New Delhi aims at being a high end restaurant that will offer fast cold or hot foods such as drinks, salads and sandwiches plus the cuisine of Canada.
In order to attain this, the restaurant must adhere to a strategy of differentiation of the products that makes it difficult for the managers to make choices.8 This will efficiently aid them produce more products with higher profits yet they will be charging more for their foods.
Some of the goals that the restaurant seeks to achieve include the following:
The Kitchener community market can be subdivided into three categories
This comprises the following approaches:
Pricing: The pricing scheme is 45.0% of the retail price.
Distribution: Customers will either call place their orders then come later to pick up, or come to the restaurant place their order and wait for it to be done, or come to dine in the restaurant.
Advertising: Banner ads, inserts in registration Guards will be the most effective method of technique. Public campaigns may also be held to increase sales.18
Customer service care: anything that will make the customers happy should be done even if it leads to low profits. After some time, this will pay off.
The focus of the strategy on pricing will be to offer healthy, high standard with unique taste foods. Because of that, our products will be slightly charged especially when the consumers of the products are agreeing that the food is of another standard.
New Delhi restaurant is its third month since commencing operations. Though it well received by people in Kitchener, there is still need to improve on marketing to ensure success and profitability in the future years.1 The most fundamental marketing need will be to offer attractive, highly innovated Indian dishes, desserts and salads.
In this restaurant most services offered will depend on the aforementioned factors. This restaurant still serves tangible products and have various ways in production processes.4 It is most likened by customers since the food offered is of good quality. If the services are of low standard, then customers are likely not to frequent the restaurant.24 In case the quality is so poor then no customer will come to the restaurant. Tangible foods are called so because they have to be sampled by the kitchen department first. There is always consistency in the quality of the foods if the set menu is well organized and properly trained waiters and chefs are put to use in the restaurant. This should be the case in fast food hotels.
|
MARKET ANALYSIS YEAR |
|||||||
|
1 |
2 |
3 |
4 |
5 |
|||
|
Customers |
Growth rate |
CagR |
CAGR |
||||
|
Local businesses |
0.0% |
501 |
501 |
501 |
501 |
501 |
0.00% |
|
Local workers |
2.0% |
20,010 |
20,410 |
20,818 |
21,214 |
21,618 |
2.00% |
|
Other downtown traffic |
1.0% |
15,010 |
15,160 |
15,312 |
15,465 |
15,600 |
1.00% |
|
Total |
1.550% |
35,500 |
36,060 |
36,600 |
37,189 |
37,768 |
1.55% |
To ensure success then New Delhi restaurant must ensure that the growth rate is matched with the demand of the cuisine. There will be need to expand from one restaurant to three after 5 years.6 The restaurants will then be designed to accommodate more people.
As mentioned earlier, customers need food that is high quality and healthy which appeals to their aesthetic tastes with no effects and there is a conducive environment in the restaurants.12 Additionally, they will need a good dining environment that make them relax during lunch hours. All the above requirements must be provided but with ease and less expenditure.16 Facilities such as take away cans; refrigerators must also be available to enable customers take some meals at home for cooking or eating.
A rise in the interest to eat healthy foods is one of the current trends in the market. Most people have adjusted to organic foods.23 It has been noticed that a large number of people from Western Kitchener have adjusted to naturally produced, organic vegetables and meats and hence this is an opportunity that the restaurant is ready to grab and utilize.21 Tenders have been given to suppliers and growers of organic foods to ensure adequate consistent supply of the organic foods.
The following are some of the different adjustments the manager of the restaurant has to notice:
Strength
The restaurant has Indian Foods that are authentic, they are made with fresh ingredients from scratch and they have a mixture of dried spices and fresh ones.17
Menus that can be adjusted to the client’s preference.
Weaknesses
Opportunities
Threats
Printing advertisements in magazines
TV advertisements: branding the restaurants image, idea and strategies
Making newspaper advertisements
Installing billboards
Holding events that promote the restaurant.
Marketing tools
Introduce a web presence in the marketing process by installing:
New Delhi is facing adverse indirect and direct competition.13 The competition is from every hotel and restaurant in Canada. Some of the major competitors include the following: Aroma Fine Cuisine, Raja Fine Cuisine, The Guru Fine Indian Cuisine, Chutneys Fine Indian Cuisine and many other hotel establishments.8 Additionally, there is competition from the suppliers especially the grocery stores who offer meals and also high end restaurants like Ambrosia’s. From the competition posed it will be noticed that the products or services produced have to be unique as so thus the taste.
