Is there a Scope for a new Vegeterian restarunt in Burpark?

1 Introduction

In Luton there are only limited amount of restaurants that serves vegeterian food and have healthy options. Due to the increase in percentage of people nationwide that are trying to eat a healthier diet and run healthier lifestyle, it seems as though there is a slight niche in the market here.

When this niche is contemplated there is a chance that a a restaurant suppling vegeterian food may be succseful survive or in the future make profts.

There are many fatty fast food restaurants in the area, such as Southern fried Chicken khalal fried chicken nevrtheless no vegeterian or healthy food can be bought in these two places.

BuryPArk is is a small area with one main street which mainly consists of tertiary sector small retail stores and many housing area around this central street. The retail stores bring consumers into the area with cash to buy goods with and some of this money will be spent on meals while the consumer is out of their home.

The surrounding area is largely residential so those residents may become regular customers and visit often due to the ease of getting to the restaurant from their homes.

The success of this Venture can be measured by profitability of the branch in the first year of the opening. This time scale is adequate because it will allow for time for customers to become regulars and for the brand awareness to spread. A whole year is needed to measure the success of the store because as the seasons chance, so do people's habits so there will be fluctuations in consumer spending patterns, for example right before Christmas or other special occasitions that are upcoming as Eid which is celberatede by the majority of the Muslim population situated near Bury park when lots of people will go out to buy presents they will eat also.

Without objectives any firm will fail. Objectives are usually the firm's targets but they are written out in such a way so that they are SMART (specific, measurable, agreed, realistic, time measured). The main objective is to create a feasibility study into the profitability of setting up a restaurant in Luton.

My secondary objectives contain the following parameters:

Competitors

Competitors must be considered when creating a feasibility study. They must be analysed to see if they will be a threat to the firm or if they will provide slight competition. Competition can also be good for a firm as it helps the firm become more productive and efficient as each business wants to do better than the others so works harder at doing so.

Suppliers

Where will a business get its stock from? Will the food still be fresh after a long journey from the suppliers? The location of suppliers is just as important to the cost of stock, especially in the food business where freshness is the key to quality and quality is the main way the business uses to attract customers.

Customers

Customers form the basis of any business. Without them, the business would not be able to create any revenue and would therefore fail.

Brand Image

The brand image is how customers will distinguish your product from the others in the same market. If customers think higher of one product over another then they are far more likely to buy the product which they prefer unless the value they place on it is less than the price. Having a large brand image will help get customers to be loyal to a business or product and not go to competition instead.

Finances

Cash is the gears behind a business that make it work. The cash is used in every transaction a firm does with anyone else and is used by businesses to help in growth. Money is needed to start and maintain a business so is fairly important and should be considered in much detail.

These secondary objectives will then help me in making my conclusions which support my primary objective which was to analyse the profitability of opening a Vegeterian restaurant in Burypark.

Research is the method used to collect information that can later on be used to create plans for the future, for example for creating objectives, aims or targets. This information is data collected directly from the source as raw data. This data must then be sorted and reorganised until it can become useful. Secondary information is data that has already been collected and sorted and can usually be found on hard-copy or by asking experts in the field that is being researched.

This is a preview of the whole essay

This study will mainly consist of secondary research for finding facts and figures about the area of Luton such as the number of residents in the area itself. I will then know my potential market. This information is better than primary information because it is usually done on a very large scale to get the most accurate results possible for the people who use it whereas the results may be very wrong in a small survey done over 15 people. If there are a decent number of residents in the area then I can assume that a fair amount of those people will at some stage visit the subway branch and may become regular customers due to the ease of getting from their homes to the store. Repeat customers have been known to make up the vast majority of the customer base as opposed to one time only customers for most businesses in the restaurant market. Repeat customers are also a good sign of customer satisfaction because if a customer was not satisfied with the service on offer then they would not have come back for a second or more time.

My primary research will be a questionnaire done on the main street in BuryPark and I will make some notes on dining habits in Luton, such as where I see most people going to eat at the lunch hour of the day. This will give a larger insight into the way consumers think and their behaviours. This questionnaire would be conducted at the middle of the main street on the pavement. This questionnaire will be essential into giving me an insight to how customers think and how they view the franchise I am investigating and it will give me a good viewpoint into the percentage of people who would become customers at the store.

I will use systematic sampling to randomly choose the people that will be surveyed in my questionnaire. This will mean I will have to ask every 7th person who walks by during the time specified if they would be interested in participating in a survey about opening a Subway branch of the restaurant on that street, This should give a fairly random sample of people asked as it is out of my control who the 7th person to walk past will be. This should give me a large amount of results as a copious amount of people walk past the area in which I am going to be at so the results should give a fairly good view on the general opinion of people of the area.

