Another factor that could affect my business is if my advertising campaigns are not successful. There are a number of reason why this could happen including the advertising were not appealing enough, I advertised in the wrong locations or the content of the advertising wasn’t relevant.
If the advertising wasn’t appealing enough to my target market, then I need to find out ways in which is most appealing to them. My primary research shows that leaflets/flyers and newspapers with 40% of males choosing leaflets/flyers and 45% of females choosing newspaper therefore I chose to advertise using these methods. However, if my advertising wasn’t successful than it means that my questionnaire that I carried out wasn’t successful. If this is the case then I would need to redo my questionnaire because my advertising methods were based on my questionnaire results. I would ask questions with more options to choose from and also ask more people ageing from a wide range of age groups because my current questionnaire is mainly focussed on teenagers therefore I would target m ore people from the 30 – 40 age group. As well as this, another reason why the advertising method wasn’t appealing enough is because the advertising wasn’t very attractive. This would lead to customer’s not paying attention it for example when leaflets are posted through the letterbox; the customers immediately throw it in the bin.
Furthermore, another reason that could result in an unsuccessful advertising campaign is if I advertise in the wrong location. My current advertisements are distributed through leaflets and newspapers around the Greenford/Southall area because my local customers and a more likely to visit my fast food restaurant.
My contingency plan for this what-if factor is to change my advertising method. As mentioned before, I will carry out another questionnaire but this time with more respondents and more option to choose from. I will then base my advertising campaigns based on the questionnaire results. In addition, I will also get a professional to design the campaigns i.e. the leaflets, posters, newspaper ads etc. I have chosen to do this because a professional has the knowledge and skills on how to create effective looking posters and leaflets as they know most of the features available on desktop publishing software.
By carrying out this contingency plan, it will allow me to meet my aims of increasing awareness of my business. This will then allow me to meet my aims of increasing sales
The UK is currently in it it’s times highest unemployment. According to my secondary research, the UK’s unemployment rate is at 8%. This has two effects on my business – one good and one bad. The good thing is that it will be easier for me to recruit well skilled staff as more people are looking for job. It also means that I am able to offer my employee’s minimum wage which will save me cost and help me to meet my objectives of reducing expenses. Moreover, recruiting staff in an economy where there is high unemployment rate would motivate them because they would work hard in order to continue to work and have a good income.
On the other hand, the negative impact of this high unemployment rate is that people have less money to spend as they have no income. This will affect my business as it will mean I will get fewer customers.
In this high period of unemployment, I will lower my prices on selected products. By doing this, it will mean customers are more willing to purchase from my fast food restaurant due to the low price.
My business could have a shortage of staff. This could be due a number of reasons such as a member of staff is on holiday or sick, the employee has decided to leave or because I require more staff to carry out more work. However, as mentioned before, the UK has currently got a high unemployment rate therefore it would be easier to recruit more staff. In addition to normal staff, there may more a shortage of skilled staff. These are the employees who have the skills and experience to produce high quality products. Having well skilled staff if essential for my business for the reason that they are able to make and prepare the food in a high quality manner. This will then improve customer satisfaction making them more likely to visit my fast food restaurant in the future.
A way to overcome a shortage of staff is to hire one extra staff member that is trained and qualified or I could rely on a family member or friend staff. By doing this, I will have enough staff available to run my fast food restaurant in case any of them are not available. However there is one major problem with doing this which is my staff may rarely take days off which means the backup staff won’t be given a chance to work.
Furthermore, if I require more staff to work in my fast food restaurant, then I will place an ad in the newspaper or on the shop window. Like mentioned before it would be easy for me to recruit staff as more people are looking for jobs.
If my business is short of skilled staff there are two options I do. The first option is to recruit well skilled staff but the drawback for doing this is that I would be required to pay higher wages as they are more skilled therefore it would increase my expenses and lead to a smaller profit. The second option is to send the current employees on a training course. By doing this, they will get the knowledge and skill to make and prepare the food in a high quality manner. This would be the better option as it will cost me less because it is a onetime cost whereas the wage increase will cost more in the long run. It also means that I am able to stick with the current employees I already have.
Similar to the increase and decrease in sales, there are two affects in which competitors can have on my business. The first affect is that a competitor in the same location as me opens up. The other affect is if one of my local competitors closes down.
If a new competitor opens up in the same location on my business then it will have a negative impact on my business. This is because I will gain fewer sales as potential customers will be going to them instead of my fast food restaurant. This will impact my business as it would mean my sales would decrease which will result in me making less profit.
A major competitor such as Pizza Hut or McDonalds will have a greater impact on my business for the reason that they are better known and recognised which means customers are more likely to go to them over me. Another reason is because they have the resources available to advertise nationally for example on widely watched television channels and nationwide newspaper. This means they are able to reach to a much wider audience.
The opening of a new local competitor can have an advantage for my business because it prevents to from going complacent. It would allow me to be competitive making effective use of promotions and advertising in order to attract customers.
