- Legal ownership
The restaurant that we are going to form is a limited liability company, with investors from Beijing Royal Food Restaurant, China Travel Service and other independent investors. The reason that we set up a joint venture limited liability company is that first only have limited liability if in the worst situation that restaurant is not successful. Furthermore, the joint venture will have a good and tight control over our new business. We can set strategies easily to fit the operation. In addition, use the IP from Beijing Royal Food restaurant, therefore the company can amortise the IP in their operation time.
As a limited liability company, we should get registration from the Ministry of Economic New Zealand. In addition, we should also apply the IRD number from the Inland Revenue and register for GST. Our company should full operate in accordance with the Company Act.
In addition, as we will import some of the raw material from overseas, we have to meet the quarantine requirement by the New Zealand Customs.
During the operation, we have to obey the Resource Management Act 1991 because as a restaurant we have to deal with land use and planning of land, water management, and waste disposal. So our restaurant will develop and protect the natural and physical resources that will enable people and communities to have their social, economic, health and safety and cultural welling beings. Therefore our restaurant is a social responsible company.
- SWOT analysis
- Strengths
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First to market – we are the first to offer authentic traditional royal Chinese cuisine in Auckland, as such we have the opportunity to build brand awareness and consumer loyalty before the competition enters to the market.
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Core product and augmentations – the product offering is not limited and thus does not alienate certain market segments. It will be offered in a tranquil and relaxing environment with first class service.
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Clear and unique market position – We try to differentiate ourselves from other high quality restaurant and Chinese food restaurants
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Strategic alliances to guarantee enough customers – the strategic alliance with China Travel Service will give use enough customers source for our operation.
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Expertise of operator - alliance with Royal Food Restaurant in Beijing will ensure the quality of our food to be or real royal “Shan” cuisine.
- Weaknesses
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Higher operation cost – we will have high initial cost in decorating our restaurant and during operating time, we will have high cost due to more services provided than food
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High set up cost- as we are seeking high quality food and service, so we will do a lot initial decoration of the restaurant, so the initial set up cost is high
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New to market- we are new to the market, therefore we may not be familiar to this local market.
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Need time to build up awareness and equity – it will time consuming and take some effort to educate our customer about our food
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Adequate financing – We are a start up venture in a market with a high failure rate and intense competition. Table utilisation and average cheque rates have to be high in the first few months, therefore significant expenditure will be required on marketing and advertising. Cash flows need to be carefully monitored in this period and credit lines secured if needed.
- Opportunities
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Increasing tourists – the statistics results show that by august 2005, there were 2.397 million visitor arrivals, up 4% and more than half of them are holidaymakers. Besides, visitors from China grows 17% (Statistics New Zealand)
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Increasing migration - New Zealand is a place of multicultural residents, it is attraction immigration and more and more Chinese origin people migrate to New Zealand.
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Increasing population growth-New Zealand population is growing so the source of our customer is increasing
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Increased trend to eating out at restaurants – the market data shows that the number of people who eat out regularly has risen This trend is set to continue thereby increasing the potential consumer base.
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Increasing acceptance of diverse cultures – More and more New Zealanders begin to accept the cultures from East Asian. Chinese food culture has been widely accepted all over the world.
- Threats
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New competitors entering the market – it is likely that, if the restaurant is successful, competitors with the same product offering will enter the market. It is essential that the restaurant creates brand loyalty for its core customers and builds brand awareness in the Auckland area to use as a platform for expansion.
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Economic downturn – Our restaurants depends on the number of tourists and people eating out. The economic downturn will cause reduction of tourist number and the number of people who eat out at restaurants is susceptible to changing economic conditions and in the event of an economic downturn it is likely that table utilisation will fall.
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Limited market- the market of New Zealand is limited
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Decreasing tourists number- because of various reasons, the number of tourists to New Zealand is fluctuate and in some seasons it is decreasing
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High exchange rate- the high New Zealand dollar makes products and services in New Zealand more expensive, so on one hand, it will reduce the overseas tourist number and on the other hand it will be more expensive for international tourist to eat at our restaurant. .
