Hotel and Restaurant Entrepreneurship

Hotel and Restaurant Entrepreneurship

Executive Summary

Nature's Kitchen is a large restaurant located in North West London. The premises are located on Finchley Road in a very close proximity to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station. The restaurant focuses on organic and original ethnic Indian food. All the ingredients are organic based and locally sourced which reduces their reliance on fossil foods used for transportation.

The premise has an outlook facing Finchley Road of approx 11.9 ft and a return frontage onto Rosemont Road of approx 13.7 ft. The restaurant is currently arranged over basement floors to provide 100 covers.

Mission

Nature's Kitchen focuses on giving people good quality, healthy, creative food in an environment that makes them feel good. The place combines excellent atmosphere with creative food.

Objectives

* Sales of £350K during the first year and more than half a million during the second.

* Personnel costs less than £300K the first year, less than £400K the second year.

* Profitable in year two, increase of 4.5% in profits on sales by year three.

Success Factors

The following factors guarantee the success of Nature's Kitchen:

* Nature's Kitchen serves highest quality food using only organic ingredients.

* It serves variety of customers. The market is segmented in four distinct groups which include business people, students, rich hippies and people with special dietary requirements.

* Exceptional service and atmosphere. We want all our customers to be satisfied. We want to provide our clients with “feeling good” factor by donating 5% of our profits to the charity. We also want our restaurant to be a social place where people get to know each other. We do this by providing free games such as scrabble and monopoly to be used in our restaurant.

* The management team is made up of two individuals with educational background and experience in management, marketing, accounting and finance within hospitality industry.

* The premises are located on Finchley Road in a very close proximity to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station.

Company description

The restaurant is a simple sole proprietorship, owned by its founders T. Karthikeya and D.Shyam. Nature's Kitchen is a large restaurant located in North West London with focus on organic food. The area is located on Finchley Road which is very close to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station:

The emphasis is to use organic and original ethnic food locally sourced when possible.

Start-up Summary

The founders of the company are T.Karthikeya and D.Shyam. Mr .Karthikeya focuses on the financial issues and Mr. Shyam on the personnel issues. T.Karthikeya earned his diploma major degree from the American Hotel and Restaurant Association.

We have found the location and secured the lease for £2,000 per month. We want to set up a shop in the basement of the restaurant where we would sell organic products. The aim of this is to turn back a profit by the end of month ten and be profitable in the second year. The place is already equipped with kitchen, air conditioning, wood flooring, two bars and hundred covers so we aim to come up with a total of £40,000 in capital, plus a £100,000 guaranteed loan, to start up the business.

Detailed start up requirements are attached in Page 19,20,21.

Products and services
Food

The restaurant will offer organic food with an original twist. The idea is to have a simple menu that will change every other day. The menu will also include specialties that will remain on the menu every day. It is predicted that the specialties will count for 70 percent of all orders. This way it is easier to plan necessary ingredients and reduce waste (Canakci, 2005).

Organic Ingredients

Organic Ingredients are much more expensive than those which do not come from eco-farms. Therefore, not everyone can afford them. The organic ingredients are sought for by wealthy people who are environmental and health conscious. This is what we want to highlight within our restaurant, and what our name “Nature's Kitchen” wants to sell across.

Ethnic Recipes

Our chef will have great freedom in creating and producing menu offerings from many different world cultures. Every week we will have at least two meals on the menu from a different country. With this, we will focus on having the best ingredients and use the most traditional recipes. This way we want to keep true to the culture and the recipes.

Interior Design

Our interior of the restaurant will be highlighted with a variety of art work from across the world. We will also use different tribal accessories like clothes which will be shown on the walls of the premises to make the restaurant even more interesting not only for food but for its design.

“Feeling Good” factor

Our restaurant will not only be about the products. We will want to sell “good feeling” factor to all our customers. This will be done not only by healthy and original food but also by ethnic interior of our restaurant. We also want to donate 5% of every profit to go to charity of our choice. For example, during this time we could contribute to Haiti appeal. This way our customers will feel good not only about doing some good for themselves but also by helping others.

