Investment Appraisal Analysis for F&F Restaurant

The assignment involves calculating NPV and IRR for a proposed investment in opening another restaurant unit by F&F. The analysis reveals that the investment proposal is not viable, with a negative net present value of £8,567.22 and an internal rate of return (IRR) of 10%. This conclusion is based on the data provided, which includes cash flows and initial investments for each year of the project.

Business Decision Making

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
1.1 Creating plan for primary and secondary data collection plan........................................3
1.2 Assessing survey methodology and sampling frame.......................................................4
1.3 Designing questionnaire for survey.................................................................................4
TASK 2......................................................................................................................................7
2.1 Summarizing primary information for the purpose of decision making..........................7
2.2 Descriptive statistics.........................................................................................................8
2.3 Measures of dispersion.....................................................................................................9
2.4 Use of statistical tools in decision making.....................................................................10
3.1 Presenting data set in a graphical format.......................................................................11
3.2 Creating trend line for future forecasting.......................................................................12
3.3 Delivering findings using software................................................................................12
3.4 Formal business report...................................................................................................12
TASK 3....................................................................................................................................13
4.1 Information processing tools and decision making........................................................13
4.2 Project plan and network diagram..................................................................................14
4.3 Use of investment appraisal techniques in the decision making process.......................15
CONCLUSION........................................................................................................................16
REFERENCES.........................................................................................................................18

INTRODUCTION
Decision making is the key and vital part of the business unit which ensures its
growth as well as success. Now, for enhancing customer base and attaining high margin firm
is required to make focus on exploring business operations as well as functions. Further,
London is recognized as the most attracting city in the world. Now, it becomes the hub for
professionals, students, local and international tourist. Hence, considering overall trend of
market and current business performance Food for Friends is planning to establish another
unit in London. In this, report will entail the manner through which responses of customers
and other information gathered before the opening of another unit. Further, it also sheds light
on statistical tools that help in taking appropriate decisions from large data set. This report
will also provide deeper insight about the techniques of investment appraisal that aid in
taking decision regarding project selection.
TASK 1
1.1 Creating plan for primary and secondary data collection plan
Currently, existing performance of F&F is good in terms of both financial and non-
financial. Hence, now taking into account growth level or trend F&F is planning to establish
another restaurant unit in London. With the motive to get information about the attitude and
preferences of the customers F&F is laying focus on conducting research. Hence, following
plan will be followed by the researcher for primary and secondary data collection such as:
Primary data collection plan: Data which is gathered by the researcher, for the first
time, to meet research aims and objectives known as primary. There are several methods such
as observation, focus group, interview, survey etc that researcher can use for primary data
collection (Le Tran and et.al., 2017). In this, for assessing customer’s preferences towards
dinning services survey method has been selected by the researcher. In the next step, 30
respondents have been selected on the basis of non-probabilistic technique such as purposive.
Further, survey gives suitable result only when tool associated with it such as questionnaire is
highly structured. By keeping in mind such aspect questionnaire has been designed by
including both close and open ended questions in relation to dinning mode, pricing,
promotional aspects etc. At last, by sending questionnaire on the mail-id of respondents
primary data has been collected.

Secondary data collection plan: It includes sources such as books, journals and
scholarly articles that previously published by other scholars on the basis of their
investigation and findings (Johnston, 2017). Hence, to evaluate the trend of restaurant sector,
customer’s intention and their decision making aspects related books, journals and articles
have been evaluated by the researcher. Along with this, for analyzing future trend or pattern,
on the basis of current performance, data pertaining to sales and profit margin has been
gathered by the researcher from the administration or financial department.
1.2 Assessing survey methodology and sampling frame
Survey methodology
This implies for the process which will be undertaken by the researcher for
conducting survey (Zakharov and et.al., 2017). Out of several available methods, online
survey methodology has been chosen by the scholar. In accordance with such tool or
methodology, primarily emphasis will be placed on acquiring mail-id’s of respondents from
existing restaurant unit. Thereafter, considering research objective questionnaire will be
designed by including questions regarding product, price, place and promotion. Once
questionnaire has been prepared then the same will be sent on the mail-id of potential
respondents. Hence, by following such structured process survey will be initiated by the
scholar.
Sampling frame
Sample selection is highly required when researcher takes decision in relation to
conducting survey for determining suitable solution of the problem. Moreover, due to lacking
enough resources it is not possible for the researcher to conduct study on large population.
Thus, by taking into account either probabilistic or non-probabilistic techniques scholar can
select sample for the investigation purpose (Ary and et.al., 2018). Hence, using purposive
sampling technique 30 customers of F&F has been selected by the researcher. This sampling
is the part of non-probabilistic technique which in turn highly suits to the qualitative
investigation type. Hence, as per the research purpose both existing and potential customers
have been selected for survey.
1.3 Designing questionnaire for survey
Questionnaire
Demographic information

