ENTERPRISE PLANNING IMPLEMENTATION

Feasibility Report: Food Canteen

Client: Mr. Toyin Olaitan

Prepared by: Westville Enterprise, Ibadan.

PRODUCTION SERVICES

Report on Canteen Operation.

FEASIBILITY STUDY REPORT FOR THE OPERATIONS OF A CANTEEN BUSINESS

IN THE FOOD INDUSTRY

IN THE CITY OF IBADAN, NIGERIA

OUTLINE OF CONTENTS
1. INTRODUCTION 2. TECHNICAL ANALYSIS 2.1 Equipment Needs and Cost 2.2 Raw Foods Prices and Sourcing 2.3 Other Materials Need and Prices 2.4 Staff Requirement 2.5 Payroll plan 2.6 Processes 3. MARKET ANALYSIS 3.1 Raw Food Ranges 3.2 Market Needs 3.3 Target Market 3.4 Demand Analysis 3.5 Competition 3.6 Location Analysis 4. FINANCIAL ANALYSIS 4.1 Start up Cost 4.2 Sales Forecast 4.2 Cash Flow Projection 4.3 Profit Projection 5. CONCLUSION 5.1 Risk 5.2 Key Success Factors 5.3 Last Words

Terms of Reference
This report was prepared using information deemed to be accurate and complete based on the competency of the sources. These sources include public sources, staff of studied organizations and management of selected Ice Block Traders in Ibadan. The information contained herein is of a general nature to be used as a guide and is not intended to address the circumstances of any particular individual or entity. The estimates and projections are based on upon professional analysis and the competent work of our firm using collated data. The projections are also based assumptions, which are subject to and variation. Therefore the projections are to be used as reliable guides not results and values that have to be matched.

1. INTRODUCTION Food canteen is a business that takes care of the feeding need of majority of people that desires to eat local/ homemade food that are often not available in the sophisticated fast food restaurants we found around. Apart from the fact that the business requires a relatively low start up cost, it enjoys net profit as high as 30% of its revenue. Ibadan is estimated to have over 400 small food canteens with at least 1 in every major street and with a combine estimated annual revenue of about N1.5 billion. The large population of the middle and the lower class people in the city is one major factor driving the success of the business. However, there is still a major gap of good customer service, comfortable ambience and quality food needed to be met in the business in Ibadan and a new canteen that positions itself to bridge this gap will enjoy great patronage and profitability. This report examines the viability, market trends and success factors of canteen business in the city of Ibadan.

2. TECHNICAL ANALYSIS 2.1 Equipment Needs and Cost The table below shows the breakdown of all the equipment that will be needed for the operations of a small scale canteen in Ibadan with their cost. The equipment can be purchased in Agbeni Ogunpa, Dugbe Alawo or Aleshinloye Market.
S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 EQUIPMENT AND MATERIALS Cooking Gas (4 burner) Industrial Gas Cylinder Camp Gas Cooker Big Cooler Small Cooler Big Cooking Pots Small Cooking Pots Frying Pots Stainless Pot Cooking Spoon Frying Spoon Turning Stick Iron Pot Cover Table Cover Serving Plates Soup Bowl Spoon Fork Jugs Cups Washing Hand Bowls Serving Spoon Napkins Pounded Yam Mortar Grinding Machine Water Tank Plastic Trays Electric Fan Tables For 4 Chairs Shelve Freezer TOTAL UNIT 1 1 2 3 2 2 4 2 3 3 3 4 2 10 5 Dozens 3 Dozens 5 Dozens 2 Dozens 1 Dozen 3 Dozens 2 Dozens 10 10 1 1 1 2 Dozens 2 5 20 1 1 UNIT COST, N 15,000 40,000 4,000 3,700 2,000 10,000 4,500 2,500 6,000 1,500 1,500 500 1,700 500 1,500 1,300 1,500 1,500 4,000 600 550 500 400 8,000 30,000 30,000 3,500 7,500 4,000 2,000 15,000 65,000 TOTAL COST, N 15,000 40,000 8,000 11,100 4,000 20,000 9,000 5,000 18,000 4,500 4,500 2,000 3,400 5,000 7,500 3,900 7,500 3,000 4,000 1,800 1,100 5,000 4,000 8,000 30,000 30,000 7,000 15,000 20,000 20,000 15,000 65,000 397,300