Markets

Although the restaurant industry is very competitive, the lifestyle changes created by modern living continue to increase the growth of hospitality industry. The health awareness enables different businesses to tap into the niche market. More and more people have less time, resources, and ability to cook for themselves paying particular attention to using only best ingredients.

The food service business is one of the largest industries in the UK. In the past five years the restaurant industry has outperformed the national GNP by 40%. This is because of

· lifestyle changes,

· health awareness

· Increase of product variety.

Therefore, Nature's Kitchen wants to tap into niche market of organic restaurants where customers strive for highest quality willing to pay the premium.

The Mintel Report predicts short and long-term growth (Mintel Report, 2008) It further suggests that modern living creates demands, and people want to eat more meals outside their homes. The DMR Industrial Report (DMR, 2005) predicts the increase of eating outside ones home as high as 30% over the next five years.

In 2008 the National Restaurant Association report (NRA, 2008, p.14) found other changes within restaurant industry:

* "Consumers will spend a greater proportion of their food away from home.

* Independent operators and entrepreneurs will be the main source of new restaurant concepts.”

Furthermore, Jones and Grimm (2008) suggest that nutritional concerns will be critical at all types of foodservice operations will be important. Finally, environmental concerns will receive increased attention according to Trujillo and Vera (2010).

Technology

The area is located on Finchley Road which is very close to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station. Because of its location, the restaurant will be attractive to young business people but also to other commuters especially those who are going to O2 centre. For those reasons, there are few segments of customers that we need to address. This will allow us to increase the prices once we evaluate the peak periods at our restaurants and this way we will be able to charge premium during busiest hours.

The area has an outlook facing Finchley Road of approx 11.9 ft and a return frontage onto Rosemont Road of approx 13.7 ft. The restaurant is currently over the basement floors to provide 100 covers.

Source: Gumtree (2010)

The ground floor is approx 530.14 sq ft and the basement in approx 555 sq ft, the kitchen is fully equipped and provides approx 193.34 sq ft. Facilities include: fully equipped kitchen, air conditioning, wood flooring, two equipped bars, one hundred covers. Total size of the restaurant is 1366.78 sq ft.

The aim of the company is to offer high quality service using only organic ingredients and original twist to the food.

Competition/competitive advantage

The competition for the high income business people has been intense. There are a lot of chains that are in the neighborhood for 10 years or over. Thenumber of new restaurants in the area has increased dramatically over the last several years and should continue to expand, all with the aim of capturing a piece of the upper level market. Some of direct competitors of Nature's Kitchen include:

* Every day is a Friday

* Hard Rock Café

* Macaroni

* Bandana

* Pizza Chicken

Still, none of the restaurants provides organic ingredients in their kitchen and does not provide unique atmosphere. All of the restaurants are based on commercial concept only without providing that competitive edge.

Competitive Advantage

The competitive advantage of Nature's Kitchen focuses on giving people good quality, healthy, creative food in an environment that makes them feel good. Our competitive edge is the menu, the chef, the atmosphere and the tie-in to environmental issues.
Success Factors

The following success factors are designed for Nature's Kitchen (SWOT analysis included in Appendix 2):

* Nature's Kitchen serves highest quality food using only organic ingredients

* It serves variety of customers. The market is segmented in four distinct groups which include business people, students, rich hippies and people with special dietary requirements

* Exceptional service and atmosphere. We want all our customers to be satisfied. We want to provide our clients with “feeling good” factor by donating 5% of our profits to charity. We also want our restaurant to be a social place where people get to know each other. We do this by providing free games such as scrabble and monopoly to be used in our restaurant.

* The management team is made up of two individuals with educational background and experience in management, marketing, accounting and finance within hospitality industry.

* The premises are located on Finchley Road in a very close proximity to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station.

