Corporate social responsibility is a guideline set aside to cater for the welfare of stakeholders of a business. This factor is opposed to the traditional view that a business’ objective is to maximize profits. Companies’ continued use of corporate social responsibility ensures that they reduce conflicts between managers and the society as a whole. The ethical standards and the social responsive nature of business are the secrets towards the continued high performance of Chipotle Restaurant.
The Fundamental Areas of Chipotle Relevant To Business
One of the areas of the company that is of importance to its business is its core values. Chipotle Restaurant emphasizes the need for being real and honest about the activities they do, which is integrity (Chipotle Mexican Grill, 2015). The company also considers establishing healthy relationships between itself and the society. For instance, the restaurant does not accept gifts from the outside but gives out the same gifts as a way of improving relationships between itself and its stakeholders.
Another area that is fundamental to the performance of the company is the organizational culture present (Ferreira & Groenewald 200). For instance, the company operates in a manner that ensures that it takes care of the customers and the rest of the stakeholders (Chipotle Mexican Grill, 2015). There is a consideration that the company ensures a close association between itself and the environment from which it operates. In this way, customers and other stakeholders become a part of the institution and the bond created serves to boost the image of the restaurant. The company also considers the protection of its assets as fundamental to its success (Weilkiens & Weiss, 2011).
Employees at Chipotle should not use company’s property, information, their duties and position for personal gain and a non-business purpose. The employees must safeguard the restaurant’s asset and ensures they are used efficiently (Chipotle Mexican Grill, 2015). The company requires that any employee engaging in vices such as theft be reported to the relevant authorities for investigation.
Steps To Ensure Ethics among Employees
The business policy of the firm should prohibit the use of confidential information such as trademarks, name and intellectual property without the consent of Chipotle restaurant. In case of doubts about whether the information is confidential or not consult the management. Such a case will entail employee education on the needs for information integrity. The company can also undertake to remind the employees of the usefulness of ethics in seminars and workshops, which will produce life-long results. The process will transform ethics into one of the core values of the company, which will help in shaping its relationship with the rest of the stakeholders.
Ways in Which Chipotle Restaurant can be Socially Responsive
Chipotle can practice corporate social responsibility by offering scholarships to the needy but bright students and disadvantaged groups such as the physically challenged by providing wheelchair and other devices that may assist them. It can also ensure the provision of good littering cans or dustbins to curb careless waste products that may be harmful to the community in which they operate. The company can also improve the sanitation of the surrounding through building more utilities such as toilets for the public and to the surrounding schools and hospitals to assist the community. The institution can also sponsor events in the community such as games that brings together people from diverse regions.
Weilkiens, T., Weiss, C., & Grass, A. R. (2011). OCEB certification guide: Business process management, fundamental level. Waltham, MA: Morgan Kaufmann.
Ferreira, E. J., Erasmus, A. W., & Groenewald, D. (2009). Administrative management. Lansdowne [South Africa: Juta Academic.
Our society has changed significantly throughout the past decades. People’s routine is continually reshaping making them change their consumer behavior alongside. It seems that the era of fast food meals and sweet beverages is gradually passing away. Today’s consumers are more active and health-conscious. They want to keep fit and healthy and perform considerable efforts to reach this goal. They expect their menu to meet their lifestyle concept – it is supposed to comprise tasty and nutrient-enriched food. Meanwhile, it appears that the catering system of “A” city fails to fulfill the new demand; hence, there is not a single healthy food restaurant to be found throughout the entire city. Patrick’s Fat-Free targets to fill this gap and introduce a new type of restaurant business.
The restaurant’s owner, Patrick, is not only a superb cook but also an overall champion in bodybuilding; thus, he is no stranger to the healthy eating system. Patrick has always dreamt of making some positive contribution to his community. His new project is more than a typical restaurant facility – it is a chance to perform a radical lifestyle change. Thence, the restaurant’s menu will offer a great variety of meals accompanied by all sorts of nutrition facts. In addition, the service will likewise include the delivery of macros and other healthy elements.
The restaurant is opening this year, and it welcomes all types of healthy-eaters to join the opening celebration. It is high time to get rid of the prejudices implying that healthy food is essentially not tasty. Patrick’s Fat-Free will open the doors to the new gastronomic planet that offers endless surprises and discoveries. The new dawn for the eating culture, Fat-Free Restaurant will make you return for a new portion of health again and again!
Our Mission
What aims does Patrick’s Fat-Free target?
The main goal of this enterprise does not reside in commercial benefits. It is not even the restaurant service that Patrick wants to offer. The key aim of opening Fat Free is a social change. The restaurant targets to reshape the people’s vision of healthy eating. It is also aimed at offering new healthy options that have been unavailable so far. Generally speaking, it is an attempt to fulfill the growing demand for a healthy lifestyle.
Why do you think Patrick’s Fat-Free will gain popularity with the locals?
I think it will be fair to claim that Patrick’s Fat-Free is a real gastronomic revolution, here, in “A.” Thus, we have never had any restaurants of a similar type before. I think the locals will naturally get interested in trying an absolutely new concept. I can see that a healthy lifestyle is very popular – more and more people start going to the gym, give up the unhealthy habits and so on. It is a shame that they have had no chance to fulfill their need for healthiness in the gastronomic sector. Patrick’s Fat-Free will fix the situation.
What is your target clientele?
There are no special criteria – Patrick’s Fat-Free will gladly welcome all the clients that share its vision of healthy living and eating. It is also essential to note that professional sportsmen and sports amateurs will be happy to discover the great variety of special options that Fat-Free offers. In fact, it is the first restaurant that will offer nutrient facts apart from traditional meals. Anyway, Fat-Free is a nice chance to bring a fresh perspective to the local gastronomic market.
Al Khettar is a local restaurant in Dubai. During the early years, the restaurant was serving traditional cuisine of the Arabian Peninsula similarly to the other establishments in the area. Eventually, the founders developed a more holistic concept of adding value to the services by expanding the cultural and ethnic dimension of the restaurant. However, despite the high level of commitment and consistency of operations, the transition towards the new design philosophy and strategic posture resulted in several issues. The following plan suggests the integration of the existing practices in order to ensure consistency of services and prioritize the functional aspect through incorporation of solid leadership practices and promotion of organizational culture. The recommended course of action is expected to enlarge the customer base, improve brand name recognition, and facilitate long-term customer loyalty and employee engagement.
Organization Description and Issues
History
Al Khettar was founded in Al Etihad Road, Dubai around 2001. During the early years, the restaurant was intended for serving traditional cuisine of the Arabian Peninsula similarly to the other firms in the area. Eventually, the founders developed a more holistic concept of adding value to the services by expanding the cultural and ethnic representation from the menu to the interior of the building and artistic pieces presented in the establishment. Around 2014, the restaurant has entered a major restructuring phase, during which the emphasis was shifted from the more conventional approach towards the authentic cuisine accompanied by visual communication of traditional values of the Peninsula.
Current Conditions
Currently, the organization’s type of ownership is a corporation. The address of the central office is Al Etihad Road, Opposite Dubai Police Head Quarter, Dubai, UAE (Al Khettar n.d.). The primary type of operation is retail (foods and beverages subtype). Main products offered by the company are a diverse range of foods in the traditional style. In addition, the restaurant offers services of hosting meetings and providing gallery space for exhibitions related to Arabian Peninsula’s culture. The company does not disclose the information on the corporate governance or the suppliers of capital. The restaurant employs workers on the full-time basis and uses direct labor. The suppliers are mostly local food producers. The primary customers are local residents and tourists who seek for culturally rich experience and are interested in the contemporary art of the region. The evolution of organization can currently be traced to a single shift in cultural emphasis described above and is consistent with the evolution of strategic posture towards greater cultural value through authenticity.