- PEST analysis
New Zealand is a free country and it is an attraction for tourists but for the Chinese passport holders, if they want to come to New Zealand for travelling, they must get necessary tourism visa, so the visa granted directed affect the number of the Chinese tourists and therefore indirectly affect our business. For other tourists groups such as from Japan, US or Australia, there is not such problem.
Now with the development of the economics in China, both China and New Zealand Government are building a better relation and the current New Zealand government is making a free trade agreement with China, therefore the political risk is becoming smaller and smaller.
New Zealand government encourage the economic development and it make policies to attract more tourists and the Company Act of New Zealand will protect our business in New Zealand
Our restaurant is deeply affected by the economic condition. During economic booming time, more and more consumers will go travelling and they will spend more on foods. For local customers, the good economics will give them more disposable income to spend on eating out. Therefore our restaurant depends on the economic condition of both New Zealand and target tourist group country such as China. China is now the world’s fastest economic developing country and more and more tourists come to New Zealand for travelling, therefore we can get enough customers source.
New Zealand has a high interest rate, so it is more expensive for us to get finance from bank. The inflation of New Zealand is reaching the up limit and the Reserve Bank is increasing OCR again. Therefore the cost of financing is high for our restaurant.
The major customers of our restaurant are those people who really interested in food. Even they are travelling, they still want to tastes something delicious and of high quality. For tourists from other Asian countries, such as Japan and Korea, they really want to taste the royal Chinese foods. Tourists from other western countries, if they are really want to experience a total completely different culture, they will be glad to try the foods of our restaurants. Currently, New Zealand population is made up of people from various culture background. A lot of people are interested in experience the different culture, especially the oriental Chinese food culture. So if there is such a authentic Royal Chinese food, they must like to have a try. So there is a social need for our restaurants.
According to Demographic Trend 2004 by Statistics New Zealand, The resident population of New Zealand at 30 June 2004 was estimated at 4,061,400. This represents an increase of 52,200 or 1.3 percent over the 30 June 2003 estimate of 4,009,200. The population change during the June 2004 year is slightly higher than the average annual increase of 44,100 (or 1.2 percent) during the 10-year period, June 1994–2004. During the 1996–2001 intercensal period, the growth rate averaged 0.8 percent per year. The estimated mean population for the year ended 30 June 2004 was 4,038,300
International passenger movements reached a new high during the year ended June 2004, with 7.8 million passenger movements in total. There were 3.885 million arrivals and 3.883 million departures. Overseas visitors accounted for around three-fifths of these movements and New Zealand residents accounted for the other two-fifths. Permanent and long-term (PLT) arrivals include people who arrive in New Zealand intending to stay for a period of 12 months or more (or permanently), and New Zealand residents returning after an absence of 12 months or more. The former group includes people with New Zealand residency as well as students and holders of work permits. Permanent and long-term departures include New Zealand residents departing for an intended period of 12 months or more (or permanently), plus overseas visitors departing from New Zealand after a stay of 12 months or more. During the June 2004 year, there were 2.250 million short-term overseas visitors, up 199,897 or 10 percent on the June 2003 year. These visitors made up 58 percent of all arrivals in New Zealand in the year to June 2004. Australia was our largest source for visitors in the June 2004 year, with 35 percent of all visitor arrivals. Other major contributors were Asia (23 percent), Europe (21 percent), and the Americas (12 percent).
We do not need high technology in running a restaurant; the only technology is the IP right of the Royal food recipe. They are the technology know-how of the Shan food secret, so we must employ the chefs of Royal food restaurant in Beijing.
- Operating zone
Our plan for the future is to open chain restaurants in the Australasia region with base in the Auckland. So we choose to open our first restaurant in downtown Auckland city, at Market Place. There are several reasons for our choice of that
- The origin place is a Chinese restaurant, therefore we can save the initial cost in design and re-decoration of the settings and the facility will be suitable for the restaurant operations
- The Auckland city is an attraction for our target customers, Chinese tourists; all the Chinese tourists will go sightseeing in Auckland. In addition, the downtown areas are full of shops which will also make it convenient for tourists to go our restaurants.
