Research Project: Food Costing Impact on Consumer Intentions Analysis

This research project investigates the critical role of food costing in influencing consumer intentions within the restaurant industry, focusing on the Spice Traders restaurant. The project examines the relationship between food and labor costs and their impact on customer decisions, analyzing the importance of accurate cost determination and its effect on profitability and competitiveness. The scope includes an analysis of the current cost structure, a review of the literature on menu pricing and managerial control, and an assessment of the restaurant's profitability. The study identifies the issues faced by Spice Traders due to a lack of proper food cost monitoring and provides recommendations for both short-term and long-term strategies to enhance the restaurant's financial performance and customer satisfaction. It emphasizes the need for quality checks, improved hospitality services, and the development of a competitive pricing structure to strengthen the customer base and improve the restaurant's position in the market.

Running head: RESEARCH PROJECT
Food Costing
(Research Project)
Name of the Student:
Name of the University:
Author Note:

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RESEARCH PROJECT
Executive Summary
This research project would provide the ideas about the food costing and the necessity of
maintaining food costing in order to create the impact on customers’ intentions with the special
review of the case study of The Spice Traders. The Spice Trader Restaurant is one of those
India cuisines that offer the high quality Indian food to the consumers. The scope of the project is
to analyze the collected data to understand the impact of food costing on the consumers’
intention to visit the restaurant. The restaurant has been experiencing majority of the issues due
to lack of proper monitoring and reviewing the entire cost structure of the food. The lack of
adequate cost sustenance is the major issue that affects the profitability of the company. The long
term recommendation is established for twelve months period. The administrative department
requires monitoring the costing structure during this period. The quality check and the
remarkable hospitality services can be taken into consideration while structure a new costing
strategy. This is considered as the short term recommendation that will help me in understanding
the profit parameter of the company.

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Table of Contents
1.0 Introduction................................................................................................................................3
1.1 Background of the Industry.......................................................................................................3
1.2 Background of the Company.....................................................................................................5
2.0 Project Scope.............................................................................................................................7
2.1 Statement of the issue................................................................................................................7
2.2 Catalyst......................................................................................................................................8
3.0 Literature Review....................................................................................................................10
3.1 Food Costing: Conceptual Ideas..............................................................................................11
3.2 Menu Pricing Strategy.............................................................................................................13
3.3 Food Cost and Managerial Control..........................................................................................14
4.0 Discussion................................................................................................................................16
4.1 Introduction..............................................................................................................................16
4.2 Result Points............................................................................................................................17
4.3 Limitations, Assumptions, and Ethical Consideration............................................................20
5.0 Recommendations....................................................................................................................21
5.1 Long-term recommendation....................................................................................................21
5.2 Short term recommendation....................................................................................................21
References......................................................................................................................................22

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1.0 Introduction
The major focus of the study is to analyze the impact of food costing on the intentions of
the consumers who have been visiting the restaurants and cuisines. Food costing is the concept
that is associated with two main costing structures. The first one is the cost of the foods and
ingredients and the other one is the labor costs (Vanhonacker and Verbeke 2014). It is noticed
that the luxurious hotels offer the high quality food, ambience, and proper hospitality services.
Therefore, the customers often pay more prices than the other cuisines. However, the customers
even sometimes avoid if they find the restaurants too much cost effective. Therefore, it is
essential for the business marketers to obtain the clear ideas about the proper cost structure and
review the record accordingly (Feldmann and Hamm 2015). The fundamental rationale of my
research is to scrutinize the nourishment costing industry in which I am taking Spice Traders
Restaurant to do some review. Food cost and Labour cost are two principle viewpoints that can
represent the moment of truth the eatery. So it is compulsory to decide the cost of the sustenance
effectively and efficiently .I join with the basically Indian eatery's proprietor to decide the
sustenance cost which is fundamental for business to make an opposition with other eatery and to
decide the cost subsequent to settling the net revenue of the eatery where profits is the lifeblood
of the business, necessary to survive and essential to thrive. This research project would provide
the ideas about the food costing and the necessity of maintaining food costing in order to create
the impact on customers’ intentions. The results derived from the collected data will be analyzed
in this research project.

