When starting a new business or even if it’s an established business it is important to know about the market that the business is operating in therefore it’s important to know the current market value. The mean value of the market is £127,000.
The mean cost of goods sold is £3930 this is also an essential part of revenue profit and braking even especially in the catering industry where stock is very easily perishable.
Similarly the annual wage bill is also valuable information as it gives employers a brief idea about how much expenditure is needed for staffing. The mean annual wage bill is £17250.
When developing a marketing budget it is essential to identify competitor’s expenditure and in most cases match it the mean expenditure on advertising as a percentage of sales is 3.3%.
For planning purposes it is essential to have knowledge about staffing levels both part time and full time employees there is an average of part time employees is 5 and an average of 10 full time employees.
We have also calculated the variance and standard deviation to analysis how spread the data is the majority of the data is spread quite evenly except the gross profit which is hugely varied.
As the majority of values are the mean the variance has been calculated as it considers how spread the data is from the mean. The majority of the data is very spread from the mean.
(All the data has been rounded to the nearest 2d.p.)
MARKET SHARE BRAKDOWN
The data received from the questionnaire illustrated quite clearly that large size restaurants, had the highest percentage of market share breakdown among the restaurant sizes. This was then followed by medium sized restaurants. Finally the small sized restaurants had the smallest market share.
The pie chart below displays the comparison of results for the different restaurant sizes. The chart shows that large size restaurants have a market share of 57% and therefore the majority and it was followed by small restaurants with a percentage of 21.4% and finally medium sized restaurants had a market share of 19.6%.
This would therefore indicate that the type of restaurants that are most profitable in this district would have to be of a large size and specialize in fast foods.
BUSINESS OUTLOOK VS BUSINESS TYPE
When analysing and processing the results obtained from the questionnaire we identified that fast food restaurants were most popular. This was then closely followed by business dinner/lunch restaurants. However from the results it was quite clear to see that private dinner/lunch restaurants, were the least favourable when compared to the other two types of restaurant.
Below is a table which demonstrates the average outlook in relation to restaurant type.
Here is a bar graph displaying the results found.
From the above graph, it has shown that there is an average outlook of 3.4 however this is rounded to the nearest whole number therefore the average outlook is 3 on the favourability scale. Therefore the business outlook is slightly unfavourable.
Additionally, the business outlook for the fast food restaurants is most favourable as it is a popular and efficient income to gain customers. It provides small, easy, snacks, for people on the move, or looking for a quick meal.
AVERAGE AMOUNT SPENT ON ADVERTISING
Comparisons and contrasts were calculated for the average amount spent on advertising in 2004 for company-owned restaurants against other forms of ownership.
Using the responses from the restaurant survey, it is evident, that out of the 279 respondents some did not respond. Consequently there are 136 restaurants that are company-owned, 106 restaurants were owned by sole traders and only 27 restaurants were partnership-owned.
This suggests that in the counties of Surrey and Hampshire, the restaurant industry is dominated by the company-owned restaurants, as they make up more than half of the total amount of restaurants in the area.
Additionally, for a small restaurant to be successful, it would be very competitive for them, as the company-owned restaurants dominate as they have a large amount of capital to invest in advertising and promotions.
Along with their brand-name, it would be easier for a company-owned restaurant to open and operate successfully, as the potential customers know what type of food and service they will receive. Thus, the fast food sector is most popular. One example could be Mc Donald’s, as it is well known around the UK and due to their customers recognising the type of food and type of service to expect, the customers continue to visit the restaurant. Thus, for every franchise that opens, it guarantees a large number of potential customers.
In 2004, the average amount spent on advertising for company-owned restaurants was 15.13%, whereas the average advertising expenditure for other restaurants such as sole trader and partnership was 4.6 %
This suggests that as the sole trader and partnership-owned restaurants do not have the same marketing advantage as the company-owned restaurants, therefore small businesses must spend more money on advertising.
Advertising is risky for smaller businesses, as the owners of partnerships and sole traders, must invest their own money into the business, so the financial budget must be spent effectively and cautiously.
Advertising is an extremely crucial part of a businesses success and is essential when entering a competitive market. Therefore businesses must create an appropriate marketing budget to ensure there success as they don’t want to under spend hence not attracting any customers, or over spend unnecessarily.
PERCNTAGES
1) Size of Restaurants
This graph shows that the largest percentage of restaurants with in this sector is small restaurants thus small restaurants are in the most competitive sector.
2) Small & Fast Food Restaurants
The numbers of small restaurant that are specific to fast food are 58, which is 20.79%. This show that even though fast food is the most popular type of restaurant not many small restaurants sell it which means that it is not a very competitive market for the small sector and is a good market to enter for potential businesses.
3) Percentage of Sole Owner, Business Dinner/Lunch Restaurants in excess of £150,000
The number of small restaurants that are sole traders and offer business dinner/lunch restaurants in an excess of £150,000 is 7, which is 2.51%. This also shows that it is not a very competitive sector as there are only 7 competitors. However an excess of £150,000 is needed which is a large sum of money for a potential business to invest when they first start out
CROSS CLASSIFICATION TABLE OF RESTAURANT SEATS
The table below displays a Cross Classification table of the number of seats in each type of restaurant. Looking at the table, it is evident, that the private dinner restaurants have the highest number of seats. As customers that go to private dinner restaurants are a lot more likely to eat in therefore the restaurant must accommodate their needs.
The fast food restaurants have the second highest number of seats as these restaurants dominate the sector in Surrey and Hampshire, thus there are large quantities of seats. Fast food restaurants are extremely popular and therefore must provide appropriate seating for the quantity of customers.