- Almost all the tourists from East Asian are fond of Chinese royal foods and they will all have Auckland as their sightseeing destination, therefore it will also be convenient for them to go to our restaurant.
- The downtown area is full of offices, which is convenient for businessmen to meet and discuss in our restaurant. The businessmen are another customer group that we are targeting at.
With the successful experience in Auckland, we will make expansion to Christchurch, Sydney and Melbourne in the future. All these cities will generate enough tourist sources from Asian especially the Chinese tourists. And people there are ready to experience different eating cultures.
- Sustainability
Generally, tourism products are no harm to the environment. For our restaurant, what environment issue we should consider are the food quality, waste management and healthy cook.
Currently, with the outbreak of foot-mouth disease, the bird flu, people all over the world are concerning the quality of the food. People care much about what they eat and the food producers are try to make all the best and high quality food and offer them to customers. According to BBC, in 2001, foot-and-mouth led to the slaughter of more than six million animals and is estimated to have cost the UK as much as billions. During that time, farmers are not allowed to move their livestock’s freely and. During the crisis, as well as the decimation of livestock farming, British tourism was badly affected, with foreign visitors put off by images of burning pyres of carcasses.
Currently, European countries are taking emergency measures to contain the spread of a deadly strain of bird flu—which has already led to the deaths of millions of birds and over 60 people in Asia—after its arrival in Russia, Romania, Turkey and possibly Greece. The disease is a serious threat to the world’s sizeable poultry industry but its spread round the globe also increases the chances of it mutating into a form that causes a human pandemic (The spreading bird-flu menace reaches Europe) Therefore we can see that the quality of the food and raw material is important all over the world. People all over the world are trying to fight against these disease to ensure the quality of the food.
Australia has been free of Foot and Mouth Disease for almost 130 years. But because this disease is highly infective and easily spread, it could be brought to Australia by infected animals or animal products such as food or on the clothing of people who have been in infected areas. The Australian Quarantine and Inspection Service (AQIS) has temporarily suspended the import of animals susceptible to Foot and Mouth Disease and to some animal related products from the European Union and from any country in which FMD is endemic or is occurring as an outbreak. This is because the virus could spread from products into animal populations. (Food Standard Australia and New Zealand) Therefore Australia is taking strict measure to protect the environment and ensure the quality of the food products.
New Zealand is a country famous for its nature beauty and the food products produced are of high quality and no harm to the people and the environment. Many of the big environmental issues for New Zealand in the first decade of the 21st century are also economic and public health issues. More sustainable use of water, managing marine resources, reducing waste, and improving our energy efficiency are all essential for creating wealth and quality of life as well as for environmental sustainability. New Zealand’s low population and limited industrial base means that our environmental issues are generally less severe than those in many other industrialised countries. New Zealanders are to have the healthy environment and quality of life they want. (Environmental issue)
For our restaurant, we first should ensure all the raw material are of high quality and will do no harm to people health. In addition, some raw material such as tofu and other herbal recipe should be good to people health. All the imported material should be examined by New Zealand quarantine department. In addition, we should have a good control of the water, electricity and other resources usages. When use of water, we should make sure that all the drinking water are purified without any contamination. For the waste water, it should be properly treated with he pipeline. For the waste, it should be properly package and disposed on the requirement by the government regulations. The waster should be categorized. Those recycled wastes, such as bottles, paper, cartoon box should be separated from others. Those rubbish should be properly put into plastic rubbish bag to prevent any air or environment pollution. For other wastes, they should use special equipment to pack them, such as the used batteries, they should be separately packaged and dispose by the special workers to make sure no harm to the environment.
