Business Plan for Start-up of Restaurant

Question: Describe about the Business Plan for Start-up of Restaurant. Answer: Introduction The aim of this report is understand the business plan for the company which is going to operate its business in the market. The objective of this report is to identify the business opportunities for the company. The idea of business plan is like plans of business formulation. The business plan of the company includes approaching investors for the loans and funds. If the company is going to operate the business in partnership, then the business plan is necessary to measure the performance for achieving goals and objectives of the company (Egerton-Thomas, 2006). A proper business plan is helpful to know that what are the objectives the company has to meet and what is the situation of the company after the financial year. It also includes the actions which can be taken if objectives of the company are not met. In this report, a business plan is made for such company which is recently going to start the business. In the business plan, all the necessary aspects such as business plan anal ysis, financial analysis, opportunities, goals, and completion of the objectives are included. This business plan will be able to describe the entrepreneurial vision regarding operations and the strategy of the proposed company (Barringer, Ireland, 2010). Business plan analysis: Measuring Feasibility Setting up a business is a very critical process for an entrepreneur and by the proper planning of setting up the business is most important for the success of the company. It is not enough to generate only idea of business plan. The idea of the business should also be feasible in some perspective such as market, legal and financial perspective. So it is important to analyze the business plan of the company before implementing. The business plan should be analyzed in the term of market feasibility, human resource feasibility, technical feasibility and financial feasibility. In this report the idea of business plan is for start up a restaurant in Australia (Westhead, Wright, McElwee, 2011). Market feasibility In the feasibility analysis, market analysis is the most important part. It gives the business idea related to product and service which will be offered to the customers. In the market feasibility test, there are some questions for implementing business idea such as does the business which is proposed sounds profitable, does the business has ability to compete with the competitors in the market, and what is the need of this business proposal etc. These entire questions can be answered by the analysis of market feasibility. The observation of market feasibility will be helpful in identifying the perceptions and opinions of buyers related to proposed business. By the research done on the customers group, the customers in Australia have appreciated the idea of the restaurant. The positive response of the customers towards the idea of opening new restaurant supports the market feasibility. So, from the customers view point, the proposal of the restaurant in Australia is a good and attrac tive proposal. By the positive response of the customers, it can be said that the business of the restaurant will gain profit and the demand of this restaurant will be increase in the Australian restaurant industry (Bowling, 2016). Along with this, for analyzing market feasibility, there is important to look on the competition structure. The capital of Australia, Canberra is full of the good restaurants and there will be a great competition for the new business in the Australian restaurant industry. There is availability of every type of food such as Indian, America, Japanese, and Korean food varieties. It is very popular country for different foods. There are many famous food destination in the city Canberra i.e. Courgette Restaurant, Temporada, The cupping room, Aubergine and Morks etc. These restaurants are highly ranked by the tourists and visitors from different countries (visitcanberra, 2016). For testing the feasibility for the restaurant plan, the analysis of the competitors and their performance in market has been analyzed: Table 1: Comprehensive study of competitors Name Food type Theme Service ratings Food ratings Venue ratings Environ-ment Price range Courgette Restaurant European Romantic Ambience, business meetings 4.5 4.5 4.5 4 $6-$10 (reasonable and affordable) Temporada Contemporary, Australian Special occasions, Bar scenes 4.5 4.5 4 4 $10-$15 The cupping room International Child-friendly, local food 4 4.5 4 4 $3-$10 Aubergine European Romantic, Special occassion 4.5 4.5 4 4.5 $6-$10 Morks Asian, Thai Child-friendly, romantic 4.5 4.5 4 4 $1-$4 Along with the analysis of competitors, the services of the restaurant include financial services, tourism, hospitality and many more services. There are high chances of growth in the Australian restaurant industry. The good economy of the country and well established tourism industry are the factors which indicate the success of proposed business plan. Restaurant is planned to open in Canberra and this is very important city for the business because this is the capital of Australia and it is also important city for overall economy of the Australia (Groucut, Leadley Forsyth, 2004). Technical feasibility Technical feasibility of the proposed business plan includes the technical requirements that are needed for the operating the business in the market. The business plan for the proposed business should be planned effectively so that when the company will be able to face the difficulties while operating the business. There