Monday, 22 September 2014

A basic business plan for a business venture for Canada.

Executive Summary

This paper presents a business plan to start a restaurant in Halifax, Nova Scotia. The proposed restaurant will be called ‘Good Day’ and will focus on selling breakfasts and light lunches (dine in and take away). Although there are over 1500 registered food outlets in Nova Scotia, the need for new restaurants is on the rise since the industry contributes around 23% to the tourism sector (which is rapidly growing) and increasing number of households are preferring to eat out; due to paucity of time or lack of cooking skills.
The target market of ‘Good Day’ will be a local population spread over 20 square miles and tourists. The restaurant also faces competition from hundreds of other restaurants and eateries established in proximity however, the offering made by good day which is of breakfasts and light lunches is hardly focused upon by any other competitor. The aim is to establish ‘Good Day’ meals as a necessity to enjoy a regular working day or weekend.
Note must also be taken that 60% of food service ventures do not survive beyond two years and 22% beyond eight. This is because every good cook cannot be a restaurant manager; as this is both a service and manufacturing industry management skills are required to mitigate problems of both. In the sections to follow we make a structured approach by means of various analyses to formulate a sound business strategy for starting up ‘Good Day’ restaurant in Halifax, Nova Scotia (Canada).

Introduction

Good Day is a restaurant planned to being established in Halifax, Nova Scotia in the next 1-2 years. Although there are a plethora of restaurants in Halifax, almost none of them focus on serving breakfast, a light lunch or light snacks as a core item on the menu. This show in the statistics, where 10% of total Canadian dinners are served by restaurants, only 3% of breakfasts are eaten out. This presents a huge opportunity to be capitalised upon since a growing part of the population is having less time to eat at home due to tight work schedules or the lack of cooking skill.
By creating a comfortable and inviting ambience at a convenient location; and by serving delicious and healthy meals, Good Day aims to build its core clientele. Also part of the sales will also come from selling frozen foods, food mixes, local handicraft and art displayed on the walls of the restaurant.
However, restaurant business is not all that rosy a venture it is often portrayed as. The Goldmine it is often thought to be has a very high failure rate. Restaurant businesses are the second biggest cause of bankruptcies in Canada after service stations. Hence care and caution must be followed while implementing the idea of starting up a food service business. In this paper we will follow a structured approach (applying established management techniques) to thoroughly examine the business idea of a breakfast restaurant. This will be done by way of seven major sections in this paper, the executive summary, introduction, industry analysis, marketing plan, operational, financial plan and risk assessment.

Industry Analysis

The restaurant industry contributes to over 1.7 billion $ in revenue yearly which forms approximately 4.4% of Nova Scotia’s GDP. This industry also directly employs over 32000 people and is projected to grow at the rate of 2.8% annually. Considering the statistics it becomes all the more lucrative to operate in this industry; moreover, the following trends make the picture all the more exciting.
1.     Busy lifestyle
Increasing number of people in the proposed locality is being absorbed by the ‘corporate culture’; which leaves them with less time for themselves. Mounting pressure of work schedules keeps people always on the go. This has opened up a need gap where one needs the same comfort of eating a nutritious meal at home, in a setting which gels better with work life. Also the lack of cooking skills in the new generation demands an eatery which fills this gap in demand and supply.

2.     Health conscious

Seven out of ten adults surveyed want to have healthy meals; this is due to rising concerns to prevent against conditions such as obesity and high cholesterol among others. Consumer preference for boiled, broiled, grilled food and salads has increased vis-à-vis fried food and meat. Focus is on tasty and healthy meals. 

3.     Dine in as well as take away

With decreasing time for self, food on the go is the preferred choice of restaurant goers; with over 65% of restaurant meal occasions happening at quick service outlets. This has only increased the relevance of including a take away option in dine in format of Good Day restaurant.

         Marketing Plan

The marketing of Good Day restaurant is to be done over three phases, pre opening, post opening, and point of sales. Although a public relations firm will be hired for pre opening marketing, most point of sales marketing will be the duty of restaurant managers (An annual budget of 10000$ has been set aside for this purpose). Discussed below are key marketing strategies to be employed:

1.     Local press and media

The PR agency hired will use its resources to build publicity and buzz in the local media; using their relations with the press and utilising their economies in using media such as outdoor bill board advertising and flyer distribution.

2.     Social Media and Email campaign

Creating viral and buzz marketing campaign on social media such as facebook and twitter will create an audience for the restaurant. Also floating email campaigns among the target market will bring the business and customer group closer. Various promotions can be undertaken from these platforms.

