The new restaurant will sell a wide variety of Indian Cuisine from its secondary retail location which is the Earls court area of London. The different types of foods that will be served in the restaurant will include Samosas, Nan bread, Tandoori, rice, biryani, balti, jalfrezi, karahi, bhuna, vindaloo, madras, noodles, burgers, desserts, beverages, special dishes, and side orders such as aloo and potatoes as appropriate for the different seasons as it unfolds. In addition, the restaurant will provide a free delivery service for orders above £10 within a 3 mile radius, and will also include a 10% discount for orders above £15. Suppliers will include retail outlets in the Earls court area that sell Asian foods such as Rajah and TRS products from wholesale suppliers in Earls court, Wembley and Southall, which are established cash and carry wholesale outlets for Indian foods in the London area. Wholesale stores such as Tescos and ASDA will also be visited if necessary.
Type of Ownership:
In this case the business will be a partnership based business, in which the major stake holder will control 55 percent of the whole business and the remaining 45% will be controlled by 3 other stakeholders (4 stakeholders' altogether).
The objective of the business is to provide high quality prepared foods and high quality service to the general public. In addition, we foresee to generate sales in excess of £100,000 in the first year!
A questionnaire was not deemed appropriate as the area of location does permit an influx of people, in which it can be said with hind sight that it will be worthwhile to press ahead with the opening of the business.
The following is a table of a price list for potential suppliers:
Gandhi Oriental Foods Southall Food Suppliers Rajtha Food Suppliers (Wembley)
Pounds (£) Pounds (£) Pounds (£)
Bag of gold self raising flour 25kg 8.25 7.99 7.99
Case Barson (Gram Flour) 6 bags 2kg 8.45 6.25 7.99
Drum vegetable oil 15 ltr KTC 7.79 5.99 6.99
Tin Mustard Oil 4 ltr 4.45 3.99 4.99
Tin pure ghee 2 kg 6.25 5.99 5.49
Tin chilli powder 18.9 17.99 17.99
Tin haldi (tumeric) powder 14.9 12.99 13.99
Cinnamon 2kg 5.45 4.99 5.25
Packet Tejpatha (Bay leaves) 750 grams 3.45 2.99
Case boiled chick peas (12) 411 grams 2.85 2.99 2.99
Packet Chana Dai 2kg 1.95 1.99 0.99
Jar mint sauce 3kg 2.95 2.99 1.99
Bag Salt 12.5kg 2.95 2.99 1.99
Case cathey container 26.9 25.99 22.99
Case carrier bag large 250 12.49 11.99 11.99
Case Cobra Beer large (12) 650ml 16.5 13.99 13.5
Kingfisher beer (12) 660ml 16.95 14.99 15.99
Basmati Rice (2kg) 12.99 11.99 12.99
Tilda Rice (2kg) 14.99 13.99 13.99
Sureeya Rice (2kg) 11.99 9.99 9.99
Lamb (per kilo)
Chops 3.99 3.99 3.99
Liver and Heart 2.17 1.99 2.17
Leg 7.49 6.99 7.5
Shoulder 7.29 6.99 7.25
Back Chops 6.19 5.99 5.7
Chicken (per kilo)
Leg Boneless 3.65 2.99 3.45
Wings 2.99 2.99 2.99
Roasters 2.17 2.25 2.2
Leg 1.18 1.25 1.1
Boneless 4.99 3.99 3.99
Sheep (per Kilo)
Chop 3.5 2.99 3.25
Neck 2.64 2.49 2.5
Ribs 2.17 1.99 1.99
Leg 4.99 4.99 4.99
Shoulders 4.89 4.99 4.5
Back Chops 4.15 3.99 3.99
Names Strengths Weaknesses
Lapappardella Ristorante (Italian) • Located off earls court road, very busy at weekends. • Limited range (mainly pasta)
Zizzi (Italian Restaurant) • Located on the high street (Earls court road)
• New and modern European) • It is a bit cramped in the sitting area
Nandos Restaurant • Very popular for its grilled and flamed chicken.
• Very busy at most times of the day and weekends.
• A very strong competitor • Limited range of food served (mainly chicken)
Dragon Palace (Chinese Restaurant) • Very competitive in terms of its different types of foods served. • It is cramped with limited space for more customers
Masala Zone • Recently opened and new in the area.