- Consumer behaviour
Due to the increase in personal income and income of the restaurant and cafe business, it can be seen that there is potential for the continued growth of the restaurant market. The increase in the number of tourists, Chinese immigrants, Chinese tourists and increased number of outings also revealed the need for more Chinese restaurants. (Appendix II) However, our market research among students shows that most Chinese (72%) still prefer to eat Chinese food when they are overseas, either on a holiday or permanently. The increased number of New Zealanders who goes overseas for holidays or work also shows gradual exposure and receptiveness to foreign culture and food.
2.9.1 Gap in the market
As indicated by both social and economic trends (Appendix II), the emphasis on recreation, interpersonal communication and new way of doing business opens up the potential for new places of attraction, which can cater to the need for entertainment and social interaction. The increased number of working hours and work related stress creates a need for people to occasionally enjoy some casual time and pleasure. However, with the proliferation of discussing businesses over entertainment, it is necessary to provide an alternative place other than golf and normal restaurants. A restaurant, which can provide a moment for people who need a break, a tourist attraction and a conducive place for discussing business, is needed.
In addition, the increase in Chinese immigrants and tourists also leads to a consumer need for a Chinese restaurant that that can act as a tourist attraction, help to promote social interaction and provide escapism to reality. Thus, a totally new type of Chinese restaurant, which can give them more than mere food, is needed.
2.9.2 Target Market
Based on our segmentation we have decided to focus on restaurant goers who want an ambience of fun and excitement in a restaurant. They want to learn more about the Chinese culture through food. They would like an opportunity to escape from the stress of their mundane lives into a land of adventure. They would like a place, which is conducive for both relaxation and discussing business. They would also like a place where they can celebrate occasions like Birthdays and festivals. Based on our segmentation and the gap in the market we have decided to target on tour groups, consumers who crave for the occasional adventure and excitement and businessman.
Tour groups
We are targeting on tourists from China. Emperor’s House would provide an ambience of fun and adventure that tourists seek during a holiday. It not only gives them an opportunity to see how their culture is perceived in a foreign country but also give them a sense of familiarity. According to our market research, Chinese still prefer Chinese food when they go overseas for a holiday. As such, they would be attracted to the “Shan” cuisine, which is considered the best cuisine in China. Due to the Royal Food Restaurant in Beijing, this group would also be able to differentiate the taste of the “Shan” cuisine. This makes our IP strategy valuable in this case.
Besides Chinese tourists, we are also targeting tourists from other countries such as Europe and Japan tourists. Like movie world, Emperor’s House gives them a place to indulge in their fantasy. In addition, it provides them with the opportunity to be exposed to another culture and dynasty through food.
The number of Chinese tourists is increase, in August 2005, more visitors arrived from China, up 17% (Statistics New Zealand) and the tourists from Japan is decreasing 12%. But those groups tourists are all interested in having real royal food from our restaurants. For other tourists group, such as tourists from UK, USA and Australia, a lot of them really want to have an authentic oriental royal food and they are interest in experienced in a totally different food culture, especially those that are seldom can be accessed to. So they will also be interested in try our royal foods.
Other light users and Ambience Seeker
Another target group is those who would like to indulge in their fantasies and occasional adventures which is the Ambience Seekers in our segmentation group. Our specially toned decoration and dinning environment can provide a totally unique experience to them.
Similarly, the Emperor House can satisfy the principle needs of light users who like to hold special occasions such as private Birthday Celebration, theme parties and weddings in restaurants. Strategic alliances will also be formed with the Asian Studies Association of New Zealand and New Zealand Chinese Association to hold their frequent diners. This is especially so during festive seasons.
Corporate Businessman
The third group is for corporate meetings. At first glance, this might seem to be in contradiction with our theme of adventure and culture. However, this is not so. Emperor’s House enables businessman to express their wish to be as successful and powerful as the emperor. Like golf, it gives them time to relax and enjoy the premises when they talk to clients. It also gives them an opportunity to impress their Chinese business clients or clients with the uniqueness of the food. Clients who like the occasional escapism from the boredom and stress of business entertainment would also be attracted to the restaurant. To create a conducive environment for the businessman, special dining rooms, with good acoustics, would be provided. In the room performance can be arranged when requested.
