The major focus of the study is to analyze the impact of food costing on the intentions of the consumers who have been visiting the restaurants and cuisines. Food costing is the concept that is associated with two main costing structures. The first one is the cost of the foods and ingredients and the other one is the labor costs (Vanhonacker and Verbeke 2014). It is noticed that the luxurious hotels offer the high quality food, ambience, and proper hospitality services. Therefore, the customers often pay more prices than the other cuisines. However, the customers even sometimes avoid if they find the restaurants too much cost effective. Therefore, it is essential for the business marketers to obtain the clear ideas about the proper cost structure and review the record accordingly (Feldmann and Hamm 2015). The fundamental rationale of my research is to scrutinize the nourishment costing industry in which I am taking Spice Traders Restaurant to do some review. Food cost and Labour cost are two principle viewpoints that can represent the moment of truth the eatery. So it is compulsory to decide the cost of the sustenance effectively and efficiently .I join with the basically Indian eatery’s proprietor to decide the sustenance cost which is fundamental for business to make an opposition with other eatery and to decide the cost subsequent to settling the net revenue of the eatery where profits is the lifeblood of the business, necessary to survive and essential to thrive. This research project would provide the ideas about the food costing and the necessity of maintaining food costing in order to create the impact on customers’ intentions. The results derived from the collected data will be analyzed in this research project.
In this research I will do fundamental concentrate on the Food costing of essentially Indian eatery. The exploration is being done to decide the cost in successful path as it decides the productivity of the eatery. It is the one in which it cost the plate and sold contrast the sum it cost to set up the food. So it is imperative to decide food cost legitimately so the business does not experience the crisis or any sort of debt. The restaurant chains and the hospitality industry in New Zealand have been experiencing the enormous growth and success in last few years. The statistical figure shows that the cafes and restaurants in Auckland region experienced the revenue growth of almost $1.91 billion. The positive outcome is encouraging the restaurant chain to invest more capital and refurbish the restaurants (Arsil et al. 2014). In fact, people are taking the plunge into starting up the new businesses across many of the sectors along with hospitality. The availability of the luxurious restaurants in different location is even creating the significant impact on the consumers’ intentions as well.
The business requires identifying the way to achieve the strong customer base. It is notable that food costing has the significant impact on the customers’ minds in terms of making the decision of visiting hotels. The major focus of the restaurant businesses is to convince the customers to pay more for the food that is higher than the cost of production. However, in order to achieve this objective, the restaurant businesses require paying attention to the food quality and greater hospitality services. The research conducted on the Indian eatery industry, it is observed that the most fast growing and successful food businesses in India are Pizza chains, and Coffee day. It is noted that the giant Pizza chain, Dominos located more than 300 locations in India whereas the Coffee day are visible in more than 800 locations. In the financial year of 2009-2010, Dominos had the food cost of 26% whereas Coffee Day has the food cost almost 20% (Ranjan and Garg 2017). On the other hand, it is noted that the other restaurants require struggling to keep food costs in check over due to the fluctuating inflated costs. This inflation rate creates the significant impact on the profitability areas. It is noticed that in last 2/3 years, the inflation rate has taken a huge toll on the prices of food ingredients. This incident has pushed the costs in the eatery business. The business owners thus faced the considerable challenges in terms of maintaining the profitability parameter.
Many of the Indian restaurants have the strengthened positioning in New Zealand. Spice Trader Restaurant is one of those India cuisines that offer the high quality Indian food to the consumers. Based on a different location, the restaurant has already established a strengthened customer base with the high quality food and effective hospitality services (Spicetradersnz.com 2017). The convenient location of the restaurant is also attracting more consumers. Almost 115 members are associated including the service staffs, chefs, and managers. The restaurant chain has almost 13 branches around New Zealand across Dunedin, Auckland, and Wellington. The Spice Traders restaurant is a restaurant which provides Indian cuisine to their consumers. It is physically located at the Queensgate Mall Lower Hutt, Johnsonville Shopping centre, Petone, Tauranga, Mt.Roskill, Hamilton, Whangarei, Hastings in New Zealand. This is big enterprise and there are about 115 members in the restaurant which includes Chef, Managers and Service Staff. This restaurant gives diverse dishes to their clients at various fares. It is an objection of a few clients that the sustenance is costly. So the exploration will happen on the matter of keep up low and sensible cost. For this project I am dealing with the Spice Traders Restaurant which is physically located in Westfield Queensgate,Level 1,Corner of Queens Drive and Bunny Street, Lower Hutt Central, Lower Hutt ,Wellington.