• It serves mainly Indian foods.
• It is a powerful competitor as its items are geared towards city life, i.e. city workers etc. • It is not as popular yet.
• It range of items sold to the public is limited.
Bibimbub (Oriental fusion dishes) • Quite a wide variety of oriental dishes and cuisine.
• Very busy at the weekends
• Its foods are geared towards nutritional and healthy diets • Although located on the high street, it is very cramp with limited space for a large number of customers to eat.
Lotus Garden (Chinese restaurant) • A wide variety of Chinese food • As mentioned the sitting area is cramped.
Information on Bank Loans:
Having carried out an in-depth search for the best rates offered by banks, one came to the conclusion that the rates offered by the Halifax, offered the best rates when it came to obtaining a bank loan.
• For loans between £5,000 and £100,000, there is a variable discounted rate of 0.10% below Bank of Scotland Base Rate.
• For the remaining term of the loan the rate then changes to 3% above Bank of Scotland Base Rate and remains on variable rate terms for the rest of the loan.
• For the fixed rate business loan the rates are published on the Halifax website every fortnightly, in which the interest rates are based on LIBOR (London Inter Bank Offered Rate) plus a margin.
• In addition, security is required on any property or assets that this agreed with the bank. The overall cost of comparison is 11.1% APR. The actual rate available will depend upon the outcome of the initial start-up capital.
Most of the information collated with regards to the price of items and competitors were gathered by the stakeholders of the restaurant.
The factors that are deemed as possible effects on the demand for the service are:
• The price of the items sold to customers.
• The quality of the menu and how it is served to customers.
• The type of products used to serve the menu items, e.g. fresh farm produce, organic foods, and completeness.
• The customer service offered to customers will be a deciding factor in how the restaurant is viewed on from its initial opening.
• The way the competitors mentioned above respond to our presence in the Earls court area will play a part in how our customer base grows.
• The state of the economy, e.g. rising personal incomes, changes in interest rates and the change in house prices.
• In addition, because Indian cuisine has been a rising trend in British society over the past 6 years, it is expected that the demand for this growing in-fashion trend will continue to rise for the foreseeable future.
The majority of existing customers we expect to come into the restaurant will be based within a 4 mile radius of the Earls court area. Typically, they will be single people, couples, tourists and families all wanting to go out and have a good meal. It is expected that they will be middle class and above, who come from very affluent backgrounds. Most of the potential customers expected will be people who earn on average, incomes starting from £17,000 upwards.
The potential strengths and weaknesses of competitors have been commented upon in the competition table. In retrospect, it is believed that the prices we will be offering with regard to items on our price list will be set below the average price of our major competitors mentioned i.e., Masala, Zone, Nandos, and Zizzis.
This will enable us compete with our competitors head-on and with hind sight we will be able to carve out a growing market share into the future for the business.
In addition, the items we are offering has a much wider range than our competitors in which the quality of the products used (fresh farm produce and organic), will set us above the competitors mentioned.
Also, the service we ascribe to present to customers will be far reaching than our competitors. I.e. a waiter/waitress will always be on hand to attend to customer questions, taking customers to their table, and always making sure that the customer is satisfied with how they are being treated and offered in the 'Star of India' cuisine.
The use of the marketing mix will be used to start off the business. They are product, price, place and promotion.
Product/Service: The product / service that will be offered to customers as a whole will mainly be organic foods which include fresh farm produce from suppliers, whole sale outlets and also canned items from the suppliers mentioned above. The service will consist of customers coming into the restaurant to have a meal or take away, in which there will be a seating area for smoking and non-smoking. Also, a waiter/waitress will be on hand to serve and assist customers on the wide range of different cuisines available. As stated previously, there will be a free delivery service for orders above £10 and a 10% discount on orders above £15. This will change subject to seasonal demand.
Price: The use of pricing strategies such as penetration pricing, promotional pricing, and price discrimination will be used to market the items offered by the restaurant.
• Penetration pricing will be used to set a low initial price in order to penetrate the market quickly and deeply, so as to attract a large number of customers quickly and win a large market share. With time the high sales volume will result in falling costs, allowing the restaurant to cut its price even further.