Name......
Age.........
Gender.......
Income.........
1. Do you visit F&F more frequently?
 Yes ()
 No ()
2. Which kind of food do you like most?
 Italian ()
 Continental ()
 British ()
 South Indian ()
 Chinese ()
3. What is your preference in relation to visiting restaurant in terms of time?
 Breakfast ()
 Lunch ()
 Dinner ()
4. Which kind of dining rooms would you prefer the most?
 Private ()
 Casual ()
 Formal ()
 Relaxing environment ()
5. Do you agree that hot and fresh food is served by F&F?
 Agree ()
 Strongly agree ()
 Neutral ()
 Disagree ()

 Strongly disagree ()
6. Do you agree that in F&F waiting time is less pertaining to taking order and serving food?
 Yes ()
 No ()
7. Are you satisfied from the service staff of F&F?
 Satisfied ()
 Highly satisfied ()
 Neither satisfied nor dissatisfied ()
 Dissatisfied ()
 Highly dissatisfied ()
8. Do you agree that dinning services of F&F are cost effective and offers high value of
money?
 Agree ()
 Strongly agree ()
 Neutral ()
 Disagree ()
 Strongly disagree ()
9. From the following list which restaurant unit is highly preferred by you?
 Food for Friends ()
 Balti palace ()
 Murano ()
 Blackfrias ()
 Others.....kindly specify
10. Which kind of advertisement mode aware you regarding the food or dinning services
offering by the restaurant unit?
 Newspaper ()
 Aids on local television ()
 Facebook ()
 Twitter ()

 Others..... (kindly specify)
11. Kindly specify location which you prefer to the most while taking decision in relation to
visiting restaurant.......................................
12. Do you want to make any changes or improvements in the existing dinning
services........Kindly specify with the reasons if any
TASK 2
2.1 Summarizing primary information for the purpose of decision making
Thematic analysis
Theme 1: British and Italian food is highly preferred by the customers of F&F
Particulars Views of respondents % of respondents
Italian 8 27%
Continental 4 13%
British 8 27%
South Indian 4 13%
Chinese 6 20%
Total 30 100
Italian Continental British South Indian Chinese
0%
5%
10%
15%
20%
25%
30%
% of respondents
% of respondents

In survey, majority of the respondents shared their views that they like to eat British
and Italian foods. Thus, for enhancing customer base restaurant unit should focus on the
inclusion of unique dishes pertaining to such food category.
Theme 2: Respondents are satisfied from the services offered by the staff of F&F
Particulars Views of respondents % of respondents
Satisfied 10 33%
Highly satisfied 9 30%
Neither satisfied nor dissatisfied 8 27%
Dissatisfied 2 7%
Highly dissatisfied 1 3%
Total 30 100
Satisfied
Highly satisfied
Neither satisfied nor dissatisfied
Dissatisfied
Highly dissatisfied
0%
10%
20%
30%
% of respondents
% of respondents
Primary data assessment shows that 33% customers are satisfied and other 30% falls
into the category of highly satisfied. Hence, considering overall evaluation it can be depicted
that respondents are highly satisfied from the skills and abilities of staff.
2.2 Descriptive statistics
Financial data set of F&F from the period of 2008 to 2017 is as follows:
Year Sales (in £) Profit (in £)
2008 750 150

2009 820 180
2010 795 175
2011 770 164
2012 880 195
2013 945 240
2014 1077 260
2015 1280 280
2016 1375 340
2017 1590 360
Particulars Sales (in £) Profit (in £)
Mean 1028.2 234.4
Standard Error 92.63738146 23.52597
Median 912.5 217.5
Mode #N/A #N/A
Range 840 210
Minimum 750 150
Maximum 1590 360
Sum 10282 2344
Count 10 10
The above depicted table shows that average sales and profit accounted for £1028 and
£234 respectively. In addition to this, median sales and margin implies for £912 and £217
significantly. Descriptive statistical evaluation shows that mean revenues and profit figure of
such restaurant unit is higher as compared to median. Referring this, it can be stated that
owner of F&F should make focus on placing advertisements on social sites. This in turn
develops awareness among the customers and thereby entices their decision making. Further,
restaurant unit requires making focus on undertaking budgetary control tools. This in turn
helps in exerting control over expenses and thereby enhances profit margin.
2.3 Measures of dispersion
Particulars Sales (in £) Profit (in £)
Standard Deviation 292.94 74.39
Sample Variance 85816.84 5534.711
Kurtosis -0.37 -0.94
Skewness 0.94 0.64