Business model/key customers

The following customers of Nature's Kitchen are divided into four group segments:

Business people

Those people would be attracted to our restaurant by its close proximity with O2 center. These would be business people who would drop by for launch and would usually come alone to catch up on some work or to rest from busy office. We would have free Wi-Fi access to attract this segment even more. Those people are wealthy and can therefore afford to pay premium on a good quality food. They would spend most on drinks, appetizers and tips (Appendix 1).

Students

The restaurant is also attractive for students who attend the O2 center. The restaurant has an atmosphere that will attract students who are environmentally conscious and a lot of them are vegetarian. Our restaurant will serve vegetarian meals and encourage people to use it as a social place to meet other people and even develop a network. In the restaurants there will be games available to use for free (this includes Monopoly and Scrabbles).

The Rich Hippies

This segment of people includes those who work in the nearby enterprises and are very rich at a very young age. They are different from the regular business people as they like to show off and do not like to be alone. Environment is extremely important for them but they can't express their views in a corporate environment. Our restaurant would be a one stop for them where they not only can show their “hippie” side but also can buy organic good. They can also contribute to our charity and became a part of environmentally friendly ideology.
People with special dietary requirements

The last groups of our customers are people with special diet requirements such as gluten free, diary free, vegan and vegetarian. There will be simple but creative food options for that group of people. There are very few restaurants that provide gluten free and diary free options and therefore our restaurant will be attractive for this type of people.

Operations General

Opening hours of the restaurant will be from 12pm until 12 am. This will allow business people to drop by for launch and would allow students who stay up late to come up for a late meal, drinks and social games.

Buildings

The restaurant has 11.9 ft X 13.7 ft. It is currently arranged over basement and provides 100 covers. The ground floor is approx 530.14 sq ft and the basement in approx 555 sq ft, the kitchen is fully equipped and provides approx 193.34 sq ft.

Equipment

The kitchen is fully equipped. The restaurant has its own air conditioning. It has wood flooring and two equipped bars

Just-in-Time

Inventory is the big thing right now for Nature's Kitchen. We offer just in time inventory which means that we do not begin to cook until the order is placed. This assures highest quality and use of the freshest ingredients.

Suppliers

Suppliers play a vital role in the success of Nature's Kitchen providing quality organic products at competitive prices. Together with the suppliers the restaurants provides new menu, helps reduce costs and ensures our customers receive the same great quality every time.

Management

The management team is made up of two individuals with educational background and experience in management, marketing, accounting and finance within hospitality industry and Busines Process Outsourcing (B.P.O). T.Karthikeya has experience in managing personnel at Genpact,India and he will be responsible for hiring staff (CV attached in Appendix 3). D.Shyam, our chef worked in Vegan restaurants before and used organic food to deliver the menu. He is known for his creative and experience of working in prestigious restaurants. At the moment, we are looking to find a young, enthusiastic staff to make sure we add the edge that makes us so unique.

Personnel Plan

As the personnel plan shows, Nature's Kitchen wants to invest in a training and a good compensation of our team. We believed that planned staff is in proportion to the size of the restaurant and projected revenues.

Personnel Plan

Year 1

Year 2

Year 3

Year 4

Year 5

Manager

£60,000

£65,000

£70,000

£72,000

£75,000

Hostess

£42,000

£45,000

£50,000

£52,000

£55,000

Chef

£54,000

£60,000

£65,000

£67,000

£70,000

Cleaning

£30,000

£35,000

£40,000

£42,000

£45,000

Waiters

£72,000

£100,000

£130,000

£150,000

£170,000

Other

£24,000

£52,000

£55,000

£57,000

£60,000

Total People

8

10

12

14

16

Total Payroll

£282,000

£357,000

£410,000

£440,000

£475,000

: Personnel Plan Payroll

Financial projections and financing

Income Statement

Income statement (also referred as profit and loss statement) is a company's financial statement that shows how revenue is transformed into the net income (Beaver, 2002 and Finley, 2000). Based on this, Nature's Kitchen is expected to be profitable in the second year of its operations and make significant profit in the third year.