2.2 Raw Foods Prices and Sourcing At start up, the owner of the canteen will need to stock major raw materials that are non-perishable and budget some money for recurrent materials such as pepper, meat and fish for the first one month.
S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ITEM Curry Maggi Thyme Take-a Way Packs Took Pick Onion Sachet Tomatoes Ginger Galik Groundnut Oil Red Oil Rice Beans Gari Yam Flour Melon TOTAL UNIT 1 Pack 1 Pack 1 Pack UNIT, COST TOTAL COST 700 780 700 5,000 2,000 2,500 2,000 1,500 1,500 6,000 4,500 7,300 2,000 1,500 2,000 4,800 32,600

50

25 Liters 25 Liters 1 Bag 10 Congos 10 Congos

Recurrent Materials Apart from the above listed materials, there will be need to budget for recurrent major materials that will be needed on a daily bases. The quantity to be purchased will depend on the daily demand at the canteen at that period. Such raw material include meat, fish and pepper. These materials can be purchased in Bodija and other small markets around the town depending on the quantity of the materials to be bought. However, for a large stock purchase it is cheaper to buy from the major market; Bodija and Agbeni. The need for freezer is justify in the fact that some of the raw materials use such as fish, pepper, etc. need to be preserved and prevented from spoiling. 2.3 Facilities The major facility needed for a canteen is building space. Other facility such as well could come with rent of the building space. 2.4 Staff Requirement The operation of a small scale food canteen in Ibadan will require the following staff
1) Supervisor 2) Head Cook

3) Cooks 4) Servers 5) Cleaners

Job Description 1) Supervisor: He/she is responsible for overseeing the operations in the canteen. He/she also performs stock and book keeping operations. 2) Head Cook: He/she supervises all cooking operations and ensures quality control for all the food cooked. He/she must be an experienced caterer that places value on quality, promptness and hygiene. He/she must also posses leadership quality needed to get the best out of the cooks working under him/her. 3) Cooks: They carry out the actual cooking operation as directed by the head cooks. They ensure conformity to the quality standard set by the management and the head cook. 4) Servers: They attend to the customer and take the orders of the customers promptly. They are expected to have sound and courteous human relation as this is a critical factor to customer retention. 5) Disher: They are responsible for taking the customers order from the server and dish the food in accordance with the order of the customers. 5) Cleaners: They wash the plates and also clean regularly the tables and the entire environment of the canteen to keep the canteen friendly to the customer. In some canteens investigated in the course of this research, a staff could perform more than one role. For example, the disher could also serve as the server. In this case, the customer directly takes his /her order from the disher before going to seat down and eat. 2.5 Payroll plan There are different methods of salary payment use by canteen operators. While some have an agreement of daily payment, some canteen operator pays their staff weekly or monthly. The table below shows the breakdown of salary for the different staff of the canteen.
S/N 1 2 3 4 5 6 Staff Requirements Supervisor Caterer Cook Servers Cleaners Disher TOTAL Staff No Total Monthly Annual Monthly Salary, N Salary, N 1 20,000 240,000 1 20,000 240,000 3 45,000 540,000 3 36,000 432,000 2 16,000 192,000 2 30,000 360,000 12 167,000 2,004,000

2.6 Processes Staff Resumption To ensure the food is ready for the breakfast, the staff resumes 7.am to begging operation for the days. The supervisor ensures all materials needed for operation that day is made ready and direct the activities of the other staff to keep the canteen ready before customer starts coming in. Operations Raw material Stocking: The supervisor, who ensures monitoring of the stock in the canteen store, makes a list of stock as at when needed and submit to the management or the owner who approves and disburses cash to purchase the needed raw materials. Food Preparation: The Caterer, who directly supervises the cooking operations, instructs the cooks on the sequence of the cooking and some of the foods are prepare concurrently to speed up the process. Customer Services: This where the customer works in and seat down to be attended to by the server who takes the order and serve the customer. Payment: The customer is required to pay the server as soon as he is served the food and the server immediately remits the money to the supervisor who takes the record. Cash Remission: The supervisor remits the cash on a daily bases to the bank and gives a copy of the teller to the owner for proper recording.

