Table of contents

Table of contents.................................................................................................... 1 Unique selling proposition.......................................................................................2 Aims & objectives:...................................................................................................2 Key facts.................................................................................................................3 Competitive analysis...............................................................................................3 Market analysis summary....................................................................................3 SWOT analysis........................................................................................................4 Funding requirements and company structure........................................................8 Costing & pricing.....................................................................................................9 Breakeven analysis...............................................................................................10 Sensitivity analysis................................................................................................12 Standard estimate..........................................................................................12 Best case scenario..........................................................................................13 Worst case scenario........................................................................................14

Unique selling proposition

The planned restaurant will be a Mediterranean themed restaurant named Corrida situated in the city centre of Guildford. The restaurant aims to distinguish itself from competitors through the provision of reasonably priced high quality Mediterranean food (e.g. Spanish Tapas), drinks and wine (e.g. Sherry and Port) as well as excellent customer service in a pleasant and cozy servicescape that enhances the overall meal experience. Since the level of service quality can make the difference between success and failure, much emphasis will be placed on employee motivation and development in order to attract and retain a skilled workforce. Even if this entails high costs it doubtlessly plays a key role in satisfying and delighting customers. Furthermore, the restaurant will implement sophisticated information technology, such as Micros RES ePOS and ERP system (Micros, 2011b), to enhance key value chain processes, improve decisionmaking and reduce costs. Likewise, it will deploy customer relationship management and integrated online and offline marketing initiatives to create loyal and profitable customers. In this respect social media (e.g. Facebook or Twitter) allow the restaurant to effectively communicate and engage with guests and promote special offers online at low costs. The restaurant aims to target a broad segment of customers aged 18-55+ as well as corporate customers who seek value for money. The restaurant has a 20-seater function room which can be used for birthdays, anniversaries, professional seminars and company events. The menu will be adapted on a regular basis to provide seasonal dishes and cater for customer preferences. Own events will be hosted throughout the year, such as wine tastings or themed dinners.

Aims & objectives:

1) Provide an outstanding meal experience in a pleasant and cozy atmosphere 2) Gather regular feedback to ensure high guest and employee satisfaction 3) Emphasize corporate social responsibility to satisfy key stakeholders 4) Negotiate mutually beneficial contracts with suppliers to achieve high gross margins 5) Maintain labor and food costs consistent with high ridge 6) Enhance internal and external processes by implementing technology 7) Increase annual sales revenues by 6% in 2015

Key facts
Total capacity Separate function room Opening hours 100 seats 20 seats Monday Sunday 12am-3pm, 6pm10.30pm

Competitive analysis

Market analysis summary

The Guildford area has 44 well-rated restaurants as listed by the Restaurant Guide (2011): 2 bar restaurants 1 American Bistro cuisine 1 Brasserie cuisine 1 Japanese Fast Food 1 Spanish cuisine English, Gastropub, cuisine 3 Grill cuisines Pub cuisines 2 French cuisines 14 Mediterranean Restaurants 2 Pizza & Pasta restaurants casual and Traditional restaurants

There are only two direct competitors which offer similar meals (La Casita and Son of Sombrero), yet lack quality customer service and an appealing atmosphere as well as sophisticated technology. This provides a great opportunity to gain market share and create loyal customers.

SWOT analysis

Opportunities A new housing society is being built nearby. The local council offers grant for regeneration of unused area if we would like to develop. Gain market share Create loyal customers Deploy technology to enhance processes

Threats

Corrida SWOT Matrix

Price competition Local family restaurants with lover price. Food price increases Increase in operating costs
Economic downturn

Strengths Our restaurant is suitable for everyone in community for all type of purpose. It is located in town centre. We have good choice of items available in menu for everyone. It offers private area for any family function or professional meetings. Have take away options for customers. It is disabled friendly restaurant. Employee satisfaction and well-being

S-O strategies
How can the restaurant leverage strengths to benefit from opportunities? Ensure guest and employee satisfaction Establish mutually beneficial relationships with suppliers

S-T strategies
How can the restaurant use strengths to minimise threats? Increase cost-efficiency and improve customer service through technology

Skilled employees Sophisticated technology W-O strategies

How can the restaurant ensure that weaknesses do not inhibit growth? Develop sound marketing strategy and integrate online and offline initiatives Allocate resources astutely to ensure the highest possible ROI

Weaknesses Our restaurant is new and not established. We have limited funds available.