Spice Trader Restaurant is the India cuisine that offers the high quality Indian food in New Zealand. The restaurant chain is located in various locations, such as Johnsonville Shopping Centre, Petone, Hamilto, Tauranga, and Queensgate Mall Lower Hutt in New Zealand (Spicetradersnz.com 2017). The restaurant has gained the remarkable reputation as the best Indian cuisine around the nation. The restaurant chain has almost 13 branches around New Zealand across Dunedin, Auckland, and Wellington. The brand positioning of this restaurant is quite strong in New Zealand. The restaurant is located in the most popular shopping malls in New Zealand and it has a number of the full restaurants in the mix. The constant focus on the customer satisfaction is driving the restaurant in adopting the unique designs by mixing up the traditional South and North Indian dishes.
The aim of the research is to identify the necessity of structuring food costing for developing the reputed position of the restaurant and gain customer base. The scope of the project is to analyze the collected data to understand the impact of food costing on the consumers’ intention to visit the restaurant. The project would also provide the insightful knowledge about the necessity of determining the food pricing strategy for developing the competitive position of the restaurant.
By breaking down the food menu and records I come to realize that the eatery is not deciding the cost of sustenance accurately and that is the reason their nourishment is costly from different eateries. The restaurant need to review the food cost as some of the prices are very high in compare with other restaurants due to which company have to face more competitions. Customers usually prefer the good hospitality services and the high quality food while they are visiting the restaurants with their friends or family. Similarly, the restaurant business is also developed by considering such demands of the consumers. Along with this, the business marketers concentrate on structuring the appropriate costing for the food that would be including the labor charges and the costs of the ingredients for preparing the foods (Rummo et al. 2015). However, The Spice Traders has been experiencing majority of the issues due to lack of proper monitoring and reviewing the entire cost structure of the food. The lack of adequate cost sustenance is the major issue that affects the profitability of the company. It is thus necessary for the company to keep the focus on the proper cost structure to strengthen the customer base and develop the competitive position. Development of the feasible pricing structure is necessary for the restaurant businesses. The food costing generally depends on the appropriate cost of sustenance that is needed to be structured in an accurate manner (Mayne, Auchincloss and Michael 2015). It is the major reasons behind the different cost nourishments in other eateries. It is necessary for every restaurant to review the costs of every dishes included in the menu. It is sometimes noticed that some price of the menu is much costly, which is ensuring more competitors in the market. The business marketers are thus facing more competitions.
The Spice Traders eatery examines the nourishment costing of the sustenance things which are accessible in their eatery. What’s more, discover the explanations for the wrong sustenance costing because of the reason that the basically business is experiencing less customers which can create the loss and unable to compete with the competitors because of this issues it might face fewer customers and lead to failure. To conquered all these kinds of problems the Spice Traders restaurant proprietor should contiguous the hand and to interrogate the price of its good and to properly maintain the cuisine value. The lack of proper nourishment costing is the major issues visible in The Spice Traders. The major drawback is faced when there is the lack of proper costing structure of the food. Hence, eventually, the number of the consumers visiting the restaurant is decreasing in a recognizable manner (Campoy-Muñoz, Cardenet and Delgado 2017). Automatically, it affects the business profits due to which the restaurant is threatened by the other competitors in the market. Restructuring the food cost can mend these gaps and develop the string customer base eventually.
The Spice Traders has observed the issues with the nourishment costing of such sustenance things that are easily accessible in this eatery. However, it is noticed that the business has failed to structure the proper cost sustenance due to which the business is experiencing the issues with the lesser number of customers (Spicetradersnz.com 2017). This issue can create the considerable effects in the profit parameter and the business can be threatened by many other competitors in the market. It is thus necessary for The Spice Traders to re-structure the food costing in order to maintain the appropriate the cuisine value.