Smaller firms are never able to carry out operations efficiently due to the limited funds. This restaurant wants to increase on profits that will then increase on the marketing techniques.12 Larger firms have advanced marketing techniques due to adequate funds and thus will attract huge number of customers.6 The most appropriate solution to this situation will be to promote and advertise on cuisine as well as the local flavor of the foods especially to those people who think that the food is low standard and unhealthy. The management believes that there is an opportunity to expand.
|
Growth and Share |
|||
|
Competitor restaurant |
Pricing |
Growth Rate |
Share market value |
|
Raja Fine Cuisine |
$16.0 |
7.000% |
15.000% |
|
Chutneys Fine Indian |
$12.0 |
6.000% |
11.000% |
|
The Guru Fine Indian Cuisine |
$14.0 |
7.000% |
13.000% |
|
Average |
$14.0 |
6.500% |
13.000% |
|
Total amount |
$42.0 |
19.500% |
39.000% |
|
Breakfast menu |
Lunch menu |
Restaurant creations |
|
Tea. |
Watercress and Sesame Salad |
Widbey Loganberry Tarts. |
|
Coffee |
Caesar Salad |
Hood River Fresh Apple Cake |
|
toast, |
Greek Salad. |
Coos Bay Hot Crab Sandwiches |
|
Cereal |
Italian Eggplant Salad |
Anacortes Seafood Burgers |
|
Omelets |
Maury Island Cranberry Arctic Salad. |
Smoked Salmon Sourdough Bread |
|
Yoghurt |
Homemade Potato Salad |
Columbia Salmon Rolls. |
Most of the efforts towards marketing are already mentioned above. The major focus is to create awareness that we actually do exist to all the people around Kitchener.7 We also need to spread out our powerful theme about the restaurant.
To focus on marketing especially to the local people then we will have to distribute flyers to people, hold a grand opening party again just to create awareness.
We must that every customer who arrives at our restaurant gets the best services that make him or her come back to our restaurant and even make recommendations about our services to other interested parties.
Marketing by word of mouth is also an essential strategy in ensuring success.4
The restaurant should also be strategically located closer enough to the market so that people will able to reach us.
Offering the best and right food is also another opportunity that we must prioritize on.
The table below highlights the important milestones in the program, with the corresponding dates, managers and budgets. The schedule below also emphasizes on planning before implementation.
Milestones
|
Milestone |
Starting Date |
closing Date |
Budget allocated($) |
Manager in charge |
Department |
|
Website planning |
1st Jan 2018 |
3rd Jan 2018 |
1000 |
Design |
website |
|
Implementation of website |
2nd Jan 2018 |
5th Jan 2018 |
9000 |
Design |
website |
|
Recruitment |
1st Jan 2018 |
3rd Jan 2018 |
2000 |
Founder |
Management |
|
Sales |
1st Jan 2018 |
4th Jan 2018 |
2000 |
Founder |
Management |
|
Market communication |
3rd Jan 2018 |
6th Jan 2018 |
5000 |
Founder |
Management |
|
Bank loan |
12th Jan 2017 |
1st Jan 2018 |
0 |
Founder |
Management |
|
1st seminar |
1st Jan 2018 |
3rd Jan 2018 |
2000 |
Founder |
Management |
|
2nd seminar |
3rd Jan 2018 |
5th Jan 2018 |
2000 |
Marketing |
Marketing |
|
3rd seminar |
4th Jan 2018 |
5th Jan 2018 |
2000 |
Marketing |
Marketing |
|
Total Budget sum |
25,000 |
There will be need to offer quick customer services especially during peak times.19 Here, the most important key will be managing the crowd, so that we always look not so busy and never full that we refuse offering services to other customers. Queues will have to go fast. We will also need a wonderful selection on convenient products that customers do buy all the time.
The most important strategy that will enhance sales will be enabling a repeat business.20 Such that, those customers who make it to our restaurant will always come back. Additionally, we will also offer discount cards, regular menu adjustments and special menu meals. By that we have to keep track of all those foods that sell very good by creating surveys and questionnaires to our customers to better understand our customers. With the information obtained from the surveys then we match our foods with the tastes of the people.
Lastly, we shall design a business or home delivery program where we will drop off food just after an order has been placed by a potential customer. This will improve on the eating patterns as well increase sales.
The table and charts below show the forecasts of sales. This forecast is manageable.
Sales Forecast
Year
1 2 3
Sales ($)
Breakfast queues 181,585.00 190,664.00 200,197.00
Lunch queues 140,605.00 147,635.00 155,017.00
Coffee queues 113,876.00 119,570.00 125,548.0
Take-away dishes 154,135.00 161,842.00 169,934.00
Others 59,020.00 61,971.00 65,070.00
Sales 649,221.00 681,682.00 715,766.00
Direct Cost of Sales 1 2 3
Breakfast queues 63,555.00 72,452.00 76,075.00
Lunch queues 49,212.00 56,101.00 58,906.00
Coffee queues 39,857.00 45,437.00 47,708.00
Take-away dishes 53,947.00 61,500.00 64,575.00
Others 23,608.00 23,549.00 24,726.00
Direct Cost
of Sales 230,178.00 259,039.00 271,991.00
The restaurant is relatively small and the employees can be categorized into busboys, kitchen helps, and clerks.22 In total we have nine workers, the owner, four clerks, two chef and two delivery boys.
