Most businesses are tertiary, as the town is a main distribution point for goods and services. There are less secondary and primary businesses as raw materials are not usually found in a town and secondary businesses tend to be established near the primary source.
Businesses range from those that are owned and run by one person to those which are run by groups of people and shareholders. They differ in control and how they raise money, and the distribution of profits. In essence, different types of ownership mean different types of organisation. This organisation is the way in which a business is structured, or arranged, so that it can achieve its objectives.
The conclusions of this previous study demonstrate that Bungay has a very round set of businesses that suit the needs of the local population. It has a variety of secondary, and tertiary industries that provide both goods and services. Some congestion occurs on the roads at rush hours due to the slower expansion of the roads and transport system in relation to the growth of business.
There is an over-provision of pubs although they all seem to be within the town’s threshold and receive business. In my extension work, I decided that a fast food outlet would fill a niche market that has an untapped demand at present.
There is no direct competition to the fast-food restaurant. The semi-direct competition includes chip shops where the food is ready prepared and available in under a minute, although the choice is very limited. Other semi-direct competition includes the takeaways, where by placing the order by phone beforehand, also reduces the waiting time to under a minute.
Possible market
To spot and fill a gap in the market requires ample expertise and can reap large benefits to the ‘entrepreneur’ if successful. This "gap" is defined when there is demand (the number of goods or services that buyers are willing and able to buy over a certain time) for goods or services, but little or no supply (the number of goods or services offered for sale over a period of time).
For example, if a town had no clothes shops and there was a general demand; big enough to support a new business, there would be a gap in the market for it.
On the other hand, if there were many clothes shops and a small demand, any new shops would have to be run very well and have something special to offer in order to compete. If not, the threshold would have been reached for that area and the business would fail.
Competition occurs when 2 or more businesses are supplying the same types of goods or services. If one company's goods or services are cheaper then the others will have to compete for custom by either lowering their own prices or supply higher quality goods etc.
In order to gauge the viability of a fast food restaurant, market research must be conducted to establish the consumer demand and competition with regard to outlets and prices.
During two adjacent Saturdays I conducted market research in the form of a questionnaire. I interviewed 100 people (50 each weekend) and took samples from all parts of the town. I attempted to ask equal number of males and females. The results were as follows:
Q. Do you live locally, or are you visiting temporarily? – Establishing Origin.
Q. If local, where do you live (nearest town)? – Establishing Origin (continued)
Q. How old are you? – Categorising (wide groups)
Q. Do you think there is sufficient demand for a fast food restaurant here? – Market research
Q. Do you use fast food restaurants? – Market research
Q. If yes, which of the following do you use? – Market research (More than one choice acceptable)
Q. How often do you use them? – Market research
Q. On average, how much do you spend per visit? – Market research
Q. How far are you prepared to travel (maximum)? – Sphere of influence statistics
The questionnaire shows the following: -
- Most people in Bungay are local – this is probably due to the fact that there is no real attraction for tourists or otherwise to come to Bungay. The weekday scenario may be different, but I believe the results would be almost the same even on a working day (there might be and increased number of visitors coming to Bungay for business reasons).
- Most people coming to Bungay live nearby. The further away they live, the more unlikely it is that they will visit. This fits with the ‘sphere of influence’ theory which suggests that a town or city’s appeal lessens the further away it is.
- Most people in Bungay are in their late teens or are in their twenties. This suggests that the large proportion of active consumers are less than 40 years old.
- 83% of people thought that a fast food restaurant would be a viable business in Bungay – Although their knowledge of business economy may be limited and therefore insubstantial.
- 88% of people used fast food restaurants. This suggests they are popular.
- McDonald’s and Burger King seem to have the largest clientele base, and as they are widespread, seem to have the best strategies and marketing.
- Most people use fast food restaurants twice a month or more, implying that they provide consistent service and satisfaction.
- Most people spend on average £5 to £10. The number of people visiting a popular fast food restaurant per day is usually at least 250 meaning that £2500 is made daily. This also shows that a meal is cheaper than many normal restaurants where a meal may cost over £20.