Strategic Intent
The company does not provide information on its vision, mission, and values directly. However, the information can be derived from the restaurant’s concept page. First, the management makes a clear emphasis on the cultural background and the traditional aspect of the Arabian Peninsula’s food (Al Khettar n.d.). This fact, combined with the evident goal of customer satisfaction, allows formulating the mission as providing innovative services through design and culinary solutions in order to connect the customer experience to the rich culture and environment of the region. By extension, the vision of the organization can be described as the creation of a culturally rich and engaging environment to communicate the national values and fascination with the region’s tradition. The installation of the acoustic systems the use of the traditional calligraphy for interior design, and the intention to promote the culturally relevant art identifies the establishment of cultural and ethnic standards as one of the objectives. The company also aims at spreading the cultural awareness by seeking partners among similar establishments willing to share the identified mission. The restaurant uses a relatively common business model for the industry, with one notable exception. Specifically, in addition to high-quality, friendly service and top-quality catering, the company relies on intangible experience created by the inclusion of the artistic layer that promotes cultural awareness. The restaurant offers the possibility of becoming a franchisee and receiving benefits of brand recognition, although it should be pointed out that the information on the existing partners is not available (Al Khettar n.d.).
Main Issues Facing Organization
Despite the high level of commitment and consistency of operations, the transition towards the new design philosophy and strategic posture created several issues. Currently, the pace of building a critical mass of the customer base is insufficient for a successful financial performance, as only a small fraction of the predicted audience segment is currently uses the restaurant’s services. At the same time, the company does not reach the majority of the potentially interested customers. Next, the synergy between the different aspects of available services (e.g. national cuisine and traditional art) is currently low. Finally, despite the clear intent to ensure participation of the local artists, the company does not have in its strategy the elements aimed at facilitating partnerships with the stakeholders. The combined effect of the identified issues hampers the financial performance of the restaurant and undermines the potential profits associated with the franchising option.
External Assessment
Overview of Industry
The food and drinks industry in the UAE is currently extremely lucrative. This is especially true in Dubai, where all the factors responsible for the growing demand are present to the high degree. The rapid development of the region’s economy and the diversification of the stakeholders resulted in the growing influx of visitors from the other countries, initiated by the business-oriented individuals and later joined by the tourists. The situation also contributed to the actualization of the Arabic culture relevance and prompted the cultural aspect of tourists, which contributed to the opportunities of the hospitality sector (Wazir 2016). As a result, the industry is estimated to grow by 500 percent in the nearest decade (Scott 2014).
Natural Environment
The natural environment has relatively minor influence on the hospitality industry. Two factors can be identified that are marginally important for the sector. First, the climate and weather can be an issue considering the fact that a growing percentage of the customers are visitors from other countries. While the local population is accustomed to the conditions, the tourists from remote locations can find it inconvenient, which can decrease customer satisfaction and must be addressed accordingly. Second, the climatic conditions limit the possibilities of local suppliers of raw materials and, by extension, the diversity of products that the restaurant can offer to its customers. However, the latter is of minor concern in the case of Al Khettar, as its menu is composed predominantly of the traditional foods and therefore requires the components that are available locally.
Macro-environment
The political environment in Dubai is fairly uniform, with no significant discrepancies among the interests of business owners and state policymakers. The existing laws and regulations contribute to the stability of the for-profit organizations. The taxation usually varies between 5 and 10 percent for restaurants. In addition, the political system visibly aims at reaching the international standards of quality, which include favorable conditions for small and medium enterprises and diversification of the economy, both of which are desirable for the local restaurants and small chains.
With the introduction of oil trade as a major source of national profit, the economy of the region eventually shifted towards international commerce and tourism. By extension, the value of hospitality industry has grown dramatically in the recent years. It should also be noted that the surge in welfare of the population created a setting where the local residents are reluctant to occupy the low-level jobs, which are then filled by the expatriates (Thompson 2016). Such situation triggered the response from the authorities in the form of imposing strict regulations for foreign workers. On the other hand, the city is extremely attractive to high-level business executives and investors who seek partnerships and funding options. Such developments also contributed to the emergence of the reliable trading routes, which effectively minimized the possibility of raw material deficits. The average payment capacity of the population is relatively high due to the rapidly developing economy and the revenues of the residents. The same can be said about the expatriates, who consider the city one of the most financially attractive options in the region. Finally, it should be pointed out that the city’s unemployment rate is the lowest in the world, which equalizes the well-being of the population (Dubai Population 2017 2017). The combination of the said factors contributed to the quick improvement in Dubai’s business rankings – according to the latest data, the city is at the 26 position in the world (a 8 point increase over the 2016 ranking) (World Bank 2017).
Due to the influx of the expatriates and the government-induced measures described above, there exists an observable disparity between the foreign workforce and the local population. Namely, the improvements in lifestyle raised the cost of living in the country and thus limited the possibilities of the majority of the workforce. Besides, the government maintains the direction of improving the quality of life for the population by subsidizing education and healthcare, further raising the bar of quality of life. This eventually created the setting where the career and service quality are high. The global perception of Dubai as a successful and prosperous location further promotes the effect by attracting an audience that seeks luxurious products and services. However, despite the relatively challenging conditions for foreign workforce, the city is largely open to the diversity of the cultures and permits deviations from the traditional values of the Arab world (e.g. covering the head is not mandatory for women and alcohol consumption is permitted in the designated places). There is also considerable progress in terms of gender equality, with women occupying the important social roles traditionally reserved for men.
The population of Dubai contains predominantly of representatives of other countries, with only a small fraction (15%) being native residents (Dubai Population 2017 2017). The majority of the population (more than two-thirds) is male. Predictably, the immigration rate remains high. The income distribution is uneven due to the factors described in the previous section.
The rapid development of the economy both stimulates and provides the resources for the technological development. As a result, Dubai, along with the rest of the UAE, consistently updates its technological background, most notably in the ICT sector. The majority of improvements are oriented towards consumer segment and quality of life. At the same time, there is no evident effort towards investment in long-term R&D base aside from specific segments directly associated with commerce (e.g. e-transactions and construction industry).
The city is one of the most active hubs of international relationships and is both influenced by and compliant with the expectations and cultural background of the other cultures. In geopolitical terms, the city enjoys a fairly stable environment with no pressure from neighboring countries and a strong orientation towards globalization.
Operating Environment
It is relatively easy to start a restaurant business since the legal and economic conditions are favorable for such activity. This, however, is only true for the small-scale cafes. Establishing a large franchisor would be a much more difficult task. Therefore, the threat of new entrants is moderate. The well-established supply chain and the dominance of the traditional dishes make the majority of the components easily accessible. On the other hand, in order to maintain high quality of the offered foods, at least some of the products must be high-grade. Therefore, the bargaining power of suppliers is low to moderate. The bargaining power of buyers is also low, primarily due to the high concentration and quantity of customers in the location, and also due to the above-average profitability of the majority of visitors. The threat of substitute products is high – there is a wide selection of cuisines in Dubai, and many establishments also offer unique cultural experience in addition to the basic services. Finally, the intensity of rivalry among the existing competitors is moderate to high. The industry is currently in the growth stage, with large amount of local players and international brands entering the segment. On the other hand, there is no consolidation between the rivals, and the diversity of the competitors is high with no evident leaders, which makes the competition less intensive.
Two important complementors in the industry are the tourism industry which ensures a steady influx of new customers and the hotel industry. The former is a necessary complementor considering the proportion of native population, and the latter is value added one as it adds to fulfillment of customers’ expectations.
Trends
The dynamics of industry evolution are within the stable range. The changes are mostly consequent and rarely deal with radical innovations. The customer base is also relatively unchanged, with increasing diversity being the most prominent change.
Driving Force Analysis
The most notable driving forces in the industry are value-added innovative services and collaboration with relevant stakeholders. The industry in its basic form offers little space for gaining competitive advantage, so it is expected from the firms to provide superior experience in imaginative and creative way and integrate cultural and social aspects into business.
Summary of External Assessment
The external economic, social, and cultural environment is extremely lucrative for hospitality business in general and the restaurant segment in particular. This predictably led to the large number of entrants of varying size, quality, and specialty. The ongoing increase in both economic growth and social and cultural diversity in the region creates the opportunities of adding value to the operations which need to be utilized in order to maintain competitive advantage.
