Viability Study For Opening Second Restaurant By Zest Restaurant Chain

Task 1

Questions:

A restaurant chain plans to open its second restaurant in London. To ensure this is a viable move, the shareholders are keen to understand the market. Therefore you are asked to carry out a planned data collection and data analysis to help the board of directors in understanding the customer pricing preferences.(e.g. income &price, age &price)

Report on Data Collection and Analysis, In this report;

• Create a plan for primary and secondary data collection with presenting the survey methodology & sampling frame used
• Design a questionnaire to collect data and provide a justification for its design
• Collect data and summarise the collected data using representative values
• Analyse the collected data using measures of dispersion. You must be able to use the analysis of the pricing preferences to inform and support decision making.
• Carry out suitable calculations to draw useful and realistic conclusions and provide valid recommendations. Your calculations must include quartile, percentiles and the correlation coefficient. Explain how these calculations helped you to draw useful conclusions.

Prepare a Business Presentation and a formal Business Report to disseminate information effectively which include;

• The findings which should be used to draw valid conclusions .You must use spreadsheet software for all calculations and incorporate graphs and charts(line,pie,bar chart,histogram,scatter ) to clearly and effectively present the findings.
• Trend lines in graphs to assist in forecasting for specified business information. For example, this may include people’s eating behaviours overtime and preferences against seasonal changes.
• A business presentation to disseminate information effectively
• Prepare a formal Business Report to be presented to the board of directors
• Use appropriate information processing tools to analyse the information
• Plan for the project, identifying relevant CRITICAL PATH, PERT, GANNT Chart, to implement a business process and the recommendations you are suggesting from your findings. For example, a business process to serve customers (It is essential to use appropriate project management software)
• Different financial tools such as discounted cash flow, net present value and IRR functions to evaluate the financial viability of the proposed recommendations

The current study focuses on the preparation of report which will discuss the viability of the second restaurant that will be opened by a Zest restaurant chain. The market scenario will be studied in order to understand the preference of the customers in terms of price which can be helpful for the board of director to take decision.

Task 1

Primary data is considered as a firsthand experience and it can be authentic and reliable.  The primary data can be acquired by using different sources such as:

Questionnaires: The manager of the restaurant can prepare questionnaire by listing question that can provide true information about the customer preferences and behavior (Bazerman and Moore, 2009). Therefore, the manager can tabulate the answer to reach to a particular point and take decision.

Interviews: The interviews can be conducted by the manger in person with the customers in order to know their choices and believes. On the other hand, telephonic interview or social chat can be done to generate the answer from people (Epstein, 2012).

Primary Data Sources

Observation: The researcher of the restaurant can observe the behavior of customers and their buying pattern while purchasing the product. Therefore, it would help the restaurant to decide the price for their food menu.

On the other hand, secondary data are generated from the resources that already exist.

Internal Sources: The manger can gather or study data of other restaurant chain relating to sales and their marketing activity. The sales record can be helpful in knowing the growth of revenue each month and types of marketing activities adopted by other business to attract customers (Brannen, 2009). Moreover, the customer response can be known towards that restaurant that can help the restaurant not to commit the same mistake done by other restaurant.

External Sources: The managers can go through different journals, articles, news or internet to collect the information that can be used for attracting the consumers in the restaurant (Ellis and Levy, 2009). The managers can know the factors that is preferred or ignored by the customers.

The social networks sites like aNobii, academia.edu, etc. can be useful for gathering relevant information for the study (Grönroos, 2010). Moreover, secondary research paper can help in collecting relevant facts that can be employed for studying the market in more efficient way.

The quantitative study can be effective for acquiring useful information from the large pool of customers. Through this study, the researcher can understand the opinions, behaviors, beliefs, preferences, etc. The manager can carry questionnaire survey in order to do the research for knowing the consumers pricing preference (Kjellberg and Helgesson, 2010). Therefore, in order to conduct study, 50 consumers can be taken in account as sampling frame that can provide right idea about fixing price for the product.

For designing a questionnaire, quantitative technique can be used for the customers with a preparation of close ended questions. The close ended question has been selected so that marketer of the restaurant can analyze the information at quick pace which can help in taking quick decision (Sandler, 2013). The open ended question has not been considered as it takes more time to classify the responses in useable data.

What are the most important factors in selecting restaurant?

	Total Respondents	No. Of Respondents	Response %
Cuisine	50	12	24
Price	50	10	20
Service/Hospitality	50	6	12
Hygiene	50	18	36
Location	50	4	8

What stimulate you to visit restaurants?

	Total Respondents	No. Of Respondents	Response %
Loyalty Program	50	2	4
Taste	50	17	34
Price	50	9	18
Variety	50	3	6
Discount	50	6	12
Quality	50	13	26

How much do you spend for a meal in restaurants?

	Total Respondents	No. Of Respondents	Response %
Over £40 per head	50	5	10
£30 – £40 per head	50	7	14
£20 – £30 per head	50	12	24
£10 – £20 per head	50	16	32
Less than £10 each head	50	10	20

How often do you dine at restaurant?