• With promotional pricing, the restaurant will temporarily price its items or products below the list price and sometimes even below cost. This will take several forms. I.e. a few items or products will be priced as loss leaders so as to attract customers into the restaurant in the hope that they will buy items at normal mark-ups.
• Price discrimination will be used to offer customers different prices for the same items or products offered by the restaurant. For example, if a customer ordered a special dish, it would automatically come with a side order of rice, in which the price is already included in the price of the special dish. However, if they ordered rice separately and the sauce separately, they would have to pay different prices for the two items.
Price list for 'The Star of India'
The Star of India Appetisers Price (£)
Chicken Samosa £3.20
Veg Samosa £3.20
Lamb Samosa £3.20
Sheek Kebab £2.40
Shami Kebab £2.40
Chicken or Lamb Tikka £2.40
Chicken Chatt £2.40
Aloo Chatt £2.40
King Prawn Butterfly £3.50
Potatoes of the day £2.75
The Star of India Breads
Keema Nan £1.80
Vegetable Nan £1.80
Peshwari Nan £1.80
Garlic Nan £1.80
Balti Nan £1.80
Paratha Nan £1.40
Stuffed Paratha £1.80
Tandoori Roti £1.20
The Star of India Tandoori Delicacies
Half Tandoori Chicken £4.70
Whole Tandoori Chicken £9.20
Chicken or Lamb Tikka £4.70
Chicken or Lamb Shaslik £5.50
Coconut Chicken £5.50
Tandoori King Prawn £8.40
Garlic Chicken £5.50
Tandoori Mixed Grill with nan £7.95
The Star of India Rice Delicacies
Pilau Rice £1.60
Boiled Rice £1.50
Mushroom Rice £1.95
Egg Fried Rice £1.95
Lebu Rice £1.95
Garlic Rice £1.95
Narial Chawal £1.95
Vegetable Rice £1.95
Special Fried Rice £1.95
Keema Rice £2.25
The Star of India Biryani Delicacies
Chicken, Meat or Prawn £5.50
King Prawn £8.40
Chicken or Lamb Tikka £5.75
Tandoori Chicken £5.75
The Star of India Special £6.50
The Star of India Balti Delicacies
Chicken, Meat or Prawn £5.75
King Prawn £8.40
The Star of India Special £6.95
Chicken or Lamb Tikka £6.75
Chicken, Meat or Lamb Sagwala, Jalfrezi, Dhansak £5.95
The Star of India Jalfrezi Delicacies
Chicken Jalfrezi £4.60
Prawn Jalfrezi £5.70
Lamb Jalfrezi £4.60
King Prawn Jalfrezi £7.40
Chicken Tikka Jalfrezi £5.60
Lamb Tikka Jalfrezi £5.60
Vegetable Jalfrezi £4.95
The Star of India Karahi Delicacies
Chicken Karahi £5.20
Prawn Karahi £5.70
Lamb Karahi £5.20
King Prawn Bhuna Karahi £7.40
Chicken Tikka Karahi £5.60
Lamb Tikka Karahi £5.60
Vegetable Karahi £4.95
The Star of India Bhuna Delicacies
Chicken Bhuna £4.40
Prawn Bhuna £5.40
Lamb Bhuna £4.40
King Prawn Bhuna £7.40
Chicken Tikka Bhuna £5.70
Lamb Tikka Bhuna £5.70
Vegetable Bhuna £4.95
The Star of India Vindaloo / Madras Delicacies
Chicken / Lamb Curry £4.10
Chicken / Lamb Madras £4.50
Chicken / Lamb Vindaloo £4.50
Prawn Curry / Madras / Vindaloo £4.80
King Prawn Curry / Madras / Vindaloo £6.50
Vegetable Curry £3.95
The Star of India Noodles
Malabar Seafood £5.70
Chicken Madras £5.20
Konkan Chicken £5.20
Malabar veg £5.20
Veg madras £5.20
The Star of India Burgers
Lamb Burger £5.20
Chicken Burger £4.80
Veggie Burger £4.80
The Star of India Special Dishes
The Star of India Special £5.90
The Star of India Khazana £6.95
Nawabi Chicken £5.90
Murgh Charga £5.90
Achari Chicken £5.90
Chingri Bahar £7.95
Lamb Nashilee £5.90
Ghoust Laziz £5.90
Jerra Chicken Massala £5.90
Kufta Massala £5.90
King Prawn Delight £7.95
Shaslik Massala £5.90
Garlic Green Chilli Massala £5.90
Special Tandoori King Prawn Massala £7.95
Butter Chicken £5.90
Peshwari Chicken £5.90
Black Pepper Chicken £5.90
Black Pepper King Prawn £7.95
Chicken Tikka Podeena £5.90
Chicken Tikka Massala £5.90
Chicken Tikka Pasanda £5.90
Chicken Tikka Markhani £5.90
Chicken Rezala £5.90
The Star of India Desserts
Gulab Jamun £2.10
Chocolate, Vanilla, and Raspberry Ice Cream £2.10
The Star of India Beverages
Fruit Juices £1.30
Mango and Coconut Lassi £1.20
Masala Chai £1.00
Coke or Diet Coke £0.65
Mineral Water £0.65