Internal Assessment
Structure
Due to the focused set of well-defined goals, the restaurant has a simple organizational structure common for the industry. The business operations are within the responsibility of the general manager, who oversees the hiring practices and the performance of the personnel. The organization is divided into two traditional segments, front of the house and back of the house. The front of the house is overseen by the food and beverage manager and run by the employees who interact with the visitors and servicing the customer area. The back of the house is overseen by the executive chef and run by the kitchen staff.
Leadership
The leadership activities are mostly within responsibilities of the general manager and are delivered through regular meetings and on the daily basis when such necessity arises. Both the food and beverage manager and executive chef are responsible for communicating with the staff, although there is no indication of requirements for consistent leadership among their documented activities.
Organizational Culture
The culture in the restaurant is for the most part tight, with highly centralized decision-making stemming from the general manager. The issues related to the cultural and artistic aspect are usually solved with the help of external consultants who are not employed full-time. The culture is strengthened via regular meetings of the staff and occasional events focused on obtaining innovative recipes, as well as brainstorming sessions aimed at cultural enhancements. The latter two are noticeably scarce and unsystematic.
Products and Services
The food served in the restaurant is of high quality and conforms to the descriptions in the menu and the individual requests of the customers. Some items are flexible enough to be modified individually, although most dishes follow a well-defined procedure in order to maintain the genuine authenticity. The aesthetic aspect of all foods is carefully maintained and consistent across the menu. The perceived quality is expected to be high due to the permeating quality of cultural influences for each newly added item.
The services are for the most part consistent in timeliness, convenience, and completeness with the respective product dimensions. The staff is courteous, attentive, and well-trained in expected areas. It is worth mentioning that the cultural competencies necessary for maximizing the desired effect are unsystematic across the staff.
Important Resources, Capabilities, and Competencies
The restaurant is comparatively small in terms of scope of activities, for which reason its physical resources are situated directly within the building. The access to raw materials is facilitated through timely deliveries by suppliers. All necessary cooking and refrigerating equipment can be found in the building. All technological processes are generic, industry-standardized, and do not rely on proprietary intellectual property. The intangible resources consist of human resources and do not involve innovative or unique capacities in managerial or organizational routines. The restaurant shows a clear orientation towards brand recognition but is currently targeting the local market.
The most important core competency clearly emphasized in the strategy is orientation towards culture-rich experience. The competency is currently in its early development stage and lacks consistency.
Activities
As is common within the industry segment, the most value is generated on the stage of marketing and service, with operations stage being of secondary importance. In the case of Al Khettar, the marketing stage is especially important since the firm aims at gaining competitive advantage through unique and relatively uncommon approach that has to be promoted in order to garner the attention of the public.
Performance Appraisal
The company does not disclose its financial performance information. However, it is likely that the benchmarks used for the appraisal are those traditionally used in the industry and include profitability, customer service levels, compliance with industry standards, and, in this particular case, satisfaction with additional services and unique experience such as the presentation of historical values.
Competitive Status
Currently, the firm has significant potential for gaining competitive advantage and standing out among its rivals. However, due to the early stage of implementation and lack of consistency, only a small fraction of the potential is realized.
Summary of Internal Assessment
The company displays the above-average level of core competencies and intangible resources that allow for exceptional performance and high level of customer satisfaction. However, the lack of integral leadership practices and unsystematic nature of activities that make use of the said resources undermine the effective utilization of opportunities.
Current Strategic Assessment
Summary of Main External and Internal Factors
The most significant external factors are the economic growth of the region and the surge of the tourism industry. The highly diversified target segment and the increasing relevance of cultural and social contexts can be deemed important for the new directions taken by the company. The internal factors include the buildup of cultural competencies and the involvement of the artistic dimension as a manifestation of creative innovation necessary for gaining competitive advantage.
Assessment of Effectiveness and Efficiency of Strategy
Due to the scope of operations, certain levels of strategy are not included. On the business level, the company tries to position itself as prioritizing the customer experience through diversification of influences (e.g. artistic qualities of the interior) rather than focus on the product and service excellence. This aspect is fairly generic and does not aim at the specific competitors. The functional level is almost non-existent, with no clearly defined leadership roles and lack of systematic activities aimed at organizational culture improvement. The operational level is focused on delivery of authentic dishes and assisted by the occasional consultations with local sources of knowledge. The groups and teams are traditional for the industry. Finally, the individual contributions are either unspecified or insignificant for the organization’s functioning.
The information above identifies the poor level of integration, especially regarding the newly added cultural and artistic dimension.
Strategy Formulation
Strategic Alternatives
Considering the information above, the mission and vision do not require adjustments as they are consistent with the firm’s goals. Therefore, it would be reasonable to emphasize the integration of the existing practices in order to ensure consistency of services and provided experiences. Alternatively, it is possible to prioritize the functional aspect through incorporation of solid leadership practices and promotion of organizational culture. Finally, the individual aspect can be introduced in order to boost and diversify the creative dimension.
Evaluation of Alternatives
The last option requires the most changes since it relies on the employee proficiencies that are uncharacteristic for the industry and therefore necessitates the modification of HR practices. In addition, it may compromise the operational aspect, which is unacceptable given the industry standards. The introduction of sound leadership would require additional investment and additional staffing but presents the opportunity for long-term improvements. Besides, it is associated with the least risks since the leadership practices are extensively researched. Finally, the integration of cultural and operational aspects of the services requires the least deviation from the existing direction and is not resource-heavy. On the other hand, it is the least predictable modification and cannot be conclusively assessed, especially in the case of small organization such as a local restaurant
Selection of Strategies
The evaluation shows that the third alternative is the least feasible one. Therefore, the first two are recommended for implementation, with the functional aspect being implemented in the short- to medium-term and the integration across segments extended for long-term facilitation. Since no apparent risks are identified except for the financial pressure, the contingency plans can be limited to allocation of additional funds.
Strategy Implementation
Action Items
First, the restaurant needs a manager that would oversee the artistic dimension created as a part of new image. This person would seek partnerships with local artists and historians to ensure a steady update rate of contemporary exhibitions. Next, in order to develop the appropriate leadership practices, an external consultant should be hired. The strategies of HR department can be adjusted without major reformation. Finally, the staff training must be developed that would provide the necessary level of knowledge.
Action Plan
The initial stage of the implementation process is expected to take two months. The development and incorporation of leadership practices would require two weeks, with six more weeks allocated for training of company’s managers. Once the art direction manager is hired, he would evaluate the current state of the company (approximately 1 week) and establish cooperation with local artists (3 weeks). Simultaneously, marketing department would modify the existing strategy to emphasize the shift in priorities from the customers’ perspective. Once the leadership framework is established, the next phase (approximately four months) would include training sessions for the existing staff and/or hiring new workers proficient in culture of the region. The training can be enhanced by involvement of the artists brought in by the art direction manager. At this time, the improvements in corporate culture are expected to increase employee engagement in corporate activities (e.g. search for new authentic recipes). The cost of the described items would consist of the salary of one additional manager, services of one external expert, and cost of training sessions, and would not exceed AED 120,000.
Summary of Execution Plan
The restaurant management would hire a full-time specialist who would synchronize the operational and cultural activities of the organization and an expert who would aid in establishing sound organizational culture. The plan is expected to enlarge the customer base, improve brand name recognition, and facilitate long-term customer loyalty and employee engagement.
Strategic Evaluation and Controls
Balanced Scorecard
The most important perspective of the balanced scorecard in the case of Al Khettar is the customer value perspective. The key measurement is the amount of positive feedback by 20% in six months. Next, employee engagement perspective must be taken into account. Therefore, reported involvement is expected to improve by 15% in 3 months. Brand recognition is another important dimension and can be measured by the increase in perceived association with culture of the region by 25% in four months. Finally, the financial dimension can be assessed by the increase in daily customers by 30% in six months.
Strategic Control Systems
Since the suggested changes are only marginally related to restaurant’s primary functions and are expected to produce financial improvements in the long run, the most relevant dimension of control is behavioral control of organizational culture. The current financial control system will remain suitable both during and after the change and, therefore, should be retained.
