Expansion: various financial goals to further increase the success of the Prashad concept. 1.
Expansion (Option 1): The goal is to keep the Prashad concept a unique and
distinct offering. Projections show that in the fi rst three years of operation, the business captures a considerable share of the market. By the end of the third year, Prashad management will look towards launching a second Prashad concept in the Bradford area. This expansion plans will be discussed wit h financial partners and lending entities.
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2.
Expansion (Option 2): It has been established throughout the plan that the
Prashad concept is expected to be a huge success whose growth can only be limited by venue size and location. As such, a second expansion plan to be considered wil l be to increase the size of the restaurant at Saltaire when it becomes too small to handle the potential of the Prashad concept. This is why the site of this restaurant has an option to expand the restaurant following a logical growth and profit plan. Exit Strategy: Prashad management is committed to the concept and its practicality. Although no entrepreneur attempts a business thinking of failing, but sometimes ventures fail due to one reason or another. In case the Prashad concept cannot fulfil its financial obligations, in terms of profitability, attempts will be made to sell its operations and use the proceeds realised to settle outstanding balances. In the proceeds from the sales are insufficient to clear outstanding balances, Prashad will have no choice but to default and outstanding balances will be borne by the investors on a weighted percentage basis of the total amounts due.
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11 Conclusions and Recommendations
The project started with a brief description of Prashad restaurant, its background, and motivation for expansion. This was followed by a description of Saltaire and t he reasons why Prashad chose Saltaire. It continued with a review of Literature on the latest thinking on strategic and analytical tools and a review of literature on financing new ventures and the importance of business planning to finance. The desc ription of the restaurant business in the UK including the tre nds and culture of British people was followed with a description of the Indian restaurant business and most relevant trends and growth rates within the Indian restaurant Industry. The essay continued with the use of frameworks to anal yse the external environment. Frameworks used include the PESTLE, Porter’s five forces. Frameworks were als o used identify the internal resources and skills of Prashad. The external analysis showed that the restaurant industry was strongly affected by the Economic; Social and Legal factors. This analysis showed that the current economic recession could have a negative impact on the restaurant industry while the current social trend tends to encourage out-of-home eating. This analysis also showed that Prashad already has an advantage in its offering of healthy foods. Analysis within t he restaurant Industry using Porter’s five forces framework also revealed that there is low bargaining power of suppliers and buyers, but a high threat of substitutes and barrie r to entry leading to strong rivalry among restaurants. The essay went f urther to describe current means of gaining competitive advantage within the restaurant business. The essay then focussed on analysing Prashad restaurant. The fram eworks used for the internal analysis includes SWOT, PLC frameworks. The lifecycle stage of Prashad was analysed and the SWOT framework was used to identify the str engths, weaknesses, opportunities and threats in the environment that Prashad will operate in. The PLC framework showed that Prashad was in its maturity stage. Next, the essay focussed on the proposed business offering of the Prashad restaurant. This section was composed of operational, marketing and financial assessments and plans.
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The operations plan examined Saltaire as a location and showed that the potential in terms of demographics was suitable. The operational plan also showed Prashad’s human resources needs. The marketing plan showed the segmentation, targeting and positioning plan of Prashad in Saltaire. The marketing mix to be pursued was also described in detail. The most attractive market segments to target were identified as young people between the ages of 16 and 45years and these constituted over 50% of Saltaire’s population. The financial plan examined the basic capital requirements needed by Prashad in its expansion plan. The sales forecast for three years of the business, a forecasted profit and loss account, projected balance sheet, project ed cash flow and key financial ratios were calculated to assess the financial viability of Prashad’s expansion into Saltaire. After concluding on the financial viability of Prashad’s expansion, the final stage was describing strategic plans for exit and expansion endeavours. The document shows that Prashad’s endeavour to expand and its choice of Saltai re as the proposed location is financially viable and will end up increasing Prashad’s presence and dominance in the Indian restaurant industry. Hence it is finally conclude that the project has fulfilled the entire objectives which were outline in the start of the business plan.
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I.
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[Accessed: 30 August 2009]
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II.