Profit and Loss

Year 1

Year 2

Year 3

Year 4

Year 5

Sales

£367,560

£565,000

£730,000

£930,000

£1,130,000

Direct Cost of Sales

£51,592

£79,250

£102,250

£142,250

£152,250

Other

£0

£0

£0

£0

£0

Total Cost of Sales

£51,592

£79,250

£102,250

£142,250

£152,250

Gross Margin

£315,969

£485,750

£627,750

£787,750

£977,750

Gross Margin %

85.96%

85.97%

85.99%

87.99%

89.99%

Expenses

Payroll

£282,000

£357,000

£410,000

£510,000

£610,000

Sales and Marketing and Other Expenses

£27,000

£35,830

£72,122

£82,122

£92,122

Depreciation

£0

£0

£0

£0

£0

Utilities

£1,200

£1,260

£1,323

£1,523

£1,623

Payroll Taxes

£42,300

£53,550

£61,500

£64,500

£67,500

Other

£0

£0

£0

£0

£0

Total Operating Expenses

£352,500

£447,640

£544,945

£658,145

£771,254

Profit Before Interest and Taxes

(£36,532)

£38,110

£82,806

£129,605

£206,496

Projected Balance Sheet

The table shows projected balance sheet for five years. A Balance Sheet is a summary of the financial balances (Burns, 2001). It lists assets, liabilities and equity of Nature's Kitchen (based on Deakins and Freel, 2003).

Sheet

Year 1

Year 2

Year 3

Year 4

Year 5

Assets

Current Assets

Cash

£49,459

£61,875

£109,337

£159,337

£199,337

Other Current Assets

£50,000

£50,000

£50,000

£50,000

£50,000

Total Current Assets

£99,459

£111,875

£159,337

£195,337

£249,337

Long-term Assets

Long-term Assets

£0

£0

£0

£0

£0

Accumulated Depreciation

£0

£0

£0

£0

£0

Total Long-term Assets

£0

£0

£0

£0

£0

Total Assets

£99,459

£111,875

£159,337

£195,337

£249,337

Liabilities and Capital

Year 1

Year 2

Year 3

Year 4

Year 5

Current Liabilities

Accounts Payable

£14,796

£15,294

£21,693

£24,693

£29,693

Current Borrowing

£0

£0

£0

£0

£0

Other Current Liabilities

£0

£0

£0

£0

£0

Subtotal Current Liabilities

£14,796

£15,294

£21,693

£24,693

£29,693

Long-term Liabilities

£93,867

£83,867

£68,867

£48,867

£38,867

Total Liabilities

£108,663

£99,161

£90,560

£73,560

£68,560

Paid-in Capital

£40,000

£40,000

£40,000

£40,000

£40,000

Retained Earnings

(£3,000)

(£49,204)

(£27,287)

(£17,287)

(£7,287)

Earnings

(£46,204)

£21,917

£56,063

£76,063

£96,063

Total Capital

(£9,204)

£12,713

£68,776

£88,776

£108,776

Total Liabilities and Capital

£99,459

£111,875

£159,337

£188,776

£228,776

Net Worth

(£9,204)

£12,713

£68,776

£88,776

£108,776
Cash Flow

The cash flow projection presents starting cost and ongoing expenses (Balanko and Dickson, 2007) which are adequate to meet the needs of Nature's Kitchen until the business generates its own cash flow sufficient to support operations (based on Carter and Jones-Evans, 2000).