3.     Coupon

The PR firm can help engage local businesses and residents by distributing promotional and trial coupons. Also the restaurant itself can help build loyalty and increase its clientele by distributing free meal coupons to regulars and to ones who bring along a friend on subsequent visits.

4.     Cards in Fish Bowl

This regular method can be employed to collect business cards of guests. Contacts and emails can thus be obtained which can be used to ensure repeat visits by initiating communication of promotions, etc through emails or text messages.

Operational Plan

The operational plan will cover the following:

1.     Facility

It is of core importance to find a convenient location to operate from, since the target customer wouldn’t want to travel far for a breakfast. Goal is to find a location which was a restaurant so it can be operational after minor renovation. Also, priority will be on finding old furniture which can be refinished along with new decors and accessories to bring out the special aesthetics.

2.     Hours of operation

The restaurant will operate from 6.00 am in the morning until 6.00 pm in the evening. This is in line with the focus on breakfast, light lunch and light snacking menu focused upon. Also everything on the menu will be available in the operating hours.

3.     Employee Training

Employees will be regularly trained in their field of operation with regular briefing in cross operational fields to build understanding of the various business function should the need arise of their filling additional or different roles. Also the chef would brief them regularly to build an understanding of the meals served.

4.     Systems control

Weekly inventory count and daily food count will be a necessary check to minimise wastage and monitor finances and stores. Food production will be mostly in house excepting for a few items like bakery which can be purchased from reliable local vendors to minimise on cost and save time.

Financial Plan

The business requires two levels of funding; first being seed capital and the second being growth capital. Seed capital will encompass all start up and daily funding needs and growth capital is the extra funds needed to expand the current facility or to open a new one once the model is successful. Financial needs can be detailed under the following heads:

1.     Start up cost

This will be the initial cost to bring the business into existence. This will typically include, cost of acquiring place, furniture, décor and machinery. We have set out 150,000 $ for the initial capital expense and 15000$ for initial promotional expense.

2.     Marketing

As already briefed the restaurant management will undertake an active marketing program across various media (including hiring a public relations firm for this purpose). A total of 10000$ annually has been set aside for marketing. However, such expenditure may be modified according to needs.

3.     Operational

Daily operational expenses such as employee wages, maintenance, inventory and taxes are aimed to be met from the revenue generated from sales. However, for the first six months, deficits if any, will be met from the initial start up capital brought forward.

Fund sourcing

Seed capital will be sourced from the owners’ contribution from their private sources. Once the business grabs a foothold in the market (assumed period for establishing clientele being six months from start) all daily/operational expenditure will be met from revenue.
Growth funds needed for expanding may be met through bank loans or venture capitalists; choice being made according to circumstances at that time.

Risk Assessment

In an industry so prone to failure and the average rate of profit returned before taxes being less than 5%, it does good to do a risk assessment of the proposed business model.

1.     Competition

It is very probable for the competition to adapt themselves to the model of Good Day, once it is successful. Imperative will be to stay ahead of the competition by continually innovating and following an aggressive marketing strategy to capture the interest of the target market and ensure consumer loyalty.

2.     Model failure

It is also very probable that the model can fail altogether, since it has been noticed that not a lot of people eat breakfast outside currently. Also an average Canadian household visits a restaurant for a snack or a meal only 11.3 times over a period of a fortnight. To mitigate this risk, a thorough understanding of the trends and a strong alternate business plan (in the same industry) or exit plan is needed.

3.     Costs

With a business with very high revenues and marginal profits, costs play a pivotal role in determining the success or failure of the enterprise. It is of importance to do real time costing, budgeting and setting up contingency or back up funds to sustain in times of adverse costs from the ones projected initially.

Conclusion

Through the above sections we have learnt how to do a basic analysis of a proposed business idea. Good Day restaurant has a good chance of survival and success should the management follow a thorough research plan which encompasses study of trends and actual costing. By means of financial regulation and managerial prowess one can turn this venture into a profitable one.
Due note must be taken of developing the marketing, operational and financial plan in detail while shaping the proposal of starting up, to be presented to various potential parties inviting them to join in the venture.

  References

2.       En.m.wikipedia.org/wiki/Nova_scotia
3.       Nova Scotia’s restaurant industry; Canadian restaurant and foodservices association
4.       SunShine Café: A Breakfast Restaurant Business Plan By Lillian I Burrow; A professional paper in partial fulfilment of the requirements for the Master of Hospitality Administration Department of Hotel Administration
5.       Fact Sheet Foodservice Industry in Nova Scotia; Restaurant Association of Nova Scotia
6.       A Guide to Starting and Operating a Restaurant Business in Nova Scotia; Prepared by: THE ECONOMIC PLANNING GROUP of Canada Halifax, Nova Scotia


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