Appendix 1
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Table 8 - Prashad Historic Performance Past Performance FY 2007
FY 2008
FY 2009
Sales
£0
£156,498
£183,638
Gross Margin
£0
£95,786
£119,523
0.00%
61.21%
65.09%
£0
£81,318
£98,575
FY 2007
FY 2008
FY 2009
Cash
£0
£2,975
£1,566
Other Current Assets
£0
£5,000
£5,249
Total Current Assets
£0
£7,975
£6,815
Long-term Assets
£0
£79,019
£81,330
Accumulated Depreciation
£0
£0
£9,583
Total Long-term Assets
£0
£79,019
£71,747
Total Assets
£0
£86,994
£78,562
Current Borrowing
£0
£30,388
£29,756
Other Current Liabilities (interest free)
£0
£24,989
£21,958
Total Current Liabilities
£0
£55,377
£51,714
Long-term Liabilities
£0
£0
£0
Total Liabilities
£0
£55,377
£51,714
Paid-in Capital
£0
£10
£10
Retained Earnings
£0
£0
(£9,583)
Earnings
£0
£31,607
£36,421
Total Capital
£0
£31,617
£26,848
Total Capital and Liabilities
£0
£86,994
£78,562
Gross Margin % Operating Expenses
Balance Sheet
Current Assets
Long-term Assets
Current Liabilities
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III.
Appendix 2
Table 9 - Monthly Sales Forecast Sales Forecast
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£28,050
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
£8,288
Deliveries
£3,613
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
£3,612
Takeaway
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£5,419
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
£45,369
Nov
Dec
Jan
Feb
Food
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
£12,978
Bar
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£2,486
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
£15,465
Sales Restaurant - Food Restaurant - Bar
& Catering Total Sales
Direct Cost
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
of Sales
Subtotal Direct Cost of Sales
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IV.
Appendix 3
Table 10 - Personnel Personnel Plan
General
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£3,244
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£1,122
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
£7,480
9
9
9
9
9
9
9
9
9
9
9
9
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
6
6
6
6
6
6
6
6
6
6
6
6
Manager + Chef Managemen t Other Staff Total People
Total Payroll
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V.
Appendix 4
Table 11 - Monthly Profit and Loss Pro Forma Profit and Loss
Sales
Direct Cost of Sales
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
9
9
9
9
9
9
9
9
9
9
9
9
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
5
5
5
5
5
5
5
5
5
5
5
5
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
£15,46
5
5
5
5
5
5
5
5
5
5
5
5
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
£29,90
4
4
4
4
4
4
4
4
4
4
4
4
65.91
65.91
65.91
65.91
65.91
65.91
65.91
65.91
65.91
65.91
65.91
65.91
%
%
%
%
%
%
%
%
%
%
%
%
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
£11,84
Other Costs of Sales Total Cost of Sales
Gross Margin
Gross Margin %
Expenses Payroll
6
6
6
6
6
6
6
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£1,333
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£2,379
£292
£292
£292
£292
£292
£292
£292
£292
£292
£1,192
£1,192
£1,192
£1,192
£1,192
£1,192
£1,192
£1,192
£1,192
£917
£917
£917
£917
£917
£917
£917
£917
£917
£917
£917
£917
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£875
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
£19,70
9
9
9
9
9
9
9
9
9
9
9
9
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
6
5
5
5
5
5
5
5
5
5
5
5
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
£10,19
6
5
5
5
5
5
5
5
5
5
5
5
Interest Expense
£3,846
£3,816
£3,786
£3,756
£3,726
£3,695
£3,665
£3,635
£3,605
£3,574
£3,544
£3,514
Taxes Incurred
£1,905
£1,914
£1,923
£1,932
£1,941
£1,950
£1,959
£1,968
£1,977
£1,986
£1,995
£2,004
Marketing/Promoti
6
6
6
6
6
on Depreciation Utilities General
15
Administrative
%
Repairs and
15
Mentenance
%
Direct Operating
15
Expenses
%
Occupancy Costs
15
£292
£1,192
£292
£1,192
£292
£1,192
% Investment Repayments
Total Operating Expenses
Profit Before Interest and Taxes EBITDA
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Net Profit
£4,444
£4,465
£4,486
£4,508
£4,529
£4,550
Net Profit/Sales
9.80%
9.84%
9.89%
9.94%
9.98%
10.03 %
08009719
£4,571
£4,592
£4,613
£4,635
£4,656
£4,677
10.08
10.12
10.17
10.22
10.26
10.31
%
%
%
%
%
%
Page 94
VI.