- Most people are prepared to travel between 6 – 20 miles to eat at a fast food restaurant, although other factors such as the adjoining town and other services in the area may change this figure. For example – a fast food restaurant not usually the sole purpose for visiting a town – many patrons at Lowestoft’s McDonald’s use it for convenience after shopping in its extensive commercial area.
After visiting other food outlets in the area, I found that the cost per meal is approximately twice that of a normal fast food restaurant. This is probably due to aesthetic extras such as tablecloths, curtains and carpets which are absent in fast food restaurants. As well as additional costs such as waiters (and subsequent service charges), and the fact that meals are usually individual (there are not 10 steak dinners ready and prepared to be served), and hence less mass produced.
The increased cost is also due to rate of stock turnover. McDonald’s probably works on a principle of low profit - high rate of turnover per item, whereas a normal restaurant uses higher profits to offset the low rate of turnover.
The low costs encourage increased demand and hence lower costs – making McDonald’s self-sustaining after a short period of time. This is in contrast to a normal restaurant where only higher quality will promote more customers, which usually leads to higher costs as the restaurant gains reputation, and can exploit this.
After breaking down my results even further, I found that men in the 15-19 group were 22% more likely to spend £5-£10 pounds per meal than women of the same age; who were more likely to spend less.
This could possibly be due to the higher social acceptability of a fast-food restaurant – This age group has more leisure time than other groups, and will visit a fast-food restaurant more often. Also, due to their age, they will usually have less expenditure on bills as higher age groups, and can therefore spend more on their “wants”.
I cannot account for the discrepancy between male and female spending unless it is socially oriented – Fast-food is seen as fattening, and women are less likely to eat and buy large quantities of fattening foods due to social pressures.
As the age of the subject rose, so too did the proportion of people who said they were customers at fast-food restaurants. This seems to show that older people are less likely to visit a fast-food restaurant. This may also be for similar reasons as the first question, but vice-versa.
Older people feel that fast-food restaurants are “tacky” or have food that is stereotypically tasteless. They have less leisure time, but generally more money. This means that they will usually chose a sit-down restaurant that has high cost/quality food with ‘all the trimmings’, over a fast food restaurant.
If this is correct, then the consumer base in Bungay is very high, as a large majority of those interviewed were less than 40 years old.
McDonald’s and Burger King have the largest shares in the market. This relies on many factors, but the most important aspects of creating a successful business are advertising and social engineering. If a company can make slightly cheaper goods (without noticeably lowering quality), and effectively advertise and create a ‘culture’ around their product, they will have a high probability of success.
McDonald’s does this by advertising its goods, so that they become a symbol to the largest group of people possible. An example of this is the McDonald’s yellow “M” symbol, that almost everyone will recognise as McDonald’s. They have socially engineered there advertising and company, so that it is “cool” to go to McDonald’s and eat. This type of advertising can even nullify the effects of poor tasting food, as the consumer will be engineered to enjoy what they are eating – “It’s cool, so it must taste nice”, response. If a new company were to start up in Bungay, they would have to advertise professionally, be placed well, and offer what was demanded. An easier option, would be a franchise – McDonald’s for instance – where the owners would apply for a franchise, and run the business under the McDonald’s name, paying them a percentage of profits, in order to sell under an established company brand. This route would cut out expensive advertising and other setting up costs, consumers would already know what was sold, and how good the quality is, but reduce profit made per customer unit.
Bungay’s other local services that add to the sphere of influence are a selection of different styled pubs, varied shopping facilities, and basic amenities and other environmental attractions (parks, a castle etc).
These will bring in consumers, who may then take advantage of the fast-food restaurant.
Appropriate sites
There are three sites that are suitable for a fast-food restaurant. The first is situated on the A144 into Bungay from Halesworth. There is a patch of unused farmland, opposite the turnoff for the local High School. It is walking distance from both the High and Middle schools and the Waveney swimming pool, nearby.
The road receives a high volume of traffic due to the business in Bungay, and also from traffic passing through from Lowestoft. It would receive business from all of these places, and in particular, could stand to make a lot of money from school children in both the afternoons and mornings.
