Blackfriars Restaurant Expansion Project

This solved assignment evaluates the potential for Blackfriars Restaurant to expand by opening a new location. It examines historical sales data, projected future revenue, and associated costs to assess profitability. The assignment also includes a financial analysis of the proposed expansion project, evaluating its internal rate of return (IRR) and net present value (NPV). Finally, it explores current restaurant industry trends and offers recommendations for Blackfriars based on its findings.

BUSINESS DECISION-MAKING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Creating plan for collection of primary and secondary dataset.............................................1
1.2 Presenting survey methodology and sampling frame............................................................2
1.3 Designing a questionnaire for the chosen problem................................................................2
TASK 2............................................................................................................................................5
2.1 Summarizing data using representative values......................................................................5
Theme: 1......................................................................................................................................5
2.2 Analyze the results to draw valid conclusions.......................................................................9
2.3 Analyzing data using dispersion measurement......................................................................9
2.4 Explaining the use of quartile, percentile and correlation coefficient.................................11
TASK 3..........................................................................................................................................13
3.1 Producing graphs using spreadsheets to draw valid conclusions.........................................13
3.2 Creating trend line in spreadsheet to assist in forecasting...................................................16
3.3 Preparing a business presentation using suitable software to disseminate information......17
3.4 Producing a formal business report......................................................................................17
TASK 4..........................................................................................................................................17
4.1 Using appropriate tool of information processing...............................................................17
4.2 Prepare a project plan to determine the critical path............................................................18
4.3 Using financial tool for decision making.............................................................................19
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

INTRODUCTION
UK is a leading nation in restaurant sector with strong growth underpinned by changing
consumer trends and demographics. People now prefers to eat out frequently and spending
increasing amount on eating out. Although the industry is growing rapidly, still, at the same time,
market environment for the restaurant operators become challenging. Blackfriars restaurant is
one of the pioneering British restaurant opened in 2001 by a couple, Sam Hook and Andy. With
the wonderful growth, it had planned to open a second branch in London. Thus, the report aims
at collecting necessary data source to assess market growth and consumer perception so that a
new unit can be established successfully. In addition, tools like spreadsheet, project management
and investment appraisal will be used for the analysis.
TASK 1
1.1 Creating plan for collection of primary and secondary dataset
Blackfriars restaurant is looking for expanding its geographical presence through opening
one more branch in London. Thus, restaurant owner needs to know consumer perceptions,
behavior and other important information by collecting needed data from different sources. Data
collection is a process whereby necessary information about essential or factors can be obtained.
Primary data: It is a method which generates data through an original research.
Questionnaire, online survey, social media, observation, survey via mobile apps are the popular
methods used for it (Gigerenzer and Gaissmaier, 2011). Looking to tough and competitive
challenges prevailing in UK restaurant sector, surveying people to know their preferences,
perception and behavior is the best way for Blackfriars restaurant.
Secondary data: Such information is already collected by a person other than the scholar
who is doing current study. It is indispensable for most of the real research studies. Books,
census data, case studies, governmental publications etc. are the most useful source of secondary
data collection. Although, it is an economical way of data collection, still, it may be biased. For
the given case, sales and profit figures of Blackfriars restaurant will be generated using
secondary survey methods.
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1.2 Presenting survey methodology and sampling frame
Blackfriars restaurant want to know the actual eating behavior, perception and feelings of
the consumers who prefers to take dinner out frequently. Therefore, all the people visiting
restaurants are the target audience. However, in London, there are a significant proportion of
people eating out. Therefore, a sample size of 100 people chosen randomly will be used for the
purpose of the current study. Random sampling is used to take out a sub set of 100 people from
the universe. Such randomly chosen sample will used to draw required source of material. The
reason behind selecting such method is, it is a biasfree method that does not discriminate
different units and every unit has a same possibility of being a part of the survey (Berenso and
et.al., 2013). It will be carry out via the use of questionnaire and in order to assure high response
rate as well as data authenticity, reliability and validity aspect, all the people selected for the
survey will be invited to take part in the survey voluntarily.