Appendix 5
Table 12 - Monthly Cash Flow Pro Forma Cash Flow
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£45,369
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
9
9
9
9
9
9
9
9
9
9
9
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
£45,36
9
9
9
9
9
9
9
9
9
9
9
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£435,45
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£487,62
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
£52,17
4
4
4
4
4
4
4
4
4
4
4
4
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Cash Received
Cash from Operations Cash Sales
Subtotal
£45,369
Cash from Operations
Additional Cash Received Sales Tax,
15.00
VAT,
£6,805
£6,805
£6,805
%
HST/GST Received New Current Borrowing New Other Liabilities (interestfree) New Longterm
0
Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received
Expenditur es
Expenditur es from Operations
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Page 95
Cash
£40,924
£40,90
£40,88
£40,86
£40,84
£40,81
£40,79
£40,77
£40,75
£40,73
£40,71
£40,69
4
3
1
0
9
8
7
6
4
3
2
£40,90
£40,88
£40,86
£40,84
£40,81
£40,79
£40,77
£40,75
£40,73
£40,71
£40,69
4
3
1
0
9
8
7
6
4
3
2
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£6,805
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£3,629
£3,629
£3,629
£3,629
£3,629
£3,629
£3,629
£3,629
£3,629
£3,629
£93,500
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
Purchase
£341,95
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
Long-term
0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£486,80
£51,33
£51,31
£51,29
£51,27
£51,25
£51,23
£51,21
£51,19
£51,16
£51,14
£51,12
8
8
7
6
5
3
2
1
0
9
8
6
£816
£836
£857
£879
£900
£921
£942
£963
£984
£1,006
£2,382
£3,218
£4,075
£4,954
£5,854
£6,775
£7,717
£8,680
£9,665
£10,67
Spending Subtotal
£40,924
Spent on Operations
Additional Cash Spent Sales Tax,
£6,805
£6,805
£6,805
VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term
£3,629
£3,629
Liabilities Principal Repayment Purchase Other Current Assets
Assets Dividends Subtotal Cash Spent
Net Cash
£1,027
£1,048
Flow Cash Balance
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0
£11,69
£12,74
7
5
Page 96
VII.
Appendix 6
Table 13 - Monthly Balance Sheet Pro Forma Balance Sheet
Assets
Nov
Dec
Jan
£2,382
£3,218
£4,075
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£11,69
£12,74
0
7
5
Startin g Balanc es
Current Assets Cash
Other
£1,566
£5,249
£4,954
£5,854
£6,775
£7,717
£8,680
£9,665
£10,67
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
£98,74
9
9
9
9
9
9
9
9
9
9
9
9
£101,1
£101,9
£102,8
£103,7
£104,6
£105,5
£106,4
£107,4
£108,4
£109,4
£110,4
£111,4
31
67
24
03
03
24
66
29
14
19
46
94
£81,33
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
£423,2
0
80
80
80
80
80
80
80
80
80
80
80
80
£9,583
£9,583
£9,583
£9,583
£71,74
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
£413,6
7
97
97
97
97
97
97
97
97
97
97
97
97
£78,56
£514,8
£515,6
£516,5
£517,4
£518,3
£519,2
£520,1
£521,1
£522,1
£523,1
£524,1
£525,1
2
28
64
21
00
00
21
63
26
11
16
43
91
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
£29,75
6
6
6
6
6
6
6
6
6
6
6
6
6
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
£21,95
8
8
8
8
8
8
8
8
8
8
8
8
8
Subtotal
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
£51,71
Current
4
4
4
4
4
4
4
4
4
4
4
4
4
Current Assets Total
£6,815
Current Assets
Long-term Assets Long-term Assets Accumulat
£9,583
£9,583
£9,583
£9,583
£9,583
£9,583
£9,583
£9,583
£9,583
ed Depreciati on Total Long-term Assets Total Assets
Liabilities and Capital
Current Liabilities Current Borrowing Other Current Liabilities
Liabilities
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Long-term
£0
£431,8
£428,1
£424,5
£420,9
£417,3
£413,6
£410,0
£406,4
£402,7
£399,1
£395,5
£391,9
21
92
63
34
05
76
47
18
89
60
31
02
£51,71
£483,5
£479,9
£476,2
£472,6
£469,0
£465,3
£461,7
£458,1
£454,5
£450,8
£447,2
£443,6
4
35
06
77
48
19
90
61
32
03
74
45
16
£10
£10
£10
£10
£10
£10
£10
£10
£10
(£9,58
£26,83
£26,83
£26,83
£26,83
£26,83
£26,83
£26,83
£26,83
Liabilities Total Liabilities
Paid-in
£10
£10
£10
£10
£26,83
£26,83
£26,83
£26,83
Capital Retained Earnings
3)
8
8
8
8
8
8
8
8
8
8
8
8
Earnings
£36,42
£4,444
£8,910
£13,39
£17,90
£22,43
£26,98
£31,55
£36,14
£40,76
£45,39
£50,05
£54,72
6
4
3
3
4
6
0
4
0
7
£40,24
£44,75
£49,28
£53,83
£58,40
£62,99
£67,60
£72,24
£76,89
£81,57
1 Total
£26,84
Capital Total
£31,29
£35,75
8
2
8
4
2
1
1
2
4
8
2
8
5
£78,56
£514,8
£515,6
£516,5
£517,4
£518,3
£519,2
£520,1
£521,1
£522,1
£523,1
£524,1
£525,1
2
28
64
21
00
00
21
63
26
11
16
43
91
£26,84
£31,29
£35,75
£40,24
£44,75
£49,28
£53,83
£58,40
£62,99
£67,60
£72,24
£76,89
£81,57
8
2
8
4
2
1
1
2
4
8
2
8
5
Liabilities and Capital
Net Worth
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VIII.
