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Table of Contents
Introduction: ................................ ................................ ................................ ......................... 3 Overview of the Business: ................................ ................................ ................................ . 3 Aim & Objectives: ................................ ................................ ................................ ............ 3 Vision: ................................ ................................ ................................ .............................. 3 Mission: ................................ ................................ ................................ ............................ 4 Nature of the products and services: ................................ ................................ ...................... 4 Production Strategy: ................................ ................................ ................................ .......... 4 Operations of the Restaurant: ................................ ................................ ............................ 4 Employees & their effective usage: ................................ ................................ ................... 5 Market and Marketing Analysis: ................................ ................................ ........................... 6 Current Market Situation: ................................ ................................ ................................ .. 6 Market Demand/Supply: ................................ ................................ ................................ ... 6 Market Gap: ................................ ................................ ................................ ...................... 6 Competitive analysis: ................................ ................................ ................................ ........ 7 Business and Marketing Strategy: ................................ ................................ ..................... 7 Financial Analysis: ................................ ................................ ................................ ............... 8 Costing: ................................ ................................ ................................ ............................ 8 Investment Appraisal: ................................ ................................ ................................ ....... 8 Profit & Loss Account: ................................ ................................ ................................ ..... 9 Balance Sheet: ................................ ................................ ................................ ................ 10 Sensitivity Analysis: ................................ ................................ ................................ ........... 11 Risk Assessment: ................................ ................................ ................................ ............ 11 Conclusion: ................................ ................................ ................................ ......................... 11 References: ................................ ................................ ................................ ......................... 13 Books: ................................ ................................ ................................ ............................ 13 Web: ................................ ................................ ................................ ............................... 13
LS Business School
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Introduction:
In this report the importance of financial resourcing on a newly started business is analysed. The researcher has chosen the service industry and the usage of appraisal methods in managing financial sources. With a roughly estimated capital amount invested from the funders, a pro forma balance sheet, profit and loss, and cash flow is tabulated. The products available for the business and it operational process is also described. The performance of the business is assessed using different methods and analysis is done for identifying various marketing strategies suitable for the business. It is also important to understand the impact of competitors in the economy and how it affects the business in both ways. In order to understand how the financial process of a business is managed we took the example of launching a new restaurant in this report. Overview of the Business: The industry chosen for the research is hospitality industry and the business is a restaurant and the name of the restaurant is Fine Diners. Since this is a small scale industry and it falls under private sector which is classified into 3 which are sole trader, partnership and limited liability. The restaurant falls under the sole trader category where there is only single owner and the entire investment for the business is provided by a single owner. The business operations in the restaurant are based on Law of 2005 and with standard regulations. This type of business is one of the finest choices made on looking at the revenue it is producing. Aim & Objectives: The ultimate aim of any business in general will be making profit, apparently in hospitality industry the main aim is to provide a first grade service to its customer and if it achieved rest all follows including profit, fame etc. For the long run of the business, it is important to maintain some of the main parameters like quality, health and hygiene, etc. Various business strategies are implemented to attract more customers which include introducing promotional offers and other deals. The hospitality in the modern world is too competitive and for the survival in such situation it is important for the business to show the projection in financial performance. Vision: The highest level of the performance is produced by the restaurant when the staffs and management are having a clear vision of their business. To become the finest restaurants in UK Developing a brand value for the restaurant Providing quality food by maintaining health & hygiene Satisfying the customers is the most important vision of this restaurant.
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Mission: Service provided to the customer is very professional and courteous. Most delicious foods with high standards are provided. An ambience is created in the restaurant where the customer can relax and have good meal and good time. To maintain the operations of the restaurant which delivers comprehensive and exceptional services at all times to every detail of operation. An environment which is friendly and also rewarding is created and maintained in-between the staffs who are working. Developing a reputation by providing quality and high standard services is the most important one, because the business growth entirely depends on the reputation it gains on the long run. Quality of service is maintained by providing support for the development of greener environment.
