BUSINESS PLAN ANALYSIS

Garlics Restaurant
Aazar Munir 11/12/2008

A business plan analysis of Garlics Restaurant, a plan written by Kathy Burns. Overview of the whole plan sorted by a per section basis from the business plan. Included are suggestions, additions, and corrections as well some ways to overcome these barriers.

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Overall Business Plan

The first step to analysing the business plan is to look at the overall structure. Kathy can improve the overall appeal of her case by changing the ratio of appendices to actual business plan. There are only about 10 to 11 pages of her business plan and the rest of it is all appendices. This sort of gives the reader an overwhelming feeling that there is going to be too much quantitative data versus qualitative. One of the main objectives of a business plan is to promote readability, that is to make it appealing enough to the reader that they want to continue reading the plan. It seems like Kathy is writing a full business plan and not a summary business plan so maybe she should increase the qualitative part of the plan into 25 to 35 pages then maybe the appendices would seem more fitted. However, this approach might make the business plan way too thick. Kathy can also re-evaluate which items from the appendix are absolutely necessary for the business plan and remove the extra information. Moreover, the purpose of writing this business plan is unclear. Kathy does mention that the business needs $200,000 to start, however, she has not asked for this investment or stated where she will be getting it from anywhere in the plan.

Executive Summary
The executive summary does not have enough detailed information. Although, it is just the executive summary and it is not supposed to have every single detail, simply stating that the best case scenario is an increase in Return on Investment by a percent is not going to win investors over. Moreover, the summary does not say that the firm is requesting the $200,000 it simply says how much it will cost and there is no mention of how much equity Kathy is willing to surrender for the capital investment. Lastly, Kathy uses a quote from some book or press release which has nothing to do with the executive summary; this should be avoided because at this point

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the reader is only interested in the business aspect of the plan. There is a lot of room left over for more information to be added, Kathy should utilize this and make the executive summary more insightful as to the actual business.

Business Description/Overview
In this section of the plan, there is slight usage of French or a popular term used by those in the food and beverage industry. A business plan should not contain any terms that a neutral reader might not understand. Kathy should not assume that the person reading this report knows anything about common terms used in the industry or even another language for that matter. Furthermore, this section should include a business model and properly elaborate on the core competencies of the business. Simply putting three points and labelling them as the competitive strategy is not the best idea. Kathy should elaborate on these points and show how her idea/company is different from the rest and is in fact an opportunity and not just any idea. The industry analysis should be a whole different section and way more detailed. An industry analysis is one of the most important aspects of the business plan because the readers need to see the external environment the proposed business is going to take place in. Furthermore, the industry analysis should contain some hard facts from credible sources that are cited properly and not just from a Hotel and Restaurant magazine.

Marketing Plan
Right away in the marketing section there is a big table that can either be shrunk down to information that is vital to the plan or simply be put into the appendix. However, to avoid overcrowding the appendix with information it is a better idea to simply state the values that are important in the table and just cite the source. Instead of wasting all that space on the table, Kathy can put more specific information about the types of restaurants and the types of consumers they attract and how Garlics Restaurant will get its market share.

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In addition, there is no evidence of a feasibility analysis or concept and usability testing done. An important aspect of the marketing plan is to further explain the products/services that are to be offered and how they will create value for the customer. Moreover, this section should include the full marketing mix and how they will relate to one another. Kathy has not described her restaurant in more detail and focused this section mainly on location of the store and customer feedback. Location and good customer service alone do not run a business, as there are many other aspects of the marketing mix that are just as important especially the product. Kathy should add some more detailed information about the products she is offering and what makes them unique.

Operations
Product Costing is placed in the Operations section in Kathys plan, instead product costing should be under marketing plan. Without the product costing under the operations section, there is little if any information about the dayto-day operations of Garlics Restaurant. Kathy should list important suppliers and talk about them in detail instead of referring the reader to an exhibit. Another important thing to note is that Kathys main chef is still just a potential. Venture capitalists and other investors usually like to see things more concrete. To mention that it is a potential chef gives the illusion that there is a possibility that he might not wish to work with Kathy. Kathy can explain in more detail about her staff in the Management section. Moreover, Kathy claims that restaurant sales are at their peak in July and December, however, she does not provide any credibility to this claim.

Company Organization
Kathy lists a bunch of unorganized categories under this heading: management, policies, consultants and specialists, legal structure, and

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license and permits. It might be a better idea to have a separate heading for management and other staff and to put the rest of the sections within the heading Company Structure, Ownership, and Intellectual Property. Changing little things like this might seem insignificant, however, they add up to make the business plan look more organized and professional which shows the reader that you have spend a lot of time into this plan. In the management section Kathy mentions that the prospective chef works in a restaurant in which he was actively involved in the start-up of their kitchen. This statement gives the impression that he has invested himself into his kitchen and might not be willing to leave and work for Kathy. There is no explanation of the benefits he will get from Kathy over his previous employer and whether he has promised to come work for Kathy yet. In the personnel policies, there is information about lower level employees and there is a reference to their work schedule which is an exhibit. This is something that is unnecessary and bulks up the business plan when it is not of essential concern. Within the legal structure section of the plan, Kathy mentions that she will be the 100% of the voting rights for the company even though there are going to be four shareholders. She should mention who those shareholders are and if they have agreed to give all the voting rights to Kathy. It seems unlikely that a person will invest heavily into a business without any voting rights. Kathy also mentions the need for getting licenses and permits approved by the government, however, this is something that should be explained in more detail. Kathy needs to show the reader that she will in fact either get these permits for sure or that they are already on their way for approval. If there is a risk that one of the permits or licences does not get approval, the investor has just wasted his capital before the business even got started.

