Post on 05-Apr-2018
8/2/2019 Fm Assignment 0705114
1/18
Table of contents
Table of contents .................................................................................................... 1Unique selling proposition ....................................................................................... 2
Aims & objectives: ................................................................................................... 2
Key facts ................................................................................................................. 3
Competitive analysis ............................................................................................... 3
Market analysis summary .................................................................................... 3
SWOT analysis ........................................................................................................ 4
Funding requirements and company structure ........................................................ 8
Costing & pricing ..................................................................................................... 9
Breakeven analysis ............................................................................................... 10
Sensitivity analysis ................................................................................................ 12
Standard estimate .......................................................................................... 12
Best case scenario .......................................................................................... 13
Worst case scenario ........................................................................................ 14
8/2/2019 Fm Assignment 0705114
2/18
Unique selling proposition
The planned restaurant will be a Mediterranean themed restaurant named
Corrida situated in the city centre of Guildford. The restaurant aims to
distinguish itself from competitors through the provision of reasonably
priced high quality Mediterranean food (e.g. Spanish Tapas), drinks and
wine (e.g. Sherry and Port) as well as excellent customer service in a
pleasant and cozy servicescape that enhances the overall meal experience.
Since the level of service quality can make the difference between success
and failure, much emphasis will be placed on employee motivation and
development in order to attract and retain a skilled workforce. Even if this
entails high costs it doubtlessly plays a key role in satisfying and delighting
customers. Furthermore, the restaurant will implement sophisticated
information technology, such as Micros RES ePOS and ERP system
(Micros, 2011b), to enhance key value chain processes, improve decision-
making and reduce costs. Likewise, it will deploy customer relationship
management and integrated online and offline marketing initiatives to
create loyal and profitable customers. In this respect social media (e.g.
Facebook or Twitter) allow the restaurant to effectively communicate and
engage with guests and promote special offers online at low costs.
The restaurant aims to target a broad segment of customers aged 18-55+
as well as corporate customers who seek value for money. The restaurant
has a 20-seater function room which can be used for birthdays,
anniversaries, professional seminars and company events. The menu will be
adapted on a regular basis to provide seasonal dishes and cater for
customer preferences. Own events will be hosted throughout the year, such
as wine tastings or themed dinners.
Aims & objectives:
1) Provide an outstanding meal experience in a pleasant and cozyatmosphere
2) Gather regular feedback to ensure high guest and employeesatisfaction
3) Emphasize corporate social responsibility to satisfy key stakeholders4) Negotiate mutually beneficial contracts with suppliers to achieve high
gross margins
5) Maintain labor and food costs consistent with high ridge6) Enhance internal and external processes by implementing technology7) Increase annual sales revenues by 6% in 2015
8/2/2019 Fm Assignment 0705114
3/18
Key factsTotal capacity 100 seatsSeparate functionroom
20 seats
Opening hours Monday Sunday 12am-3pm, 6pm-
10.30pm
Competitive analysis
Market analysis summary
The Guildford area has 44 well-rated restaurants as listed by the Restaurant Guide (2011):
2 bar restaurants
1 American Bistro cuisine
1 Brasserie cuisine
1 Japanese Fast Food
1 Spanish cuisine
English, Gastropub, cuisine
3 Grill cuisines
Pub cuisines
2 French cuisines
14 Mediterranean Restaurants
2 Pizza & Pasta restaurants
casual and Traditional restaurants
There are only two direct competitors which offer similar meals (La Casita and Son
of Sombrero), yet lack quality customer service and an appealing atmosphere as
well as sophisticated technology. This provides a great opportunity to gain market
share and create loyal customers.
8/2/2019 Fm Assignment 0705114
4/18
SWOT analysis
Corrida
SWOTMatrix
Opportunities Threats
A new housingsociety is beingbuilt nearby.