The literature review provides the theoretical background of the subject matter. The study is based on the impact of food costing on the consumers’ intention of visiting restaurant. In this section of the study, the discussion will be based on the different aspects to be taken into consideration for managing the cost sustenance. In addition to this, the study would also specify the impact of such cost structure on the consumers’ intention and organizational profitability. It is necessary for the administrative department of eatery enterprise to maintain the scheduled or routine check up to understand the productive approach. Identifying the nourishment costs would helpful enough in deciding the actual benefits of costing in the foods served in the restaurants. Marian et al. (2014) suggested that the sustenance cost provides the clear feature of the customer esteem, nourishment, and administration ability level. It is essential for the restaurant to take more time in reviewing the entire pricing structure of the menu that will be served to the customers. The food price has such significant impact on the reputation of the restaurants. Moreover, it determines the extent to which the restaurant has the ability to participate in a competitive business market (Anselmsson, Vestman Bondesson and Johansson 2014). The competitive positioning of the restaurant would help in attracting more customers and sustain the long-term position.
Restaurant industry usually needs to concentrate on the costing structure. The most controllable costs are food costs and labor costs. According to Knezevic et al. (2014), the labor costs and the food costs generally deal with the different types of food service operations. For example, the luxurious hotels or restaurants apparently have the higher food costs and labor cost percentages than the fast food restaurants or casual dining. In usual cases, the product sale depends on the quality of the food and hospitality service, product sales mix, and pricing and hours of operations (Lewis and Lee 2016). These factors create the significant impact on both labor cost percentage and food costs.
In the food service industry, the ‘prime cost’ is associated with the charges of the culinary labor and the food products. Such components associated with the food costing ensure the critical role in all pricing strategies. The food cost control depends on the management of proper utilization of the food products. The application of the ‘cost control’ techniques requires concentrating on the identification of cost and the budget. Accordingly, the corrective actions are undertaken. According to Yandrasevich (2012), corrective action determines the operational or budgetary aspects that depends on the particulars of the variance or the circumstances. The realistic performance goals are accordingly established by concentrating on the budgetary process.
With nourishment expenses and expansion climbing and clients spending less, eatery administrators should routinely check their menus to guarantee they are productive. One of the best weapons against benefit misfortune is to know your nourishment costs. An eatery’s nourishment taken a toll decides its benefit. Without comprehending what the sustenance cost is, there is no real way to know whether the things on a menu is creating a benefit. Sustenance Cost likewise demonstrates the nature of the nourishment and customer esteem and administration ability level. Without any delay Spice Traders proprietor need to give time regarding reviewing of the food price which will impact on the restaurants reputation as well as to maintain competition in the market. So that the business can attract more customers. Due to all these reasons the Spice Traders decided to explore the nourishment costing directly.
The fundamental reasons of the director are as follows:
1) Firstly Managers need to give more time in the business particularly in this branch.
2) Secondly, need to review the price of the cuisines.
3) Due to competition in the market, the business needs to compete with others with satisfying prices to the consumers.
4) Because of the negligence the company might lose many consumers and hamper other branches as well.
Cost of goods can be determined by:
-The manager should invest more time in this branch for analysing the cost of the cuisines.
– Always need to track the food prices whether they are increasing or decreasing.
-Track down the cost of good sales and need to adjust with purchase and inventory levels.
-Managers need to take inventory regularly and consistently to determine the food usage and associated costs.
-Cost of Food Sales =Total Purchases +/-investment adjustment (add if the beginning inventory is greater than ending inventory and if the ending inventory is greater than the beginning then it should be subtracted.
– Lastly Food Cost Percentage is equal to cost of goods sales divided by food sales
-Food Cost Percentage =cost of food sales /food sales
-Menu pricing is an important aspect to managing your food costs. Keep up-to-date on their prices so you remain competitive. Consider offering incentives for reducing waste and bad orders.
The menu pricing strategy in the restaurant is based on two different techniques, first is the qualitative menu pricing and quantitative menu pricing. It is notable that the menu prices of a restaurant are mainly based on the competitive charges on the similar food products. Accordingly, the operational price would be determined, whether it should be structured as equal, below or above the competitive rate (Hirsch, Kaufman and Zelenska 2015). However, the major drawback of this strategy is that the strategy does not consider the profitability and more focused on the competition. It is noticed that the luxurious hotels offer the high quality food, ambience, and proper hospitality services. Therefore, the customers often pay more prices than the other cuisines. However, the customers even sometimes avoid if they find the restaurants too much cost effective. Therefore, it is essential for the business marketers to obtain the clear ideas about the proper cost structure and review the record accordingly (Feldmann and Hamm 2015). ). It is noticed that the luxurious hotels offer the high quality food, ambience, and proper hospitality services. Therefore, the customers often pay more prices than the other cuisines. However, the customers even sometimes avoid if they find the restaurants too much cost effective. Therefore, it is essential for the business marketers to obtain the clear ideas about the proper cost structure and review the record accordingly (Feldmann and Hamm 2015). On the other hand, the ‘quantitative pricing strategy’ creates the difference between sales price and food cost for a particular item. The “gross profit” label in the income statement defines this strategy more clearly (Seal and Mattimoe 2014). The ‘contribution margin’ represents the amount that is remaining after product cost and this amount would be subtracted from an item’s selling price. This strategy is beneficial because it incorporates the proven sales and expenses. Accordingly, it is necessary to structure the prices as per the local competitive environment.