The owner will come to the restaurant by 7 o’clock in the morning then leaves at 6 in the evening.17 Some employees, especially those appointed by the owner will play a role of supervising the other employees.
The initial investment from the founder was $20000. He was also funded by the bank, a loan of $30,000 to pay within five years and also a 10,000 loan from a friend with no interest.8 The loan was to be secured by the owner of the business.
General assumptions
|
1 |
2 |
3 |
|
|
Plan Month |
1 |
2 |
3 |
|
Current Interest Rate |
10.00% |
10.00% |
10.00% |
|
Long-term Interest Rate |
10.00% |
10.00% |
10.00% |
|
Tax Rate |
30.00% |
30.00% |
30.00% |
|
Other |
0 |
0 |
0 |
Some of the key financial indicators will include the adjustments in the sales, gross margin and the expenses.2 The chart below explains those indicators
Monthly Revenue Break-even $39,158
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $25,275
Here we assume a slightly higher gross margin as compared to the industry standards for these restaurants, since we do not have the full meals. The kitchen staff, delivery boys are excluded from the cost of sales, to make simple conclusions.3
Since, our restaurant is new in the market, the profitability has been adjusted to normality by adding quite a huge amount on the expenses.10 This gives an overview of the expenses that we are anticipating. If this does not happen then our restaurant will be more profitable.
|
Pro Forma Profit and Loss |
|||
|
1 |
2 |
3 |
|
|
Sales($) |
649,221.0 |
681,682.0 |
715,766.0 |
|
Cost of Sales |
230,178.0 |
259,039.0 |
271,991.0 |
|
kitchen expenses |
36,000.0 |
40,000.0 |
45,000.0 |
|
Total Co Sales |
266,178.0 |
299,039.0 |
316,991.0 |
|
Gross Margin |
383,043.0 |
382,643.0 |
398,775.0 |
|
Gross Margin percentage |
59.000% |
56.130% |
55.710% |
|
Expenses |
|||
|
Payroll |
186,000 |
135,000 |
170,000 |
|
Sales and Marketing and Other Expenses |
81,000 |
57,500 |
76,000 |
|
Depreciation |
0 |
0 |
0 |
|
Utilities |
2,400 |
2,400 |
2,400 |
|
Insurance |
6,000 |
6,600 |
7,200 |
|
Payroll Taxes |
27,900 |
20,250 |
25,500 |
|
Other |
0 |
0 |
0 |
|
Total Operating Expenses |
303,300.0 |
221,750.0 |
281,100.0 |
|
Profit Before Interest and Taxes |
79,743.0 |
160,893.0 |
117,675.0 |
|
EBITDA |
79,743.0 |
160,893.0 |
117,675.0 |
|
Interest Expense |
3,678.0 |
1,257.0 |
0 |
|
Taxes Incurred |
22,819.0 |
47,891.0 |
35,303.o |
|
Net Profit |
53,245.0 |
111,745.0 |
82,373.0 |
|
Net Profit/Sales |
8.200% |
16.390% |
11.510% |
These restaurants will remain with enough cash throughout the first three years.15 For the 1st and 2nd year the cash will be used to upgrade the equipment and facilities in the restaurant.