Summary of Evaluation and Control Measures
The financial performance of the restaurant can be left intact as no major changes are expected at the initial stage. The feedback from customers can be collected from online resources. The survey must be administered to the employees. Failure to meet the formulated objective must be discussed at the staff meeting and timely addressed. The dimensions identified in the balanced scorecard are to be retained for future operations in order to maintain the high level of quality and customer satisfaction.
Doner Deli is a fast-food restaurant found in Dubai, the United Arab Emirates. The restaurant was established in 2014 to serve the high demand for a kebab in the region. Inspired by the city of Berlin, the founders sought to create a kebab joint to allow customers to experience “the unique taste, extract flavor, exceptionally juicy fresh and healthy halal products that included veal, chicken or mixed sandwich” (Dona Deli 3). The restaurant enjoys a significant market in Dubai due to its famous brand. According to Dona Deli, the joint is not only renowned for preparing quality food but also offering excellent customer services (3). The management of Doner Deli appreciates that their success relies on the ability to sell unique products, manage the supply chain, and use an exceptional branding strategy. It would be difficult for an organization to succeed without establishing trust, generating and maintaining sufficient cash flow, and promoting customer loyalty (Ha and Jang 389). The restaurant’s primary objective is to create productive business relations with different partners and suppliers who share similar visions and goals.
Doner Deli supports the growth of individual departments and teams in the business through training and empowerment. Currently, the restaurant has created a strong business platform in the fast-food sector. It leverages concept design, brand identity, and product menu to overcome competition. According to Dona Deli, the company “creates and maintains a funky urban restaurant that is comprehensive and exceptional, giving attention to every detail of operation to help its growing family improve the quality of life” (4). The restaurant is committed to establishing a one-stop-shop where customers can get all their desired meals. Moreover, it is dedicated to providing regular services across all its franchises. Thus, the restaurant offers training to employees who work in various outlets to guarantee professionalism, efficiency, and integrity. The employees make sure that they provide quality food that follows German traditions.
Company Classification
Doner Deli falls under the fast-food eatery classification or what is also referred to as the quick-service restaurant. The restaurant exhibits various characteristics attributed to the fast-food business. They include limited table service and preparation of fast food cuisines. The food served at Doner Deli is usually a constituent of “meat-sweet diet” “offered from a limited menu, cooked in bulk in advance and kept hot, finished and packaged to order and usually available for takeaway, though seating may be provided at the restaurant” (Ha and Jang 391). According to Mirosa and Lawson, fast food joints are constituents of a franchise or an eatery chain that offers standard products across the globe (818). The joints use standard methods to prepare food and source their supplies via a controlled channel. Doner Deli started as a single restaurant in 2014. Currently, the business comprises seven joints that are spread across the United Arab Emirates. The outlets use standard ingredients and procedures to prepare their products. They are the only fast food joints that sell authentic German doner. Doner Deli sources its supplies from German factories, which are responsible for providing pita bread and doner meat. It enables the restaurant to prepare good doner sandwiches and offer standard products across the stores.
Mirosa and Lawson posit, “The menu items of a majority of the fast-food restaurants are made from processed ingredients prepared at central supply facilities and then shipped to individual outlets where they are cooked” (820). The same case applies to Doner Deli. A majority of the restaurant’s menu items are prepared in Germany and shipped to the United Arab Emirates. It helps to guarantee the quality of the food items that the restaurant serves. Moreover, the centralization of the supply facility contributes to enhancing the efficiency of the restaurants and minimizing equipment and labor costs. According to Smith et al., commercial emphasis on speed, uniformity, product safety, taste, and low cost compels fast-food restaurants to use unique ingredients to prepare their meals to ensure that they have a noticeable aroma, flavor, mouthfeel, and texture (2369). Doner Deli promises to offer tasty meals to its customers. The fast-food restaurant uses the best cuts of turkey, veal, and chicken, which are cautiously sourced from artisanal farms in Germany. The restaurant is keen to offer tender, fresh, and delicious meals to clients at all times. Mirosa and Lawson argue that Doner Deli uses modern techniques to prepare its products (823). It does not serve the regular sandwiches. Instead, the restaurant’s chefs give clients an opportunity to try other inventive products like doner platter and doner box.
Uniformity and consistency in brand image and internal operations are paramount to fast food restaurants. They enable the eatery to instill a sense of steadfastness in clients’ minds. The perception of consistency, in conjunction with quality customer experience, results in consumers trusting a company. Smith et al. hold that the sense of reliability enables an organization to grow its customer base, therefore enhancing its profit margin (2371). Many customers prefer to eat in restaurants that they understand. Because of the significance of uniformity and consistency, Doner Deli has established a set of regulations that govern operations in all its seven stores. The rules guarantee that the branches observe practices that are consistent with the restaurant’s standards. Dona Deli is conscious of the health of its target consumers. Consequently, it ensures that its sandwiches are prepared with little fat content to meet the needs of health-conscious consumers. The restaurant offers flexible options to clients. It provides takeaway, dines in, and delivery services to clients based on their needs. Additionally, the restaurant prepares food in front of the clients to enable them to confirm its quality. It also ensures that deliveries do not take more than one hour.
Tabassum and Rahman claim that one feature that is unique to fast food restaurants is the provision of value meals (17). They comprise a group of food items, which are served collectively at lower prices than they would cost if sold separately. Most value meals include a drink, side of fries, and a hamburger. Doner Deli serves value meals as one of its menu items. The restaurant’s value meals constitute halal veal served with Aryan drink, fries, and salad. The restaurant sells the best doner in the UAE, which is prepared in an easy, efficient, and affable method that surpasses clients’ expectations. Moreover, it allows customers to make doner sandwiches according to their preferences. It makes customers feel special and helps to promote customer loyalty.
Target Market
Tabassum and Rahman define the target market as “a group of customers that a business has decided to aim its marketing efforts and ultimately its merchandises towards” (21). A marketing strategy is incomplete without a distinct target market. Defining a target market enables a business to identify the needs of the consumers and address them effectively. Mostly, a target market comprises clients with similar features like income, age, lifestyle, and location. Understanding the target market enables a business to avoid excessive costs attributed to inventory management. A company that has explicit knowledge of its target market makes sure that it manufactures products according to customer orders. The organization does not incur inventory costs as it avoids producing excess products. The majority of people believe that fast food is not healthy, and therefore should be eaten in restraint. Nevertheless, in spite of this opinion, many people frequent fast-food joints. Indeed, the number of fast-food restaurants continues to increase across the globe. Doner Deli has divided its target market according to the needs and lifestyles of consumers. The company targets families, high-income earners, and employed individuals among others.
Families
The majority of families take their kids or relatives to fast food joints as a way to show their appreciation for a job well done or good behavior. Moreover, whenever individuals want to offer special treatment to their families, they take them to a fast-food joint. Consequently, one of the primary target markets for Doner Deli is families. According to Tabassum and Rahman, parents prefer fast food joints because they serve a variety of meals that cater to the needs of all ages (24). Moreover, the meals are easy to eat and delicious. Doner Deli serves different varieties of meals to families. They include doner platter, doner box, sandwiches, grilled and roasted chicken among others. Its stores are spacious, clean, and comfortable. Moreover, they offer a playground for kids. Therefore, many families prefer Doner Deli because it meets all their needs and interests.
Employed People
Today, the number of individuals in white color jobs is high. These people spend most of their time in the workplace and do not get a chance to prepare food. Thus, they prefer to eat from fast food joints. Smith et al. maintain that working people purchase food from the joints due to their expediency (2375). Employed people “are light users of fast food and not overly responsive to sales promotions or advertising” (Tabassum and Rahman 26). Moreover, they do not associate with a single brand because they consider expediency in making buying decisions. As a result, fast food businesses require opening multiple outlets and offering different varieties of meals to exploit this market segment. Initially, Doner Deli specialized in the production and sales of doner sandwiches only. Today, the company sells a range of doner selections. The goal is to meet the needs of different working individuals and to grow the market share.