The associated variances in the food costs are usually categorized by origin as either fabrication or procurement process. The administrative department needs to keep the clear record of understanding the cost division for the food products and for the labor costs. suggested that the sustenance cost provides the clear feature of the customer esteem, nourishment, and administration ability level. It is essential for the restaurant to take more time in reviewing the entire pricing structure of the menu that will be served to the customers (Yim, Lee and Kim 2014). The food price has such significant impact on the reputation of the restaurants. Moreover, it determines the extent to which the restaurant has the ability to participate in a competitive business market. The managers require keeping the concentration on some of the specific aspects that contribute to the profitability of the business. These aspects are discussed further:
The managers require concentrating on these aspects to make the relevant decisions regarding the pricing strategy of foods. (Ozdemir and Caliskan 2014) implied that following a systematic approach for establishing the pricing strategy for foods would ensure more profitability of the business in a competitive scenario.
The restaurant chains and the hospitality industry in New Zealand have been experiencing the enormous growth and success in last few years. The statistical figure shows that the cafes and restaurants in Auckland region experienced the revenue growth of almost $1.91 billion. The positive outcome is encouraging the restaurant chain to invest more capital and refurbish the restaurants (Arsil et al. 2014). In this section of the study, the collected data would be analyzed. The analysis is based on the responses extracted from the primary data collection process. It is noticed that the respondents shared their views based on their real life experiences. The information will be analyzed to understand the areas of improvement that can help the restaurant in strengthening the customer base. This discussion section would also imply the perceptions of the managers who have been dealing with the real life scenario to satisfy the customers’ needs.
Research methodology provides the systematic ideas of conducting the research. The use of the appropriate data collection process would be determined in this section. The research provides the insightful ideas about the impact of food costing on customer intention. It is thus notable that the use of the primary data would be much beneficial in understanding the purchasing intention of the consumers. The application of the suggestive research methodology is helpful for developing the ideas gathered from the primary research. The observation of the real experience would be discussed in this chapter. The study would research on the areas of food costing that have the clear impact on the customers’ intentions of consuming foods at the restaurants. It determines the appropriate way of structuring the costs. However, it is noticed that obtaining data from the primary data collection process is more effective than the secondary data collection process. Therefore, this particular research will be conducted through undertaking the primary data collection process. The application of the quantitative techniques would be much helpful in fulfilling the research objectives (Cope 2014). This process would even help in managing the cost of cuisine food.
In this section of the study, the findings obtained from the data collection process would be discussed. This section would reflect on the perspective values of the participants in terms of food costing in the restaurant. The responses of the customers and managers would be taken into account to discuss the results. The research would deal with the relevant accumulation strategy that would provide the insightful ideas of the customers’ experiences while they are visiting the restaurants. Moreover, this primary data collection process would provide the adequate knowledge about the managers’ perspectives in structuring the cost of the food price and restaurants. The development of the hypothetical values would be helpful enough for the study to derive the relevant data Chan, Z.C., (Fung and Chien 2013). Gathering data from the owner and buyers would be much preferable to understand the demands and profitability parameter. This data is also much useful in time of presenting the review of the entire restaurant activities. This primary data collection process would provide the adequate knowledge about the managers’ perspectives in structuring the cost of the food price and restaurants. The development of the hypothetical values would be helpful enough for the study to derive the relevant data.
