Demonstrate a critical understanding of the material introduced throughout the module.
Critically evaluate subject matter using examples and academic support from a wide range of sources.
Everyone in a room of Bay Area restaurant will deliberate about the shortages of labor, affordability crisis, increasing costs, as well as lack of the late-night transportation. Precisely, a great number of these problems remain systemic and hence cannot be tackled by a single industry, despite chefs frequently proposing the provision of housing for cooks or owning a Bay Area Rapid Transit system which operates throughout the night (Arikan 2008).
The consumer always spend money on dine-out food compared to groceries; this has been so pronounced in the Bay Area whereby new restaurants appear to open weekly. This growth ironically comes at the point where the rent, food and labor cost are fast rising. The affordability crisis influences both commercial and residential rents for which there is no control of rent. It implies that Cardiff Bay Area is extremely expensive for the average restaurant workers to live. Therefore, while the minimum wage is rising as well as cost of labor keeps surging up, restauranteurs are trying to discover mechanisms to pay workers even more to retain them in Cardiff Bay Area (Shafer, Smith and Linder 2005).
Moreover, in the face of the hiked wages in the Bay Area, the absence of affordable housing options implies there are just no adequate employees to work in the restaurants. The restauranteurs are quite literally hitting the tipping point, or as certain restauranteurs have been referring it, ‘peak restaurant’ (Schneider and Spieth 2013).
In particular ways, the Cardiff Bay Area has never been quite interesting, obvious from recognition. Chefs are preparing delicious meals as well as new, innovative terms are attracting dinners as well as critics in the same manner. Nevertheless, an enormous part of growth in the restaurant industry is directly linked to Cardiff Bay Area’s rigorous economy. This economy has witnessed record job growth of its individuals with the minimum unemployment rate in the neighborhood rising. This growth has culminated into a new pool of investors in the restaurant industry-tech employees as well as venture capitalist that love the cache that the ownership of restaurant can bring without working in the restaurant (Schimmer, Geschuhn and Vogler 2015).
Individual restaurant investors, dissimilar to banks, will take an advantage of a chef or restaurant terms which resonates. The well-remunerated employees flush with cash, several of whom have kept pace with the Food Network as well as have undertaken to photograph their food, are happy to make restaurant their social activity. This paper will hence critically explore the key barricades to commencing new venture within the Cardiff Bay Area’s restaurant industry given the current economic climate (Osterwalder, Pigneur and Tucci 2005).
Even though there is talk of the Cardiff Bay Area restaurant future featuring iPad ordering and robots serving drinks as well as preparing food, it has not been the norm of the industry. Indeed, the restaurant economic model has not altered extensively in the past eighty years, when the Golden Gate Restaurant Association (GGRA) was established. What has altered is the diminishing unionized restaurants that was a famous phenomenon in the Cardiff Bay Area tracing back to the Gold Rush. Presently, unionized restaurants solely exist in the enormous event facilities such as stadiums, hotels, airports as well as private clubs. Nevertheless, the diminishing unionization as well as the gains linked to them has culminated in the modern day backlash thereby brining these gains back. Whether it remains the Fight for fifteen dollar, new healthcare regulations as well as state and local paid-leave ordinances, such regulatory efforts are anchored in the union model of how these restaurants once ran in many cities. Nevertheless, the contemporary’s restaurant cost structure remains strained since the regulation patchwork and wages establish across different jurisdiction, besides the business models structured to maintain prices low enough to encourage dinning out per day.
The barrier to market research for the new ventures in the restaurant industry relates to the increasing number of issues that must be made clear prior to actualizing the business plan. This is coupled with stiff competition, shortage of labor, marketing and even public relation (Number 2013). The market researchers for new venture must ensure that they avail facts that will help the firm to make a rational decision on whether to enter or opt not to enter the industry. Such questions that must be answered here include:
Answering the above market research question is not a simple task since the industry keeps on changing tactics and rivals firms do not rest in coming up with new strategies to outstrip one another.
Whereas the Cardiff Bay Area’s restaurant community remains increasingly collaborative as well as supportive of each other compared to many other regions, competition stays fierce. The restaurants fiercely compete for workers, dinners, as well as public relations making it had for new ventures to start operations. These restaurants are not solely competing against each other, but also competes against the delivery of meal services which prepare their individual food, non-restaurant industry jobs as well as tech companies with enormous kitchen operations.
These makes the competitive strategy for new entries to face serious challenges. Moreover, the restaurants jobs cannot remain competitive with the benefits, salaries as well as vacation time provide by other industries. The operational costs and the number of seats as well as turns in the industry vary, permitting certain restaurants to be increasingly generous in wages, benefits and salaries than in others thereby creating a barrier to entry.
Many restaurants have been driven out of the restaurant industry by the affordability crisis and hence restaurants must bullish about hiring as well as retaining workforce, that implies poaching from others and hence a barrier to entry. As whereas this competition remains a boom to the workforce, it is really hiking up the labor cost which makes it even harder for new restaurants to enter.