1.3 Designing a questionnaire for the chosen problem
This is a method wherein multiple of questions is asked from the target people keeping
into mind the key aim of the research to collect relevant data set and draw useful information
about the universe.
QUESTIONNAIRE
Name: ________________
Email address:__________
Demographic information
Q:1 What is your gender?
 Male
Female
Q:2. What is your current age in years?
 Less than 15 years
 16 – 25 years
 26 – 35 years
 36 years – 45 years
 Above 45 years
Q:3. What is your nationality?
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 Indian
 British
 Italian
Q: 4. How much do you earn per month?
____________
Restaurant-specific information
Q:1. Frequency of visiting in a restaurant for lunch and/or dinner?
 Once a week
 Once a fortnight
 Once a month
 Less than once a month
 More than once a week
 I don’t take meal out
Q:2 What is the key reason for visiting to restaurant?
 To enjoy with friends, relatives and others
 To eat quality food
 To eat something unique food items
 To celebrate special occasions
 Unspecified situation i.e. office parties
 Others, please specify
Q:3. With whom, you often go restaurant?
 Friends
 Alone
 Family members
 Colleagues
 Business partner
 No matters
Q:4. Which factor is most likely to attract you to visit a restaurant unit?
 Variety of food choices
 Affordable prices
 Quality of ingredients
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 Hygiene
 Pleasant atmosphere
 Friendly and warm staff services
 Prompt order delivery
 Other, please specify
Q:5. How long you would be able to visit a new restaurant?
 0 – 10 miles
 11 – 20 miles
 21 – 30 miles
 31 – 40 miles
 41 – 50 miles
 More than 50 miles
Q:6. How well do you agree and disagree with the services offered by Blackfriars restaurant?
Food Quality Strongly
Disagree
Somewhat
disagree
Neutral Somewhat
agree
Strongly
agree
Food served is hot and fresh o o o o o
Menu offers a variety of
choices
o o o o o
Food quality offered by us is
excellent
o o o o o
Food served is flavorful,
healthier and tasty
o o o o o
Q:7. Do our staff are friendly and courteous?
 Yes
 No
Q:8. How much do you spend per visit on restaurant each person?
 Below £15
 £16 - £30
 £31 - £45
 £46 - £60
 More than £60
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Q:9. How do you think about the value of the prices charged for the food menu?
Value Strongly
Disagree
Somewhat
disagree
Neutral Somewhat
agree
Strongly
agree
Food offered is a great value
for British pound
o o o o o
Prices charged are
competitive
o o o o o
Q:10. Suggest us how to serve you better?
____________________________________________________________________
TASK 2
2.1 Summarizing data using representative values
Theme: 1.
Number of respondents
Once a week 12
Once a fortnight 24
Once a month 36
Less than once a month 9
More than once a week 14
I don’t take meal out 5
100
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12%
24%
36%
9%
14%
5%
Frequency of visiting to a restaurant
Once a week
Once a fortnight
Once a month
Less than once a month
More than once a week
I don’t take meal out
The result shows that (36%) consumers are extremely preferring visiting restaurant at-
least once a month. Moreover, a significant proportion of surveyed audience (12%) visit
restaurant once a fortnight means twice a month. However, 14% people visit frequently 2-3 times
a week, thus, the result clearly shows growing demand for restaurant industry.
Theme: 2.
Number of respondents
To enjoy with friends, relatives and others 22
To eat quality food 36
To eat something unique food items 15
To celebrate special occasions 12
Unspecified situation i.e. office parties 9
Others, please specify 6
100
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22%
36%
15%
12%
9% 6%
Purpose of visiting to a restaurant
To enjoy with friends, relatives and
others
To eat quality food
To eat something unique food items
To celebrate special occasions
Unspecified situation i.e. office
parties
Others, please specify
Major proportion of people, in the survey, 36% visit restaurant to enjoy tastier, healthier
and quality food items and 22% visit to enjoy with others.