Place: The business will be located in the Earls Court area of central London. The reasoning behind the Earls court area is due to the fact that it is a prime secondary site close to a large number of tourist hotels, which is frequently busy the whole year round in central London. A map of the area is shown below:
The restaurant will be located on Earls Court road, opposite Nevern Place, which is off Earls Court Road. There are two vacant outlets there. The major competitors the restaurant will face include, the Masala zone, which is the only Indian restaurant on the Earls court road, Zizzi, which is a trendy new Italian restaurant just opened about 6 months ago, Nandos which is a Portuguese eatery that specialises in grilled and flamed Chicken, and a number of Oriental restaurants including Chinese and Thai restaurants.
Having said this, the main competitor will be the Masala zone, because, although the items it offers to customers are not as wide ranging as the proposed items we are offering at the Star of India restaurant, it is bound to be our major competitor. Notwithstanding, the potential customers we foresee to attract include, students, tourists, office workers, and members of the general public.
Promotion: This is the specific mix of advertising, personal selling, sales promotion and public relations that a company uses to pursue its advertising and marketing objectives.
• There will be very limited advertising in the local paper: the restaurant opening and seasonal sales. It is proposed that we will get a well known Indian Chef to open the restaurant.
• Extensive promotion to students and restaurant discounts will be carried out. Displays will be mounted in front of the restaurant at its initial opening with leaflets being distributed to the general public. In addition special evenings will be arranged, e.g. buffets at 12 pm to 2pm.
• In-restaurant seasonal promotions for certain items on the menu will be offered to customers. This could include special discounts on loss leader items such as a free meal when you spend over £20 to get customers into the restaurant.
• Restaurant displays would emphasise the Asian feel.
This will start of with all the relevant ingredients required to prepare all the meals mentioned in the price list bought and stocked in the fridge and store. Then there will be a waiter/waitress on hand to attend to all customer orders. This will be followed by the waiter/waitress presenting the order to the chefs, who will then prepare the relevant meal in the kitchen (see physical resources). Usually takes between 10 to 15 minutes. Once prepared, the chef will place a call for the waiter/waitress to pick up the meal and present it to the customer. In general it will all depend on what the customer has ordered. For appetizers, it will usually take 5 to 10 minutes for it to be presented to the customer.
The quantity of the items served and sold to customers will be high grade fresh farm produce, in which it is expected that on average each month, £10,000 worth of sales will be made. This is forecasted to increase during the winter months because of the cold weather (seasonal demand). The reasoning behind this figure is that, Indian food has become a hit in the UK, whereby there has been a steady rise in the number of people ordering Indian takeaways, and also an increase in the number of sales made within supermarket stores,(Sainsbury's, Tescos) for Indian food recipes and pre-prepared Indian meals.
In addition, a promotional campaign of leaflets will be used heavily at the initial stage of its opening. Plant, machinery, and equipment such as a Chester cooker, big and small hot plate, a big deep fryer, sink, tables, chairs, etc, will all be required (apart from the Chester cooker, all other machinery will be purchase as new) to make sure that the restaurant is in an excellent condition to prepare and serve all customers alike.
Most importantly more items will be purchased during the winter months as demand is expected to increase during this period.
Both financial and physical resources will play a major part in how the business unfolds right from its opening.