W-T strategies
How can the restaurant fix weaknesses that can make threats have a real impact? Gain additional necessary funding if

Price comparison (food)

La casita Son of sombrero Olivo Corrida

Starter Soup Main dish Dessert Tapas Cold tapas Vegetarian tapas Fish tapas Meat tapas 4 tapas meal 8 tapas meal 12 tapas meal

5.1 3.45 6.8 5.1 1.60 2.1 4.5 4.1

4.95 2.95 7.95 4.95

6 4.4 11.95 7.1

5.14 3.45 7.95 5.95 1.95 1.85 3.27 3.95 7.95 12.95 15.95

7.50 11.95 14.90

Price comparison (beverages)

La casita Son of sombrero Olivo Corrida

Drinks

Water 1000 ml Beer 500 ml Soft Drink Fruit juices Coffee Tea White wine Red wine Sherry Port Sparkling wine

3.29 3.3 2.1 3.1 2.20 1.95 10.95 10.7 3.4 5.3 44.6

3.65 3.1 3 3.5 2.15 1.9 11.2 9.65 4.15 5.5 35.4

5.2 3.9 3.5 5 2.95 2.7 15.5 14.95 5.2 7.5 49.95

4.5 3 2.5 3.42 2.22 2.45 13.4 11.95 4.83 6.56 47.24

Wine

Funding requirements and company structure

An amount of 200,000 is needed to cover start-up costs and provide working capital. Partners will contribute 40,000 at equal amounts and a Government backed loan of 160,000 (at an Annual Interest Rate of 7.9% for a loan period of 10 years) provided by Natwest, 75% of which will be guaranteed by the UK Department for Business Innovation and skills. This kind of loan allows borrowing more money without having a large amount of security to back the borrowing (Natwest, 2011). There is a 100 arrangement fee. The structure of the restaurant will be a Limited Liability Partnership (LLP), which requires partners to register at Companies HouseIn order to avoid possible disagreement, an agreement will be written and approved by each member. Moreover, each member needs to registers as self-employed at HM Revenue and Customs (HMRC). In this kind of business, partners share the risks, costs, responsibilities and profits of the business. However, liability is limited to the amount of money that each partner has invested in the business and to any guarantee they provided to secure the funding. This legal form is well adapted for a restaurant which is not a big structure, but still provides some protection for the partners if the business gets in trouble. In fact, this legal form allows different people to work together without all the procedure constraint of a limited company. The obligations are to produce annual self assessments returns for the business and for each individual member to the Inland Revenue. Moreover, Limited liability partnership must file accounts with Companies House. In this kind of business, the four partners manage and support the business, but they can have employee. The restaurants profits will be withdraw between the partners depending on the agreement. Partners are taxed as individuals at normal rates on their share of profits and need to pay their own National Insurance Contributions. In fact LLP dont have to pay Corporation Tax (Business Link, 2011b)

Costing & pricing

In terms of costing and pricing restaurants, in addition to tangible meals and drinks, need to consider the intangible factors which complement the whole meal experience, such as customer service and restaurant atmosphere (Cousins et al., 2002). Likewise, perceived guest value, competition, price rounding and traditional prices charged are further factors that influence the pricing decision (Schmidgall et al., 2002, p. 196). Furthermore, given the perishability of inventories it is crucial to carefully manage inventory levels. To facilitate both costing and pricing the restaurant will use Micros RES system that maintains real-time information on inventory levels, recipe ingredients and costs, competitive bids, as well as actual versus theoretical reports (Micros, 2011a). The system also facilitates adapting menus to cater for customer preferences and evaluate the profitability of individual menu items through menu engineering, which is a tool used to determine the relative contribution margin and demand and make changes if necessary (Jagels et al., 2007, p. 256). A sample food and drinks menu has been created and costs of products and recipe ingredients have been researched using ASDA online. Since all supplies will be bought in bulk from hospitality suppliers, the contribution margin is expected to slightly increase. The sample food menu comprises starters, soups, main dishes, desserts and tapas, whereas the sample drinks menu comprises water, soft drinks, beer, wine, coffee and tea. Deals are provided for lunch, dinner and tapas to persuade guests to buy more. A marketing-orientated pricing approach has been adopted in addition to cost-plus pricing to take account of key influencing factors such as competitors (Jobber, 2010, p. 427). The selling prices are exclusive of the current standard-rate of VAT (20%) which needs to be added (HM Revenue & Customs, 2011; Business Link, 2011a). Further information about the total costs and expenses can be found in the financial statements.

Breakeven analysis
The breakeven analysis is an essential tool in business planning to enhance decision making, because the breakeven point shows the threshold from which a business turns profitable. Calculating the precise breakeven point for restaurants is difficult as they offer a great variety of different meals and drinks. This is also referred to as the menu mix (Jagels et al., 2007, p. 254). Cafferky et al. (2010) therefore suggest using the Cost of Goods method to calculate the breakeven point for restaurants. The estimated average check per guest (13) and costs of goods rate excluding waste (30.33%) were used to calculate both variable costs and contribution. The average fixed costs used are 891,615.85. The breakeven analysis shows that the restaurant needs to make at least 1,281,376.16 in sales a year or 3,510.62 day and serve at least 270 customers a day to break even. The breakeven occupancy rate and seat turnover are 45% and 2.70 respectively. Due to the dynamic nature of the hospitality industry breakeven analyses will be conducted on a regular basis taking account of any changes in fixed and variable costs and average check per guest (Cafferky et al., 2010). Average Average Average year 1-3 Average fixed costs year 1-3 check per guest variable costs per check contribution per check 891.615,8 5 13,00 3,95 9,05 1.281.376, 16 106.781,3 5 3.510,62 45,01% 2,70 98567 8214 270