Theme: 3.
Number of respondents
Variety of food choices 25
Affordable prices 20
Quality of ingredients 18
Hygiene 13
Pleasant atmosphere 6
Friendly and warm staff services 8
Prompt order delivery 7
Other, please specify 3
100
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25%
20%
18%
13%
6%
8%
7% 3%
Factors affecting buying decisions of consumers
Variety of food choices
Affordable prices
Quality of ingredients
Hygiene
Pleasant atmosphere
Friendly and warm staff services
Prompt order delivery
Other, please specify
A considerable proportion of restaurant visitors are affected by food choices and prefer to
visit in restaurant with multiple varieties. Besides this, 20% look for economical charges and
18% for quality ingredients.
Sales and profit:
Sales Profit
2007 1230 360
2008 1256 390
2009 1325 345
2010 1368 360
2011 1425 390
2012 1530 455
2013 1670 520
2014 1760 590
2015 1860 660
2016 1970 750
Average: It is also called mean which is found by summing up all the values and divided
by the number of items (Berenso and et.al., 2013). It is important for Blackfriars restaurant to
know average sales, which is helpful for future sales prediction.
Average sales/ profit =Total sales/ profit /Number of years
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Sales=£ 15,394 /10 years=£ 1,539.4
Average profit=£ 4,820/10 years=£ 482
Median: It is the middle value which classify series into two series, one above 50% or
another below 50% ( Selvanathan, Selvanathan and Keller, 2014).
Value of median=(10+1)/2
¿ 11/2
¿ valueof 5.5 thitem
¿( Valueof 5 th item+ value of 6 thitem)/2
Sales=(£ 1,425+ £ 1,530) /2
¿ £ 1477.5
Profit=(£ 390+£ 455)/2
¿ £ 422.5
Mode: Frequently occurring item in a data series is called mode. No sales value took
place twice or more times, whilst in profit series, £ 360 and £ 390 occur twice times.
2.2 Analyze the results to draw valid conclusions
It is expected, that every year, possibly, Blackfriars restaurant generates sales around
£ 1539.4 and earn average return worth £ 482. It means that actual sales and profit earnings of the
restaurant lies near around or closer to it. In some years, it may be above than it and in some,
actual sales and profit may be higher.
However, according to middle, since 2007, 50% of total turnover and profit is found to
£ 1477.5 and £ 422.5 respectively. Since 2012, actual sales and profit is above 50% and in future,
it is expected to rise further.
2.3 Analyzing data using dispersion measurement
Range: It is simply the difference between biggest and lowest value of a series. Thus, by
this way, it indicates maximum spreded value (Weiss, 2015).
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Range=Largest −lowest
Sales: £ 1,970−£ 1,230
¿ £ 740
Profit : £ 750−£ 345
¿ £ 405
High range of sales shows that sales volume shows high scatterness because of
differences in consumer perceptions, desires and other restaurant chains with more quality food
choices in different cuisine.
Standard deviation is the spread measurement that measures deviation between each
value and average to find out the level of dispersion (Wan and et.al., 2014).
Year Sales Profit Sales Profit
D = X-A D2 D = X-A D2
2007 1230 360 -195 38025 -30 900
2008 1256 390 -169 28561 0 0
2009 1325 345 -100 10000 -45 2025
2010 1368 360 -57 3249 -30 900
2011 1425 390 0 0 0 0
2012 1530 455 105 11025 65 4225
2013 1670 520 245 60025 130 16900
2014 1760 590 335 112225 200 40000
2015 1860 660 435 189225 270 72900
2016 1970 750 545 297025 360 129600
1144 749360 920 267450
Standard deviation=√ ∑ Dx 2/N – (∑ Dx)2/( N ) 2
Sales=√ 749,360/10 – (1144) 2/(10) 2
¿ 248.69
Profit=√ 267,450/10 – ( 920)2/(10)2
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¿ 135.2072
As per the results, standard deviation of profit is lower whereas sales has a very high
standard deviation, which means that sales is far away from the mean (Chen, So and Kuruoglu,
2016). However, profit changes near around the average profit worth £ 482.