	Total Respondents	No. Of Respondents	Response %
Once a week	50	2	4
2-3 times in a week	50	6	12
Once in a month	50	10	20
Twice a month	50	14	28
Once in 2 weeks	50	18	36

What meal do you consume most frequently?

	Total Respondents	No. Of Respondents	Response %
Breakfast	50	7	14
Lunch	50	10	20
Diner	50	20	40
Beverages	50	13	26

For conducting the survey, the college student and income group people has been considered as representative value.  It can be observed that from first question, price is the third most preferred choice for selecting restaurant. It shows only 20 % out of which 12% are student and 8% are income group. In the second question, taste of the food motivates the people to visit restaurant than price. The 16% college student and 18% income group totals 34% that prefers taste. In the third question, the college student hardly spend more than £20 whereas, high income group people normally bear all the cost per head. In the fourth question, college student preferring going restaurant more in comparison to income group who visits once or twice in a month.

NUMBERS	FREQUENCY	X	FX	Frequency – Mean	(Frequency – Mean)2
0-5	6	2.5	15	(12.7)	161
5-15	12	10	120	(6.7)	45
15-25	16	20	320	(2.7)	7
25-35	11	30	330	(7.7)	59
35-45	5	30	150	(13.7)	188
TOTAL			935		460

Questionnaires

Table 1: Calculation of Measures of Dispersion

Mean = 935 / 50 = 18.7

Variance = 460 / 50 = 9.2

Standard Deviation = √Variance = √9.2 = 3.033

It can be analyzed from the estimation of measures of dispersion that the most of the customers have same response towards the pricing activities of the restaurant. As the standard deviation is lower this suggests that both college student and income group people significantly have same opinion about the pricing preference (Miller, 2012). On the other hand, the variance between the two representatives is also less which adds that customers prefer other factors beyond going the pricing factor.

Quartile is considered as the value that fragments the data table into four different categories at approximate value into four similar divisions like 25%, 50%, 75% and 100%.

Quartile 1 = (6+12) = 9

Quartile 2 = (6+12+16+11) / 2 = 22.5

Quartile 3 = (6+12+16+11+5) / 2 = 25

It can be observed that, the customers does not consider only the pricing factor but also taken in account other issues that meet their expectation and desires that can lead to satisfaction (Boulding et al. 2010). It can be assumed from the calculation that less than or around 25% of the customers takes the price factor while visiting the restaurant. The calculation helped in knowing whether the customer really consider the price or some other factors in order to dine at restaurant. Therefore, it was effective for the restaurant to make decision and restudy the perception of the customers to engage the customer in their restaurant chains in London. From the calculation, it can be observed that, the restaurant perception that customer prefer the price totally fall on the nose (Gil-Lafuente, 2013). Therefore, the restaurant has to think over the quality and hygiene to engage the better customer base in their new restaurant.

NUMBERS	FREQUENCY	Cumulative Frequency
0-5	6	6
5-15	12	18
15-25	16	34
25-35	11	45
35-45	5	50

Table 2: Calculation of Cumulative Frequency

Percentile = Number of scores below X / Number of Scores × 100

= 45 / 50 × 100 = 90 percentile

It can be analyzed that maximum number of customer may not turn out to restaurant if the restaurant fails in providing quality and hygiene food. Therefore, it lead to loss to restaurant.

Price (£) (x)	No. Of customers  (y)	xy	X2	Y2
10	25	250	100	625
20	37	740	400	1369
30	30	900	900	900
40	28	1120	1600	784
45	25	1125	2025	625
50	19	950	2500	361
∑ x = 33	∑ y = 27	∑ xy = 5085	∑ x2 = 7525	∑ y2 = 4664

Table 3: Calculation of Correlation Coefficient

Correlation Coefficient = 5085 – (33) (27) / 6

                                        √ 7525 – (33) 2 / 6 × 4664 – (27) 2 / 6

= 4936 / √ 7344 × 4543

= 4936 / 5776 = 0.854

Therefore, it can be conclude that price is positively correlated as one of the factor in relation with the preference of customers.

Conclusion and Recommendations

From all the study, the management of the restaurant has to taken in account all other factors such as quality, hygiene, hospitality, discount, etc to provide better service in their new restaurant. Moreover, the total quality management can be effective in increasing the performance level and providing best value to the customers. On the other hand, the ambience of the restaurant has to be decorated in pleasant ways that can sooth the customers. The price of the food has to be reasonable.

Interviews

Graphs and Charts for representing findings

Graph 1: Factors selecting Restaurant

Graph 2: Factors Motivating Customer to visit Restaurant

Graph 3: Customer paying for a meal

Graph 4: Customer Dine at Restaurant

Graph 5: Frequent meal consumption by customers

Graph 6: Satisfaction level of customers

Graph 7: Turnover of Restaurant

Graph 8: Restaurant Growth Rate in London

It can be observed from the graphs that restaurant chain can gain benefit from the market of London that can ensure better sales and profit for them. On the other hand, the shareholders can be able to receive benefit too. Moreover, the turnover of the restaurant can increase more.