Financial resources: the lease purchase will be £70,000 and will last for 25 years, redecoration of the place will cost approximately £6,000, fixtures and fittings will cost £15,000. Thereby in total it will cost £91,000 to finance the business.
Labour costs with regard to redecoration, fixtures and fittings, and already included in the rounded figures of £6,000 and £15,000, in which the payments will be deducted from both, and if it needs be there is an extra £2,000 set aside for unforeseen costs. This can be used to settle any labour costs that might arise.
In addition, it is expected that three labourers and a painter will be required to carryout this job from start to finish, in which a wage salary of £8 an hour is deemed as the average salary cap for labourers. For the painter the wage salary has been negotiated as £7 an hour as there job requirement is less strenuous as compared to the labourers.
In the initial stage about £50,000 will be required as start-up capital and it will cost about £100,000 working capital to fund the day-to-day operations of the firm per annum.
Physical resources: This will include all the physical items required to make the restaurant excellent.
• The equipment required will include a big hotplate (£1,000), a small hotplate (£400).
• A Chester cooker (£1,000)
• Rods for nan kebab, sheek kebab, tandoori chicken, and lamb kebab (£600)
• Cooking Utensils (£2,000)
• Cooler freezer (£5,000)
• Fryer (£500)
• Stainless Steel Table (£500)
• Sink (£500)
• Dishes, Plates and Cutleries (£10,000)
• Tables and Chairs (£100 and £80 each)
• Heat/Light/Power (£1,600)
All the items mentioned above apart from the tables and chairs will be purchased from Kelkoo. They are one of the leading manufacturers in Kitchen equipment and machinery.
In addition three vehicles will be used to carry out the operations of the business, two costing, £8,000 each and the third (delivery van) will cost £9,000. Two of the vehicles will be used for take away deliveries, and the other vehicle will be used as a stock delivery van. As the business expands, freelance drivers will be employed to expand our delivery service.
There will be three co-partners in the business, in which I will be the majority stake holder and assume the role of general manager; the other two will take the roles of managers at different intervals of the month.
There will be seven staff members. Two kitchen chefs, one kitchen porter, two waiter/waitresses, and two bar staff. They will be recruited through job recruitment agencies such as job centre plus, catering recruitment centres and also the vacancies will be placed in national newspapers such as metro and the evening standard.
It will cost nothing to place a job description in job centre plus and the metro newspaper, however for the catering recruitment agencies, it will cost £20, and the evening standard £10, all monthly.
There will be a pre-requisite to hire staff members who have some previous experience in preparing Indian food. However, the head chef and the head bar manager will be one who has all the experience in preparing Indian food and taking care of the bar.
The other staff members such as the second chef and the other bar staff will not have to have any experience, but must be willing to show signs of wanting to learn. They will be trained by both the head chef and the head bar manager.
The training will cost nothing, in which the time estimate to setup the business, right from the very start to its complete look, will take 3 months.
Financial Analysis and Planning:
Sources of finance
£80,000 of the stakeholder's funds which includes funds from the majority stakeholder and the other stakeholders (£36,000) will be used to finance the business. In addition to cover the remaining capital required to fund the business.
A bank loan of £55,000 will be negotiated on the discounted rate interest of 0.10% which is below the Bank of Scotland Base Rate, in which an overdraft facility of £25,000 will also be negotiated with the Halifax bank.
Apart from the Chester cook (will be bought second hand), all other equipment and machinery will be bought so as to establish a new presence feel for the new business in which it is expected to grow in customer size from its initial opening.
Trade credit from potential suppliers such as Rajtha food suppliers, Wembley, will be negotiated in order to establish what is required and the timing of monthly deliveries to the restaurant. This is highly necessary so that the cuisine does not run short of needed supplies when required. This will all be negotiated with the suppliers.
A capital budget of £142,300 will be required at the initial stage and then that figure is expected to drop after the restaurant has been opened. In addition, depending on the time of the year (seasonal demand), a sales budget of £10,000 monthly is required. The purchase budget will be £52,300, and the overheads budget will be £10,995.
The capital budget figure was calculated as a sum of the lease purchase (£70,000), redecoration of the place (£6,000), fixtures and fittings (£15,000), the physical resources mentioned (£26,300), and the vehicles required to carry out the operations of the business (£25,000).