- Marketing
2.10.1 Positioning
In the mind of our target consumers, Emperor’s House would be a place to indulge in their fantasy and be “an Emperor for a day”. Therefore, our positioning focuses not only the delicious and unique “Shan” cuisine, but also the culture experience cohesive to the eating process. We aim to “Connecting Chinese ancient culture with the modern dietetic art”.
2.10.2 The Marketing Mix
Product
Our product is a unique Chinese royal cuisine with costume service and palace-like eating environment that simulate real royal life in ancient China. The uniqueness of the food is that they are able to make ordinary Chinese dishes e.g wheaten products such as corn flour cake into exquisite desserts. Not only must the food be tasty, it must be aesthetically pleasing.. For instance, the bean curd (i.e. tofu) cannot be presented as a usual tofu dish but must be a work of art such as being carved into a lobster.
However, we are providing more than mere food. We are providing an educational and emotional benefit. Our restaurant enables the diners to catch a glimpse of ancient China and its opulence. Through the use of multimedia and performances, we would not only be able to bring the customers into their fantasy world but would also be educating customers’ on China’s history and culture.
Price:
We are charging an average of about $30 per person for lunch and dinner. We are assuming an average occupancy rate of 58% and inclusion of tea times. This is in fact a conservative estimation. Compared to industry average, this amount is a 5 to 10% premium of the normal price. The premium is because certain ingredients are not available in Australia and has to be imported. The emotional benefits of the restaurant and the opulence of the setting also lead to the higher price. Our customer is less price-sensitive to our price as we are offering more than mere food. The unique services that we offer (refer to promotions) also lead to the higher price. Our cost of goods sold is 40% of our selling price and remaining 55% is the selling and administrative and other expenses. This amount is inclusive of promotion costs and retention costs.
Besides the base price, we will offer price discount to some tourist groups. In addition, during some traditional Chinese festivals, such as Chinese New Year, Moon Festival, we will offer special price to the whole family that dinning at our restaurant. So what we do is try to build our brand awareness and attract customers.
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Place:
Only one restaurant will be opened in Auckland to keep the originality and novelty. The restaurant will be located in Downtown Harbour as it is easily accessible and is close to the business district, hotels and Asians community. This makes the restaurant easily accessible to our target market.
To keep the originality of the restaurant, catering would only be allowed for certain functions that coincide with our theme and generally no take-away is provided since it is not in line with our strategic position – to provide a holistic eating experience to consumers.
Other channels of distribution comprise of our cooperation with China Travel Services. This will bring us a constant stream of customers. The incentive and compensation package to them is detailed below. Our restaurant also provide a ready place and conducive setting to promote the Chinese culture in Auckland, we are also collaborating with the Asian Studies Association of New Zealand and New Zealand Chinese Association. (Refer to table for details)
Table2: Strategic Options
Table3: Mutual benefits of Strategic Alliance
Promotion:
The promotion strategy focuses on creating awareness and educating the customer on the culture and history of China. This would be done hand in hand with associations like the New Zealand Chinese Association and the Asian Studies Association of New Zealand. Function and talks by these associations can be carried out in our restaurant. To educate the customers on Chinese culture and to emulate the entertainment in the palace in ancient China, there would be performance by Chinese artisans such as the Beijing Dance troupe and playing of the “qin” during festive seasons. On certain special festive occasions, there would be a games and prizes. This would enable diners to mingle and to have fun. To coincide with our theme, the waitresses would also be dressed like court maids and eunuchs. The service would be so good that customers would be able to feel like an emperor for a day
The total marketing and promotion budget for 5 years is $350,000. This would be $100,000 in the first year a total of $250,000 for the subsequent years. The key promotion strategy will include advertising in cuisine/life style/fashion/tourism magazine and in cinemas. This is especially so for the first year and festive season. Discounts or food vouchers would also be given to members of these associations or privilege customers in the second year onwards. . As the Shan cuisine is famous for its savoury snacks, discounts would be given during tea times( 11am and 3pm) to allow more customers to indulge themselves. The usual promotional schedule and retention tactics for our restaurant is summarized below:
Table4: Detail Plan of Promotion
The sample advertisement leaflet is attached below:
- Recruitment
The staffs we need to have are of three categories: chefs, managers and waiters and waitress and other services people.