2.4 Explaining the use of quartile, percentile and correlation coefficient
Upper quartile means presenting 3/4th value and lower quartile shows values fall below
1/4th of the data series (Gigerenzer and Gaissmaier, 2011).
Lower quartile (Q1)=Value of ( N +1)/4 th item
¿( 10+1)/ 4 th item
¿ 2.75
¿ £ 1,256+0.75 (£ 1,325−£ 1,256)
¿ £ 1,307.75
Profit=£ 360+0.75 (£ 360−360)
¿ £ 360
Second quartile( Q2)=Median
Sales=£ 1,477.5
Profit=£ 422.5
Upper quartile(Q3)=Value of 3( N +1)/4 thitem
¿ valueof 3(10+1)/ 4
¿ valueof 8.25 thitem
Sales=£ 1760+0.25(£ 1760−£ 1670)
¿ £ 1,782.5
Profit=£ 590+0.25 (£ 590−£ 520)
¿ £ 590+ £ 17.5
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¿ £ 607.5
Sales and profit follows positive relationship with other, however, they did not change in
the same proportion with each other. Therefore, in statistical analysis, correlation is often to
know the level of relation between two interlinked data series (Shevlyakov and Smirnov, 2016).
Year Sales Profit
2007 1230 360
2008 1256 390
2009 1325 345
2010 1368 360
2011 1425 390
2012 1530 455
2013 1670 520
2014 1760 590
2015 1860 660
2016 1970 750
0.969918
The value of .96 shows strong relationship and with the increase in sales, restaurant
generates increased profitability. Thus, sales has a strong impact over its net profit and other
factors like cost does not influence profit to a major extent (Mukaka, 2012). Thus, by opening
one more unit, restaurant can generate more revenue and thereby contribute towards profit
maximization.
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TASK 3
3.1 Producing graphs using spreadsheets to draw valid conclusions
2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6
1230 1256 1325 1368 1425 1530 1670 1760 1860 1970
360 390 345 360 390 455 520 590 660 750
Sales and profit performance
Sales Profit
Year
Sales and profit
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
0 500 1000 1500 2000 2500
1230
1256
1325
1368
1425
1530
1670
1760
1860
1970
Sales results
Sales figures
Year
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2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
0 100 200 300 400 500 600 700 800
360
390
345
360
390
455
520
590
660
750
Profit results
Profit figures
Year
8% 8%
9%
9%
9%
10%11%
11%
12%
13%
7%
8%
7%
7%
8%
9%
11%
12%
14%
16%
Sales and profit results
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100
0
100
200
300
400
500
600
700
800
Scatter diagram
Sales
Profit
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
1230 1256 1325 1368 1425 1530 1670 1760 1860 1970
360 390 345 360 390 455 520 590 660 750
Sales and profit results
Sales Profit
year
sales and profit
Interpretation: Despite volatile market and challenging macro
environment of the British restaurant sector, increased consumer
discretionary expenditures on restaurant enable Blackfriars to grow its sales
regularly over the period. However, pricing pressure because of inflation,
increasing transportation cost and high staffing cost negatively affected
sales growth rate. In above table, in 2010 and 2011, year on year (YoY)
growth in sales was 3.25% and 4.17% only which increased to 7.37% and
9.15%, again, came down to 5.39%, 5.68% and 5.91%. Increasing cost of
input i.e. ingredients, high spending on staff as it is a labor-intensive sector
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(Restructuring restaurant trends, 2017). Due to such effect, in 2008, profit came
down by 11.54% however; use of organic ingredients, cleanliness,
infrastructure development, expansion, multiple cuisine offerings in menu
brought an impressive growth by 16.67% and 14.29%. Thereafter, tough
competitive challenges, cost pressure and changing social preferences
decreased YoY profit growth, came to 13.64% in 2016.