The sales budget figure was arrived on the suggestion that we believe that on average per month the business will be able to generate sales of £10,000 as mentioned previously, in which at the end of the first year a general sales figure of £318,425.
The purchase budget is the sum of all the physical resources mentioned (£27,300), and the vehicles mentioned (£25,000).
The overheads budget was calculated as the sum of wages/salaries monthly (£6,220), advertising monthly (£30), insurance monthly (£545), telephone monthly (£1,000), stationery including leaflets to promote the business as when needed (£1,200) and any unforeseen costs (£2,000) that may arise.
Cash Flow Statement:
Please see Excel sheet (107192(1).rtf) for the 'Cash flow forecast for Star of India'.
From the table of the cash flow forecast for 'The Star of India's cash flow, it shows a positive cash flow forecast exists in both the opening and closing balance, per annum. This occurs because one has added the capital introduced and grants/loans of £142,300 and carried it into the following year, which is then subtracted from the payments.
Break – Even Forecasts:
Forecast profit and loss account
Business: The Star of India' Restaurant
Period: Year to Apr. 2007
Sales: £0 £318425 (A)
Less direct (var.)costs:
Redecorating and Fittings £21,000
Physical Resources £26,300
Direct wages £
Total direct (var.) costs: £47,300
Gross profit / contribution: £271,125 (B)
Fixed costs (overheads):
Lease Purchase £70,000
Lease Purchase £70,000
Unforeseen costs £2,000
Sundry and Prof. fees £500
Total fixed costs: £250,405 ©
Net profit £20,720
Less drawings or dividends £5,000
Profit retained in the business £15,720
Break-even point = (C) × (A)
That gives approximately, 250,000 × 320,000 = 296,296 units
The breakeven analysis is 296,296 units.
The number of items that is believed to be profitable will be the 'Star of India', appetisers, breads, rice delicacies, biryani, special dishes, and Indian desserts, in which it is expected that the customers expected to try this new cuisine will mainly be office workers, a handful of tourists, and local families in the 4 mile area of Earls Court.
Is the Business profitable?
The business has been geared towards being profitable by having enough funds to make it work and remain profitable. This is the reason the £15,720 in its first year of opening. After which the costs associated with running the business decreases.
The following is the projected balance sheet for 'The star of India':
Projected Balance Sheet for 'The star of India' restaurant.
Current Assets 2007 (£)
Other Current Assets £70,000
Total Current Assets 115,250
Long-term Assets £186,105
Accumulated Depreciation £16,000
Total Long-term Assets £170,105
Total Assets £285,355
Accounts Payable £186,105
Current Borrowing £55,000
Other Current Liabilities £0
Subtotal Current Liabilities £241,105
Long-term Liabilities £0
Total Liabilities £241,105
Paid-in Capital £318,425
Retained Earnings £104,500
Total Capital £487,075
Total Liabilities and Capital £285,355
Net Worth £487,075
All figures are derived from the cash-flow forecast (attached xls sheet) and the forecasted profit and loss account from the abovementioned tables. In general, due to the high cash stockpile to invest and finance the business, the figures proof that the cuisine will be profitable.
Viability of the Business plan:
The positive figures show that the business will be successful. It is a very good idea in-terms of an investment potential in an international location which is the city of London. In relation to the massive increase of personal disposable incomes in a wide scale, there is a growing demand for this type of cuisine, particularly in the cold winters.
In every major city in the United Kingdom, there is an Indian cuisine which is well established, but the city of London is a diverse place with so many people from around the globe, and so the investment into this type of business is deemed to be profitable.
There will be competition with regards to other types of foods in restaurants in the Earls court area of London, i.e., Masala Zone (Indian), Nandos (Portuguese), Chinese (Oriental), and Zizzis (Italian), however, Indian has sporadically become one of the most trendiest, and fashion and healthy eateries in the United Kingdom in the past 6 years and it is growing.
Customers will come into the 'The Star of Indian', because there is not as much a wider variety of Indian cuisine (only, Masala Zone). The variety on the price list for items will attract customers into the business and have a good meal and remain customers, whereby other competitors will loose customers to us.
'The business plan' for 'The Star of India' will start at a steady pace of increasing market share in the Earl's court area of London for the four months of operations. The market share will increase during the winter months.
