Feasibility Analysis

Jack Sprat’s Restaurant

Genius

admonished

Assignment #1
Evaluations by Ryan Dear
3325727
Submitted Oct. 21st
Executive Summary:

There are numerous problems, concerns and issues residing in this case that Chris, a

young and inexperienced entrepreneur fails to address properly. No legitimate research

has been conducted to justify the existence of Jack Sprat’s customer. Even the evidence

for the existence of said customer is insufficient. Chris distorts the meaning of the

statistics for the industry by unfairly assuming he will receive market share immediately

after opening. There are also troubling issues as far as the organizational team itself.

There already appears to be tension between Chris and his father, who has access to a

substantial amount of much needed investment capital. Because of this access to funds,

Chris may feel obligated to make a decision that will merit the use of that money – it may

not be the best decision. Other ambiguities include the suppliers, yet to be determined

and seemingly difficult to find. The suppliers will be totally responsible for the meals

through outsourcing, which in turn grants the suppliers a substantial amount of power due

to the reliance on their supply. The best suggestion anyone could make to Chris and his

family filled board of directors is to hire an objective consultant to rewrite the business

plan that is seemingly non-existent anyway. Arlene Spiegel is perfect for that job. Her

experience and connections in the foodservice industry will be infinitely valuable to Jack

Sprat’s restaurant, well worth the $25,000 fee, which happens to be the cheapest of all.

Arlene is the best chance Chris and his team have at making this business model work.

She has worked with the fast food giants, and is likely to suggest how Jack Sprat’s could

adopt a more practical and proven business model. She would also draw attention to the

obvious mistakes in the financial statements, which are ambiguous at best. Without some

outside consultancy, the entire venture is doomed to fail on its current path.
Product/Service Feasibility:

Though it may seem like an obvious million-dollar idea, Jack Sprat’s service
offering for low-fat and tasty fast food has a multitude of mistakes and omissions. To
start, there is a real lacking of concrete ideas as far as the target market is concerned.
Chris seems more preoccupied with selecting an appropriate location than focusing the
business concept behind a specific type of customer: “Site would be preliminarily
selected using the following guidelines, then additional demographic and psychographic
criteria for the typical customer in the area would be applied.” High foot traffic in a
downtown location is an excellent way to increase visibility, and your chances to “pull
customers off the street,” but he hasn’t actually identified who the customer is. Chris
needs to do actual research instead of just selecting a location close to a competitor. Let’s
assume Chris has the target market correct – the high wage business professional. What
evidence does Chris have that people with higher than average incomes enjoy a
prepackaged entrée? There are no menu samples or anything to remotely suggest what
prepackaged entrees a professional might enjoy either. One can only deduce that
professionals would obtain a higher level of utility by having fresh food catered to them,
or prepared for them by a chef.
The meal creation is to be outsourced and controlled by an undetermined
foodservice supplier. By eliminating the need for an on-site chef, Chris will reduce the
costs of operations, requiring employees to merely heat up the food for the customer.
The issue is that developing these recipes (since none exist for Jack Sprat’s at this point)
will be very time consuming and expensive. Difficulties can arise in terms of the supply
of ingredients, such that if the supplier does not receive them, the meals cannot be
prepared. If the chef creates an in-house recipe, the food service company will first and
foremost have to match the taste specifications of that in-house recipe. This requires
much time in trial and error, and consequently is more expensive and complicated than
Chris leads the reader to believe. After Chris does a bit of QSR training at another
restaurant he discovers that sometimes 20 different ingredients are involved in creating a
dish. That means a supplier must carry all of those specific ingredients, or, many
suppliers must carry all the ingredients, consistently to have a sustainable menu created.
Inevitably, the more ingredients there are, the higher the cost of the final product
competing in a very sensitive price conditions. Quality will also suffer if the product is
merely heated up and presented. Chris abuses the term gourmet when his meals are
prepared much like a precooked McDonalds burger in a plastic grave of a tray, thrown
together whenever demand happens to arise.
Chris’s service strategy can be broken down into short term and long term goals.
Jack Sprat’s operates under two different business models: stand alone QSR and hosted
QSR differentiated by virtue of size, location, menu selection, and customer base. The
product remains the same, an unspecified menu of low-fat pre packaged meals. It is
difficult to understand how these two models will function together. Furthermore, in the
so called “short term” of the business strategy, I cannot figure out what healthy foods can
be made all at once, and then assembled into meals throughout the day without
compromising freshness or quality! Chris assumes that these hypothetical models will
prove the concept and allow for “rapid growth” without having done research or any solid
figures.
Jack Sprat’s restaurant needs to show the customer how its food is of superior
value to prepackaged healthy foods in the supermarket and fast food competitors. The
plan has not one iota of any sustainable competitive advantage as far as the product is
concerned. Differentiating on the fat free basis alone may not be a sustainable
competitive advantage due to the size and nature of the competitors, who could change
menus to accommodate healthier eating leaving Chris naked and broke for the poor
entrepreneur that he is. It is because of the aforementioned problems that Jack Sprat’s
product/service proposition is not feasible. The business model needs to be revaluated, as
well as the product itself.