Stocking

Remission

Preparation

Payment

Serving

PROCESSES

3. MARKET ANALYSIS 3.1 Food Ranges Below is the range of the food, soup, fish and meat found in small scale canteens Ibadan. Food 1) Plain Rice 2) Jollof Rice 3) Fried rice 4) Beans 5) Plantain 6) Eba 7) Fufu 8) Semo 9) Pounded Yam 10) Amala 11) Yam Porage Soup 1) Red Stew 2) Vegetable soup 3) Okro 4) Ewedu 5) Ogbono 6) Melon 7) Beans Soup (Gbegiri) Meat and Fish 1) Red meat 2) Bush meat 3) Regular fish 4) Stock fish 5) Fresh fish The type of food regularly demand for depends on the purchasing power and exposure of the people in the area where the canteen is located. Therefore, the owner must study the customer buying pattern and listen to their request to determine the type and quantity of food being prepared. 3.2 Market Needs Food being a primary need of human is one item that has patronage size as much as people living on the surface of the earth. People have this important need of their life met by either cooking at home or visit a restaurant. However, our study shows that majority of people due to their work demanding often have little or no time to prepare their food and therefore often have to patronize canteen to eat during their work days. While almost every street in Ibadan has one or two canteen, only very few canteens are satisfying the need of the customer for a canteen with warm customer service, quality food, clean environment and reliable service.

3.3 Target Market Small scale canteen targets majorly at serving people in the lower and the middle clas:, the classes of people with the majority of the population. These classes of people main include: I. Cab and bus drivers II. Bus drivers assistant and bike riders III. Traders IV. Small business owners V. Professionals e.g. Bankers, Lawyers etc. VI. Public Servants These classes of people have earnings ranging between N15, 000 and N150, 000 monthly. 3.4 Demand Analysis Demand in the regular food canteen Ibadan was estimated to reach about N1.2 billion annually with each canteen making an average of N30, 000 revenue per day. 3.5 Pricing The price of the food is a function of the purchasing power of the people the canteen is serving. The table shows the prices of food items in most of the canteen in Ibadan.
S/N Food Item 1 Plain Rice 2 Jollof Rice 3 Fried rice 4 Beans 5 Plantain 6 Eba 7 Fufu 8 Semo 9 Pounded Yam 10 Amala 11 Yam Porage 12 Meat 13 Fish Unit/Measure 1 Serving Spoon 1 Serving Spoon 1 Serving Spoon 1 Serving Spoon 1 Piece 1 Rap 1 Rap 1 Rap 1 Rap 1 Rap 1 Serving Spoon 1 Piece 1 Piece Price, N 50 50 50 50 10 to 20 20 to 50 20 to 50 20 to 50 50 20 to 50 50 30 to 50 30 to 50

3.6 Location Analysis The location of the canteen is an important factor that determines the patronage the canteen enjoys. A new canteen should be located in a high traffic area close to both residential and office area. Proximity to a market alongside residential and office area is also a very important factor that drives patronage for a canteen. Other important factor could include proximity to a (Secondary school or Tertiary institution).

4. FINANCIAL ANALYSIS 4.1 Start up Cost The table below shows the breakdown of the startup cost.

S/N 1 2 3 4 5 6 7 8

ITEM Rent (1 Year) Equipment and Materials 1 Month Initial Stock 1 Month Recurrent Budget 1st 3 Month Salary Registration 1st 3 Month Utility Cost Start Up Contingencies TOTAL

COST, N 120,000 397,000 70,000 100,000 501,000 50,000 15,000 120,000 1,373,000

4.2 Sales Forecast The table below shows a realistic projection for a new canteen starting in Ibadan. The projection takes into consideration fluctuation in sales that may be experienced at the inception of the business. However, as more people patronizes the business and refers others the patronage rises. The average amount spent by each person eating at the canteen is put at N150.
MONTH DAILY MONTH MONTHLY PATRONAGE PATRONAGE REVENUE (N) MNTH1 10 260 39,000 MNTH2 20 520 78,000 MNTH3 35 910 136,500 MNTH4 50 1,300 195,000 MNTH5 75 1,950 292,500 MNTH6 100 2,600 390,000 MNTH7 110 2,860 429,000 MNTH8 120 3,120 468,000 MNTH9 150 3,900 585,000 MNTH10 160 4,160 624,000 MNTH11 180 4,860 729,000 MNTH12 200 5,200 780,000 TOTAL 31,640 N 4,746,000