Analyzing the outcome of measures of dispersion it can be presented that in the near
future mean value pertaining to sales and profit will deviate from £293 & 74 respectively.
Hence, by taking into account such results owner of F&F do strategic planning that aid in the
organizational growth and success.
2.4 Use of statistical tools in decision making
Quartile and percentile
Particulars Sales (in £) Profit (in £)
1st quartile and 25th
percentile 801.25 176.25
2nd quartile and 50th
percentile 913 217.5
3rd quartile and 75th
percentile 1229 275
Results of quartile and percentile show that a sales as well as profit margins of F&F
were increased in each quarter. However, in comparison to the 2nd quarter, under 3rd one
significant improvement was found in the sales and profit margin of F&F. Hence, increasing
trend exhibits that customers prefer to
Correlation co-efficient
Sales Profit
Sales 1 0.98
Profit 0.98 1
Statistical evaluation presents that highly positive relationship takes place between
sales and profit margin generated by the restaurant unit during the concerned period.
Correlation such as .98 entails that fluctuation which takes place in one variable has
significant impact on another in a similar tandem (Şahin and Liu, 2017). Thus, restaurant unit
should make focus on undertaking promotional campaign and offering quality services to the
customers. This in turn enhances sales and thereby profit margin to a great extent.

3.1 Presenting data set in a graphical format
Graphical presentation is the most effectual part of statistical analysis which in turn
helps in presenting data set in an attractive and understandable manner. Hence, referring
graphs one can understand and evaluate overall pattern more effectually.
Column graph pertaining to data set from 2008 to 2017 is as follows:
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
200
400
600
800
1000
1200
1400
1600
1800
Sales (in £)
Profit (in £)
Column graph shows fluctuated trend in the sales and profit margin from the period of
2009 to 2017. Thereafter, increasing trend has assessed in both the variables such as sales and
profit margin. This in turn indicates that customers are more likely to visit F&F and they are
satisfied from its services. Moreover, revenue increases along with the customer base to the
significant level. Further, as per positive relationship both the variables are increased
simultaneously over the time period. Thus, in the context of current business plan, graphical
presentation of past data set gives indication regarding the future growth and success.

3.2 Creating trend line for future forecasting
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
200
400
600
800
1000
1200
1400
1600
1800
f(x) = 90.0363636363636 x + 533
R² = 0.865914059206855
f(x) = 23.4424242424242 x + 105.466666666667
R² = 0.910167919731803
Sales (in £)
Linear (Sales (in £))
Profit (in £)
Linear (Profit (in £))
By taking into account the above depicted trend line, it can be stated that in the
upcoming time period both sales as well as profit margin will increase significantly. Upward
movement of trend line shows that in the near future customers prefer to come and visit
restaurant unit which in turn may result into high sales as well as profit margin. In accordance
with this, concerned plan in relation to the establishment of another unit will make
contribution in the attainment of organizational goals and objectives.
3.3 Delivering findings using software
Enclosed in power point presentation.
3.4 Formal business report
To
Manager of F&F
Date: 7th April 2017
Subject: Research report pertaining to the establishment of another restaurant unit in London
Introduction: Investigation has been conducted to assess the views, preferences and attitude
of customers towards the dinning services of F&F. Hence, several tools and techniques have
been undertaken by the investigator for presenting the fair view of such establishment plan.
Methods: In order to evaluate customer’s preferences data has been collected from both
primary and secondary sources. For assessing suitable solution survey has been conducted on

30 individuals including both existing and potential customer base. Further, statistical tools
have been applied for summarizing and evaluating data set.
Analysis and findings: From primary data investigation, it has found that customers viewed
services of F&F highly prominent and gives value for money, In addition to this, results of
primary data evaluation shows that customers are highly satisfied from dinning services
offering by F&F. Further, secondary data assessment presents that in the near future both
revenue and profit margin will incline significantly. Thus, by serving customers with unique
and quality dishes owner of F&F can generate high margin.
Conclusion and recommendations: It can be concluded from evaluation that business entity
will attain both monetary and non-monetary benefits by opening another restaurant unit in
London. Further, it is recommend to the business entity of F&F to make focus on innovative
offerings and promotional aspects. Both such aspects will help such restaurant unit in
increasing sales and thereby profit margin.
Sincerely
Research Analyst
TASK 3
4.1 Information processing tools and decision making
Now, for processing and summarizing large data set manager focuses on using tools
such as MIS, DSS and TPS etc. All such tools provide business entity with suitable reports
for decision making. Hence, main information processing tools that owner of F&F can use
are enumerated below:
Management information system: This software organizes and programme financial
information for producing regular reports (Link and et.al., 2017). Hence, it furnishes
information regarding each managerial level and thereby supports effectual managerial
decisions.
Decision support system: DSS software clearly indicates the suitability of alternatives
out of several available options. Most of the times, managers face issue in taking decision
about the option which in turn proves to be more suitable (Keum and Coulibaly, 2017).