Meeting Place
Some customers visit fast food joints not because they are interested in the meals but due to their friendly facilities and strategic locations. According to Melkis et al., fast food joints offer an excellent venue for individuals to meet and catch up with their friends (37). Many fast-food restaurants are situated in strategic locations, thus easy to find. Furthermore, they have in-store facilities that facilitate socialization or business meetings. Doner Deli restaurants offer modern informal dining experience with warm accents, soothing ambiance, and inviting colors. Therefore, many people prefer to visit Doner Deli joints if they wish to reconnect with their friends. Additionally, the restaurants offer a safe environment for couples who want to have quality time together away from disturbances. The restaurants have experienced workers that meet the needs of individual clients.
Nice and Easy
According to Melkis et al., some consumers prefer to eat from fast food joints because of their convenience (39). They do not like preparing their meals or purchasing food products from grocery stores. Moreover, they do not arrange for their weekly food, thus preferring the handiness of fast food retails. Numerous customers frequent Doner Deli joints because they are convenient. The joints offer multiple service options, which comprise dine-in, takeaway, and delivery services. Moreover, their ordering system is efficient. The clients are not sensitive to the prices of the foods and fancy Doner Deli joints because they are time-saving. Doner Deli has realized that this market segment seeks food joints with multiple outlets. Consequently, the restaurant is in the process of opening branches across the UAE to increase its market share.
Other Target Consumers
Doner Deli targets other groups of consumers, which include the health-conscious patrons and individuals who buy fast foods because of their taste. The restaurant appreciates that some clients purchase food due to their unique taste. Consequently, it has invested in the preparation of a variety of doner selections with German flavors to cater to this market segment. Clients who purchase food due to its taste value consistency. They expect to buy food with the same quality, flavor, and taste in all the branches of a particular business. It underlines the reason Doner Deli has a centralized supply channel to enable it to offer standardized services across its stores. The restaurant also targets health-conscious clients who chose fast foods depending on their nutritional value. Currently, it ensures that its sandwiches have low-fat content to cater to the needs of health-conscious customers.
Works Cited
Dona Deli. “Join the Taste Revolution.” World Franchise Center, 2014, Web.
Ha, Jooyeon, and SooCheong Jang. “Attributes, Consequences, and Consumer Values: A Means-End Chain Approach Across Restaurant Segments.” International Journal of Contemporary Hospitality Management, vol. 25, no. 3, 2013, pp. 383-409.
Melkis, Madeline, et al. “The Influence of Marital Status and Age on the Perception of Fast Food Consumer in an Emerging Market.” International Journal of Business and Innovation, vol. 1, no. 3, 2014, pp. 33-42.
Mirosa, Miranda, and Rob Lawson. “Revealing the Lifestyles of Local Food Consumers.” British Food Journal, vol. 114, no. 6, 2012, pp. 816-825.
Smith, Claire, et al. “Characteristics of Fast-Food/Takeaway-Food Restaurant/Café-Food Consumers among New Zealand Adults.” Public Health Nutrition, vol. 17, no. 10, 2013, pp. 2368-2377.
Tabassum, Ayesha, and Tasnuva Rahman. “Differences in Consumer Attitude towards Selective Fast Food Restaurants in Bangladesh: An Implication of Multiattribute Attitude Model.” World Review of Business Research, vol. 2, no. 3, 2012, pp. 12-27.
Restaurant management is a complex issue that demands enhanced competence related to the sphere and improved understanding of the target audience that visits a particular unit. At the same time, the tendency towards the gradual rise in the level of rivalry and increased demands of visitors to the quality of services introduce the need for improvement and implementation of new technologies to preserve leading positions and create value. However, the introduction of new approaches should be preconditioned by the comprehensive investigation of its pros and cons to ensure that the positive effect will be attained in the course of the change process.
Existing Reservation System and OpenTable
Therefore, speaking of Blackshops case, several factors should be considered before making a final decision about the implementation of the OpenTable system. First, at the moment, the restaurant uses a traditional approach to the reservation. It means that one of four managers have to work with reservations using a specific form. Regarding the fact that the traffic can achieve 200 guests on Friday nights and even more, the task becomes complex as a worker has to consider diverse variables like the number of free tables, their availability, arrival time, etc. Exhibit 4 of the case demonstrates that the manager introduces multiple corrections and notes to the form to monitor the situation and ensure that all guests will be provided with needed services (“Blackshop restaurant,” 2011). Numerous marks on the blank evidence the high probability of error. Additionally, the efficiency of reservation depends on the competence of the manager and his/her ability to work under pressure or regarding the high traffic. In such a way, the implementation of the OpenTable system could be considered an appropriate solution to attain better outcomes and preserve the target audience.
Probability of Mistake
First of all, the nature of the suggested system helps it to monitor recent alterations in available tables and reservations. In such a way, clients will be able to use this service and look for a particular date and time that will satisfy their demands. Moreover, due to the use of advanced technologies, the probability of mistake decreases, and managers do not have to fill in specific blanks keeping in mind all data needed for the efficient reservation. The OpenTable system creates databases that include all information about a particular restaurant and available tables. In such a way, the problem of walk-ins could be solved by information updates. All of Blackshops clients will be able to reserve tables that will remain available.
Cooperation with Clients
The implementation of the OpenTable system could also help to improve the restaurants image among clients and cooperation with them. Thus, the program identifies regulars and VIP clients who might have diverse preferences and suggests to them services they traditionally use. The given practice demonstrates its efficiency and results in numerous positive feedbacks that could be seen in Exhibit 6 (“Blackshop restaurant,” 2011). The bigger part of clients is satisfied with the system as it provides them with the feeling of their extreme significance for a particular restaurant. Moreover, as far as their preferences are stored, visitors can use OpenTable anytime, and they will be provided with their favorite services. Additionally, there is a specific bonus program that provides users with an opportunity to collect points and change them to real money. In such a way, implementing this system, Blackshop will demonstrate its desire to care about its clients and guarantee their ability to find the most appropriate time to visit the restaurant.
Cost-Saving
Another aspect that can be used to justify the implementation of OpenTable is its cost-saving character. The given factor is emphasized by the providers of the service. Thus, the analysis of Blackshops functioning demonstrates that OpenTable can really help to decrease spending. The current reservation practice presupposes that one of four managers should be engaged in working with reservations and receiving calls from visitors. Thus, the use of the suggested system will eliminate the necessity to lose time. In such a way, this manager could be provided with another significant task. This practice will help to increase the performance and efficiency of workers and delegate responsibilities in accordance with the existing demands.
Rivals
Finally, the sphere of the restaurant business is a competitive environment that presupposes the necessity to preserve a competitive advantage by implementing new technologies. The closest Blackshops rivals have already integrated OpenTable to their functioning. For this reason, to be able to compete and survive, the restaurant has to use this system to attain increased efficiency in working with clients.
Conclusion
Altogether, despite all fears related to the implementation of the OpenTable system and its hypothetically negative impact on the atmosphere of Blackshop and its relations with customers, the system should be used to guarantee the restaurants further development. It will also help to create new value by providing visitors with an opportunity to choose the needed services and feel their increased importance for the unit. Moreover, the practice will help to save costs by providing managers with a chance to perform other tasks instead of dealing with reservations.
The success of international market penetration is determined by a multitude of factors that need to be acknowledged in the development of an entry strategy (Tiwari, 2013). The following report provides a summary of relevant factors and a set of recommendations for Egyptian market entry by Motomachi Japanese Restaurant & Patisserie. The findings suggest relatively unfavorable conditions for entry and suggest joint venture as the most viable approach considering the resource limitations and a highly competitive environment. Polycentric approach to staffing and a transnational strategy for business operations are recommended to retain cultural competencies and sustain a competitive advantage and establish presence in the host country.
Company Background
Motomachi Japanese Restaurant & Patisserie is a company that serves Japanese cuisine in the UAE. The company focuses on ensuring the authenticity of the experience (“Motomachi Restaurant & Patisserie,” 2017). In addition to the diverse menu, the restaurant offers the takeaway service but does not provide delivery options. The company does not disclose its size, ownership, or history. Motomachi brand is largely unfamiliar to customers outside the UAE and the expansion potential is fairly limited.