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Financial Data
In this section Kathy only explains the financial need for the first year of operation. A proper business plan would show pro-forma statements for 3 to 5 years and also financial need for those years. In addition, Kathy has not included a sources and uses of funds statement which shows where she will get the money and how she will spend it. Kathy has assumed that if her competitors are getting a certain number of customers, that she will also get a similar amount. This assumption is made without showing how exactly these customers will be attracted and what the competitors do to attract them. Her financial statements are based on the projected number of customers and seem overly optimistic. Moreover, Kathy has not included any information about a liquidity event; which generally states how and when the investors will be getting their return on investment. Kathy should also include an exit strategy, which is a solid edition to any business plan and shows the reader that the entrepreneur has thought the whole process through from the start-up to exit.

Additions to the Business Plan

There are several sections of a business plan that Kathy failed to implement. One of the most important parts of a business plan is the competitor analysis. Kathy has simply put all of her information on her competitors into an appendix. There is not qualitative analysis of these tables present in her business plan. In order for a business to be successful, the owner must take it competitors into consideration. Venture capitalists and other investors reading this report might not even read all the exhibits because of the overload of information; this is why Kathy needs to dedicate a whole section to talking about her competitors. Another important part of a business plan Kathy skipped is the Critical Risk Factors. Every business takes some degree of risk so one of the most important things that a business plan should convey to its readers is a sense

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that the ventures management team is on the ball and understands the critical risks facing the business. A subsection of this Critical Risk evaluation should be a contingency plan to implement in case one of the critical factors of the plan went wrong.

10 Important Questions a Business Plan should answer

An important framework for assessing the success of a business plan is offered in the course text book. There are ten questions a business plan must be able to answer in order for it to successfully appeal to its reader. A copy of this framework is presented in appendix 1. There are a few questions out of the 10 discussed in class that Kathy fails to answer. Firstly, she fails to show that her business plan is actually an opportunity with real potential; this plan seems more like just an idea. A feasibility analysis would help solve this problem for Kathy. There is also a slight problem with question number two. There is nothing extremely unique or something that competitors cannot easily copy about her business plan except maybe the location. In response to question number three, there is no feasibility analysis mentioned in the plan. Kathy should also address question number six and talk about how competitors might react to her entering in their market. In regards to question nine, Kathy only mentions the return on investment in the executive summary and then after fails to mention exactly what portion investors will be getting of her profits let alone when they will be receiving any return. In addition, she has not mentioned any critical risk factors and has no contingency plan to answer question number ten.

Red Flags in Business Plans

Provided in appendix 2 are five red-flags any business plan writer should avoid. One of the biggest red-flags in a business plan is that founders should have some of their own money at risk with the opening of their business plan. However, Kathy does not even mention the source of any income

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whether it is from her or anyone else. It is not a good idea to request the whole $200,000 of starting expenses from an investor. Typically investors like to see entrepreneurs who are willing to put their own money at risk because it shows how much faith the owner has in his business opportunity. Another red-flag in business plans is poor citation. Kathy has not cited any major sources; the only things she has referenced are a few sources from a magazine and some quotes from food enthusiasts. There should be a section at the end of the report showing a bibliography for the reader to maybe go into some of the websites or get a hold of some of the books used in the business plan to get more detailed information about the industry, trends or competitors etc.

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Appendix 1
The 10 Most Important Questions a Business Plan Should Answer
1. Is the business just an idea, or is it an opportunity with real potential? 2. Does the firm have an exciting and sensible business model? Will other firms be able to copy its business model, or will the firm be able to defend its position through patents, copyrights, or some other means? 3. Is the product or service viable? Does it add significant value to the customer? Has a feasibility analysis been completed? If so, what are the results? 4. Is the industry in which the product or service will be competing growing, stable, or declining in nature? 5. Does the firm have a well-defined target market? 6. How will the firms competitors react to its entrance into their markets? 7. Is the management team experienced, skilled, and up to the task of launching the new venture? 8. Is the firm organized in an appropriate manner? Are its strategy and business practices legal and ethical? 9. Are the financial projections realistic, and do they project a bright future for the firm? What rate of return can investors expect? 10.What are the critical risks surrounding the business, and does the management team have contingency plans in place if risks become actually problems?

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Appendix 2
Red Flags in Business Plans
1. Founders with none of their own money at risk. 2. A poorly cited plan. 3. Defining the market size too broadly. 4. Overly aggressive financials. 5. Sloppiness in any area.