Some firms like Target and Walgreens that were once focused on the business of personal items alongside household commodities have entered the industry and are currently in the business of food preparation creating stiffer competition than before. Moreover, the food trucks as well as mobile street carts have proliferated the industry thereby making the restaurants to have an even wider cohort of competitors that cannot be withstand by new entrants.
Non-restaurant establishments have remained cheaper in many cases than a comparable restaurants because these users lack same overhead costs. Consequently, such a price difference really matters to the consumers and hence for restaurants to compete for customers, they must reduce prices of food against the hiked costs of food preparation hence a barrier to entry. The game of public relation is another area that creates increasing barrier to entry for new restaurants. Many restaurants engage in fierce competition to make it to the top list.
They want their new brunch, menu relaunch, happy hour as well as chef to attract new dinners. They are also concerned whether the entrance of new restaurants will undermine them from their respective fame. Moreover, there is also a concern of whether someone else is practicing a concept that is similar to their, and only inexpensive, or based on an increasingly intimate ambiance. The restaurants are concerned about how to continue standing out competitively and have to even go extra mile to make sure that they have good competitive strategy. This will ensure they become a popular neighborhood restaurant, and achieve the need to be a destination.
The era of Instagram is marred with food bloggers as well as review sites and hence the restaurants have to think of how to increasingly become appealing to every consumer. They must know their respective brands as well as determine what they need it to be.
III – Marketing
The marketing in the restaurant industry creates barriers due to increasingly expensive cost of undertaking marketing due to stiffer competition. Many established restaurants are already controlling the industry and compete against each other and against non-restaurant industries for factors of production. Accordingly, the cost of marketing affect the entire cost of starting and running the restaurant in the Cardiff Bay Area.
Large and established restaurants have already created brands and loyal customers. They can charge low prices for foods even in the face of the increased cost of production and hence new ventures find it difficult to survive these competition strategies. They will, therefore, be locked out from entering the business to avoid inevitable losses.
Only restaurant that can effectively establish as well as maintain their respective brands can find efficient ways to undertake marketing online and via additional ventures, including the media. This is because with the new restaurants, meal delivery services, and review websites and further presently, more than ever before, it remains essential for them to create and uphold their brands. However, this is increasingly challenging since the already existing and established firms have hiked the cost of marketing and hence new restaurants must use extremely huge funds to keep the pace which means a loss in profit.
These established restaurants further complicates the marketing since they persistently engage in marketing strategies due to the bustling restaurant industry to survive the competition and increasing costs. Marketers must show that their respective staffs have maintained quality and service and built a sustainable restaurant brand that keeps a restaurant busy in the face of a bust and boom cycle.
They must spend exorbitantly higher amount of money to market their products to instill customer loyalty since raising the prices becomes a huge deterrence to the customers from visiting the facility. The marketers must show that their respective meal delivery services has extended their brand as well as helped them find new customers. All these considered raise the marketing cost beyond the imaginable levels for the new ventures who will finally opt not to make entry into the industry (Morris, Schindehutte and Allen 2005).
This is because many restaurants stand out as mission driven or those offering customers a unique, dinner party-esque experience must part with huge cash to accomplish their marketing goals. Other established restaurants have also employed excessive social media tactics with locations supporting neighborhood schools whereby they have to raise huge amount of funds. This means that any new venture must be prepared use much funds to market their products and create reasonable brands.
There are shortages for the workers in the Cardiff Bay Area for restaurants due to competition from both restaurants and non-restaurants. A full-service restaurant for example will be increasingly hard pressed to get a cook to work for fourteen dollars per hour. Moreover, on top of Cardiff Bay Area having the highest minimum wage compared to any given enormous city, workers have to pay the cost of the local health care ordinance of the city. This is 1.68 dollars per hour per worker for employers with twenty to ninety-nine employees. They will pay 2.53 dollars for employers with one hundred or additional workers. The restauranteurs moreover have a need to provide paid sick leave that some other jurisdictions have embraced.
And currently, new paid parental leave benefits are added to the mix thereby creating barriers for new entrance to acquire labor. All these challenges considered, prior to even undertaking adjustments for market pressures for the workers’ wages, Cardiff Bay Area restaurants remain in at fifteen dollar to sixteen dollar per hour per worker on mandated costs. This is creating a barrier for a new entrance restaurant thereby locking them out of the industry. Moreover, there is no tip credit in the Cardiff Bay Area and hence everybody is compelled to make full minimum wage thereby increasing the cost of starting a new venture in the Cardiff Bay Area restaurant industry.