The local counciloffers grant forregeneration ofunused area ifwe would like to
develop. Gain market
share
Create loyalcustomers
Deploytechnology toenhanceprocesses
Price competition
Local familyrestaurants withlover price.
Food priceincreases
Increase inoperating costs
Economic downturn
Strengths S-O strategies S-T strategies Our restaurant is
suitable foreveryone incommunity for alltype of purpose.
It is located intown centre.
We have goodchoice of itemsavailable in menu
for everyone. It offers private
area for anyfamily function orprofessionalmeetings.
Have take awayoptions forcustomers.
It is disabledfriendly
restaurant. Employee
satisfaction andwell-being
How can the restaurant
leverage strengths to benefit
from opportunities?
Ensure guest and employee
satisfaction
Establish mutually beneficial
relationships with suppliers
How can the restaurant usestrengths to minimise threats?
Increase cost-efficiency andimprove customer servicethrough technology
8/2/2019 Fm Assignment 0705114
5/18
Skilled employees
Sophisticatedtechnology
Weaknesses W-O strategies W-T strategies
Our restaurant isnew and notestablished.
We have limitedfunds available.
How can the restaurant
ensure that weaknesses do
not inhibit growth?
Develop sound marketing
strategy and integrate online
and offline initiatives
Allocate resources astutely to
ensure the highest possible
ROI
How can the restaurant fixweaknesses that can makethreats have a real impact?
Gain additional funding if
necessary
8/2/2019 Fm Assignment 0705114
6/18
Price comparison (food)
La casita Son of sombrero Olivo Corrida
Starter 5.1 4.95 6 5.14
Soup 3.45 2.95 4.4 3.45
Main dish 6.8 7.95 11.95 7.95
Dessert 5.1 4.95 7.1 5.95
Tapas
Cold tapas 1.60 1.95
Vegetariantapas
2.1 1.85
Fish tapas 4.5 3.27
Meat tapas 4.1 3.95
4 tapas meal 7.50 7.95
8 tapas meal 11.95 12.95
12 tapas meal 14.90 15.95
Price comparison (beverages)
La casita Son of sombrero Olivo Corrida
DrinksWater1000 ml
3.29 3.65 5.2 4.5
Beer 500 ml 3.3 3.1 3.9 3
Soft Drink 2.1 3 3.5 2.5
Fruit juices 3.1 3.5 5 3.42
Coffee 2.20 2.15 2.95 2.22
Tea 1.95 1.9 2.7 2.45
Wine White wine 10.95 11.2 15.5 13.4
Red wine 10.7 9.65 14.95 11.95
Sherry 3.4 4.15 5.2 4.83
Port 5.3 5.5 7.5 6.56
Sparkling wine 44.6 35.4 49.95 47.24
8/2/2019 Fm Assignment 0705114
7/18
8/2/2019 Fm Assignment 0705114
8/18
Funding requirements and company structureAn amount of 200,000 is needed to cover start-up costs and provide working
capital. Partners will contribute 40,000 at equal amounts and a Government
backed loan of 160,000 (at an Annual Interest Rate of 7.9% for a loan period of 10
years) provided by Natwest, 75% of which will be guaranteed by the UK
Department for Business Innovation and skills. This kind of loan allows borrowing
more money without having a large amount of security to back the borrowing
(Natwest, 2011). There is a 100 arrangement fee.
The structure of the restaurant will be a Limited Liability Partnership (LLP), which
requires partners to register at Companies HouseIn order to avoid possible
disagreement, an agreement will be written and approved by each member.
Moreover, each member needs to registers as self-employed at HM Revenue andCustoms (HMRC). In this kind of business, partners share the risks, costs,
responsibilities and profits of the business. However, liability is limited to the
amount of money that each partner has invested in the business and to any
guarantee they provided to secure the funding. This legal form is well adapted for a
restaurant which is not a big structure, but still provides some protection for the
partners if the business gets in trouble. In fact, this legal form allows different
people to work together without all the procedure constraint of a limited company.