I hope to find that competition in the area for the specific market the to will be fairly low or easy to overcome. As in all areas, there will always be a few restaurants so it would be unlikely for there to be no competition in Burypark. Problems may arise if there is already a supply of the same goods and services that I want to supply to the consumers in the area.

To investigate into the competition in the area, I performed some primary research in BuryPark and visited all of the potential competition. The possible competitors include:Al deen which is a fast food retaurant which also sells a litlle vegeterian food and Kebabish. At a glance, it can be seen that these restaurants do not specialize in healthy food and restaurants such Kebabish do not any proper healthy food. Pizza Hut and the local pubs provide some healthy food, but at these restaurants the customer usually pays mostly for the service provided in serving their meal in a relaxing environment so they do not provide it as a fast service. This is a promising aspect so far because all of the potential competitors are not directly linked in the same market. The main competition will be from Kebabish and Pizza Hut due to Pizza Hut's large scale brand awareness and both restaurants provide good quality fast food at an affordable price. The kinds of people who go to these two places to eat may not care much for their diet and it may be tough trying to get customers to change to a healthier option of vegeterian food.

To establish the reasoning why consumers went to Pizza Hut and Kebabish, I stood at their doors for 30 minutes each around lunch time on a working day and asked each person who entered what their reason for wanting to eat at those particular restaurants was and most people responded with something along the lines of that they wanted some food that they could get quickly that was near to where they worked. This is promising for my feasibility study because the restaurant I am conducting a feasibility study into is a fast food restaurant with a healthy theme to it. The consumers now need to be analysed to give further help into my feasibility study into setting up a a Vegetertan fast food restaurant.

Using the above reasoning, I have found that there is some competition in the food market which may be hard to compete against as they may have brand loyalty but most of the customers will be from a more specific niche market, the market of young professionals. This will be analysed more closely when researching the secondary objectives for the customers.

Suppliers

Suppliers are one of the main factors in a businesses running, If the suppliers are charging too much for goods then the firms costs will rise which could cause problems from the firm.

If the restaurant was to buy in extreme quantities of bulk buying, so the cost per unit would be significantly reduced then if each unit were bought separately. The main things to look for in a good supplier are that they must be reliable, supply on time and should be cheaper than other suppliers.

Without customers, any business will fail so before setting up any firm we must be sure that there is sufficient demand on the market to keep the firm running.

There are many ways of finding out about potential customers. One of these is to look at how many people there are living in the area of Luton This is useful because it would be convenient for the residents of that area to often have a quick snack or meal from a fast food restaurant. By using the Census Report of 2003, I have found that approximately 60,000 people live in the area with the postcode beginning with around Luton and BuryPark and suroundidng parameters .This number of residents gives a promising outlook on the number of local potential customers.

Burypark is a area is an area near to the Town centre so many businessmen will work in the local area so would visit Stockbridge at lunch for a quick meal. I feel those people would be the main type of consumer which the product is aimed at. This is because many of those young professionals want a fast lunch so that they can get back to their busy work and they also will want something healthy because young professionals are known to eat and exercise well to keep in shape. One lunchtime on a working day, I went out to BuryPark and inspected the number of young people wearing a suit. The results were as expected as a lot of the people I saw were dressed in this way so we can assume they are young professionals. The main target market will, therefore, be young professionals.

Attitudes are very important in every day life. They can determine what we buy, where we go and what we do. ACORN tells that there is a 60% greater chance of someone being a vegetarian in Buryparkthan the national average. This may be the cause for the low meat consumption in the area. The most popular grocery products are ground coffee, mineral water, fresh fish and fresh fruit. This Vegeterian restarunt will provide its customers with a range of fresh products. It seems that people in Burypark enjoy fresh foods and do not eat much meat..

Unfortunately, winter holidays are 60% more popular and long holidays are 3 times times more popular than the national average so sales may be expected to decrease in the winter and on holiday occasions. Many of the young professionals will not travel though because they will be hard working and want to spend lots of time on their job so may not want to travel far away, such as abroad.

Luton is a a quite affluent area with 3.5 times more people earning 25,000 to 55,000. This will mean there is more professionals in the area than in other places. Professionals take their jobs very seriously and do not have long lunch breaks so fast service is very important along with the healthy lifestyle the majority of people now lead.

Leisure activities are very popular in the area as people are very active. According to ACORN, they do lots of sports so probably live by the attitude of a healthy body is a healthy mind. One part of having a healthy body is the food they eat, eating at Southern fried chicken an unhealthy restaurant in BuryParkwould not be a common option for healthy eaters, instead they would probably prefer a healthy vegeterian health fastfood.The results of my survey indicated that most people questioned in my random sample were between the ages of 14 to 40 as shown in the below distribution graph. These ages are also the type of age which most commonly care about their general health, so it is very promising when these are the sorts of people the target market for the sandwich restaurant would be.