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

1ST YEAR SALES PROJECTION

4.2 Cash Flow Projection Our research shows that an average of 40% of the revenue is the cost of the raw materials use in preparing the food. Below is a table that shows a projection of the raw material and the gross profit for the first one year.
MONTH MNTH1 MNTH2 MNTH3 MNTH4 MNTH5 MNTH6 MNTH7 MNTH8 MNTH9 MNTH10 MNTH11 MNTH12 TOTAL DAILY PATRNG 10 20 35 50 75 100 110 120 150 160 180 200 MONTH PATRNG 260 520 910 1,300 1,950 2,600 2,860 3,120 3,900 4,160 4,860 5,200 31,640 MONTHLY REVENUE, N 39,000 78,000 136,500 195,000 292,500 390,000 429,000 468,000 585,000 624,000 729,000 780,000 4,746,000 COST OF RAW MATERIAL 15,600 31,200 54,600 78,000 117,000 156,000 171,600 187,200 234,000 249,600 291,600 312,000 1,898,400 GROSS PROFIT 23,400 46,800 81,900 117,000 175,500 234,000 257,400 280,800 351,000 374,400 437,400 468,000 2,847,600

4.3 Profit Projection

Year 1 REVENUE FIXED COSTS Salaries Rent Utility TOTAL FIXED COST VARIABLE COSTS Raw Materials TOTAL VARIABLE COSTS TOTAL FIXED COST TOTAL VARIABLE COSTS OTHER CONTINGENCIES TOTAL COST NET PROFIT Year 2 Year 3

4,746,000 8,424,000 10,920,000

1,644,000 1,972,800 120,000 120,000 60,000 60,000 1,824,000 2,152,800

2,301,600 120,000 60,000 2,481,600

1,898,400 3,369,600 1,898,400 3,369,600 1,824,000 2,152,800 1,898,400 3,369,600 237,300 421,200 3,959,700 5,943,600 786,300 2,682,540

4,368,000 4,368,000 2,481,600 4,368,000 546,000 7,395,600 3,524,400

5. CONCLUSION 5.1 Risk Factors Despite the huge potential and profitability inherent in a canteen operation business, there are certain risks peculiar to the business that must be taking care of with proper mitigation plan from the start up. Such risks are outlined below: 1. Theft. Research shows that operators of small canteen often have challenges with staff who steals money and materials from the canteen. To mitigate this, the operator must place emphasis on honesty while recruiting staff and have strict policy against pilfering. 2. Poor Cash Handling. Because many of the canteens often have to pay suppliers and make certain purchases on a regular basis, the need for proper reconciliation, while keeping the expense low to maximize profit is of great importance. When this is not giving attention to, operator of canteen can be losing money and not be aware of it until it has a major impact on the operating capital of the business. 3. Fire. Another risk peculiar to canteen is fire outrage. This can be mitigated by giving proper orientation to the staff on how to avoid fire outrage and quickly put out fire whenever it occurs. Also, positioning of fire extinguisher in a place easily accessible in the canteen is important in preparation against fire occurrence.

Risk Risk Risk

Theft Poor Cash Handling Fire
5.2 Key Success Factors 1. Customer Focus. Courtesy, care, empathy and keen attention to customer needs and complaint is a major factor that contributes to speedy increase in patronage. 2. Quality food. When a high quality food standard is maintained in a canteen, the canteen will enjoy good referrer and repeat purchase from the customer, therefore the restaurant should make quality their priority to enjoy good success 3. Good Management. Proper supervision, good treatment of staff, sound financial management and right leadership approach are an inevitable success factors for canteen business.

Quality Food

Customer Focus

Good Manage ment

Key Success Factor

5.4 Last Words This report reveals the following facts, observations and conclusions for a new canteen business located in Ibadan: 1. The management of the new canteen will invest N1, 373,000 to commence operations.
2. The canteen will experience monthly sales performance of N 39,000 to N195, 000 in the first four months of its operation. This performance will increase to N624, 000 from the 10th month and up to N780, 000 from the 12th month. 3. The total revenue in the first three fiscal years is: N4, 746, 000, N8, 424, 000 and N10, 920, 000 respectively. 4. The canteen will enjoy a net profit of 16.6%, 31.8% and 32.3% of its revenue in the 1st, 2nd and 3rd year respectively.