Sometimes it becomes much difficult to involve entire staffs and individual buyers to understand the value of the costs in restaurants. The survey thus will be structured by ensuring a specific sampling size in which some of the customers has participated and shared their experiences. The customers who are available around the eatery are here accepted as the sampling population who has taken on the survey. The research would deal with the relevant accumulation strategy that would provide the insightful ideas of the customers’ experiences while they are visiting the restaurants. Moreover, this primary data collection process would provide the adequate knowledge about the managers’ perspectives in structuring the cost of the food price and restaurants. The development of the hypothetical values would be helpful enough for the study to derive the relevant data Chan, Z.C., (Fung and Chien 2013). It is necessary to develop the appropriate research instruments to understand the dependable information in exact and subsequent form. The collected data would be analyzed by using the perspective values of the participants. The survey result would help in understanding the effectiveness of the food costing determined by the restaurant.
The costs of the food are generally calculated by adding the cost of the ingredients to prepare the food, labor charges, and the hospitality charges. In the primary data collection process, one of the managers responded that the restaurant has the greater reputation in the New Zealand market since it offers the high quality food with proper ambience and hospitality services. The restaurant is even concentrating on the health aspects of the visitors due to which the pricing strategy is selected reasonable. However, some of the special dishes are sometimes charged costly since it requires more investments.
In the primary data collection process, one of the managers revealed that the administrative department reviews the entire food costing structure to ensure the pricing strategy. At the end of the month, they compare the price with the competitors and measure the price received from food selling. However, it is notable that the changes in the operational process of food producing would help in maintaining the competitive prices and gathering the consumers’ attention.
Majority of the consumers, in the primary data collection process, referred that the restaurant charges extra cost for the food products. The quality and quantity of the foods are quite appreciable. However, they have the major concern with the prices of the competitors. They can find foods of higher quality at a very reasonable price in some other restaurants in the market. Hence, the restaurant requires focusing on developing the pricing structure of the products more specifically. It would be beneficial in gathering the customers’ attention.
It is notable that the pricing structure in a restaurant creates the special impact on a customers’ mind. In the primary data collection process, the customers implied that they have the different options to dine in other cuisine as well. However, the restaurant provides the quality food, effective ambience, and good hospitality services. On the other hand, if it is considered to other Indian cuisines available in the New Zealand market, it would increase the competition level. It is noticed that the business has failed to structure the proper cost sustenance due to which the business is experiencing the issues with the lesser number of customers. In such cases, it is essential for the restaurant to take more time in reviewing the entire pricing structure of the menu that will be served to the customers. The food price has such significant impact on the reputation of the restaurants. Moreover, it determines the extent to which the restaurant has the ability to participate in a competitive business market.
The biasness of the managers in terms of revealing the pricing structure of the food has made this research somewhat limited. However, as per the research ethics, the participants would not be persuaded to answer any of these questions. Hence, it was quite difficult to analyze the limited data and present the conclusion. It can be assumed that the managers would be unwilling to provide any information concerning the strategic development of the restaurant. However, the research would not include any false assumptions and would include adequate information related to the subject. On the other hand, the lack of updated information is also a major drawback in this study. The ethical concern suggests that the research should be based on the current updates and the consequences. Ethical standards usually promote the values for the collaborative work approaches. The proper ethical standard is associated with integrity, honesty, objectivity, openness, and respect for the intellectual property. Maintaining confidentiality of the information is necessary for conducting any particular research. The research process is concentrating on such ethical factors for analyzing the collected information. However, in such cases, the study has been ensuring some of the specific limitations. The major limitations in this research method are as follows:
Observing the emerging issues with the food costing at The Spice Traders, the long term and short term recommendations are provided further:
The long term recommendation is established for twelve months period. The administrative department requires monitoring the costing structure during this period. It is essential to monitor the pricing strategy to measure profits in next 1 year. Accordingly, if there would be any changes required, the cost structure can be adjusted accordingly.
The short term recommendation would be established for next six months period. In this six months process, it is necessary for the restaurant to compare the prices of the competitors for the similar products. It is essential for the restaurant to take more time in reviewing the entire pricing structure of the menu that will be served to the customers. The food price has such significant impact on the reputation of the restaurants. Moreover, it determines the extent to which the restaurant has the ability to participate in a competitive business market. The quality check and the remarkable hospitality services can be taken into consideration while structure a new costing strategy. If the price is comparable with the competitors in terms of quality, quantity and hospitality services, the customers would be more interested in visiting the restaurant. In this six month period, it is necessary to monitor the performance progress or the profitability of the business. Accordingly, the necessary amendments can be done to manage the price. These recommendations would help the restaurants to improve the operational process and ensure the long term sustainability.
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