The Business Dinner restaurants have the third highest number of seats as mostly people from other businesses attend these restaurants. They tend to attend in high numbers; hence, large sections of the seats are used at once in certain periods of the day.
The total amount for each seating type is similar for each type of restaurant. This may represent the fact that there is roughly an equal amount of demand for each restaurant type overall.
CONCLUSIONS
The most significant responses identified from the survey are questions 8-13 as these indicate the types of restaurants and. Questions 2-7 indicate a financial estimation of the restaurants in the sector with estimation of current value, cost of goods and capital invested.
The responses to the survey have been used to evaluate the current status of the restaurant sector in Surrey and Hampshire. The findings in the report showed the highest market share in the restaurant sector was dominated by the large-sized restaurants. The fast food type restaurants also dominate the restaurant sector, as the food is easy to obtain over the counter and is relatively cheap.
As the summary measures have shown the business outlook of restaurants within the Surrey and Hampshire areas is bordering unfavourable and this is a damaging environment for new business and therefore they should be wary. However even though the outlook is bleak there is a potential to earn an average gross sales of £100,000 to £140,000.
The company-owned restaurants also dominate the sector in Surrey and Hampshire, hence it may be a difficult market for small businesses to break into as company owned restaurants or franchises such as Mc Donald’s are very well established with strong brand names and consequently have brand loyalty; this form of business also has large amounts of capital invested in them.
RECOMMENDATIONS
A survey was compiled with the purpose of analysing the current status of restaurants in the areas of Surrey and Hampshire. The responses collected helped to develop useful data for small businesses, which plan and operate in the same sector or area.
Small restaurants are relatively cheap to start up as the premises are small, and the seating can be flexible to accommodate customers. However, through the analysis of the responses we have shown that it is very risky area and industry for small businesses with in the Surrey and Hampshire as it is very competitive and the only chance of being successful is through intense capital investment
It is suggested that for a new small business to be successful and operate effectively, it should consider the fast food industry. The results from the responses have shown that there is apparent interest from customers, as the estimation of gross sales is high, subsequently business can expect a higher profit.
The data has been collected through the use of a self-completion questionnaire as it was seen to be the most practical from of obtaining the data from restaurants. However, out of 279 questionnaires, not all of the questions were answered and so the random sample of results were not as clear cut.
In order to collect a more varied type of sample, alternative types of means could have been used to collect the data. These means could be over the phone, where gaining the personal attention of the relevant manager to explain more about the business. Another means to collect the data would be direct marketing, so as well as the questionnaire; internet advertisements and post marketing (through the letterbox leaflets) could also gather the relevant data that would help make the data more unbiased and useful.
Company-owned restaurants dominate the area therefore making it harder for a small business to operate successfully. However, if they were to open a fast food restaurant, or increase expenditure on advertising and promotions they are a lot more likely to be successful
APPENDIX 1
APPENDIX 2
Summary Measures & Analysis of Data
The data that was collected has been classified in to 2 main categories, firstly whether it is continuous or discrete and secondly by characteristics.
This table identifies whether the data collected for each question is continuous or discrete
This table identifies the characteristics of the data collected for each question
As a form of analysing all the data that has been collected from the survey is by calculating the relevant summary measures which include both measures of spread and measures of location.
As different type of information has been collected different ways of analysing this information is required.
The Mean
The Mode
The Median
The Average
The Variance
Standard Deviation
APPENDIX 3
Market Share Breakdown Among Restaurant Sizes in 2004
Market share calculated by sum of market value divided by total market value (£83788000).
APPENDIX 4
Comparison of the Business Outlook and the Restaurant Type
Calculated by adding outlook figures for restaurant type and dividing it with number of restaurants identified.
APPENDIX 5
Average Amount Spent on Advertising in 2004 for Company Owned Restaurants as Against Other Forms of Ownership
APPENDIX 6
Percentage = number of restaurant divided by 279 (total responses) multiplied by 100
APPENDIX 7
Frequency Table for the Annual Wage Bill in 2004
The data received from the questionnaire indicated that the most popular percentage of the annual wage bill as a percentage of gross sales was in fact the class interval of 20-29 which had a frequency of 102. This class interval had a percentage frequency of 45% when compared to the other class intervals. The second most popular class interval was 30-39. This interval had a 27% frequency when compared to the other intervals. The results demonstrate that 20-29% of gross sales is the most common percentage of gross sales that are paid out in wages.
Below is a frequency table which demonstrates the results from the questionnaire.
From the above frequency table it can be seen that 0-39% is the most common percentage of wages that are paid out as a percentage of gross sales. Once the percentage rises above 40 % the frequency percentage drops considerably from 6 % right down to 0.4 %. This would suggest that many restaurants hardly pay wages in excess of 49% of their gross sales.
The class intervals of 50 – 89 are among the lowest in terms of percentage frequency. From the above frequency table shows that the percentage frequency is less than 1%. This illustrates that many restaurants never pay wages in excess of 50% of their gross sales.
After analysing the graph we can tell that it is left skewed which tell us that the majority of the data is less than the mean. Thus the data is unevenly distributed.
APPENDIX 8
Comparison of the Number of Seats in Each Type of Restaurant
-Identified restaurants all added and then divided by known restaurants
APPENDIX 9
REFERENCES
Books
- Swift l, and Piff, S (2005) Quantitative methods for Business, Management and Finance, Second Edition, Palgrave, New York
Includes all restaurant including unknown form of ownership
calculated by total % of restaurants including missing data/ no of restaurants that are unknown