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Employees & their effective usage: As mentioned above the number of staffs needed is decided on looking at the seating capacity of the restaurant and hence for 50 people seating capacity, a total of 10 full time staff is required to run the business smoothly and effectively. Manager 12pm to closing He is the person responsible for the entire business and also he is the person who manages the other employees, putting shifts, assigning task, solving issues, handling with cash and banking etc. 1 Supervisor 11am to 12pm This person comes under the supervisor, and the responsibility mostly covers the waiters, assigning jobs to the waiters, guiding them what to do when to do and how to do. 1 Head Chefs 12pm to 11pm All the food items prepared should be under his supervision or presence, only after he has approved the food should be serviced to the customers. As the supervisor has control over the dining area, the head chef is responsible for the entire kitchen which includes 2 kombis and one porter. 2 Kombis 11am to closing Other the main course all the side course and starters are prepared by them; sometimes in the absence of Head chef they step up to the situation and take responsible of the kitchen. 1 Porter -12 am to closing Keeping kitchen in a good hygiene condition is the responsibility of the porter and also washing the utensils and getting them ready for the next service. 2 Head Waiters 12pm to 11pm They fall under the supervisor where they are the person responsible for taking orders, up selling, and interaction with the customers. 3 Waiters 11pm to closing They come under head waiters, and these waiters are responsible for setting up the table, clearing the table, picking up the orders, serving the customers etc. If it is busy, they are even responsible for taking orders and also they will be closing the restaurants.
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Fig 1: Relation between Price, demand and supply. Market Gap: The market gap analysis determines the new markets for the future where demand is greater than the supply. If a new product is introduced by an organisation, the time taken by
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the product to reach the consumers in the market is referred to market gap and it happens due to several factors. Competitive analysis: This is one of the important analyses considering a hospitality industry because there are various sectors which customers use to compare between two brands. In this case of a restaurant there are 2 competitors, one is an entire industry which is fast food industry and the second one is the other restaurants within the industry. Fast food industry is considered to be main competitor for the hospitality industry because in the modern era people are having more work to be completed with less time period, so they dont prefer to spend more time in restaurants where the service style of fast food sector has hugely attracted such people. The quality of service and the time taken for food preparation and service is a key to restaurant business, because it is the area where customers get an idea and rate the business comparing the other and also the price factor is there where it can be covered by some additional offers and services. There are many restaurants in and around London which forms a group of competitors. Business and Marketing Strategy: Any type of business, the most important part which helps the growth of the business is its marketing, Since a new restaurant with a new name is opened, many people will not having the information and hence it is important for the managers to focus on marketing and make sure the service with such name is well published. Media is the best means of marketing particularly restaurants and the media like newspaper more suits the advertisement and also by providing introductory offers to customers will attract more customers. If it is possible to make the customers satisfy and happy, then there is no means of marketing than customers appraisal, they will discuss about the quality of service provided with friends and it spreads which is good marketing strategy and it helps the growth of the business. For increasing the financial performance, it is important to follow much condition which is set to be cost effective. Unnecessary staffs, reducing food wastage, etc will help the business financial performance.
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Financial Analysis:
Fine Diners Restaurant and Bar Costing:
Description
Cost
200,000
Investment Appraisal: Pay Back Year 0 year 1st Year 2nd year 3rd year (30,000) Cash flow 200,000 (out) 70,000 (In flow) 95,000 (In flow) 55,000 (In flow) Pay back = 2years 7 months Cumulative cash flow (200,000) (130,000) (35,000)
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Amount. ()
69,750 Less: Cost of sales Purchase Return outward 15,000 (250) 14,750 Less: Closing inventory (1,500) (13250) Gross profit Discount received 56,500 500 57,000 15,000 2,000 8,000 5,000 3 .50 8.50 4.50 31650 Net Profit
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Salaries Administration expenses Water and electricity Advertisement Discount allowed Interest paid Telephone charges
25,350
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Amount
30,000
Current assets Closing stock Account receivable Bank 8,000 24500 Less: current assets Account payables Net current assets (9,500) 15,000 96,000 Capital Net Profit 75,000 25,350 100,350 Less: Drawings (4350) 96,000
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4,000 12500
Sensitivity Analysis:
Risk Assessment: Fine diners restaurants as hospitality industry posses some risk to the environment and some factors cause risk to the business as well. One of the main risks that restaurants trouble the environment is the wastage of food materials in a huge quantity. More wastage will never support for the greener environment and the money involved for the production of food is huge, hence will not be feasible for the hospitality industry in reducing the waste at the same time making fresh food every day, so a balance should be brought to reduce the wastages. Health and safety issue is one of the major risk causing the business performance of the restaurant and hence it is important for the employees and owners to follow the rules and regulation of health and safety without bringing any changes for convenience. Fire risk is always a serious one and the possibility of causing such risk is very high, preparing food, dish etc are done by using cooking gas. A small leak can cause the entire restaurant to come under fire. So to prevent this all fire extinguishing equipments must be checked regularly and necessary refilling must be made. It is always better to check the fire alarms regularly. Environmental disaster is another risk which is out of control with anyone in the world, but it is possible to find steps to protect from such disaster if plannings executed. Right from the construction design, location etc we can overcome such crisis to some extent. Insuring the restaurant will be a good idea, because in modern world it is hard to believe in human characters which can turn violent at any time. Troubles from thieves are other concern which can be stopped to some extent by installing security devices. In running a restaurant it is most important to understand about the rules and regulation that affects the business like hygiene, liabilities, etc. At the end all this risk factors affect the financial performance of the restaurant.