The obligations are to produce annual self assessments returns for the business
and for each individual member to the Inland Revenue. Moreover, Limited liability
partnership must file accounts with Companies House. In this kind of business, thefour partners manage and support the business, but they can have employee. The
restaurants profits will be withdraw between the partners depending on the
agreement. Partners are taxed as individuals at normal rates on their share of
profits and need to pay their own National Insurance Contributions. In fact LLP
dont have to pay Corporation Tax (Business Link, 2011b)
8/2/2019 Fm Assignment 0705114
9/18
Costing & pricingIn terms of costing and pricing restaurants, in addition to tangible meals and
drinks, need to consider the intangible factors which complement the whole meal
experience, such as customer service and restaurant atmosphere (Cousins et al.,
2002). Likewise, perceived guest value, competition, price rounding and
traditional prices charged are further factors that influence the pricing decision
(Schmidgall et al., 2002, p. 196). Furthermore, given the perishability of inventories
it is crucial to carefully manage inventory levels. To facilitate both costing and
pricing the restaurant will use Micros RES system that maintains real-time
information on inventory levels, recipe ingredients and costs, competitive bids, as
well as actual versus theoretical reports (Micros, 2011a). The system also
facilitates adapting menus to cater for customer preferences and evaluate the
profitability of individual menu items through menu engineering, which is a toolused to determine the relative contribution margin and demand and make changes
if necessary (Jagels et al., 2007, p. 256).
A sample food and drinks menu has been created and costs of products and recipe
ingredients have been researched using ASDA online. Since all supplies will be
bought in bulk from hospitality suppliers, the contribution margin is expected to
slightly increase. The sample food menu comprises starters, soups, main dishes,
desserts and tapas, whereas the sample drinks menu comprises water, soft drinks,
beer, wine, coffee and tea. Deals are provided for lunch, dinner and tapas to
persuade guests to buy more. A marketing-orientated pricing approach has beenadopted in addition to cost-plus pricing to take account of key influencing factors
such as competitors (Jobber, 2010, p. 427). The selling prices are exclusive of the
current standard-rate of VAT (20%) which needs to be added (HM Revenue &
Customs, 2011; Business Link, 2011a).
Further information about the total costs and expenses can be found in the
financial statements.
8/2/2019 Fm Assignment 0705114
10/18
Breakeven analysisThe breakeven analysis is an essential tool in business planning to enhance
decision making, because the breakeven point shows the threshold from which abusiness turns profitable. Calculating the precise breakeven point for restaurants is
difficult as they offer a great variety of different meals and drinks. This is also
referred to as the menu mix (Jagels et al., 2007, p. 254). Cafferky et al. (2010)
therefore suggest using the Cost of Goods method to calculate the breakeven
point for restaurants. The estimated average check per guest (13) and costs of
goods rate excluding waste (30.33%) were used to calculate both variable costs
and contribution. The average fixed costs used are 891,615.85.
The breakeven analysis shows that the restaurant needs to make at least
1,281,376.16 in sales a year or 3,510.62 day and serve at least 270 customers aday to break even. The breakeven occupancy rate and seat turnover are 45% and
2.70 respectively.
Due to the dynamic nature of the hospitality industry breakeven analyses will be
conducted on a regular basis taking account of any changes in fixed and variable
costs and average check per guest (Cafferky et al., 2010).
Average fixed costs year 1-3891.615,8
5
Average check per guest 13,00
Average variable costs per checkyear 1-3 3,95
Average contribution per check 9,05
Breakeven sales level per year1.281.376,
16
Breakeven sales level per month106.781,3
5
Breakeven sales level per day 3.510,62
Breakeven occupancy rate 45,01%
Breakeven seat turnover 2,70
Breakeven guest count per year 98567Breakeven guest count permonth 8214
Breakeven guest count per day 270
8/2/2019 Fm Assignment 0705114
11/18
8/2/2019 Fm Assignment 0705114
12/18
Sensitivity analysis
Sensitivity analysis is a useful tool to evaluate the potential risk of an investment (Atrill et al., 2010). Since in practice various input
values are having an influence on profitability a best and worst case scenario have been considered which include favorable and
unfavorable variations in the average check per guest, variable costs, fixed costs and capacity.