3.2 Creating trend line in spreadsheet to assist in forecasting
2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6
1230
1256
1325
1368
1425
1530
1670
1760
1860
1970
360
390
345
360
390
455
520
590
660
750
f(x) = 85.2969696969697 x + 1070.26666666667
R² = 0.970489853548236
f(x) = 43.4545454545455 x + 243
R² = 0.852166432112824
Trend line
Sales Linear (Sales)
Profit Linear (Profit)
Upward moving trend of both sales and profit figures depicts that possibly, historical
trend expects that restaurant will generate increased revenue and get good return also (Chan, Lee
and Wong, 2014).
Forecasting sales and profit for 2017
2017=85.297 x+1070.3
¿ 85.297( 11)+1070.3
¿ 2008.56
2017=43.455 x+ 243
¿ 43.45 (11)+243
¿ 720.95
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Trend line forecasted that by opening a new restaurant and serving people with the best
quality, healthy, tasty and delightful variety of food choices in different cuisine will possibly
grow its sales volume and value. Moreover, looking to current moderate rate of inflation, rising
fuel cost, equipment purchase and hiring more staff members for new restaurant, it is obvious,
that cost will be increase, still, and high growth in sales will maximize profit.
3.3 Preparing a business presentation using suitable software to disseminate information
Enclosed in PPT.
3.4 Producing a formal business report
To: Blackfriars restaurant’s manager
From: Statistical analyst
Date: 2nd December 2017
Respected sir
I am priviledged to investigate and analyze the sales and profit performance of the
restaurant for last decade and it’s really good to share that despite challenging market,
increasing cost pressure on ingredients, fuel and staff and marketing expenses, Blackfriars
restaurant had performed successfully. It became possible only due to its quality food made by
excellent chefs using fresh ingredients, multiple variety of food dishes, growth of e-commerce
and changing preferences. Moreover, controlled overhead enable unit to maximize its net
profit at a good growth. Considering past year’s results, it is possibly expected to rise sales and
profit further in near future. Trend line expected growth in sales and profitability to
GBP2008.56 and GBP720.95. Thus, restaurant will perform much well in future.
TASK 4
4.1 Using appropriate tool of information processing
Transaction processing system: This system, as name implies, daily routine activities
and transactions are processed to generate useful analytical information. It transform raw data
into meaningful and useful resources and provide reports to the managers.
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Inventory management system: Restaurant needs to store enough inventory, therefore,
this system can be used to analyze and evaluate changing inventory balances and track it
regularly for proper inventory plans.
Management information system: Blackfriars restaurant can use MIS to record, store,
integrate and also summarize information from all of its units in Liverpool, New Castle,
Edinburg and others (Laudon and Laudon, 2011). With this, it can maintain all the critical data
set such as guests confidential details, purchase of ingredients, wages paid to staff, sales
performance, order delivered online, marketing expense and other available stock in inventory
and can evaluate it to make good decisions.
Decision-support system: DSS can be used by top-level managers of the restaurant to
analyze the success of existing plans and strategies and set new plans for growth like expansion,
digitalization and others (Power, Sharda and Burstein, 2015).
4.2 Prepare a project plan to determine the critical path
S. No. Activities Days
Predece
ssor
1 Preparing a well plan for market research 15 -
2
Collection of primary data through survey and secondary data
about sales and profit 9 1
3 Data findings and its evaluation 6 2
4 Forecast possible expenditures through budget 7 2,3
5
Strategic plan i.e Fixing locations, layout design, staff hiring and
others 12 3,4
6 Implementing the plan 25 5
7 Performance review 14 6
8 Make decisions to bring improvement in needed area 5 7
Gantt chart: It presents the sequence of all the project activities with stipulated time. It
is useful to show inter-relationship between various events.
