Restaurant Startup Finance Plan

This assignment examines the financial requirements for opening a new restaurant, 'Fountain Valley.' It outlines a £400,000 budget and explores both internal (sole proprietor savings) and external (loan from Barclays Bank) financing sources to minimize costs and maximize profit margins. The analysis considers the advantages and disadvantages of each funding option.

Business Plan
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TABLE OF CONTENTS
1. Executive summary .........................................................................................................................3
2. nature of business ............................................................................................................................3
Introduction about company ...........................................................................................................3
Business aims and objectives ..........................................................................................................3
Description of products or services ................................................................................................3
3. market ..............................................................................................................................................4
Market growth .................................................................................................................................4
Market demand for start up .............................................................................................................4
Market demand risk and opportunities ...........................................................................................4
4. Competitors analysis .......................................................................................................................5
5. Marketing plan .................................................................................................................................5
Marketing strategies ........................................................................................................................5
Segmentation, targeting and positioning (STP approach)...............................................................6
6. Operational structure .......................................................................................................................7
7. Financials and forecasts ...................................................................................................................7
Financial feasibility..........................................................................................................................7
Sources of finance ...........................................................................................................................9
References...........................................................................................................................................11
INDEX OF TABLES
Table 1: Projected income statement....................................................................................................8
Table 2: Average sales price of dishes..................................................................................................9
Table 3: COGS for various dishes........................................................................................................9
Table 4: Percentage growth of dishes on monthly basis.......................................................................9
Table 5: Employee cost of the firm......................................................................................................9
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1. EXECUTIVE SUMMARY
In the present era, growth which takes place in service industry such as hospitality,
restaurants etc. is more commendable. By taking into account this aspect entrepreneur has decided
to open restaurant in Manchester of London. Moreover, it is the more famous area of London
where number of luxurious restaurants are situated. In this, entrepreneur has identified that he will
compete with such restaurants by establishing the artificial water fall in Fountain Valley. Besides
this, entrepreneur has determined that by opening the restaurant at late night he will enlarge its
profit margin to the large extent. Further, from the operational and financial point of view the
project of restaurant will be more viable. Hence, by framing the suitable framework according the
competitors framework Fountain Valley will enjoy the desired level of outcome or success .
2. NATURE OF BUSINESS
Introduction about company
From market research, entrepreneur has decided that he will open Fountain Valley restaurant
in London. This restaurant will be based on artificial waterfall which assists him in attracting the
large number of customers. In this, the the waves of water will move from the below side in such a
way that it is move from the table. It is one of the main innovativeness of this restaurant which will
make it different from others. This restaurant will offer, British, Mexican, Chinese and Indian food
products or services to the customers. Besides this, it will also provide late night restaurant services
to the customers. Further, with the aim to enhance profitability by serving more customers strategies
of competitors will be analyzed by the business entity. It will enable him to frame competent
strategic and policy framework for attaining success in the strategic business arena.
Business aims and objectives
Aim of the entrepreneur includes the offering of hygienic and quality food products or
services to the customers at late night. It will provide assistance to the business entity in
maximizing the productivity and profitability by influencing the more customers. Sole proprietor
has employed below mentioned goals and objectives for carrying out the project of restaurant are:
 To offer remarkable dinning experience to the customers by establishing artificial waterfall.
 To provide customers with attractive ambiance which make their experience memorable.
 To offer variety of foods such as British, Indian, Mexican, Chinese etc. for increasing the
customer base.
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Description of products or services
Business entity will offer wide variety of foods at different time. Moreover, breakfast,
lunch, snakes as well as dinner will be offered by Fountain Valley restaurant. In this regard, sole
proprietor will offer breakfast to the customer during the time period of 10am to 12 pm. Whereas,
during 1pm to 3 pm lunch will be availed by the restaurant. Further, from 7pm to 12am restaurant
will offer snakes and dinner to the customers according to their demands. Besides this, such
artificial water fall restaurant will provide many kind of food on one roof such as Indian, Mexican,
Chinese, British etc. Along with this, Fountain Valley restaurants will deliver late night and other
dinning services in whole year. Besides this, business unit will also make focus on building the
ambiance of restaurant highly attractive through artificial waterfall and music system. Besides this,
business entity will also design the restaurant in such a way that gives satisfactory experience to the
customers by making luxurious dinning arrangements and reducing the waiting time to the
significant level.