Pro Forma Cash Flow Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $649,221 $681,682 $715,766
Subtotal Cash from Operations $649,221 $681,682 $715,766
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $15,000 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $664,221 $681,682 $715,766
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $186,000 $135,000 $170,000
Bill Payments $400,625 $436,393 $462,602
Subtotal Spent on Operations $586,625 $571,393 $632,602
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $19,868 $25,132 $0
Other Liabilities Principal Repayment $10,000 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $40,000 $0
Purchase Long-term Assets $0 $50,000 $0
Dividends $25,000 $25,000 $60,000
Subtotal Cash Spent $641,493 $711,525 $692,602
Net Cash Flow $22,728 ($29,843) $23,164
Cash Balance $50,928 $21,086 $44,250
|
Pro Forma Balance Sheet |
|||
|
Year 1 |
Year 2 |
Year 3 |
|
|
Assets |
|||
|
Current Assets |
|||
|
Cash |
$50,928 |
$21,086 |
$44,250 |
|
Inventory |
$24,979 |
$28,111 |
$29,516 |
|
Other Current Assets |
$2,000 |
$42,000 |
$42,000 |
|
Total Current Assets |
$77,907 |
$91,197 |
$115,766 |
|
Long-term Assets |
|||
|
Long-term Assets |
$24,000 |
$74,000 |
$74,000 |
|
Accumulated Depreciation |
$0 |
$0 |
$0 |
|
Total Long-term Assets |
$24,000 |
$74,000 |
$74,000 |
|
Total Assets |
$101,907 |
$165,197 |
$189,766 |
|
Liabilities and Capital |
Year 1 |
Year 2 |
Year 3 |
|
Current Liabilities |
|||
|
Accounts Payable |
$34,330 |
$36,006 |
$38,203 |
|
Current Borrowing |
$25,132 |
$0 |
$0 |
|
Other Current Liabilities |
$0 |
$0 |
$0 |
|
Subtotal Current Liabilities |
$59,462 |
$36,006 |
$38,203 |
|
Long-term Liabilities |
$0 |
$0 |
$0 |
|
Total Liabilities |
$59,462 |
$36,006 |
$38,203 |
|
Paid-in Capital |
$20,000 |
$20,000 |
$20,000 |
|
Retained Earnings |
($30,800) |
($2,555) |
$49,191 |
|
Earnings |
$53,245 |
$111,745 |
$82,373 |
|
Total Capital |
$42,445 |
$129,191 |
$151,563 |
|
Total Liabilities and Capital |
$101,907 |
$165,197 |
$189,766 |
|
Net Worth |
$42,445 |
$129,191 |
$151,563 |
|
Ratio Analysis |
||||
|
Year 1 |
Year 2 |
Year 3 |
Industry Profile |
|
|
Sales Growth |
0.00% |
5.00% |
5.00% |
7.60% |
|
Percent of Total Assets |
||||
|
Inventory |
24.51% |
17.02% |
15.55% |
3.60% |
|
Other Current Assets |
1.96% |
25.42% |
22.13% |
35.60% |
|
Total Current Assets |
76.45% |
55.20% |
61.00% |
43.70% |
|
Long-term Assets |
23.55% |
44.80% |
39.00% |
56.30% |
|
Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
|
Current Liabilities |
58.35% |
21.80% |
20.13% |
32.70% |
|
Long-term Liabilities |
0.00% |
0.00% |
0.00% |
28.50% |
|
Total Liabilities |
58.35% |
21.80% |
20.13% |
61.20% |
|
Net Worth |
41.65% |
78.20% |
79.87% |
38.80% |
|
Percent of Sales |
||||
|
Sales |
100.00% |
100.00% |
100.00% |
100.00% |
|
Gross Margin |
59.00% |
56.13% |
55.71% |
60.50% |
|
Selling, General & Administrative Expenses |
50.80% |
39.74% |
44.18% |
39.80% |
|
Advertising Expenses |
5.08% |
3.67% |
5.59% |
3.20% |
|
Profit Before Interest and Taxes |
12.28% |
23.60% |
16.44% |
0.70% |
|
Main Ratios |
||||
|
Current |
1.31 |
2.53 |
3.03 |
0.98 |
|
Quick |
0.89 |
1.75 |
2.26 |
0.65 |
|
Total Debt to Total Assets |
58.35% |
21.80% |
20.13% |
61.20% |
|
Pre-tax Return on Net Worth |
179.21% |
123.57% |
77.64% |
1.70% |
|
Pre-tax Return on Assets |
74.64% |
96.63% |
62.01% |
4.30% |
|
Additional Ratios |
Year 1 |
Year 2 |
Year 3 |
|
|
Net Profit Margin |
8.20% |
16.39% |
11.51% |
n.a |
|
Return on Equity |
125.44% |
86.50% |
54.35% |
n.a |
|
Activity Ratios |
||||
|
Inventory Turnover |
10.91 |
9.76 |
9.44 |
n.a |
|
Accounts Payable Turnover |
12.67 |
12.17 |
12.17 |
n.a |
|
Payment Days |
27 |
29 |
29 |
n.a |
|
Total Asset Turnover |
6.37 |
4.13 |
3.77 |
n.a |
|
Debt Ratios |
||||
|
Debt to Net Worth |
1.40 |
0.28 |
0.25 |
n.a |
|
Current Liab. to Liab. |
1.00 |
1.00 |
1.00 |
n.a |
|
Liquidity Ratios |
||||
|
Net Working Capital |
18,445 |
55,191 |
77,563 |
n.a |
|
Interest Coverage |
21.68 |
128.04 |
183,568,059.24 |
n.a |
|
Additional Ratios |
||||
|
Assets to Sales |
0.16 |
0.24 |
0.27 |
n.a |
|
Current Debt/Total Assets |
58% |
22% |
20% |
n.a |
|
Acid Test |
0.89 |
1.75 |
2.26 |
n.a |
|
Sales/Net Worth |
15.30 |
5.28 |
4.72 |
n.a |
|
Dividend Payout |
0.47 |
0.22 |
0.73 |
n.a |
References
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