Country and Market Analysis
External Factors
Political Stability
Currently, the political situation in the country is uncertain and can be evaluated as 4/10 in terms of suitability. The country’s current president has faced a host of political issues left from the Hosni Mubarak’s presidency. While there is evidence that an overall direction taken by the government is favorable for the country’s economic condition in the long run, the resilience of certain issues still poses a significant barrier to the profitability of businesses (Nasr, 2015). In addition, the government imposes strict regulations that restrict adaptability and flexibility (Nasr, 2015).
Free Market Systems
From a formal standpoint, Egypt’s economy is based on free market system and can be ranked 8/10 in terms of suitability. In the recent decades, the centralized control by the government was gradually transformed into a more liberalized approach (Nasr, 2015). This is especially important for the international players that do not need to rely on familiarity with local regulations and can operate using the internationally accepted principles.
Inflation Rates
Inflation rates have remained high in the recent decade and can be evaluated as 5/10 in terms of suitability. The latest data indicates an overall rate as above 30 percent (see Figure 1). Such high rate is unfavorable for the business as it is usually associated with the uncontrolled increase in the cost of operation and production and has an adverse effect on capital expenditure. It should also be pointed out that high inflation rate is generally unfavorable for foreign exchange rates which is especially relevant for international businesses.
Figure 1. Egypt’s Market Profile.
Corruption Levels
The level of corruption is relatively high in Egypt, which suggests a ranking of 4/10 in terms of suitability for business. The latest data from Transparency International provides a rank of 34/100 (Nasr, 2015). Such situation leads to lower predictability of business performance and should be considered before entry.
Customer/Competitor-Based Factors
Level of Existing Competition
The Japanese food segment of the restaurant industry is relatively well-developed in the country, suggesting a suitability score of 4/10. TripAdvisor lists 41 Japanese food restaurants in Cairo alone, with an average of 100 reviews per restaurant for the top ten entries (TripAdvisor, 2017). In other words, the segment is densely populated and popular among the local population, adding to the challenge of a new entry.
Efficiency and Value of Existing Competitors
The leading competitors in the Japanese food segment are Mirai, Kazoku, Shogun, Sachi Restaurant, Saigon Restaurant, and Tao (TripAdvisor, 2017). Of these, only two are Egyptian businesses whereas others are international companies with an established presence in other countries. Thus, the suitability of this factor can be ranked at 3/10 since the majority of the competitors have the opportunities and resource capacity for mitigating the country-specific barriers.
Industry and Business Factors
Suitable Labor Force Availability
The labor market in Egypt is largely unfavorable for the restaurant industry and can be ranked 5/10. On the one hand, the unemployment is relatively high in the country, ranging between 12 and 13 percent according to the official information (Export.gov, 2017). In addition, the majority of the unemployed population is comprised of the educated young citizens that are unable to find implementation for their labor skills. On the other hand, the public sector is relatively overstaffed whereas the private enterprises face significant shortage of specialists due to the mismatch between labor skills and market demand (Export.gov, 2017).
Trade Barriers
In its current state, the legislation of the country has an adverse impact on the transparency and accessibility for the international players and can be ranked 6/10 (Australian government, n.d.). The most significant barrier is the trademark registration for the licensees requiring a range of documents. Licences also influence trade practices (see Figure 2). In addition, at least some of the ingredients required for running a Japanese food business will be imported, which may require inspection for compliance with established specifications in order to obtain permission for import.
Figure 2. Egypt: Country Report.
Transport Costs
The transportation system in the country has undergone a major redesign in the recent decades and can be ranked 8/10. Currently, the private sector handles the majority of maritime and air transportation services and has managed to update the key aspects of the industry, increasing the efficiency of operations and lowering the costs. Some public transportation costs have increased in 2017 in response to the changes in fuel and electricity prices (Ahram Online, 2017). However, the costs remain relatively low thanks to an ongoing renovation effort.
Costs of Establishment
The cost of establishing a new business is relatively high in the country and can be ranked 6/10 in terms of suitability. Despite a considerable effort from the authorities aimed at liberalizing the business environment, foreign investors are still discouraged from doing business in Egypt (Saif & Ghoneim, 2013). According to the rating reported by the World Bank, Egypt ranks 128th in terms of obtaining permits, getting credit, registering property, and paying taxes, among other factors (The World Bank, 2017).
Marketing Mix and Staffing Policy
The success of entry is largely determined by the appropriateness of the marketing mix created in accordance to the specificities of national culture, quality standards, and economic development. The company’s main product is Japanese food. In addition to sushi, the restaurant’s menu also includes a wide variety of other items. While it is reasonable to expect the former to be the most sought-after option, such diversity is expected to provide a competitive advantage for the restaurant.
The place/distribution strategy requires situating the restaurant in a location popular among the locals. Tourists and visitors will likely seek for a more authentic and country-specific experience, whereas the locals will be more interested in novel and exotic dishes. Since the majority of ingredients can be obtained in Egypt, the production will be located primarily within the restaurant whereas some of the more exotic ones need to be imported in the processed form. The distribution channel will include trusted food suppliers that can validate the quality of their products, advertisement, and Internet marketing.
The promotion of the restaurant needs to include web tools as well as traditional media. The former will be primarily oriented at the younger generation and may include social network promotion and the introduction of the VIP registration-based service that would be used for the distribution of coupons as well as special offers for important dates. The latter will expand the audience by including those individuals who have limited exposure to digital marketing means and prefer a traditional approach. Considering the relatively low cultural barriers and noise levels, pull strategy will be more appropriate due to high familiarity of the offered product.
The pricing strategy that is the most suitable for the company is the penetration pricing characterized with artificially low price for high-quality goods (Baker, 2014). Such strategy will ensure the establishment of the core audience and may create a competitive advantage early in the course of events. It should also be mentioned that the hospitality industry is characterized by a relatively high elasticity, which means that penetration pricing may cause some customers to change their preferred restaurant (Baker, 2014).
The most suitable approach to staffing is a polycentric one. There are two reasons for this. First, the high rate of educated and unemployed specialists combined with the presence of similar businesses suggest the existence of qualified individuals suitable for hiring. Second, and, perhaps, more importantly, the locals are more familiar with the specificities of the political and economic conditions as well as the cultural profile of the audience. This move will also contribute to local responsiveness of the business.
Market Entry Strategy
Some of the market entry strategies are inherently unsuitable for the restaurant business. For instance, exporting is largely unnecessary since many ingredients are readily available in the host country and the delivery of perishable products introduces additional challenge. Turnkey projects are unnecessarily complex for the purpose of opening a restaurant due to their generic nature and a relatively high cost.
Licensing offers a more cost-effective solution by providing the host businesses an opportunity to use brand names and intellectual properties. In addition, it has the least restrictive regulatory framework. However, it also erodes the means of control available to the owner (Vyuptakesh, 2013).
Franchising offers more control over the host business based on specific documented criteria. However, it requires a strong brand name for success. Joint venture is an approach associated with lower risk due to the shared resources and responsibilities between the stakeholders but opens up the possibility of the conflict of interest (Baker, 2014). Finally, a wholly owned subsidiary provides the strongest control and eliminates the majority of risks but requires substantial investment and is oriented at long-term profitability.
Based on these considerations, it would be reasonable to recommend joint venture as a preferred mode of entry. This mode will allow for readjustment of the local business models in a non-disruptive way. Admittedly, such approach may contribute to the increased debt (Vyuptakesh, 2013). To address this, additional resources need to be allocated to support the entry.
Strategy for International Business Operations
The current economic setting discourages the use of both international and localization strategies, primarily due to the presence of numerous competitors. Thus, the pressure for cost reduction is high. On the other hand, transnational strategy offers a more flexible cultural competence profile and allows accounting for the aspects of local conditions (Baker, 2014). In addition, the local partners will possess relevant market experience, familiarity with location economies, and competing pressures. At the same time, it provides sufficient space for expanding the market and a subsequent evolution of strategy.