3. MARKET
Market growth
According to the report introduced by market intelligence firm Allegra Food services, the
growth of the restaurant will double over the next three years. Besides this, report shows that the
UK restaurant market will be reached on £52bn by 2017 (Market trend of UK, 2016). This aspect
clearly shows that the people of London prefer to go restaurants more frequently. In the present
time, rise in disposable income and desire of living with high standard is one of the main causes
due to which people go to restaurants. This is the good indicator for the firm which will aid in their
growth and profitability aspects. Hence, Fountain Valley can build or sustain competitive advantage
by offering the unique dinning products or services to the customers.
Market demand for start up
Demand for the new start up will be high due the changing trends or pattern of lifestyle. In
the present scenario, large number of people prefer to go to the restaurant on weekends which
reflect their standard of living. Besides this, trend towards the working women also increased with
the very high pace. In this, most of the time couple prefers to go to the restaurant for taking lunch
and dinner more frequently.
Market demand risk and opportunities
Changing taste and preferences of the customers is one of the main factors which closely
hampers the market demand. Moreover, now customers prefer to take experience of new-new
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dishes. Besides this, uncertain economic condition such as inflation or deflation also affects the
demand of the market in the negative direction. Whereas, entrepreneur can enhance its revenue by
offering the quality and hygienic food to the customers in breakfast, lunch or dinner. Due to the
high level of health conciousness people prefer to visit the restaurant who offers diet food to them.
Hence, by garbing such opportunity business entity can attain success in the highly dynamic
business arena. Further, risk can also be minimized by the entrepreneur with the help of suitable
strategic framework.
4. COMPETITORS ANALYSIS
Business entity will also make analysis of strategies employed by the rival firm with the aim
to analyze their strengths, weaknesses, opportunities and threats. By taking into account the
outcome of it entrepreneur can frame most effectual framework for the near future. Royal Nawab
and Albert shed's are the major competitors of Fountain Valley. As compared to others, Fountain
Valley is a theme based restaurant such as waterfall restaurant. It is main aspects which makes
different it from others. Besides this, in comparison to other restaurants Fountain Valley will serve
wide range of items from carious categories such as British, Indian, Chinese, Mexican etc.
Whereas, products of competitor firms are highly limited to the Indian and Pakistan's food. Further,
Fountain Valley will be opened late night in against to the rival firm.
5. MARKETING PLAN
Marketing strategies Product: Fountain Valley will offer wider range of food varieties such as Indian, Mexican,
Chinese and British according to the taste of customers. Price: usually, high and middle income class people compare quality of the products or
services in against to the price charged by the firm. Hence, competitive pricing strategy will
be set by the firm for influencing their pricing decisions. Place: entrepreneur will offer dinning services by opening up restaurant in Cheetham hill
Road of Manchester. Through this, Fountain Valley will provide opportunity to the
restaurant Promotion: Both traditional and modern means of promotion will be undertaken by the
entrepreneur to promote the exclusive waterfall restaurant services offered by them. In this
regard, business entity will place advertisement in newspaper and television. Besides this,
social media marketing technique will also be employed by the business entity for widened
their reach to the potential customers.
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 People: In service industry, customer satisfaction and loyalty aspect is highly affected by
the skills and competencies of personnel. Thus, entrepreneur will recruit and select 13
personnel for delivering the most effectual services to the customers. Process: For raising the satisfaction level of customers Fountain Valley will maintain proper
quality and hygiene during the preparation and delivery of food. In this context, business
entity will provide guidance to the personnel about the manner in which they need to
perform their work.
 Physical evidence: Entrepreneur will also make the interior and exterior more attractive. For
this purpose, business entity will build the artificial water fall. Hence, waterfall restaurant is
one of the main uniqueness which will attract several customers of London. In addition to
this, music, seating arrangements etc. would be made by the entrepreneur for offering the
better services to the customers.