If a new competitor does open, then I would need to produce a contingency plan. The contingency plan if this occurs is I will introduce more promotions. Not only will it attract more customers, but it would also allow me to meet my aims of increasing sales. Furthermore, I will also carry out more advertising to attract more customers which would also allow me to meet my aims. As well as this, I will also reduce the pricing on some of my product to attract customers. I will offer competitive pricing in an attempt so that customer would prefer to come to my fast food restaurant due the lower price. This would also allow me to meet my objectives of offering competitive pricing which would allow me to meet my aims of increasing customer loyalty.
Conversely, if one on my competitors closes down then it would be beneficial for my business because it would mean my sales would increase as more people would be coming to my fast food restaurant. If this happens then I should take advantage of this my increasing the price on some of my products. This will mean customers are willing to pay the extra price because they have no other fast food restaurant to go to. This would then allow me to meet my profit aims as the increase in price would mean I am making a greater profit. However in doing this, it may put off customers because when they expect to pay the normal price of the product and could therefore choose to offer home delivery on other fast food restaurant. Moreover, it would decrease customer loyalty and therefore could decrease my sales. In the unlikely circumstance that a local competitor does close down, it could have a negative impact on my business as because it would mean I got complacent. This is because I will take it easy because there is less competition
Inflation is where the average cost of prices increase. This can be due to two reasons: The first reason is if there high demand for a product but short supply and the second reason is if the value of the currency increases i.e. it is worth more. This can cause a number of affect on my business both good and bad.
This increase in the value of goods means that it will cost me more when buying from my suppliers. This will in turn increase my cost of sales as I am paying more for my raw materials and will ultimately decrease my gross and net profit margin. As well as the increase in supplies, my staff will demand more wages in line with inflation therefore I will may increase the wages slightly so my employees will be able to cope with the average increase in prices.. The increase in prices would mean that the price of my product is going to increase. The negative impact inflation would have on my business is that I could experience fewer sales because customers will be put off from the increase in price and will not want to purchase especially in the current economic climate. These factors will affect my business as it means I would be making less profit.
Cooking oil is a major ingredient which would be used on almost all my products. According to the BBC, the rise cooking oil prices has increase by 7.7% which means that the cost more than they did in previous years. This may increase over the years and I would need to prepare for this increase in price
My contingency plan for the increase in inflation is to offer promotions that will allow customer to save money. This will allow me to meet my objectives to offer promotions to my customers which will then in turn allow me to meet my aims of increasing sales.
Expenses that are involved within my business can arise. One of my expenses that could arise is bills such as electricity and heating. If this happens that I would have to make some cut back for example making sure machinery’s are turned off when they are not it use to save electricity costs turning on the heating only when it’s cold. Furthermore, another cost that could arise is my rent.
Increases in expenses will have an effect on my business because it will decrease the amount of profit I will be making. Furthermore it will also decrease the amount of net profit margin I make. In addition to my profit of £23,522, it will also affect my cash flow forecast for the reason that more money would be going out the business and as mentioned before, my business is already having cash flow problems at the beginning n the first three months of trading.
My contingency plan if expenses are to arise is to cut back on costs wherever possible. In doing this, I will be meeting my aims of reducing expenses which would lead to me meeting my aims of increasing profit.
My business has taken out a loan and therefore as a result of this, I would be required to pay back this loan with interest. An increase in loan would mean that I would be paying back more on the initial loan and will therefore decrease the amount of profit I make.
For example the loan I will be taking out is £7,500. If the loan on this would increase from 7% to 10%, then it would mean I would pay back and extra £750 instead of £525. Even a little increase in interest rate would cause great affects to my business.
My contingency plan if interest rate increase is to pay back the loan quicker. From my payback period, I will be able to pay back the loan I took out within 1 year and 38 weeks from the start of my business. I can perhaps try to reduce this period to 1 years and 25 weeks. By doing this, it would mean I would pay back less because loan companies usually charge interest rate per month and the sooner I pay back, the less interest I would be required to pay.
According to the BBC, the current interest rate is 0.5%. This is a decrease from 1.1% from last year. The decrease in interest rate would also affect my business because I would be paying less on the amount I have borrowed and will therefore increase the amount of profit I will be making. A decrease in interest rates would allow me to meet my aims of increasing profit and it would allow me to meet my objectives of decreasing expenses.
Suppliers may decide to increase their prices may any given time. This could be due to a number of reasons for example due to inflation, or in order for them to increase the amount of profit they make. This would affect my business because it would increase the cost of the raw materials it takes to make my products. An increase in cost of sales would reduce my gross profit margin because I would be making less gross profit per sale.
Moreover, if my suppliers decide to decrease their prices, it would benefit me for the reason that it would decrease my cost of sales which would increase my gross profit margin. This would also increase my profit I make and allow me to meet my aims of increasing profit.
My contingency plan if my suppliers increase their prices would be to find new suppliers because other suppliers may offer cheaper prices or offers that would reduce my business costs. Furthermore, I could buy in bulk which would save me money as suppliers offer a discount to customers to customers who buy many supplies at one time.