References
Ahram Online. (2017). Cairo metro ticket prices to double by last quarter of 2018: Transport minister. Web.
Australian government. (n.d.). Export markets – Egypt. Web.
Baker, M. (2014). Marketing strategy and management (5th ed.). London, UK: Palgrave Macmillan.
The current ratio measures the company’s ability to meet its short-term maturing obligation to its creditors or suppliers; it measures the company’s solvency (Microstrategy.com, 2011). A current ratio of more than one represents a margin of safety for the creditors or suppliers. The higher the ratio, the more liquid the firm is, and the more confident the creditors will be with the company (Microstrategy.com, 2011).
=CA / CL
=340,902/ 381,000
= 0.89: 1
Quick ratio
A current ratio is not an adequate measure of liquidity. It includes inventory or stock, which is not easily converted into cash; on the other hand, a quick ratio excludes the stock in its calculation (Meir, 2008). A quick ratio of more than one is satisfactory for the firm, since the higher the ratio, the more the firm’s ability to meet its short term maturing obligations (Meir, 2008). However, a higher quick ratio may not always reflect high liquidity for the firm, which has a high average collection period; on the other hand, a low quick ratio may not necessarily reflect low liquidity if the average collection period is short (Meir, 2008).
If the firm’s quick ratio is less than one, this means that the firm’s liquidity is not satisfactory (Meir, 2008). In such cases, the company needs to do two things; improve its debt management policy, ensuring that debtors pay within a short duration of time, and it should also improve the stock management policy to ensure that stock is converted into cash within a short duration (Meir, 2008).
= (CA – Inventory) / CL
= (340,902 – 267,000) / 381,000
= 0.19: 1
Working capital ratio
The working capital ratio measures the firm’s ability to meet its short term liability from its assets (GoldmanSachs.com, 2011).
= Total Assets/ Total Liabilities
= 1,516,002 / 981,000
= 1.55: 1
Debt to Equity ratio
Debt to Equity ratio is a gearing or leverage ratio; leverage ratios measure the extent to which a firm uses the assets financed by non-owners supplied funds (Drake, 2009). They measure the company’s financial risk; the higher the ratio, the higher the firm’s financial risk (Drake, 2009). There should be an appropriate mix of debt and equity finance in the company’s assets (Drake, 2009).
Debt to Equity ratio measures the proportion of non-owner-supplied funds (Long term debt) to owners’ contribution (Shareholders’ Equity); if it is more than 100%, the firm is highly geared (Drake, 2009).
The implication of high gearing level
Debt financing is riskier from the point of view of the firm, where the firm has a legal obligation to pay interest to the debt holders irrespective of whether the company makes a profit or not. If the company defaults on the payment of interest on time, the creditors may sue the firm resulting in liquidation (Drake, 2009). A highly debt-burdened firm will find it difficult to raise more funds since it will be viewed as risky by providers of funds; if the equity base is thin, the firm is less likely to receive funds from creditors (Drake, 2009).
Debt is advantageous to shareholders because they maintain control of the firm since debt holders do not have a controlling interest in the firm (Drake, 2009).
= Total Long-term Debt / Total Equity
= 600,000 / 535,002
=1.12 x 100
= 112%
Summary Statement
The restaurant’s net profit margin (net profit as a percentage of sales) is at 8.72%. This means that the firm has not been efficient in controlling its production, operating, and financing costs. This is because the net profit is only represented by 8.72% of sales and 91.28% represent the cost of sales, operating costs, financing cost, and taxes.
Rally’s current ratio is not satisfactory since it is below the margin of safety; the current ratio of 0.89 means that the restaurant’s current assets can only cover current liabilities 0.89, implying that the firm is facing liquidity risk and it cannot be able to pay its short term obligations. However, a quick ratio is more preferred than the current ratio to decide whether the firm is liquid or not, as it does not include inventory (Drake, 2009).
From the ratio calculated, the firm’s quick ratio is at 0.19, which is below the required ratio of 1. Therefore, the restaurant is facing liquidity risk. The current ratio and quick ratio variance are very wide. This implies that the firm has a lot of money tied in inventory or stock. This indicates that the firm is having idle stock in the warehouse. Therefore the firm should; improve its debt management policy by ensuring that debtors pay within a short duration of time. It should improve the stock management policy to ensure that stock is converted into cash within a short duration (Drake, 2009).
The firm working capital ratio is at 1.55. This means that the firm is efficient in using its assets to meet its obligations to the creditors or suppliers; if sales drop, this will mean that the restaurant will not be utilizing its asset efficiently, and the working capital ratio will drop below 1.55.
The gearing ratio of 112% (debt to Equity ratio) is more than 100%; this means that Rally’s Restaurant is highly geared. Thus, if the restaurant defaults in paying the interest rate, it will be sued and finally be liquidated, or it may face difficulty in the future if it wants to raise more funds. This implies that the firm is very risky to the creditors.
In conclusion, Rally’s Restaurant is not successful as it is facing liquidity problems or risk, leverage, or financial risk, and it is holding more of its cash in terms of idle stock. This is as a result of poor debt and stock management policy. Rally Restuarant should concentrate on improving debt and stock management policy and improving its cost control efficiency.
The key issue, in this case, relates to an urgent decision to acquire a fast-food restaurant. The decision-maker, Kelly, has three options, namely, leasing, buying, or franchising. Each of the three alternatives has some pros and cons. An ideal option is the one that requires a smaller budget but promises a higher return on investment (ROI). The decision criteria involve quantitative and qualitative factors.
Quantitative criteria include Kingston’s demographics, restaurant spending, operating expenses, cost of goods sold, outlet size, and bank lending rates. Qualitative criteria include strategic location, family dining habits, and legal structure of the business. A franchise contract is the best approach for launching the restaurant as it involves less initial capital and promises better returns than the other two options.
Identification and Analysis of Issues/Alternatives
Issues
The main issue in the case is deciding on a cost-effective method for launching the restaurant. The quantitative data indicate that the operating expenses (staff salaries) and cost of goods sold (supplies) of a restaurant located in Kingston amount to 35% and 50% of gross sales respectively. Thus, Kelly should select an option that requires less capital so that the restaurant does not fail due to under-capitalisation. This decision is not only urgent, but it also has a high strategic value to the business.
The second issue relates to the decision to purchase, lease, or enter into a franchise contract to secure the restaurant’s location. In making this decision, the benefits and limitations of each alternative deserve careful consideration. Purchasing a location is a long-term investment that requires enough funds. In this case, Kelly has $20,000 as the start-up capital, and therefore, a good option should require a small budget. This consideration, though not urgent, holds high strategic importance to the restaurant.
Kelly must also make a decision to resign her current position so that she can operate the restaurant full-time. The start-up will require great time investment in the initial stages. Her husband is a teacher and thus, cannot run the restaurant full-time. The decision to leave her position to run the restaurant is significant and urgently needed. Another consideration relates to the plan to remortgage the family house to supplement the start-up capital. This will raise the issue of legal ownership of the restaurant. Although funds are urgently required, the legal structure of the restaurant can be agreed on later.
One conceptual issue pertinent to this case includes the selection of a location that is closer home to allow flexible work hours. Kelly wants a work schedule that is flexible so that she can find time to spend with her family. Additionally, both Kelly (a department manager) and her husband (a teacher) do not have sufficient experience in restaurant management. Thus, the restaurant needs support in terms of skills to be successful.
Analysis
The root causes of the problem presented in the case fall into three categories, namely, methods, people, and materials. The method of choosing a restaurant location can influence the success of the enterprise. The key quantitative factors to consider when selecting a site include population (95,000 residents), the number of restaurants (110 outlets), and outlet size (1,500 sq. ft.). The materials required are contained in the cost of sales (supplies), which stand at a quantitative value of 50% of gross sales. The business also lacks the right skills to thrive (qualitative).