Standard estimate
Sensitivity Analysis Standard estimate
TimeGuests/Capacity
Averagecheck
Variablecosts
Contribution Fixed costs
Day 60 13,00 3,95 9,05 2.442,78
GuestsOccupancy Sales Variable cost
Contribution
Fixedcosts
Totalcosts Net income
0 0% 0,00 0,00 0,00 2.442,78 2.442,78 -2.442,78
60 10% 780,00 237,26 542,74 2.442,78 2.680,04 -1.900,04
120 20% 1.560,00 474,51 1.085,49 2.442,78 2.917,29 -1.357,29
180 30% 2.340,00 711,77 1.628,23 2.442,78 3.154,55 -814,55
240 40% 3.120,00 949,02 2.170,98 2.442,78 3.391,80 -271,80
300 50% 3.900,00 1.186,28 2.713,72 2.442,78 3.629,06 270,94
360 60% 4.680,00 1.423,53 3.256,47 2.442,78 3.866,31 813,69420 70% 5.460,00 1.660,79 3.799,21 2.442,78 4.103,57 1.356,43
480 80% 6.240,00 1.898,04 4.341,96 2.442,78 4.340,82 1.899,18
540 90% 7.020,00 2.135,30 4.884,70 2.442,78 4.578,08 2.441,92
600 100% 7.800,00 2.372,55 5.427,45 2.442,78 4.815,33 2.984,67
Breakeven guest count Breakeven Breakeven seat turnover Breakeven sales level
8/2/2019 Fm Assignment 0705114
13/18
per day occupancy rate per day
270 45,01% 2,70 3.510,62
Best case scenario
AssumptionsAverage check +
10%,Variable costs -5%,Capacity + 5%
Sensitivity Analysis Best case scenario
TimeGuests/Capacity
Averagecheck
Variablecosts
Contribution Fixed costs
Day 63 14,30 3,76 10,54 2.442,78
GuestsOccupancy Sales Variable cost
Contribution
Fixedcosts
Totalcosts Net income
0 0% 0,00 0,00 0,00 2.442,78 2.442,78 -2.442,78
63 10% 900,90 236,66 664,24 2.442,78 2.679,45 -1.778,55
126 20% 1.801,80 473,32 1.328,48 2.442,78 2.916,11 -1.114,31
189 30% 2.702,70 709,99 1.992,71 2.442,78 3.152,77 -450,07
252 40% 3.603,60 946,65 2.656,95 2.442,78 3.389,43 214,17
315 50% 4.504,50 1.183,31 3.321,19 2.442,78 3.626,09 878,41
378 60% 5.405,40 1.419,97 3.985,43 2.442,78 3.862,75 1.542,65
441 70% 6.306,30 1.656,63 4.649,67 2.442,78 4.099,42 2.206,88
504 80% 7.207,20 1.893,30 5.313,90 2.442,78 4.336,08 2.871,12
567 90% 8.108,10 2.129,96 5.978,14 2.442,78 4.572,74 3.535,36
630 100% 9.009,00 2.366,62 6.642,38 2.442,78 4.809,40 4.199,60
8/2/2019 Fm Assignment 0705114
14/18
Breakeven guest countper day
Breakevenoccupancy rate Breakeven seat turnover
Breakeven sales levelper day
232 36,78% 2,32 3.313,12
Worst case scenario
AssumptionsAverage check -10%Variable costs +10%
,Fixed costs +10%
Sensitivity Analysis Worst case scenario
TimeGuests/Capacity
Averagecheck
Variablecosts
Contribution Fixed costs
Day 60 11,70 4,35 7,35 2.687,06
GuestsOccupancy Sales Variable cost
Contribution
Fixedcosts
Totalcosts Net income
0 0% 0,00 0,00 0,00 2.687,06 2.687,06 -2.687,06
60 10% 702,00 260,98 441,02 2.687,06 2.948,04 -2.246,04
120 20% 1.404,00 521,96 882,04 2.687,06 3.209,02 -1.805,02