Segmentation, targeting and positioning (STP approach) Segmentation: It is not possible for the entrepreneur to fulfil the need of whole market. By
keeping this fact in mind sole proprietor will segment its customers on the basis of age,
income and the pattern of living (Min, Kim and Choi, 2014). Thus, entrepreneur will make
focus on both middle and high income class people who give more priority to both luxurious
and ambiance of restaurant. In this, by developing the artificial water fall entrepreneur can
satisfy the high living standard of people to the large extent. Besides this, sole proprietor
will place emphasis on both young and middle age group people. Moreover, people who lie
in this age group has desire to make their dinning experience more memorable when they
come with their loved one. Targeting: In order to attract large number of customers business entity will frame
differentiated targeting strategy or framework (Wedel and Kamakura, 2012). On the basis of
this aspect entrepreneur will prepare distinct framework for influencing the young and
middle age group people. Besides this, entrepreneur will employ targeting strategy by taking
into consideration the taste and preferences of the customers in terms of vegetarian and non-
vegetarian. By considering such aspect entrepreneur will employ distinct marketing mix
which enables him to satisfy the needs, wants and expectations of the varied customer
segment.
 Positioning: With the aim to build distinct image in the mind of potential customers
entrepreneur will positioned Fountain Valley on the basis of ambiance, quality and hygiene
aspect. Hence, business entity can influence the decisions of customers by highlighting the
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quality and hygienic aspect (Gregor and Hevner, 2013). Moreover, now customers are
highly health concious in nature and prefer to visit the restaurant who takes care of all these
aspects. In this, by claiming that we offer high quality and hygienic food services to the
customers. In addition to this, customers also give more preference to the ambiance of the
restaurant. Hence, by highlighting the uniqueness of restaurant such as water fall
entrepreneur can attract more customers and thereby enhance their profit margin.
6. OPERATIONAL STRUCTURE
This structure clearly defines the personnel which will be needed by the restaurant for
preparing food and offering the dinning the dinning facility to the customers. In this regard, the
operational structure of Fountain Valley are described below:
Operations Description
Business Location Cheetham hill Road, Manchester
Member in management Team 2 people
Structure of Staff 2 head chef
2 Assistant chef
4 personnel for serving the customers
2 domestic staff (Cleaning and dis-washing)
Quality team 1
Equipment required Ovens and latest cooking equipments
Mode or system of payment Cash and cards
For managing the business operations and functions in a smooth manner sole proprietor will
appoint 2 head and 2 assistant chef. On the basis of this aspect, assistant chef will work under the
guidance of head chef during the preparation of food. Whereas, entrepreneur will also hire 4
personnel who will be assigned with the responsibility to offer quality as well as hygienic services
to the customers. In addition to this, business entity will employ 2 personnel for maintaining the
cleaning and washing the utensils in the restaurant. Further, 1 personnel is appointed in the quality
team who has responsibility to maintain the superiority of the products or services. Quality
personnel also needs to ensure that the artificial water fall works in a proper manner because it will
be the centre of attraction within the restaurant.
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7. FINANCIALS AND FORECASTS
Financial feasibility
For assessing the viability of project feasibility analysis will be conducted by the
entrepreneur. In this, sole proprietor prepares and thereby makes analysis of the income as well as
cash flow statement by taking into account certain assumptions. Income statement provides deeper
insight about the revenue which will be generated by the Fountain Valley during the period of 3
years over the expenses. It will provide deeper insight to the entrepreneur about the return which he
will get over by opening the restaurant in London (Vuong, 2014). Besides this, cash flow statement
serves information about the financial inflow or outflow of Fountain Valley. According to this,
project will be more viable if it provides more revenue as well as positive and high inflow to the
business entity. Hence, by taking into account such assessment entrepreneur can check the financial
viability in an effectual manner.
Assumptions
 Working days of the restaurant is 30 in a month.
 COGS would be 40% per annum.
 Restaurant will pay 3.5% interest for the financial assistance which is undertaken by them.
 Insurance expenses for the years is £5328.
 Tax charges @ 20% of sales
 Utilities and other expenses are 7500 in the initial year then it will be raised by 2.45% in
each year.