Most of the people in the survey turned out to live in the area. Each person who answered that they would visit the restaurant if one were to open in BuryPArk and also said they lived in the area may become regular customers due to the ease of being able to reach the restaurant and they also expressed an interest in visiting the store. Repeat customers are vital to the success of a business and make up most of the total number of sales a business will receive.

This market seems to have vast amounts of young professionals in it which are the main target market. The Vegeterian restaurant will suit the healthy attitude that most of the people of Burypark seem to live on so therefore there is a fairly high demand

2.5 Secondary Objective 5 - Finances

A feasibility study must also cover financial aspects because without money, a firm cannot operate. There are four areas of finance which apply, these are: start-up costs, sales revenue, direct costs and indirect overheads.

Because the firm is a franchise, fees have to be paid to the administration of the firm. This fee is ?12,500. There are three different types of store that the franchisee are allowed to open, a lower cost store, a moderate cost store and a higher cost store. The initial start up costs and running costs for the first three months for each is as follows:

With sales revenue, many things must be considered; these include a sales volume forecast and the effect of seasons. The forecast for the volume of sales must be looked at in three timeframes, long medium and short term. In the short term, it seems that many people in the area will visit the restaurant to try it to see if it meets their standards and their tastes in food. This should mean a relatively high volume of sales in the short term but the medium and long term sales will come from repeat customers. Repeat customers form the main consumer base of the majority of markets so they keep the demand high. The sales are not likely to be affected by seasonal changes unless there is a psychological connection with the weather and peoples' eating habits which is yet to be proven. The price does need to research into pricing tactics such as price discrimination or selective discounting.

Direct cost may include materials, stock bought and labour. As shown in the above table, the stock each three months will cost from 500 to 1000. There would also need to be somewhere to store the stock which must also be paid for. This could be avoided by using a just in time basis or by having frequent, small deliveries of stock. Due to the nature of the business, having small and frequent deliveries would be the best option because the food must be fresh when sold to the customer, ensuring high quality goods and service.

Indirect costs would be the rent, salaries/wages, bills, insurance, interest on loans and depreciation. The rent has been found to be from ?2000 to ?12000 for two months depending on the type of store bought and the location, the insurance costs from ?800 to ?2500 each three months and there are many loan schemes that banks offer..

Deciding which type of store should be set up is another major consideration. The store will be located in a prime area and so will attract a fair amount of customers so it may not be a good idea to go for the low-cost store as it will be smaller and less attractive so may not attract as many customers. The higher the cost of the store, the more risk there is involved. We would like to have as little risk as possible whilst still being a quality shop so it may not be very practical to go for the high-cost store. This leaves one viable option left, the medium-cost store.

The restaurant must look for other form of money to pay for the original start-up costs. There are several different ways of obtaining this money. Some of these include bank loans, personal money owned and shareholders. Having shareholders in this particular case is not an option as franchisees cannot have shareholders due to the nature of the business. This leaves two other main options, personal finance and a bank loan. The total ?149550 will not all be able to come from the one source in this case but they could borrow money from friends and family. Borrowing within friends and family causes many social problems, such as family disputes over the firm. Many people will not want to help in the business venture as of the extremely high risks involved in starting up a business. This is why a bank loan would be the opportune way to collect funds to start up the firm. The only disadvantage in applying for a bank loan is that a feasibility study must be done and shown to the bank and the restaurant must be able to prove to the bank that the bank will get its money back with interest in a specified time. This feasibility study would be very useful in showing to a bank manager to help them make a decision on whether they think the risk outweighs the potential profits or not.

By 5 years into the business venture, It is hoped that at least the initial start-up costs will be paid off and the business is making a continuous profit. I would like to compare the opportunity cost of investing the ?149550 in a building society with extremely low risk instead of investing in the business proposition with very high risk over a 5 year period.

For this table, I assume the branch will of 3.5% make a revenue of 90 000 per year. I also assume that there is a fixed interest rate on my building society investment.

The above table shows that if the base rate remains the same then the interest rate will also be the same and after 5 years, 177 618 would be the amount of money the business would have by the end of the five years that could come from investing this money into a building society in a building society called Nationwide Building Society. If the business venture was taken up, ?309450 would be the money made after paying back the loan.

This means that if the money were to be put into a business society then the opportunity cost of this would be that (409 450 - 177 618.50) ?231 831.5 was missed out on.

There are many problems with this method to calculate payback, the main one being that costs are not taken into consideration. The costs for the business venture will be fairly high so the figures calculated are not an accurate representation of the future, it is only a model. The cost of investing in the building society is also not considered because of depreciation in the economy for currency.

The second problem with this method is that it does not take into account risk. The risk in the business venture is extremely high and if there are problems then the franchisee will be completely liable whereas the investing in a building society has little and almost no risk attached to it. Risk is one of the main factors in making important decisions about whether or not to become a franchisee. My calculations seem to show that it would be a very profitable to take up the business venture but it has also made me consider the factor of risk in more detail .