The business plan is financially viable, particularly if the stakeholders put forward a huge sum of £80,000. This will enable the business to start-of with no financial worries. In addition, the bank loan of £55,000 will also make the business idea worthwhile.
The financial forecast are 75% based on realistic figures. In addition, the breakeven chart below shows that 296,296 units of the items listed on the price list must be sold before the firm will begin to realize a profit.
The Breakeven Chart.
The Profit region
400 Total Cost
The Breakeven Point
300 safety Variable Cost
250 Fixed Cost
0 10 20 30 40 50 60 70 80
The breakeven chart shows that the business is viable, particularly after the first year of business. In addition one is likely to breakeven. This is shown on the cash flow sheet, in which at the end of the year the closing balance is £64,150 profit.
The profit and loss statement shows that this business plan is viable. This is proved by the retained which is £15,720. The retain profit is enough to keep the business afloat for at least another year.
The return on capital employed is = EBIT (earnings before interest and tax) × 100.
= 20,750 × 100
This shows that the business is bound to make a 10.51% rate of profit in its first year of business.
The gross profit margin = 132,320 × 100
This shows that the business will increase its gross profit by 41.55% in its first year of operations.
The net profit margin = 20,750 × 100
This shows that the net profit margin will increase by 6.5% in its first year of operations.
Since there are only four stakeholders, the ability to reward them and the repayment of the bank loan can be deemed as possible. One could pay out dividends to the three stakeholders to the sum of £2,400 (each) in the first year of business, from the retained profit of £15,720.
The remainder of the retained profit £8,646, will go to the majority stakeholder who has a 55% stake in the business as mentioned previously. In addition, alternative financial requirements are not necessary because since the business is one starting from scratch it is deemed that the cash pile will play an important role in its first year of operations.
The capital introduced of £142,300 and the bank loan of £55,000, enables the business not to need anymore capital. If any extra capital is needed for unforeseen circumstances, the bank overdraft will prove well needed and also there is a £2,000 amount set aside in addition to this.
The suppliers are the best in the country with regard to the competitive price list of items required for the food service we hope to achieve at 'The Star of India'. The overheads budget is very reasonable considering the business is one that is to be started from scratch, rather than buying it off from someone else.
The sales figure of an average per month of £10,000 is moderate considering we will only be in the first year of business. This is believed to increase in the second and third year of opening, as the business becomes established and more known to the general public and customers in the Earls court area of central London.
In retrospect, in the first year of business, it will be advisable to start-off with low prices on loss leader items, such as the Appetisers and special dishes which comes with rice already, so as to attract customers in the Earls court area. After which only after we have established the business (possibly in the third year of operations), possibly increases in the price of delicacies could be carried out.
There will be no need to market the business in a different way. It will be worthwhile to ascertain how the business does in its first year of operations after which, at the end of the first year a review can be carried as to what needs to be done if the business is making a profit or not. However, with the huge cash stock pile introduced into the business, the 'Star of India' is bound to make a profit, hence no need to market the business in a different way.
The approach taking is that the business plan writer is one of the stakeholders, for the simple fact that, why will one want to do a business plan if they are not keen and interested in opening a business.
There are three other stakeholders, all having a stake in the business. Three is an excellent number because for a restaurant business it needs only a handful of investors and not a large shareholder number.
The approach taken to write up the business plan is on the grounds that the majority stakeholder has £100,000 to invest in a restaurant business, with the other stakeholders seeing it as an excellent business opportunity into a market that has potential in the Earls court area of London. That is why the business is forecasted as profitable at the end of its first year of operations.
In addition, the bank loan (£55,000) and overdraft facility (£25,000), will enable the business to stay afloat throughout its first year of opening, in which in the second year its sales is forecasted to increase with popularity and presence in the Earls court area. This will exponentially increase in the third year of opening.
The remaining figures used have been gathered from the Halifax, copies of price list items for suppliers were gathered from an already established Indian restaurant in the Earls Court area of London and the price of items for foods, were gathered from a range of well known and established Indian restaurant both in the greater London area of Hertfordshire and central London.
Hence, the approach taking to construct this business plan can be deemed as highly realistic.
In section 1, one has decided to go for a wider range of cuisine items, because having visited the Earls court are and looked at the menus of potential competitors, it was identified that, variety was non-existent on the menus looked at.