180 30% 2.106,00 782,94 1.323,06 2.687,06 3.470,00 -1.364,00
240 40% 2.808,00 1.043,92 1.764,08 2.687,06 3.730,98 -922,98
300 50% 3.510,00 1.304,90 2.205,10 2.687,06 3.991,96 -481,96
360 60% 4.212,00 1.565,88 2.646,12 2.687,06 4.252,95 -40,95
420 70% 4.914,00 1.826,86 3.087,14 2.687,06 4.513,93 400,07
480 80% 5.616,00 2.087,84 3.528,16 2.687,06 4.774,91 841,09
540 90% 6.318,00 2.348,83 3.969,17 2.687,06 5.035,89 1.282,11
600 100% 7.020,00 2.609,81 4.410,19 2.687,06 5.296,87 1.723,13
8/2/2019 Fm Assignment 0705114
15/18
Breakeven guest countper day
Breakevenoccupancy rate Breakeven seat turnover
Breakeven sales levelper day
366 60,93% 3,66 4.277,18
8/2/2019 Fm Assignment 0705114
16/18
8/2/2019 Fm Assignment 0705114
17/18
Atrill, P., McLaney, E. (2010) Accounting: An Introduction.
5th edn. Essex: Pearson Education Limited
Business Link (2011a) Rates of VAT on different goods and service.
Available at: http://www.businesslink.gov.uk/bdotg/action/layer?
topicId=1083088706&furlname=vatratesgoodsservices&furlparam=vatratesgoods
services&ref=&domain=www.businesslink.gov.uk
(Accessed: 6 May 2011).
Business Link (2011b) Set up and register a limited liability partnership (LLP).
Available at: http://www.businesslink.gov.uk/bdotg/action/layer?
r.l1=1073858805&r.l2=1085161962&r.s=tl&topicId=1073865702 (Accessed: 6
May 2011).
Cafferky, M., Wentworth, J. (2010) Breakeven Analysis: The Definitive Guide to
Cost-Volume-Profit Analysis. New York: Business Expert Press
Cousins, J., Foskett, D., Gillespie, C. (2002) Food and Beverage Management.
Essex: Pearson Education Limited.
HM Revenue & Customs (2011) VAT Catering and Take-Away Food.
Available at:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?
_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=
document&columns=1&id=HMCE_CL_000160#P176_17005 (Accessed: 6 May2011).
Jagels, M.G., Ralston, C.E. (2007) Hospitality management accounting.
New Jersey: John Wiley & Sons, Inc.
Jobber, D. (2010) Principles and Practice of Marketing.
6th edn. Maidenhead: McGraw-Hill Higher Education.
Micros (2011a) Micros RES Product Management.
Available at: http://www.micros.com/Products/RES/ProductManagement/
(Accessed: 1 May 2011).
Micros (2011b) MICROS RES: Back-Office, Guest Services, & Restaurant POS
Software.
Available at: http://www.micros.com/Products/RES/restaurant-pos-software.htm
(Accessed: 1 May 2011).
Natwest (2011) Government-backed loan.
Available at: http://www.natwest.com/business/products/borrowing/longer-
term/loans/government-backed-loan.ashx#tabs=section1
(Accessed: 1 May 2011).
8/2/2019 Fm Assignment 0705114
18/18
Schmidgall, R.S., Hayes, D.K., Ninemeier, J.D. (2002) Restaurant financial basics.
New Jersey: John Wiley & Sons, Inc.