This has really compelled the local restaurant to raise question regarding whether the restauranteurs are facing the economic model end of the restaurant as it is known. Since the Cardiff Bay Area is a high cost labor environment, there is no possibility of any restaurants including the new ventures to raise the prices since in doing so, mass consumers will be automatically alienated. The increase in wages means coupled with the shortage of affordable housing option further complicates the new entrance as this means that there are just not sufficient employees for the available number of restaurants in the Cardiff Bay Area.
The labor pool is, therefore, increasingly getting shallower. Accordingly, the recruitment as well as retention of workers will re-surface as a top barrier for both new entrance restaurant operators as well as the existing ones, as a tighter national labor market implies a stiffer competition with other industries for the workers. The labor force demographics are further shifting to involve a greater proportion of older employees whereas the younger worker pool is diminishing. The new ventures, therefore, remain locked out of the industry as solely the established restaurants have the advantage to compete favorably for the few existing and expensive workers.
In the Cardiff Bay Area just like in any other metropolitan regions, the cost of living remains extremely expensive thereby making extremely hard for the restauranteurs in the industry to partake in the industry especially the new ventures. Cooks are quitting the Cardiff Bay Area frequently for less expensive locales as well as shifting to technology corporations which offer lucrative pays besides benefits thereby making the competition in the industry for to be stiff amidst the local talent pool. The restaurants are compelled to share or poach workers, depending on the circumstance which even makes it extremely impossible for new entrance in the industry. Moreover, there is an increasing shortage of managers since the rising minimum wage has ensure that the industry becomes additionally lucrative to remain a server rather than in management.
The concern circumventing remuneration is a creating a challenging barrier to the new entrance. This is because large and already established restaurants are seen as being able to control the entire revenue coming into the industry as a means to augment income stability for the house front, whereas raising the wages of the house back (Knotek and Terry 2009). This has also helped in professionalizing the work surrounding as well as establishes a different culture whereby workers think differently regarding their dedication and commitment to their respective duties or jobs.
As a result of the lack of tip credit in the neighborhood, the gab witnessed between back and front of the house wages is hiked compared to any other place in the region. Accordingly, the restauranteurs are compelled to restructure their respective businesses models. This is aimed at removing the tipping, raise their respective prices and increase all their respective workers to extreme positive wages than the available minimum wage as well as providing workers with health insurance alongside other benefits (Information Resources Management Association 2015).
All these restructuring works considered, the new entrances to the industry view it as the greatest barrier ever to entry. While there are certain initial issues among the group regarding the alteration, it has proved positive in attracting as well as retaining workforce for the established restaurants. This is making the new ventures to either pay more to attract workers or opt not to make entry into the market (Caywood 2012).
Another barrier to the new entries related to the shortage of labor circumvents the question of how to raise nobility in the restaurant industry. In the Cardiff Bay Area, the restaurant work is never revered like it is in other areas. Where a young adult informs their respective parents they need to enter the culinary profession or commence a restaurant, they frequently discourages them. Working in the Cardiff Bay Area restaurant, something one-half of all adults have undertaken at particular time, is viewed as something one does to earn money whereas going via school, pursuing a career within the arts (Greenberg and Kates 2014).
The new entrance also face barriers since only firms that have established can perform effective mentorship programmes that has been earmarked as essential in tackling the scarcity of labor in the Cardiff Bay Area restaurant industry. The industry key labor shortages are categorized into cooks and management. Restaurants are trapped in a dilemma to determine how chefs as owners or restaurant management cultivate the subsequent generation of talents and whether mentorship is something which requires to remain formal or embedded in the business culture (Ginty, Vaccarello and Leake 2011). Only firms that can think effectively how mentorship play a key role in the retention as well as promotion of the talent can survive in this extremely competitive industry.
Conclusion
It is apparent from the above discussion that restaurants industry in the Cardiff Bay Area face severe systemic barriers that not only drives out restaurants but also block new ones from entering the industry. The relevant vexing query regards the most effective path forward for restaurants to endure this competitive environment. The economic and competition climate has the Cardiff Bay Area restauranteurs deliberating severely regarding whether they are able to eradicate tipping as well as add service charges (Cockx and Picchio 2013).
The restauranteurs remain in a dilemmatic condition of exploring whether they need to shift into a pre fix menu or come out of the full service business and subsequently move to ‘quality casual’. Indeed, the restauranteurs remain stranded on whether the tip line on bill for kitchen is effective because back-of-the-house workforce are unable to share in the tip pool. While certain restauranteurs are leaping into finding the new path, everyone is watching to see whether they need to attempt it as well (Carvalho 2015). Many restauranteurs have increased prices already whereas others have added surcharges where they did not initially have them placed.
Everyone is seeking for answers as well as will continue to do so as long as possible before selecting the definitive path. Restauranteurs must seek to predict how the future will be to remain relevant in the industry. For a great percentage of restauranteurs it remains a bit uncertain. Nevertheless, presently more than ever before, it is essential that the restaurant industry support each other, educate consumers as well as share the respective best practices.
References
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