 10% deprecation will be charged by the restaurant on fixed assets worth of £112602 on a
straight line basis.
Table 1: Projected income statement
2016 2017 2018 2019 2020
Revenue 359948 377945 396842 416684 437519
Less: Cost of goods sold 143979 151178 158737 166674 175007
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Gross profit 215969 226767 238105 250011 262511
Expenses
Rent 19200 20954 22002 23102 24257
Employee cost 172600 188366 197785 207674 218058
Marketing expenses 8400 9167 9626 10107 10612
Bank interest 19680 21478 22552 23679 24863
Insurance expenses 5328 5815 6105 6411 6731
Utility 7500 9267 9730 10217 10728
Depreciation 22512 24568 25797 27087 28441
Tax 2400 2520 2646 2778 2917
Sum of expenses 257620 56692 59526 62503 65628
Net profit -41651 170075 178579 187508 196883
Table 2: Average sales price of dishes
Values in £
Average price of British dishes 16
Average price of Indian dishes 10
Average price of Maxican dishes 15
Average price of Chinese dishes 12
Table 3: COGS for various dishes
COGS for British food items 40.00%
COGS for Indian food items 40.00%
COGS for Maxican food items 40.00%
COGS for Chinese food items 40.00%
Table 4: Percentage growth of dishes on monthly basis
Percentage growth on month on month basis June
Percentage growth in Biritsh dishes demand 5.00%
Percentage growth in Indian dishes demand 4.00%
Percentage growth in Maxian dishes demand 2.00%
Percentage growth in Chinese dishes demand 4.00%
Table 5: Employee cost of the firm
Monthly data for hours and numbe of
cloths
Salaary per person
(PA)
Total employee
cost
Managers 1 23000 23000.0 86300
Head cheff 1 16000 16000.0
Assitant cheff 2 14000 28000.0 Per month
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employee cost
Servers 4 1900 7600.0 7191.6666666667
Servants 1 1700 1700.0
Quality team 1 10000 10000
Sources of finance
For the new start up of restaurant there is the requirement of £400000 to the business entity.
In this, to fulfil the financial requirements at low cost both internal and external sources will be used
by the sole proprietor. Hence, for meeting the financial needs entrepreneur will make use of his own
savings or fund worth of £180000. By taking into account this source business entity can save
money. Moreover, in this he does not obliged with the periodical financial burden (Caglayan and
Demir 2014). However, if business entity will make use of such source then he does get interest on
his own capital. Along with this, sole proprietor will also approach for loan of £220000 to Barclays
bank. This source will also prove to be more beneficial for the entrepreneur because such source
provides tax benefit to him. However, in this business entity has to pay interest to the bank for the
financial assistance will be taken by them (Bhattacharya and Londhe, 2014). Hence, both these
sources will help Fountain Valley restaurant in enjoying the high profit margin by reducing the cost
of finance to the significant level.
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REFERENCES
Books and Journals
Bhattacharya, S. and Londhe, B.R., 2014. Micro Entrepreneurship: Sources of Finance & Related
Constraints. Procedia Economics and Finance. 11. pp.775-783.
Caglayan, M. and Demir, F., 2014. Firm productivity, exchange rate movements, sources of
finance, and export orientation. World Development. 54. pp.204-219.
Gregor, S. and Hevner, A.R., 2013. Positioning and Presenting Design Science Research for
Maximum Impact. MIS quarterly. 37(2). pp.337-355.
Min, H.N., Kim, I.J. and Choi, K.W., 2014. The Impact of Brand Diversification on Firm
Performance: A Study Restaurant Firms. Journal of the Korean Society of Food Culture.
29(6). pp.593-598.
Vuong, Q.H., 2014. Operational scales, sources of finance, and firms’ performance: evidence from
Vietnamese longitudinal data.
Wedel, M. and Kamakura, W.A., 2012. Market segmentation: Conceptual and methodological
foundations (Vol. 8). Springer Science & Business Media.
Online
Market trend of UK, 2016. Online. Available throusgh: <http://www.bighospitality.co.uk/Trends-
Reports/Value-of-restaurant-market-to-reach-52bn-by-2017>. [Accessed on 14th June
2016].
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