Breakeven sales level per year Breakeven Breakeven Breakeven Breakeven Breakeven Breakeven month Breakeven sales level per month sales level per day occupancy rate seat turnover guest count per year guest count per guest count per day

Sensitivity analysis
Sensitivity analysis is a useful tool to evaluate the potential risk of an investment (Atrill et al., 2010). Since in practice various input values are having an influence on profitability a best and worst case scenario have been considered which include favorable and unfavorable variations in the average check per guest, variable costs, fixed costs and capacity. Standard estimate

Sensitivity Analysis Standard estimate Guests/Capa Average Variable Contributi Time city check costs on Fixed costs Day 60 13,00 3,95 9,05 2.442,78 Occupan cy 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Contributio Fixed Total Sales Variable cost n costs costs Net income 0,00 0,00 0,00 2.442,78 2.442,78 -2.442,78 780,00 237,26 542,74 2.442,78 2.680,04 -1.900,04 1.560,00 474,51 1.085,49 2.442,78 2.917,29 -1.357,29 2.340,00 711,77 1.628,23 2.442,78 3.154,55 -814,55 3.120,00 949,02 2.170,98 2.442,78 3.391,80 -271,80 3.900,00 1.186,28 2.713,72 2.442,78 3.629,06 270,94 4.680,00 1.423,53 3.256,47 2.442,78 3.866,31 813,69 5.460,00 1.660,79 3.799,21 2.442,78 4.103,57 1.356,43 6.240,00 1.898,04 4.341,96 2.442,78 4.340,82 1.899,18 7.020,00 2.135,30 4.884,70 2.442,78 4.578,08 2.441,92 7.800,00 2.372,55 5.427,45 2.442,78 4.815,33 2.984,67 Breakeven seat turnover Breakeven sales level

Guests 0 60 120 180 240 300 360 420 480 540 600 Breakeven guest count

Breakeven

per day 270 Best case scenario Assumptions Average check Variable costs Capacity

occupancy rate 45,01%

2,70

per day 3.510,62

+ 10%, -5%, + 5% Sensitivity Analysis Best case scenario Guests/Capa Average Variable Contributi Time city check costs on Fixed costs Day 63 14,30 3,76 10,54 2.442,78 Occupan cy 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Contributio Fixed Total Sales Variable cost n costs costs Net income 0,00 0,00 0,00 2.442,78 2.442,78 -2.442,78 900,90 236,66 664,24 2.442,78 2.679,45 -1.778,55 1.801,80 473,32 1.328,48 2.442,78 2.916,11 -1.114,31 2.702,70 709,99 1.992,71 2.442,78 3.152,77 -450,07 3.603,60 946,65 2.656,95 2.442,78 3.389,43 214,17 4.504,50 1.183,31 3.321,19 2.442,78 3.626,09 878,41 5.405,40 1.419,97 3.985,43 2.442,78 3.862,75 1.542,65 6.306,30 1.656,63 4.649,67 2.442,78 4.099,42 2.206,88 7.207,20 1.893,30 5.313,90 2.442,78 4.336,08 2.871,12 8.108,10 2.129,96 5.978,14 2.442,78 4.572,74 3.535,36 9.009,00 2.366,62 6.642,38 2.442,78 4.809,40 4.199,60

Guests 0 63 126 189 252 315 378 441 504 567 630

Breakeven guest count per day 232 Worst case scenario Assumptions Average check Variable costs Fixed costs

Breakeven occupancy rate 36,78%

Breakeven seat turnover 2,32

Breakeven sales level per day 3.313,12

-10% +10% , +10% Sensitivity Analysis Worst case scenario Guests/Capa Average Variable Contributi Time city check costs on Fixed costs Day 60 11,70 4,35 7,35 2.687,06 Occupan cy 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Contributio Fixed Total Sales Variable cost n costs costs Net income 0,00 0,00 0,00 2.687,06 2.687,06 -2.687,06 702,00 260,98 441,02 2.687,06 2.948,04 -2.246,04 1.404,00 521,96 882,04 2.687,06 3.209,02 -1.805,02 2.106,00 782,94 1.323,06 2.687,06 3.470,00 -1.364,00 2.808,00 1.043,92 1.764,08 2.687,06 3.730,98 -922,98 3.510,00 1.304,90 2.205,10 2.687,06 3.991,96 -481,96 4.212,00 1.565,88 2.646,12 2.687,06 4.252,95 -40,95 4.914,00 1.826,86 3.087,14 2.687,06 4.513,93 400,07 5.616,00 2.087,84 3.528,16 2.687,06 4.774,91 841,09 6.318,00 2.348,83 3.969,17 2.687,06 5.035,89 1.282,11 7.020,00 2.609,81 4.410,19 2.687,06 5.296,87 1.723,13

Guests 0 60 120 180 240 300 360 420 480 540 600

Breakeven guest count per day 366

Breakeven occupancy rate 60,93%

Breakeven seat turnover 3,66

Breakeven sales level per day 4.277,18

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