Industry/Market Feasibility

Researching the market must be done objectively and without bias. This is
critical if Chris intends to penetrate the fast food market with his low fat/fat-free chain.
Overly optimistic attitudes are illustrated when Chris inquires about his restaurant idea
with vendors from the Northeast Foodservice Exhibition in Boston. Of course these
vendors responded in favour of Chris’s restaurant concept – many of them could be
potential suppliers! This bias applies again when the vendors at the Chicago show
respond with so much enthusiasm. The fact of the matter is, these vendors are looking
for business like Jack Sprat’s to increase revenue, not give advice on how the business
should run.
As mentioned earlier, Jack Sprat’s has a very poorly defined niche in an already
mature and crowded foodservice market of $300 billion. In the foodservice industry,
price competition is high due to the high availability of substitutes from many different
firms. The fat free and lite packaged goods market is said to be growing steadily at a rate
of 5%, which is low compared to its yearly sales volume estimated at approximately 30$
billion. Chris should not feel entitled to a small piece of the market share merely because
of the magnitude of the sales already established in this market. One of the worst ways
for entrepreneurs to explain potential market attractiveness is to describe some huge
market or segment. There is no guarantee that a start up will get any percentage of a
market unless the start up has some real advantage over its competitors, good access to
customers, and some way of preventing imitation, among other things.i
Suppliers are another concern for Jack Sprat’s, as the business plan currently has
no definite prospects. Chris also has to make a decision on whether or not all
components of a meal will be created by one supplier, or many. As the supplier count
increases, so does Jack Sprat’s vulnerability to market externalities affecting the suppliers
prices. It would be advisable that generic ingredients be used due to this risk. Jack
Sprat’s restaurant would be a slave to its supplier(s) if they outsourced the most critical
part of the business. And if all assembly is in-house, how will he assemble meals if an
ingredient is missing?
It would appear that Jack Sprat’s restaurant is pursuing a much more horizontal
than vertical market strategy, in that the service will be provided to a wide variety of
customers rather than a defined niche. It seems too idealistic to assume there is no better
way to target these customers.
Most importantly, we are left questioning how valuable the proposition of value is
to the customers actually is. There is no information as to what customers like to
purchase, or what they value. Jack Sprat’s should be concentrating on how they will
convert unhealthy fast food eaters into to healthy ones. An illustration of customer roles
and values can be found in appendix 3.ii Users, payers, and buyers will realize social
value, price value (if competitively priced) and service/convenience value respectively.
Due to the above considerations, the market does not appear to be as attractive as
Chris communicates it to be. With all the threatening factors pertaining to supply, and
without a specified target market or meaningful research to justify demand, it is not
feasible for Jack Sprat’s to penetrate the market with their current strategy.