First of all, the major chefs should be employed from the Beijing Royal Food restaurant; their skills are unique and can not be replaced by others. They should be responsible for all the quality, taste of the Shan foods. So we can directly have some chef from Beijing.
For the management team, we should also employ those people with both experience and knowledge of local New Zealand market and hospitality industry. Furthermore they must also be familiar with Chinese culture, especially the food culture.
For the other staffs, such as waiters and waitress and kitchen hand, we can make advertisement in the local newspaper and recruit them based on the information from their CVs and interviews. We can also employ some part-time students during the peak seasons and peak time. However, they should all be familiar with Chinese food cultures. For those service people, we should provide necessary training to them because what we will offer is a high quality service. For all the staffs they should be enthusiastic in the hospitality industry, and they may have some knowledge of Chinese food culture. So we will train them how to treat customers, how to make the table, how to make introduction to customers and how to give dishes. So all the training will ensure that they can treat our customers as the member of a royal family.
- Financial plan
Initial financial result has been compiled based on conservative assumptions (Appendix III, Calculation for Revenue Figure). As indicated by summaries posted below that the Emperor House can achieve breakeven at year 3. The ROI is also calculated by earnings before tax over average operating assets. In five years time, our expected ROI is 14.4%. In all the first five years, we always have positive cash balance from operations. Pro-forma Financial Statements are also attached
Assumptions
- All figures are in real New Zealand dollars;
- Expenses are forecasted according the industrial average by Statistics New Zealand
Table5: Industrial Average Cost Structure
- Intangible assets are amortized in ten years using straight-line method; (Appendix IV)
- Fixed assets are depreciated in ten years using straight-line method; (Appendix IV)
- Sales growth 5.2% in 2006, same as the industrial average, then 7% and 6% individually in the following years; (Appendix III)
- Corporate income tax rate is 30%;
- Dividend payment begin in three years time according to the investment proportion;
- Dividend payment are 30% of net profit after tax
Our business keeps a constant gross margin that is 60% of the sales revenue, in line with the average industrial level.
Table6: Gross Margin
In the long term, as the effect of economies of scale of operation level, we are confident to achieve higher gross margin.
Profit Potential and Durability
In the first two years, we enjoy the tax refund because the loss in our business and from the third year we make positive profit and we use the corporate income tax rate, i.e. 30%. As our business will be in mature stage and we will enjoy the economies of scale in operation, we can achieve 20% growth of EBIT by reducing certain expenses.
Table7: Net Profit Margin
Fixed and variable cost
The fixed costs of our business are wages and salary, depreciation and amortization, interest expense, and rental expense. They are fixed only in one-year time and also increase with inflation rate and our expansion. All the other expenses are variables costs that relate to the sales revenue.
Cash flow
Because of the business nature and the need of liquidity, we always keep positive cash balance even we have negative cash flow during a certain period. Because of the expansion plan in the third year, we have negative cash flow of that year, but we still have enough cash balance to meet the requirement of next period.
Table8: Summary Financial Results
The IRR calculate from the projected profit streams at end of year 5 valuation of the company is 29.5%. We use WACC (8.8%) to calculate the NPV of our restaurant. (Appendix V, WACC and NPV calculation) The NPV is $207 thousand.
Table9: Key Performance Indicators
Source and Uses of Funds
Equity financing will raise a fund of $700,000. As the business nature, it is difficult for us to borrowing from bank except excellent performance so we will consider debt financing around $300,000 in third year for expansion because of our stable growing operations.