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Year 4

Year 5

Cash Received

Cash from Operations

Cash Sales

£367,560

£565,000

£730,000

£930,000

£1,030,000

Subtotal Cash from Operations

£367,560

£565,000

£730,000

£930,000

£1,030,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received

£0

£0

£0

£0

£0

New Current Borrowing

£0

£0

£0

£0

£0

New Other Liabilities (interest-free)

£0

£0

£0

£0

£0

New Long-term Liabilities

£0

£0

£0

£0

£0

Sales of Other Current Assets

£0

£0

£0

£0

£0

Sales of Long-term Assets

£0

£0

£0

£0

£0

New Investment Received

£0

£0

£0

£0

£0

Subtotal Cash Received

£367,560

£565,000

£730,000

£930,000

£1,030,000

Expenditures

Year 1

Year 2

Year 3

Year 4

Year 5

Expenditures from Operations

Cash Spending

£282,000

£357,000

£410,000

£450,000

£510,000

Bill Payments

£117,968

£185,584

£257,538

£297,538

£357,538

Subtotal Spent on Operations

£399,968

£542,584

£667,538

£742,538

£867,538

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

£0

£0

£0

£0

£0

Principal Repayment of Current Borrowing

£0

£0

£0

£0

£0

Other Liabilities Principal Repayment

£0

£0

£0

£0

£0

Long-term Liabilities Principal Repayment

£6,133

£10,000

£15,000

£20,000

£25,000

Purchase Other Current Assets

£0

£0

£0

£0

£0

Purchase Long-term Assets

£0

£0

£0

£0

£0

Dividends

£0

£0

£0

£0

£0

Subtotal Cash Spent

£406,101

£552,584

£682,538

£762,538

£892,538

Net Cash Flow

(£38,541)

£12,416

£47,462

£67,462

£87,462

Cash Balance

£49,459

£61,875

£109,337

£139,337

£169,337
Financing

The following table calculates start up expenses needed for successful start of Nature's Kitchen (based on Hill, O'Sullivan , 2003 and Kaplan, 2003):

Start up expenses

Assets

Start up funding

£3,000

Non-cash Assets from Start-up

£50,000

Assets to fund

£138,000

Cash Requirements from Start-up

£88,000

Total start up expenes

£141,000

Cash Balance on Starting Date

£88,000

Total Assets

£138,000

Liabilities and Capital

Capital

Liabilities

Planned Investment

Current Borrowing

£0

Investor 1

£25,000

Long-term Liabilities

£100,000

Investor 2

£15,000

Accounts Payable (Outstanding Bills)

£1,000

Additional Investment Requirement

£0

Other Current Liabilities (interest-free)

£0

Total Planned Investment

£40,000

Total Liabilities

£101,000

Loss at Start-up (Start-up Expenses)

(£3,000)

Total Capital

£37,000

Total Capital and Liabilities

£138,000

Total Funding

£141,000

Start up Requirements

Start-up Expenses

Legal

£1,000

Stationery etc.

£1,000

Other

£1,000

Total Start-up Expenses

£3,000

Start-up Assets

Cash Required

£88,000

Other Current Assets

£50,000

Long-term Assets

£0

Total Assets

£138,000

Total Requirements

£141,000

Conclusion

Based on the above Business Plan it is assessed that Nature's Kitchen is going to be a success. This is because of several factors that contribute to the triumph of the company. First of all, Nature's Kitchen serves highest quality food using only organic ingredients. Second of all, it serves variety of customers. The market is segmented in four distinct groups which include business people, students, rich hippies and people with special dietary requirements. Third of all, we offer exceptional service and atmosphere. We want all our customers to be satisfied. We want to provide our clients with “feeling good” factor by donating 5% of our profits to charity. We also want our restaurant to be a social place where people get to know each other. We do this by providing free games such as scrabble and monopoly to be used in our restaurant. Next, the management team is made up of two individuals with educational background and experience in management, marketing, accounting and finance within hospitality industry. Finally, the premises are located on Finchley Road in a very close proximity to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station. All of this guarantees the success of the business and therefore the restaurant is worth investing in.

Appendix 1

Nature's Kitchen serves variety of customers. The market is segmented in four distinct groups which include business people, students, rich hippies and people with special dietary requirements (based on Wickham, 2004 and Stokes and Wilson, 2006). The following analysis makes a projection of potential customers.