Graph 9: Trend Line of Customer’s eating behavior overtime

Graph 10: Trend Line of restaurant growth rate in London

Formal Business Report

The plan for expanding the restaurant chain in London can turn out to be profitable venture for the whole venture and shareholders. The market research conducted by the researcher shows that the market of London is viable to start a new operation. The restaurant growth rate in London is booming that can be effective for long term profitability and gaining better market share. On the other hand, the restaurant can be able to attract large number of customers. The current financial growth of the restaurant shows that the restaurant has positive chance to excel in London with their restaurant as it is well known in the present market. Therefore, the image of the restaurant can be effective in engaging customers and number of suppliers (Birt, 2012). As per the primary research, which is conducted on the basis of questionnaire points out that customers mainly prefers quality and taste first and other factors are consider secondary. Therefore, for providing the best service and do well, the efficient and quality employees has to be hired that can provide superior service and also produce quality food that can satisfy the customers (Bsr.org,  2014).

On the other hand, the researcher presented before the board of directors that the restaurant has to be careful from the well established restaurant such as Chez Bruce and TheWolseley Restaurants (Gummesson, 2009). This restaurant has a better customer base in the proposed area. Therefore, quality, price, ambience of the restaurant has to be designed that can help in giving tough challenges to those restaurants. Apart from that, the growth rate of restaurant in London shows a positive sign that restaurant can earn can earn high profit that can help in future expansion. Moreover, the turnover rate of restaurant is increasing at higher rate and due to that many small restaurants are earning good and it shows a good chance that the restaurant can also increase their turnover value (Carpenter and Fairhurst, 2009). The eating behavior of the consumer reveals that, behavior of customers in London has changed and customers have become health conscious. Therefore, the fatty food product has to be removed and organic and low cholesterol food has to be supplied if profit has to be earned.

Observation

Management Information System: Through this technique, the management can pass on the related information about the working behavior or providing service to consumers to the employees. Therefore, decision can be made on the basis of MIS and for taking tactical and strategic decision and handling daily operation, DSS can be adopted (Ho, 2010).

Business Intelligence system: The system can be effective for analyzing the data in order to reach at effective decision. The management of restaurant can be able to combine skill, technology, process, practice and application for evaluating the information and develop better decision (Fraedrich et al. 2011). Therefore, it can help in improving the operation of restaurant and attain goal of opening restaurant in London.

TASK	1st Week	2nd-3rd Week	4th-5th Week	6th Week	7th Week	7-8th Week
Plan for Business	·
Approving Planning	·	·
Recruitment of project team		·
Market Study		·	·
Market Analysis			·
Developing Marketing Plan			·	·
Scrutiny of the Plan				·
Implementing plan					·
Project Attainment						·

Table 4: Gantt char for Restaurant business

TASK	Activity	Duration
Plan for Business	1	5 months
Approving Planning	2	4 months
Recruitment of project team	3	10 months
Market Study	4	8 months
Market Analysis	5	6 months
Developing Marketing Plan	6	10 months
Scrutiny of the Plan	7	7 months
Implementing plan	8	11 months
Project Achievement	9	5 months

Figure 1: CPM for Expansion Plan (Zest Restaurant)

Start= Activity 1 + Activity 3 + Activity 4 + Activity 7 + Activity 9 = (5+10+8+7+5 = 35)

Start= Activity 2 + Activity 5 + Activity 6 + Activity 8 = (4+6+10+11 = 31)

Start= Activity 2 + Activity 1 + Activity 3 + Activity 4 + Activity 7 + Activity 9 = (4+5+10+8+7+5 = 39)

Start= Activity 2 + Activity 3 + Activity 4 + Activity 7 + Activity 9 = (4+10+8+7+5 = 34)

Start= Activity 2 + Activity 5 + Activity 6 + Activity 7 + Activity 8 = (4+6+10+7+11 = 38)

The 3rd route can be effective for the restaurant to implement the plan and provide quick service to customers.

Net present Value

Year	Cash Flow	Discounted Cash Flow (10%)	PV of cash flow
2014	35600	0.909	32360
2015	40000	0.826	33040
2016	43000	0.751	32293
2017	47000	0.683	32101
TOTAL			129794
Initial Investment			117850
Net Present Value			11944

It can be observed that, restaurant can be able to generate profit from the London’s market.

Year	Cash Flow	Discounted Cash Flow (14%)	PV of cash flow
2014	35600	0.877	31221
2015	40000	0.769	30760
2016	43000	0.674	28982
2017	47000	0.592	27824
TOTAL			118787
Initial Investment			117850
Net Present Value			937

At 14% IRR rate the restaurant can be able to equate the initial investment of restaurant with the PV of the future cash flow.

References

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