Conclusion:
Managing financial performance which is important and should be taken in parallel with the business, in other words the business depends on how the finance is managed. In this report by choosing the example of opening a restaurant various strategies and analysis are performed on how the performance gets affected. By setting a capital amount the cash flow, profit and loss and balance sheet are calculated and tabulated for the upcoming 3 years and some assumptions are made for the calculations. For successfully running the business it is important for all the employees to understand about the value of business and also the mission of the business. The entire research is performed by 2 categories, one is the primary strategy and second one is the secondary strategy. The primary strategy involves the nature of the
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business, objectives etc. The secondary research involves the financial analysis which proves by choosing such business the profit and turnover obtained. The researcher can be proudly and with confidence to go forward with this project to any investors and convince them for the new business plan. The main theory which can be used for convincing the investors is the customer satisfaction provided and financial performance for the upcoming three years, these 2 factors from the report helps a lot.
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References:
Books: [1] Glen Arnold, 2008. Corporate Financial Management (Financial Times), 4th Edition Financial Times Management [2] Bettye H. Pruitt, 1998.Timken: From Missouri to Mars-A Century of Leadership in Manufacturing. First Edition Harvard Business Press [3] Robert Steven Kaplan, 1997. Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance. Edition Harvard Business Press [4] Gregory H. Watson, 2007. Strategic Benchmarking Reloaded with Six sigma. Improving Your Company's Performance Using Global Best Practice. 2 Editions Wiley [5] Adam Jolly, 2005. Managing Business Risk: A Practical Guide to Protecting Your Business, 2nd Edition Kogan Page Business Books [6] David Stokes, 2010. Small Business Management and Entrepreneurship, 6th revised edition, Cengage Learning Web: [7] Writing a Business Plan - Financial Plan Section of Business Plan. 2011. Writing a Business Plan - Financial Plan Section of Business Plan. [ONLINE] Available at:http://sbinfocanada.about.com/cs/businessplans/a/bizplanfinanc.htm. [Accessed 20 June 2011] [8] Market Gap Analysis. 2011. Market Gap Analysis. [ONLINE] Available at: http://www.thecxogroup.com/index-market-gap.htm. [Accessed 22 June 2011] [9] Restaurant Marketing Strategies 2011 Restaurant Marketing Strategies [ONLINE] Available at: http://www.myrestaurantmarketing.com/restaurant_marketing.html. [Accessed 30 May 2011] [10] Restaurant Operations 2011 Restaurant Operations [ONLINE] Available at: http://www.myrestaurantmarketing.com/restaurant_operations.html. [Accessed 21 June 2011] [11] Market Gap Analysis - A Value Forward Group Service. 2011. Market Gap Analysis - A Value Forward Group Service. [ONLINE] Available at: http://www.marketgapanalysis.com/. [Accessed 22 June 2011] [12] Health and Safety in Restaurants | Business Risks for Restaurants | Risk Management for Restaurants from MORE TH>N BUSINESS. 2011. Health and Safety in Restaurants | Business Risks for Restaurants | Risk Management for Restaurants from MORE TH>N BUSINESS. [ONLINE] Available at:http://www.morethanbusiness.com/KnowledgeCentre/Risk-Assessment/Risk-Assessment/Restaurants-Cafes. [Accessed 23 June 2011]
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[13] Small Business Finance, Financing Small Business | Economy Watch. 2011. Small Business Finance, Financing Small Business | Economy Watch. [ONLINE] Available at: http://www.economywatch.com/finance/small-business-finance.html. [Accessed 22 June 2011] [14] UK Hotel, Hospitality and Restaurant Financial Management and Consulting from Premier Cru. 2011. UK Hotel, Hospitality and Restaurant Financial Management and Consulting from Premier Cru. [ONLINE] Available at:http://www.1ercru.co.uk/financial_management.aspx. [Accessed 22 June 2011] [15] Supply and Demand Curves - Strategy Skills Training from MindTools.com. 2011. Supply and Demand Curves - Strategy Skills Training from MindTools.com. [ONLINE] Available at: http://www.mindtools.com/pages/article/newSTR_69.htm. [Accessed 22 June 2011]
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