One constraint that Kelly must deal with in her decision-making is the start-up capital. She must source for enough initial capital to finance the business. The $20,000 (savings) may not be sufficient to acquire a restaurant site, purchase furniture/equipment, and recruit staff. Other constraints relate to operating expenses and cost of goods sold, which are estimated to be 35% and 50% of gross sales respectively. The high costs will constrain Kelly’s decisions.
In the case, a number of opportunities exist that one can capitalise on to launch the business. The lending rate is 10%, which is relatively low. Thus, an affordable bank loan can be acquired to finance the business. A strategic location will also give the business an opportunity to increase its visibility and attract the target clients (families). Franchise contracts can give the start-up an opportunity to grow because the parent restaurant provides support and brand equity.
From the quantitative data, a large proportion of a restaurant’s profits go to the operating expenses and cost of goods sold (85%), leaving 15% of the sales as the net profit. Thus, the new restaurant must minimise its expenses and cost of supplies. The target market segment of 20,000 families, which is served by 110 restaurants, constitutes a considerable proportion of the population. Additionally, family monthly restaurant spending is modest ($80).
The average lending rate is relatively low at 10%, which means that the restaurant can be financed through a cheap loan. The restaurant outlets are spacious (an average of 1,500 square feet) and thus, provide sufficient space for expansion. Qualitative analysis of the case reveals that Kelly is passionate about the restaurant business. She has some experience in this business, having worked at a fast-food franchise during her teenage years. Additionally, the husband has been supportive of her.
Alternatives
Leasing a location – it cuts down start-up capital, as a small budget is needed to start the business.
Franchise contract – this will reduce costs associated with marketing due to brand recognition. The restaurant will also receive support from the parent organisation. However, royalties and lack of independence can affect growth.
Buying – it requires a huge amount of capital (start-up costs). However, buying protects the business from rental price fluctuations.
Decision Criteria
To choose the alternative that offers the best market entry strategy, the writer will use criteria consisting of quantitative and qualitative variables. These include:
Cost – the amount that will be spent on leasing, purchasing, or franchising a restaurant site (30%).
Market share – the approach that provides the best opportunity to grow the market (25%).
ROI – the alternative that promises the highest returns (25%).
Competitive advantage – the approach that will enhance the restaurant’s competitiveness (10%).
Customer satisfaction – this will help in brand development (10%).
Assessing the Alternatives
The first alternative (leasing) involves fewer costs (less budget), but has less ROI (due to rent payment). It also does not provide the owner with an opportunity to expand the restaurant’s market share. Thus, based on the criteria one, this option is worth 30%.
The second alternative (franchise contract) has a less budget, enhances competitiveness and market share due to brand recognition, and increases customer satisfaction. It satisfies the first, second, third, and fourth criteria (75%).
The third alternative (buying) is expensive and does not guarantee short-term ROI and customer satisfaction. However, buying a restaurant site can give a firm a competitive advantage associated with location (10%).
Recommendation
The second alternative (franchising) fits Kelly’s budget of $20,000. It also promises better returns than leasing or buying a restaurant site. Thus, the writer recommends a restaurant franchise as the best option of launching the business.
Action Plan
To launch the restaurant successfully, Kelly should make an urgent decision to enter into a franchise contract with a national fast-food restaurant that has plans to set a branch in Kingston. Under the contract, she will pay $20,000 (her start-up capital) and finance the rest ($50,000) using a bank loan.
Among the key target customers, middle class families, office workers and students can be identified.
Early Adopters
The ideal customer for the company to work with can be characterized as the person concerned with healthy eating and the one, who attempts at reducing the possibility of developing diseases due to bad habits.
Problem
An overview of the existing fast food companies has shown that most of the food provided within the industry is highly saturated in fats and other nutrients, which have a deleterious impact on people’s health. Among the key ones, the following issues deserve to be mentioned:
Threat of obesity due to the low nutritional value, as well as increased high fat and cholesterol rates;
Threat of a cardiovascular disease due to high fat saturation (Mytton et al. 2).
Though not numerous, the specified factors still make the use of fast food rather questionable in terms of the consequences for the health of the person consuming it.
Existing Alternatives
Though the amount of companies, which serve home cooked meals, is quite limited, they
Unique Value Proposition
Home cooked food, in its turn, does not contain the elements mentioned above. Therefore, it is assumed that the existing niche for home cooked food can be filled successfully.
High-Level Concept
The organization in question, therefore, will represent the McDonald’s, the KFC or the Burger King for those, who are willing to eat not only cheap, but also healthy food.
Solution
A closer look at the subject matter will show that the harm, which is caused by fast food, occurs due to the methods of cooking adopted in the industry. As a result, the fast food encourages for an increase in the calorie intake. The innovative approach adopted by the company in question concerns refraining from using trans-fats, as well as incorporating reasonable amounts of salt into the dishes cooked. Specifically, butter, olive oil and coconut oil deserve to be mentioned as the key ingredients of the food served by the company.
Channels
The food produced by the company will be distributed to retailers in the local shops, which are going to be a part of the company’s restaurant chain. The principle, according to which the food will be supplied to the end customer, will be similar to that one used by the aforementioned rival companies (e.g., McDonalds, Burger King, KFC, etc.).
It is also suggested that the food produced by the organization should be available in the local shops; therefore, the approach involving the introduction of retailers into the channel list should be viewed as an opportunity.
Revenue Streams
Among the key sources of revenue, the profit obtained from selling the fast food products to the customers should be listed.
Cost Structure
The fixed costs include the rent for the premises and equipment, as well as the utility bills, property taxes, insurance and the staff’s salaries. Among the key variable costs, direct materials, commissions and freight out costs deserve to be mentioned.
Key Metrics
In order to evaluate the efficacy of the business, one will have to keep an eye on the sales revenue; it is expected to reach the mark of $2,000,000 within the first year of the company’s operations. In addition, the customer retention rates and the gross margin size should be incorporated into the company’s analysis (Stahl et al. 47).
Unfair Advantage
The lean business model, which will serve as the basis for the business to evolve, can be considered the company’s unfair advantage.
Works Cited
Mytton, Oliver, Dushy Clarke, and Mike Rayner. “Taxing Unhealthy Food and Drinks to Improve Health.”BMJ 344.e2931 (2012):1–7. Print.
Stahl, Florian, Mark Heitmann, Donald R. Lehmann, & Scott A. Neslin. “The Impact of Brand Equity on Customer Acquisition, Retention, and Profit Margin.” Journal of Marketing 76.1 (2012), 44–63. Print.
To open a restaurant in my town, I need to go through the following steps of the strategic retail planning process. First, I have to define the mission of my restaurant, i.e. to develop a statement, which describes the function and advantages of my organization, such as the following. In my restaurant, a customer will be offered high-quality food products prepared in a short period of time with professional staff in a comfortable place with good music. Second, I need to perform the situation audit. This step will include market attractiveness analysis, which is the analysis of my possibilities to receive profit in this market. I have to assess the number of people, who may be interested in visiting my restaurant and the popularity of the restaurants of such kind (with a certain menu, interior design, and music) in this region. On the same step, I should fulfill the competitor analysis, which is the examination of all the restaurant businesses that may be my rivals, their advantages and disadvantages.
Additionally, the self-analysis is needed: I have to evaluate my personal abilities as a manager and a leader. Next, I should identify the strategic opportunities of my future business, i.e. to find the ways to attract people to my particular type of restaurant. Then, I have to evaluate the strategic alternatives, which requires choosing the ways to secure my restaurant business from severe losses. Since my business is new, I will focus on price to make my restaurant more competitive. Then, I need to establish precise objectives, such as 1) open the restaurant, 2) attract customers, 3) hire professional staff, and allocate resources for these objectives. Finally, I will develop a marketing mix to make my restaurant successful. For the mix, I will introduce the products that are popular within my target market, choose a convenient place for my restaurant to ensure the high number of visits, establish attractive prices, and develop and appropriate advertising policy, making stress on good prices and comfortable atmosphere (Levy et al. 107).
Works Cited
Levy, Michael, Barton Weitz and Dea Watson. Retailing Management. 4th ed. 2014. Toronto, Canada: McGraw-Hill Ryerson. Print.