Table10: Fund Used as S&M Expenses
Table11: Fund Used as G&A Expenses
Breakeven analysis
We will breakeven in less than 2.5 years time with sales of less than $3,000,000
Table12: Breakeven Situation
- Risks
The main risk with our business proposition is associated with the cost of their IP rights, the 10 year time limit of a trade mark and the agreement of the Royal Food Restaurant. Though they are currently asking for overseas agents rights to develop their brand name and cuisine in other countries, they may not be willing to give us sole proprietorship to their IP rights. As for the trade secret, the special technique of cooking the “Shan” cuisine means that the cost of hiring some of the top chefs from the Royal Food will be very high. This goes against our new venture principle of keeping cost as low as possible
New Zealand local people may not be able to differentiate the taste. Thus competitors who imitate the Shan cuisine may still be able to attract our customers without infringing on our IP rights.
To prevent this, one of our target groups are on tourists from China and Chinese immigrants in New Zealand. These two groups would be able to differentiate the tastes of the real ‘Shan’ cuisine.
Our main focus will be on the emotional benefits that the restaurant brings. This will be hard to emulate.
- Conclusion and recommendation
Above all the analysis, we will agree to set up our Royal food restaurant in downtown Auckland New Zealand as the first one in Australasia region. The restaurant has a good vision that is to provide the authentic royal Chinese food to the overseas New Zealand market, major target at the tourist group, local diverse culture seeker and businessmen. So our tourist product will be attractive to those tourist groups from the oriental Asian Countries and other western countries who want to experience a different food culture. We can see that our Royal Chinese Food restaurant will have its market and will be successful if it can get the target tourist market. based on the above information and analysis, we are confident to be successful in the future and the investors can get satisfactory return for their investment on our business.
- References
Collier, A (2003) Principle of Tourism, A New Zealand perspective, 6th edition, Auckland: person Education New Zealand
Statistics New Zealand, retrieved on 15th October 2005 from world wide website
Fang Shan, retrieved on 15th October 2005 from world wide website
Foot and Mouth rules set to be eased, BBC, retrieved on 27th Oct 2005 from world wide website
Food Standard Australia and New Zealand, Updated ANZFA facts about Foot and Mouth Disease and Food - 27 March 2001
Environmental issue, the Ministry for the Environment, retrieved on 22nd October, 2005 from world wide website
Demographic Trend 2004, Statistics New Zealand, retrieved on 27th Oct 2005 from world website
- Appendix
Appendix I: Background of Royal Food – the “Shan” cuisine
The Monarchical system had been ruling in China for more than 2000 years before it was overturned in 1911. As sole rulers of such a fertile country like China, emperors used to be extravagant in every aspect of their lives. Food, of cause, was one of the key areas. The chefs of the royal family, after hundreds years of practices, assimilating the quintessence of cuisines from all over China, created a unique type of cuisines. The cuisine has a special name “Shan” in Chinese which can only be used by the royal family. The “Shan” had been kept as a mystery until it was unveiled in 1925 with the establishment of the Royal Food Restaurant of China by the chefs from the Forbidden City of Qing Dynasty Royal Family. From then, it has been operating in Beijing for more than 70 years and becoming a popular tourism attraction of China.
Appendix II: Social, Demographic and economic trends:
Appendix III – Calculation for the Revenue Figures.
Our sales revenue mainly comes from lunch, dinner and leisure teatime sales. For the price we charge 5-10% premium to the industrial average. According to our capacity and the percentage of the seats taken, we get the daily sales on usually days and holidays and then we can get the annual sales.
For the second year, the sales grow at 5.02%, same as the industrial average, and than 7% and 6% annually. In the third year, we expand our capacity to 250 seats.
Appendix IV -- Depreciation and Amortization
From 2006-2010
Additional Depreciation from 2006-2008
Appendix V: WACC and NPV Calculation:
In calculating NPV of our restaurant, we use discounted free cash flow method. Our investors require 10% risk premium, i.e. rp for their investment, and βis same as the industry, that is 1. Risk free interest rate rf is 6%. The leverage ratio for our restaurant from the third year is 3/7. SO the WACC = 0.3x 6% + 0.7x 1x 10% = 8.8%.
For the first two years, we discount the free cash flow by the rp, because we have no debt, then use WACC to discount them. In the way, the present value of our restaurant is $ 907,334, NPV is $207,334