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Network Diagram: It is constructed with the main concern to know the minimum time
that project will take in completion
As per the network diagram, all activities are found critical, therefore, possibly, the
project of new restaurant unit will take 93 days near about 3 months in opening.
4.3 Using financial tool for decision making
Opening a new restaurant requires restaurant owner to invest £190,000 for acquiring a
new premises. On it, company requires a minimum return of 12% per annum, thus, it is the cost
of capital. Discounted cash flow methods are highly useful to know whether the given project is
worthy or not.
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Net present value: This method makes use of present value of anticipated future cash
flows using a PV factor. The surplus of total of it over initial investment is known as net present
value (Baum and Crosby, 2014).
Selection criteria: Positive and higher NPV
Year Cash flows DF PV
1 50000 0.892857 44642.86
2 64000 0.797194 51020.41
3 58000 0.71178 41283.25
4 70000 0.635518 44486.27
Total PV 181432.8
Less: investment -190000
NPV -8567.21
Internal rate of return: This method predicts the discounting rate at where, if cash flows
are discounted then, zero NPV will be found.
Selection criteria: IRR above discounting factor
Year Cash flows
Beginning outlay -190000
1 50000
2 64000
3 58000
4 70000
IRR 10%
Project shows negative NPV of £8567.21 at IRR of 10% < 12%, hence, there is no reason
to invest in this project. Hence, restaurant can be suggested to look after other opportunities,
which will generate return.
CONCLUSION
The above research concluded that with the increase in sales through opening a new
restaurant, Blackfriars restaurant can generate increased profitability. Moreover, it is found that
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taking into account historical sales, it is expected that in near future, restaurant will perform
much better. The project of new restaurant opening will take near about 3 month to be open for
people. Lastly, the given investment project did not found worthy because its IRR is below the
required return rate and NPV is also negative.
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REFERENCES
Books and Journals
Baum, A.E. and Crosby, N., 2014. Property investment appraisal. John Wiley & Sons.
Berenson, M. and et.al., 2013. Basic Business Statistics: Global Edition. Pearson Higher
Chan, R.H.F., Lee, S.T.H. and Wong, W.K., 2014. Chart Pattern Reading—Trend, Trend Line
and Trend Channel. In TECHNICAL ANALYSIS AND FINANCIAL ASSET
FORECASTING: From Simple Tools to Advanced Techniques. 10(5). pp. 27-37.
Chen, Y., So, H. C. and Kuruoglu, E. E., 2016. Variance analysis of unbiased least ℓp-norm
estimator in non-Gaussian noise. Signal Processing. 122. pp.190-203.
Gigerenzer, G. and Gaissmaier, W., 2011. Heuristic decision making. Annual review of
psychology. 62. pp.451-482.
Laudon, K.C. and Laudon, J.P., 2011. Management information systems (Vol. 8). New Jersey:
Prentice Hall.
Mukaka, M. M., 2012. A guide to appropriate use of Correlation coefficient in medical research.
Malawi Medical Journal. 24(3). pp.69-71.
Power, D. J., Sharda, R. and Burstein, F., 2015. Decision support systems. John Wiley & Sons,
Ltd.
Selvanathan, S., Selvanathan, S. and Keller, G., 2014. Business Statistics: Australia/New
Zealand. Cengage Learning.
Shevlyakov, G. and Smirnov, P., 2016. Robust estimation of the correlation coefficient: An
attempt of survey. Austrian Journal of Statistics. 40(1&2). pp.147-156.
Wan, X. and et.al., 2014. Estimating the sample mean and standard deviation from the sample
size, median, range and/or interquartile range. BMC medical research
methodology. 14(1). pp.135-148.
Weiss, N.A., 2015. Introductory statistics. Pearson.
Online
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Restructuring restaurant trends. 2017. [Online]. Available through:
https://www.pwc.co.uk/services/business-recovery/insights/restructuring-trends/
restaurants-2017-food-for-thought.html
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