Hence, using reports which are generated on the basis of DSS manager can take appropriate
decision.
Transaction processing system: Such software makes focus on the collection,
modification and retrieval of transactions related to the business enterprise (Mahato and
Singh, 2018). TPS provides manager with reliable and consistent information which in turn
can be used for decision making.
Hence, considering all the above aspects it can be depicted that information
processing tools aid in suitable and profitable decision making.
4.2 Project plan and network diagram
For the establishment of new restaurant within the suitable time frame manager of
F&F needs to develop highly structured and competent plan. In this regard, techniques of
project management are significant which in turn helps in monitoring performance. Further,
network diagram assists in finding the most suitable way or path that can be followed for
accomplishing project.
Plan for the establishment of another restaurant unit
S. No Activities Duration Predecessors
1
Outlining ides and other aspects
in relation to the establishment of
new restaurant unit
6 days
2 Assessment of research tools and
methods 3 days 1
3 Collecting responses of
customers through survey 7 days 1,2
4 Secondary data collection plan 5 days 1
5 Analyzing data set using thematic
perception test technique 8 days 3,4
6 Selection of area for new
restaurant establishment 5 days 5
7 Purchasing fixed assets and their
installation 3 days 6
8 Improvement in the
infrastructural aspects 8 days 6
9 Hiring personnel 4 days 5
10 Organizing training 5 days 9
11 Inauguration 7 days 10

Network diagram
Considering above depicted network diagram it can be said that owner of F&F should
follow below mentioned path. This in turn helps restaurant unit in establishing restaurant
within less time period such as 34 days. If business entity will avoid following such path then
it may result into delay in the establishment of restaurant.
Critical path:
1 + 3 + 5 + 6 + 8
= 6 + 7 + 8 + 5 + 8
= 34 days
4.3 Use of investment appraisal techniques in the decision making process
Tools & technique of investment appraisal includes payback period, net present value
and internal rate of return which in turn helps in assessing whether concerned capital
investment project proves to be profitable or not (Capital budgeting tools, 2018). For another
restaurant unit, business entity of F&F has option with the initial investment of £190000.
Hence, for analyzing financial viability of such proposal investment appraisal tools such as
NPV and IRR are applied.
Net present value (NPV)
Year
Cash inflows (in £) PV factor @ 12% PV of cash flows
(CIF * PV factor)
1 50000 .893 44642.86

2 64000 .797 51020.41
3 58000 .712 41283.25
4 70000 .635 44486.27
Sum of present value
of cash flows
181432.8
Less: Initial
investment (II)
190000
NPV -8567.22
Internal rate of return (IRR)
Year
Cash flows (in £)
Initial investment (190000)
1 50000
2 64000
3 58000
4 70000
IRR 10%
It has assessed from investment appraisal analysis that NPV of the proposed option
was negative such as 8567.22 respectively. Further, IRR of the investment proposal accounts
for 10% significantly. In accordance with the selection criteria, such proposal is not viable.
Moreover, the main motive of business entity behind the opening of another unit is to explore
operations and generate high profit margin. Outcome of investment appraisal analysis clearly
exhibits that such investment project will not offer enough returns to the owner of F&F.
Thus, F&F should reject such proposal and now need to make focus on finding other
profitable option.
CONCLUSION
In conclusion to this report, it can be concluded that for assessing the suitable view of
research problem, regarding the attitude of customers, data has been gathered from primary
and secondary sources. Further, for completing research within the suitable time frame online

survey methodology has been chosen. It can be seen in the report that customers having
positive experience and attitude towards the dinning services offered by it. Along with this, it
has been articulated from the trend line that both sales and profit margin will incline in the
near future. In addition to this, graphical presentation shows that graph of both sales and
profit is increasing continuously which in turn considered as positive indicator. Besides this,
it can be summarized from ratio analysis that concerned investment proposal or option is not
viable. Moreover, business entity will generate negative return if invest £190000 in the
opening of another restaurant.