Appendix 7
Figure 28 - Prashad Menu
•
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IX.
PROJECT PROPOSAL
UB Number:
08009719
Project Title:
Developing a Business Plan and Advice on Sources of Funding
for Prashad Restaurant Supervisor:
Alan Somerville
Company:
Prashad Restaurant
Submission: September 2009 1
Scope/Rationale of Proiect
Prashad is a vegetarian deli & restaurant situated in Bradford that has been operating since 1986. Current situation analysis shows that Prashad’s current location is undermining the business’ potential. This is because over the years, the demographic of the people living around the restaurant’s location has evolved to people who do not appreciate the restaurants business. As a result, the company is looking to expanding and opening a new outlet in a more favourable location. A good business plan will help the company in its expansion plans and help in raising finance. This project will review the proposed location for the business expansion and investigate sources of finance with a view to making recommendations on the choice of location and sources of finance. A business plan will be developed which guide Prashad in its expansion plan and be used in securing appropriate finance. 2
Methodology
The objective of the project is to provide a Business Plan to guide Prashad in its expansion plans, measure its success and secure funding for its expansion. This will involve identifying Prashad’s competitive advantage, analysing the restaurant market, constructing a cash-flow and Profit and loss statement, then build a business plan around it.
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The literature review will cover the latest developments on market analysis, market offering and marketing strategy. Historic analysis of the business will also be reviewed. It will be important to discuss why Prashad is looking to expand and how it has grown over the years. Saltaire, the proposed location will be analysed. It’s history and especially analysis of suitability of demographic of people there to Prashad’s business offering. Percentage of restaurants that have failed or succeeded in Saltaire and the reason will also be analysed. An analysis of the competition of Prashad in Salt aire will also be performed. An initial setup cost including step by step cost analysis will be prepared. A cash flow analysis and Profit & Loss statement for one year will be prepared. Sources of financing will be investigated and best repayment methods will also be researched. The project will produce a business plan and recommend appropriate source for funding based on researches and analysis carried out. This plan will guide Prashad in their expansion plans and be used as a tool to revi ew its performance and to secure funding for the business. 3
Data Sources
Primary information •
Interviews with Prashad staff
•
Interview with other restaurant owners in Saltaire.
•
Customer feedback on Prashad’s product and services.
Secondary information •
Publications on Vegetarian Restaurants
•
Publications on Saltaire
•
Publications on Customer Satisfaction
•
Current thinking on Strategic Management
•
Industry/market reports
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4
Aspects of MBA Syllabus Used
The project will involve aspects of the core courses in Finance, Marketing and Strategic Management, and the elective in Project Management. 5
Proposed Chapter Headings and Sub-Headings
1.
Introduction
1.1
Prashad
1.2
Project background
1.3
Terms of reference
1.4
Project methodology
2.
Company Summary
2.1
Prashad Ownership
2.2
Prashad History
2.3
Prashad location and facilities
3.
Products and Services
3.1
Product and Service Description
3.2
Competitive Comparison
3.3
Sales literature
3.4
Future Product and Services
4.
Saltaire Market Analysis Summary
4.1
Saltaire History
4.2
Market Segmentation
4.3
Target Market Strategy
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4.3.1 Market Needs 4.3.2 Market Trends 4.3.3 Market Growth 4.4
Service Business Analysis
4.4.1
Competition and Buying Patterns
4.4.2
Main Competitors
4.4.3 Business Participants 5.
Strategy and Implementation Summary
5.1
Marketing Strategy
5.1.1
Promotion Strategy
5.1.2 Positioning Statement 5.1.3 Pricing Strategy 5.2
Sales Strategy
5.2.1 Sales Forecast 5.3
Strategic Alliances
5.4
Competitive Edge
5.5
Milestones
6.
Management Summary
6.1
Organisational Structure
6.2
Management Team
6.3
Management Team Gaps
6.4
Personnel Plan
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7.
Financial Plan
7.1
Important Assumptions
7.2
Key Financial Indicators
7.3
Break-even Analysis
7.4
Projected Profit and Loss
7.5
Projected Cash Flow
7.6
Projected Balance Sheet
7.7
Business Ratios
7.8
Expansion and Payback Strategy
7.9
Long Term Plan and Investment Opportunities
8.
Sources of Finance
9.
Conclusions and Recommendations
9.1
Conclusions
9.2
Recommendations
12 Appendices and Bibliography
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