can be many difficulties in the business such as difficulties during the order, billing of the payments, viewing order history, and slow down the server etc. technical feasibility is the study of details of delivered products and services such labor, material, required technologies, and location of the business etc (Wolfe, 2016). The analysis of the technical feasibility can be done on the basis of some points: Physical location- The proposed business plan is for the opening of restaurant in Australia. The city for the restaurant is choosing Canberra, the capital of Australia. The reason of choosing this city is that the city is surrounded by different establishments such as many schools, banks, call centers, and many government places. Along with this, the city is the key of growth and success because of strong economy (Burk, 2007). Labor: For the operating of the restaurant, sufficient staff is required. The required staff would be head chef, Chef, Assistant cooks, Waiters, Reception and counter staff and Reception and counter staff. For the filling the staff, the hiring should be done by the public notice. Materials: For operating the business of restaurants, there are requirements of some materials. The materials would be required i.e. office supplies, kitchen equipments, kitchen utensils, maintenance equipments, materials for advertisings such as hoardings, paints etc, furniture and fixture and store equipments (Newman, 2008). Human feasibility The main aim of human feasibility is to identify the availability of proper sills and sufficient resources so that the company can bring best services in the market. Analysis of human feasibility includes no-financial factors which are important for the business operations. There can be two main issues in human feasibility such as sufficiency of resources and management competence. For evaluating the sufficiency of resources, it is very important to identify non-financial resources which give idea to move ahead in the market (Godsmark, Garvey Dismore, 2011). The resources for the new business can be support of government, quality of workforce, customers, competitors and suppliers etc. If there is no sufficient availability of resources, then the idea should be developed again. On the other hand, for evaluating management competence, the capabilities of the management team should be analyzed on the basis of their expertise to launch new business (Bangs, 2002). If the customers are continuously arriving into the restaurant then a well maintained staff will be needed to provide the services. The description of staff can be: Table 2: Required number of staff Staff Name Required number of persons Head chef 1 (expert in ordered menu and food) Chef 5 (expert in each food) Assistant cooks 5 Waiters 10 Reception and counter staff 1 Manager 1 The main management team will be distributed between three parts such as administration, finance and marketing. Along with this, the growth of the company is also depending upon sales and marketing activities. The decisions of the company should be taken on the basis of the companys mission and vision statements so the company will not face any difficulties in future (Hitt, Ireland Hoskisson, 2007). The staff in the company should be recruited by the public notice about the recruitment process. The duties should be given to the staff members according to their knowledge, experience, abilities and creativity. Members of the restaurant should respect to each other. People in the company should build a better atmosphere to provide better customer services. This idea will be helpful for the current staff members as well as new members who will be hired by the company (Baraban Durocher, 2010). Financial analysis The financial analysis of the proposed plan provides a framework of the business proposal to acquire funds. This element gives financial support to the proposed business plan. This financial plan is an estimation of required fund for the business operation of restaurant. It is estimated that the $300,000 will be acquired by short term loans and $50,500 will come from the owner of the business. It is assumed that the profit of the restaurant will be dependent on the nature of the growth (Dayananda, 2002). Start-up funding: For start-up the restaurant, the fund will come from owner and short-term loans. The total fund for start-up is described below: Table 3: Required fund Capital Amount Owner equity $50,500 Short term loan $300,000 Total investment $350,000 Start-up expenses ($275,500) Total capital $75,000 Total capital and liabilities $75,000 Total fund $350,000 Key assumptions: The financial plan of every company is based on some assumptions. For this proposed business plan, the key assumptions are as follows: Australia is the country of high-growth economy and the average per day traffic in the city will be 567 individual. It is assumed that there will be no expected changes in the popularity of restaurant. Food for the two people in the restaurant will be in range of $20-$30. The average cost per head of meal will be $15 per meal. The cost of alcohol per head will be $15. It is assumed that the gross profit margin of the restaurant will be 30%. It is assumed that the arrival of the customers in the bar section is 20% of total arrival in the restaurant (Best, 2010). Estimation of the sales revenue of restaurant is given below: Table 4: Sales revenue Year 2016 2017 Revenue of food section Estimated customer per year 273510 314475 Revenue per head 18 20 Total revenue 4923180 6289500 Revenue of bar section year order restaurant year food 2016 10 54702 547020 3654094 2017 10.5 62895 660397.5 