Market Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers

Growth

CAGR

Business People

10%

400,000

440,000

484,000

532,400

585,640

10.00%

Students

8%

150,000

162,000

174,960

188,957

204,074

8.00%

Rich Hippies

6%

250,000

265,000

280,900

297,754

315,619

6.00%

Special dietary requirements

7%

350,000

374,500

400,715

428,765

458,779

7.00%

Other

5%

50,000

52,500

55,125

57,881

60,775

5.00%

Total

7.87%

1,200,000

1,294,000

1,395,700

1,505,757

1,624,887

7.87%
Appendix 2
SWOT Analysis

Strengths

* Exceptional service and atmosphere. We want all our customers to be satisfied. We want to provide our clients with “feeling good” factor by donating 5% of our profits to charity (based on Morrison, Rimmington and Williams, 1999). We also want our restaurant to be a social place where people get to know each other. We do this by providing free games such as scrabble and monopoly to be used in our restaurant.

* Location. The premises are located on Finchley Road in a very close proximity to the O2 centre, Finchley Road underground station and Finchley and Frognal rail station.

* The first organic restaurant in the area of Finchley Road

* Nature's Kitchen serves highest quality food using only organic ingredients

* The management team is made up of two individuals with educational background and experience in management, marketing, accounting and finance within hospitality industry.

Weaknesses

* Employee turnover in that area is high.

* Plenty of other restaurants in the area

* No parking space

Opportunities

* It serves variety of customers. The market is segmented in four distinct groups which include business people, students, rich hippies and people with special dietary requirements which provide opportunity for further expansion.

* Continue to expand channel opportunities to include various social events.

* Continue to revise and refresh menu offerings.

· Develop more partnerships with organic food producers

Threats

* Food contamination

* Economic downturn.

* Government policies

* Bird Flu

References

Balanko-Dickson, G., (2007) Tips and traps for writing an effective business plan. New York McGraw-Hill

Beaver, G. (2002) Small Business, Entrepreneurship and Enterprise Development. Harlow: Pearson Education.

Burns, P. (2001) Entrepreneurship and Small Business. Basingstoke. Palgrave.

Canakci , M. (2005) The potential of restaurant waste lipids as biodiesel feedstocks, International Journal of Contemporary Hospitality Management, Volume 98, Issue 1, January 2007, Pages 183-190

Carter, S. & Jones-Evans (2000) Enterprise and Small Business. Harlow. FT Prentice Hall.

Deakins, D. and Freel, M. (2003) Entrepreneurship and Small Firms. Maidenhead: McGraw-Hill.

Finley, P.N. (2000) Strategic Management: an introduction to business and corporate strategy. Harlow. Financial Times/Prentice Hall

Gumtree (2010) Gumtree ad. Available from: http://www.gumtree.com/london/09/47884709.html

Hill, L., O'Sullivan, C. & O'Sullivan, T. (2003) Creative Arts Marketing. London. Butterworth Heinemann.

Jones, T. and Grimm, K. (2008) Public Knowledge and Attitudes Regarding Public Health Inspections of Restaurants American Journal of Preventive Medicine, Volume 34, Issue 6, Pages 510-513

Kaplan, J. M. (2003) Patterns of Entrepreneurship. Hoboken, NJ: John Wiley.

Mintel Report (2008) Restaurants – UK - April 2008

Mintel Report (2009) Restaurant Beverage Trends - UK - December 2009

Morrison, A., Rimmington, M., & Williams, C., (1999) Entrepreneurship in the Hospitality, Tourism and Leisure Industries. Oxford. Butterworth Heinemann

National Restaurant Association, The (2008) Restaurant Trends, The National Restaurant Association

Stokes, D., and Wilson, N., (2006) Small business management and entrepreneurship (5th ed) London : Thomson Learning

Trujillo, A. and Vera, J. (2010) Determinants of the service quality in restaurants: a qualitative analysis International Journal of Leisure and Tourism Marketing, Volume 1, Number 3 / 2010 Pages: 271 – 287

Wickham, P. A. (2004) Strategic Entrepreneurship (3rd edn). Harlow: Pearson Education.


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