This area is situated away from the centre of the town and would require a walk of approximately 5 minutes from the centre of Bungay.
The next suitable site, would be the same road (A144), but leaving Bungay, and going towards Ditchingham and Broome. This central A-road has traffic from Halesworth, Beccles, and Harleston, and can be built on an unused green site, next to the new, large road. It would be similar to the restaurant near Beccles, where the only connection is by road, and it is suitable for a drive-thru.
This site is located about the same distance from the centre of Bungay than the last site, but does not have the same pedestrian access, and is less likely to receive as much trade through non-driving consumers.
A third site could be placed somewhere inside the town. This is subject to council restrictions and would probably harm the town. The high volume of traffic past the doors would increase the chance success and would probably lead to a larger profit than the first site.
Car parking would be a problem to integrate into such a small area, and the building size would be considerably smaller than Norwich, for instance, due to the small frontage of each shop.
The most viable out of this three is the first site. It has the greatest chance of being successful, and is located in an area that could accommodate it.
Management
A partnership, or franchise, would probably suit this type of business best. There would have to be at least two people helping run the business, as a restaurant is a large operation and requires a corresponding amount of work.
Partnership details: -
Advantages
- Provide a much greater range of skills than a sole proprietor, as each partner can specialise.
- The partnership may have more profitable ideas than a sole proprietor.
- Easier to raise capital as each partner contributes a share.
Disadvantages
- Arguments more likely
- Unless a deed of partnership is written out, disagreements cannot be solved.
Franchise details: -
Advantages
- Greater chance of success, as product has been tried and tested, and has a secure place in the market.
- Benefit from being able to use a brand name, which is advertised nationally (or internationally).
- Franchiser, provides continuous support, any difficulties can be solved by the franchisee, by asking for help. There is a better chance of solving problems as they may already have been met and overcome in other franchises.
- Easier cash borrowing potential – Banks feel a franchise is less risky than an untried business operation.
Disadvantages
- Has less independence than other sole proprietors
- Will not be able to sell the business without the franchiser’s agreement.
- Does not always have the right to renew the franchise automatically.
- Has to make continuing royalty payments to the franchiser.
- Sometimes has to pay a mark-up, or percentage of the price, on supplies from the franchiser.
I think that although a franchise has more disadvantages that other management schemes, it also has the most appealing advantages. A franchise would be the most suitable in my situation.
Conclusion
The opening of a new fast food restaurant would be a viable business proposition.
From the data I have collected I can demonstrate why:
- The initial conditions of Bungay are suitable – size, population, communication links, distance from other settlements etc are all beneficial to the placing of the restaurant.
- The level of competition is low – there are no direct competitors, and few semi-direct competitors that pose a threat.
- The level of demand is high – 88% of people asked used a fast food restaurant and 19% of these used it twice a week. Of the 88%, 60% spend between £5-£10 on each trip. McDonald’s has a 45% share elsewhere and is the best client for a franchise.
- Consumer bas is high – 32% of people asked were prepared to travel 10-20 miles to travel to Bungay. 75% of people asked were from Bungay. 42% were aged between 15-19 and are therefore easily targeted with advertising.
I recommend that site 1 be used, and that the restaurant be opened under a McDonald’s or Burger King franchise in order to increase the success chances.
Evaluation
Based on my questionnaire, site, and business management analysis. I believe that a fast-food restaurant would be a viable and successful business proposition.
I could have improved my questionnaire by asking more people, at more varied times of the day, different days of the week etc. I could not do this as I was limited by time constraints.
I could have improved my whole project by studying more than one town, and also by using information from actual business –writing to McDonald’s to see how they gauge viability of a new site.
By targeting the younger consumers with advertising, it will be increasingly socially acceptable to go there. My research suggests that the younger clientele are already more likely to go there, and extra advertising will reinforce this view.
By attempting to target the older consumers who are not inclined to fast food, could work, although it is equally likely to be a drain of resources and money since they have more formed opinions about things.