4374347 Sales forecast: The sales forecast of the proposed restaurant for two years is described below: Table 5: Sales Forecast Sales Forecast Year 2016 2017 Units 328,212 377,370 Sales value @$1000/unit 5,957,048 7,534,192 Sales policy Cash flow on sales 5,957,048 7,534,192 Cost of goods 3,654,094 4,374,347 Supplier payment policy Cash flow of cost of goods 3,654,094 4,374,347 Cash flow of the proposed project: Table 6: cash flow Cash Flow Forecast Year 0 2016 2017 Cash Inflows Cash from sales 5,957,048 7,534,192 Loan from directors 300,000 Share capital 50,500 Other external loans Other cash inflows Total cash inflow 350,500 5,957,048 7,534,192 Cash Outflows Payment of materials 0 3,654,094 4,374,347 Operating expenses Rent (premises) 9,000 65,340 71,874 Salaries and wages 0 380,880 438,012 Other expenses 0 110,214 121,434 Interest and bank charges 0 20,000 10,000 Other payments 0 0 0 Corporate tax 420,733 431,092 Survey cost in market 10,000 Other preliminary expenses 140,000 Capital expenditure Plant and other expenditures 21,500 Repayments of finance Loan repayments 100,000 100,000 Dividends 0 0 0 Total cash outflows 180,500 4,751,261 5,546,759 Summary Net cash flow 170,000 1,205,787 1,987,433 Opening balance 0 1,907,233 3,113,020 Closing balance 170,000 3,113,020 5,100,452 Estimated profit and loss: The statement of profit and loss is an estimated statement to calculate the total revenue, cost of goods and services, and total expenses which incurred during the business operation in a particular time period. The profit and loss statement identifies the capability of the business to generate revenue and profit. It is also known as the income statement. All the numbers used in the profit and loss statement is assumed for the business operations (Walker, 2007). For the business proposal of restaurant, the estimated profit and loss statement is given below: Table 7: Profit loss statement Income and expenses 0 1 2 General expenses 110,214 121,434 Payable bank charges 20,000 10,000 Lease payments 0 0 Depreciation 2150 2150 Other expenses Total expenses 9,000 578,584 643,470 Profit before tax 9,000 1,724,370 2,516,375 Tax (25%) 431,092 629,094 Profit after tax 1,293,277 1,887,281 Dividends 0 0 0 Transfer to reserves 1,293,277 1,887,281 Balance sheet Assets Fixed assets Building 0 0 0 Furniture 21,500 15,050 12,900 Vehicles 0 0 0 Plant Machinery 0 0 0 Net Fixed Assets 21,500 15,050 12,900 Current assets Stock 211,957 364,529 0 Debtors 0 496,421 627,849 Cash 170,00 0 3,113,02 0 5,100,452 Other Rent 9,000 65,340 71,874 Market survey cost 10,000 Other preliminary expenses 140,00 0 Total 540,957 4,039,309 5,800,175 Current liabilities Taxation 431,092 629,094 Total 431,092 629,094 Total assets-current liabilities 3,623,267 5,183,982 Liabilities Share cap 50,500 50,500 50,500 Reserves 2,555,477 4,442,758 Total equity 50,500 2,605,977 4,493,258 Loans 300,000 100,000 0 Total 350,500 2,705,977 4,493,258 Break-even analysis: Break even analysis is the calculation of the volume of the sales for identifying the cost. In the analysis, lower sales volume indicates that the break-even point would be unprofitable and higher sales volume indicates that the break-even point would be profitable. The analysis is based on the relationship between the fixed cost, variable cost and selling price. By the analysis of break-even point in the restaurant, it will be identified that the restaurant is by how much sales, the restaurant will be able to gain profit (Wong, 2010). The break-even point can be calculated by the formula: Break-even point= Fixed cost/ (selling price-variable costs) Figure 1: Break-even point The break-even point for the proposed restaurant is given in the chart which is estimating level of sales volume. It shows the project attractiveness for investment. Payback period: Payback period is the technique of financial evaluation. It is used to analyze that in how much time, the company is able to return the loans and investments. It is also known as non-discounted technique. In this proposed business plan, to start-up the required fund is $350,000. The required capital will be recovered by gaining profit. To analyze the payback period for the proposed plan, the calculation is given below: Table 8: Payback period Year Net profit Cumulative net profit 2015 $143,258 $143,258 2016 $460,848 $604,106 2017 $879,710 $1,483,816 Payback period= 2+ (350,500-143,258)/460,846 = 2.4 years or 2 years and 5 months Payback period of the company is low. So, it is a right business to be invested. Conclusion (Assessment of business development proposal) This report is based on the business plan of a restaurant which is opening in the city Canberra, the capital of Australia. For this proposal, market research has been done. For the success of the business plan, the feasibility of market, human resource, technical and financial has been tested. From the above analysis, it has been observed that the idea of the business plan is good and will be successful. The investment in the proposed plan will be profitable because by the break-even point and payback period, it has been analyzed that revenue of the restaurant will be good. References Bangs, H. D., (2002), Business Planning Guide, (9th). USA: Dearbourn Financial Publications Baraban, R. S. Durocher, J. F., (2010).Successful Restaurant Design. USA: John Wiley Sons. Barringer, B., Ireland, D., (2010), Entrepreneurship (Successfully Launching New Ventures) (3rd), UK: Pearson Education Inc Best, T. (2010), Low-Cost Marketing Strategies For Bars And Restaurants, UK: The Butler Publishing Group. 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