Organizational Feasibility:

Chris Harami is a connoisseur of fine cuisine who believes that gourmet comes in
a prepackaged box. Despite the contradiction, he has been very dedicated to his pursuit
of creating Jack Sprats – perhaps getting a little ahead of himself. He has had two past
failures that are troubling. It is interesting that in 1994, he and his partner Michael
Tapiro were the only two of five intending to pursue the eventual failure of a crepe
business. After developing and creating the plan for Jack Sprat’s with John Farmian, he
too decided to leave a 6 month partnership, and business potential behind Since then,
Chris had been on a solo mission to create Jack Sprat’s until it came time for financing. It
is no surprise that he appears to lack the confidence of a true leader, because he has yet to
lead anyone, or any business to success.
There are also problems of bias in an exclusively family-run business. His two
brothers to serve on the board of directors is certainly questionable, considering there is
no evidence of their qualifications. It seems disadvantageous to the business that those
with potential bias would serve on a board of directors. Although the decision has not yet
been made to invest, Dr. Harami has reserved the exclusive right to give the go ahead
when the opportunity does arrive. Should the power hungry Dr. Harami decide to
withdraw his offer, the business would fail, along with the strain in the family
relationship. Dr. Harami should be considered an odd ball considering his advice for
Chris to open a “hamburger joint” after undergoing heart surgery to remove a severe
coronary blockage.
 Contrary to the advice of Dr. Harami, Arlene Spiegel could very well be the key
to the success to Jack Sprat’s restaurant. Not only does she boast an extensive record of
awards and success, but she is the least expensive fee of all the consultants. With Arlene,
he may even be able to reintroduce his idea to the group of doctors who had been
previously made uncomfortable by his youth. Her connections will be infinitely valuable
to Chris who clearly doesn’t know where to start the search.
The staff is another uncertainty in this business plan. There is no information as
to how many employees there will be, how they will be trained or what duties they need
to perform. Most ridiculous of all, is that Chris is searching for a location before he even
has a chef. If Chris hopes to stay even remotely close to his completely unrealistic
timeline, he will need to immediately hire a chef to design and submit recipes for
evaluation. And if the chef isn’t on site, who will take care of reordering what ingredients
need be ordered or fix the machines?
Chris has the intention of setting up shop in Boston, but the only spot brought to
attention is one deemed as too trendy, and too expensive at $225,000. There should be
other location opportunities in Boston to consider. Perhaps Chris should leave the
standalone restaurants aside, significantly reducing his start up costs to focus on a much
more practical prototype.
A cluster likely exists in a city that has hosted so many restaurant chain start-ups,
so there should not be any shortage in the labour force. This is, at least, one benefit of
being in close proximity to the numerous competing firms.
The organizational feasibility is almost entirely dependent on Arlene’s
involvement. Without her, the Harami family would sure fail due to lack of insight and
planning. Getting Arlene to support the idea will not only increase the feasibility of the
entire plan, but it will also grant much needed credibility as Chris has very little
experience. As such, the plan could be feasible if $25,000 is spent on revamping the
business plan – a small cost considering the potential benefits of her service.
Financial Feasibility

On careful examination of the financial statements provided by Chris, there are a

number of issues to be rectified. The total start up cost illustrated in the provided
statement does not accurately reflect correct estimations. First, there is no provision of
funds for the purchase of the location, which increases the amount of start up money
required by at least $150,000 assuming that the location for $225,000 is too expensive,
and not to be considered a viable option. The information in this section is lacking the
most, likely because Chris believes that “The restaurants would not need to pay back the
investment to prove the concept was successful", which is absurd.
The marketing expenses in this statement of start-up costs do not match those on
the income statement, a difference of $5000.
The listing of the SBA Guaranteed Loan may be unjustifiably listed as a source of
funding as it has not yet been acquired, but is a possibility dependent on the quality of the
finished business plan.
Dr. Harami, Chris’s father, has agreed to invest $250,000. This leaves $200,000
in unclaimed equity that Chris assumes will be obtained through “other investors.” The
seed money is also without a donor or explanation, it doesn’t sound like Chris has any
skin in the game.
A provision for contingency is allotted $65,000 without any evidence of a
contingency plan in place.
The proforma income statement illustrates a series of questionable elements under
only one undefined certainty scenario. First, there is no justification for rent if Chris
intends on buying a building. It is also peculiar that there are no marketing expenses for
the opening month, or the month of December when many people are on the go shopping
for Christmas presents.
No information is given for expected margins, nor is there an industry standard
identified to be benchmarked against.
The erroneous recording of expenses, unjustified listing of unnamed start-up
capital, and other aforementioned omissions are enough reason to believe the financial
section of this business plan is not feasible. There is simply too much missing.
 Appendix 1.iii