Only the Chinese and oriental restaurant's had a wider food range. This is why the sales figure is forecasted to be in excess of £100,000.
There are no disadvantaged with the abovementioned as this has been thoroughly investigated.
In section2, the primary data was collated from real wholesale / retail prices. This is used so as to try and a get a realistic conclusion to ones findings.
The decision to include and show potential competitor strengthens and weaknesses can be stated as appropriate. This will enable one to identify the exact type of competition they are bound to face n the restaurant business of the Earls court area of central London.
The decision to use the Halifax for the 'information on bank loans' is based on the finding that the Halifax bank offered the best rates compared with other major banks in the UK, when it comes to obtaining a bank loan.
In addition, because the Earls court area of London is located in an above average earning gap, it is believed, in time the business will grow and surpass its competitors in the area.
There are no disadvantages one could identify.
In section 3, the marketing plan approach of products/service, price, place and promotion, have been carefully assessed and gathered. Obviously, the service we are providing is first class. I.e. a waiter/waitress is on hand to attend to customer queries, and the use of fresh farm produce in preparing all the items on its food menu.
However, it is believed, the use of penetration pricing, promotional and price discrimination is highly required. This is because the use of any of these strategies will enable us to gain market share.
The promotions of 10% discount on orders over £15 and a free meal on orders over £20 is needed so as to gain more customers, and hence increase market share.
Since this has been carefully orchestrated, researched and investigated upon, the disadvantages are minimal.
In section 4, the approach for the production process is based on a real observation of an established Indian restaurant in the London area that was identified as being busy with a lot of customers. This was observed over a four day period between 8pm and 10pm.
Hence cooking minutes is suggested on average as being between 10 – 15 minutes, in which appetizers will take 5 – 10 minutes to present to hungry customers.
The summation of £10,000 is also based on the observation that with a standard approach as seen and mentioned with regards to the observation in other Indian restaurants, it is believed the business could potentially earn on average monthly £10,000.
There are minimal disadvantages to the approach used.
In section 5, the financial resources and physical resources are based on realistic findings. The figures were collated through interviews with managers in four Indian restaurants in the London area, including Earls court.
Therefore, the approach can be said to be as near realistic as it can be.
The disadvantages with regard to the accuracy of the figures are minimal.
In section6, the approach taken is based on the stakeholders, who have a combined capital introduction of £80,000 to invest into the 'The Star of India' restaurant. Hence, it can be deemed that they are quite well off in the first place.
The bank loan is based on a realistic figure from the bank of Scotland (Halifax). Interest payments on the loan are not repayable until after the first year of operations.
Contrary to the above mentioned a manager in one of the leading established Indian restaurant was interviewed, in which it was mentioned that the Chester cook from the physical resources required, is one that comes second-hand in all established Indian restaurants in the UK.
The capital budget approach is based on real and hypothetical figures. However, it was identified that if this business was going to be successful, a huge initial capital introduction was required. Hence the approach of having well off stakeholders (£80,000) is tabled.
This is the main reason why the business remains profitable at the end of its first year of operations.
The disadvantages are that the sales figures could prove too optimistic, hence it's a question of making sure that the business plan is constantly reviewed so that the sales target could be met, and also to be able to foresee any losses when there is a lack of customers.
In section 7, the viability of the business is deemed to be a highly successful one. This is shown by the positive figures in the break-even chart analysis of the return on capital employed and the net profit.
The approach taken is based on the findings of what was observed and collated in the Earls court area of London.
Its competitors such as Nandos and the Chinese restaurants are very strong, because they have been established in the Earls court area for sometime, hence it might prove difficult in the short-term to pull-in new customers and to retain them. I.e. increase market share.
As mentioned previously, the disadvantages with regards to this approach relates to the figures generated. The figures calculated might prove too optimistic. Thereby a constant review of the viability of the business plan might prove advantageous.
Burns, P., (2001), Entrepreneurship and small business, Palgrave.
Pike, R., and Neale, B., Corporate finance and investment, 4th edition, Prentice Hall, FT.
Kotler, Wong, Saunders, and Armstrong, (2005), The principles of marketing, Pearson, Prentice Hall.
Various observations and conversations were held with managers of restaurants in the Earls court area, central London.