Color: Reactions/Recommends: Supporting Case Evidence:

Create a prototype No test market data

White Find more relevant statistics Data is too large to be relevant/
not specific
No proof of customer value No evidence
Redefine target market Too broad
Ill crafted financials Omitted/unjust sources of
equity
Red Very Skeptical Vague prod. Descriptions
Hopeful Potential of Arlene
Confused Lack of information on
business models

Black Will not succeed Poorly thought out concept

Poor logic in planning chef/menu/location/business
plan non existent
Not profitable enough to satisfy Too low profits for quick
desired timeline expansion/too little capital
Current management team will Lack of experience starting
fail businesses

Yellow Good location to cluster Many success stories for

QSR’s.

Potential for high traffic “easy” to find locations

downtown
Green Re-approach doctors w/ Arlene Past rejection based on age

Blue Focus on converting customers No customer acquisition strat.

Hire Arlene Cheapest most qualified
Need to further develop the consultant
concept
Appendix 2iv

Factors Internal Strengths Internal Weaknesses

1. Motivated 1. Low brand loyalty
Management 2. Lack of investment
2. Fast/Convenient resources
3. Consistent recipes 3. Lack of managerial
from private label experience
supplier

External Opportunities Possible Strategies: Possible Strategies:

1. Growing demand for 1. Align and distribute 1. Hire consultant to
fast and tasty food in hospitals or train and guide
2. Boston’s existing kiosks in malls venture team/make
health conscious, 2. Adapt trendy changes to business
trendy, and educated atmosphere to attract model
population customers 2. Seek out more
3. Proximity to cluster investors
group
4. Strategic partners
with health
professionals

External Threats Possible Strategies: Possible Strategies:

1. Many Large 1. Develop Strategic 1. Abandon venture
Competitors partnerships 2. Rewrite plan for
2. Shortages of food 2. Maximize potential more specific
commodities number of suppliers market
3. Prohibitive 3. Change location 3. Aggressive
municipal marketing initiatives
legislation to convert customer
Appendix 3
 STATEMENT OF ACADEMIC INTEGRITY

Please read and sign the following statement, and submit this sheet
with your paper. Your paper will not be graded until you have
submitted this form.

I, the undersigned, confirm that I understand that all the following constitutes
academic misconduct according to Brock University’s policy on academic
misconduct, which in turn is consistent with general academic practice:

• Quoting someone’s words without using quotation marks

• Quoting someone’s words without acknowledging the source

• Citing someone else’s ideas in my own words but without citing the source

• Using someone else’s organization of ideas

• Allowing someone else the opportunity to borrow material from my paper

(e.g., by letting them have access to my paper when they are writing their
own paper)

• Writing the paper for another student, or doing some of the work for them
(such as, but not limited to, reading the articles for them and providing them
with notes on the articles)

• Allowing someone else (or paying someone else) to write part or all of my
paper, or do some of the work for me. The exceptions to this are that it is
acceptable to allow someone to type the paper for me or make editorial
comment on it. However, if someone types the paper for me, or if I
incorporate an editorial suggestion, and there are errors in the typing or the
suggestion was misguided, I take full responsibility for those errors.

• Submitting this work to another course without both instructors’ permission.

I confirm that I have not done any of the above forms of academic misconduct.

Name (please print):_________________________

Signature: _________________________________

Date: _____________________________________
Bibliography

i
Michael A. Cusumano, The Business of Software (New York: Free Press, 2004).
ii
Jagdish N. Sheth and Banwari Mittal. Customer Behavior: A Managerial Perspective.
2nd edition, 2004
iii
De Bono, E. (1992). Serious Creativity: Using the Power of Lateral Thinking to
Create New Ideas. New York: Harper Business.
iv
Peter Yannopoulos. Marketing Strategy. Course Kit for MBAB 5P61, Fall 2004.