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1.1 Background of the Industry
In this research I will do fundamental concentrate on the Food costing of essentially
Indian eatery. The exploration is being done to decide the cost in successful path as it decides the
productivity of the eatery. It is the one in which it cost the plate and sold contrast the sum it cost
to set up the food. So it is imperative to decide food cost legitimately so the business does not
experience the crisis or any sort of debt. The restaurant chains and the hospitality industry in
New Zealand have been experiencing the enormous growth and success in last few years. The
statistical figure shows that the cafes and restaurants in Auckland region experienced the revenue
growth of almost $1.91 billion. The positive outcome is encouraging the restaurant chain to
invest more capital and refurbish the restaurants (Arsil et al. 2014). In fact, people are taking the
plunge into starting up the new businesses across many of the sectors along with hospitality. The
availability of the luxurious restaurants in different location is even creating the significant
impact on the consumers’ intentions as well.
The business requires identifying the way to achieve the strong customer base. It is
notable that food costing has the significant impact on the customers’ minds in terms of making
the decision of visiting hotels. The major focus of the restaurant businesses is to convince the
customers to pay more for the food that is higher than the cost of production. However, in order
to achieve this objective, the restaurant businesses require paying attention to the food quality
and greater hospitality services. The research conducted on the Indian eatery industry, it is
observed that the most fast growing and successful food businesses in India are Pizza chains, and
Coffee day. It is noted that the giant Pizza chain, Dominos located more than 300 locations in
India whereas the Coffee day are visible in more than 800 locations. In the financial year of
2009-2010, Dominos had the food cost of 26% whereas Coffee Day has the food cost almost

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20% (Ranjan and Garg 2017). On the other hand, it is noted that the other restaurants require
struggling to keep food costs in check over due to the fluctuating inflated costs. This inflation
rate creates the significant impact on the profitability areas. It is noticed that in last 2/3 years, the
inflation rate has taken a huge toll on the prices of food ingredients. This incident has pushed the
costs in the eatery business. The business owners thus faced the considerable challenges in terms
of maintaining the profitability parameter.
1.2 Background of the Company
Many of the Indian restaurants have the strengthened positioning in New Zealand. Spice
Trader Restaurant is one of those India cuisines that offer the high quality Indian food to the
consumers. Based on a different location, the restaurant has already established a strengthened
customer base with the high quality food and effective hospitality services (Spicetradersnz.com
2017). The convenient location of the restaurant is also attracting more consumers. Almost 115
members are associated including the service staffs, chefs, and managers. The restaurant chain
has almost 13 branches around New Zealand across Dunedin, Auckland, and Wellington. The
Spice Traders restaurant is a restaurant which provides Indian cuisine to their consumers. It is
physically located at the Queensgate Mall Lower Hutt, Johnsonville Shopping centre, Petone,
Tauranga, Mt.Roskill, Hamilton, Whangarei, Hastings in New Zealand. This is big enterprise and
there are about 115 members in the restaurant which includes Chef, Managers and Service Staff.
This restaurant gives diverse dishes to their clients at various fares. It is an objection of a few
clients that the sustenance is costly. So the exploration will happen on the matter of keep up low
and sensible cost. For this project I am dealing with the Spice Traders Restaurant which is
physically located in Westfield Queensgate,Level 1,Corner of Queens Drive and Bunny Street,
Lower Hutt Central, Lower Hutt ,Wellington.

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Spice Trader Restaurant is the India cuisine that offers the high quality Indian food in
New Zealand. The restaurant chain is located in various locations, such as Johnsonville Shopping
Centre, Petone, Hamilto, Tauranga, and Queensgate Mall Lower Hutt in New Zealand
(Spicetradersnz.com 2017). The restaurant has gained the remarkable reputation as the best
Indian cuisine around the nation. The restaurant chain has almost 13 branches around New
Zealand across Dunedin, Auckland, and Wellington. The brand positioning of this restaurant is
quite strong in New Zealand. The restaurant is located in the most popular shopping malls in
New Zealand and it has a number of the full restaurants in the mix. The constant focus on the
customer satisfaction is driving the restaurant in adopting the unique designs by mixing up the
traditional South and North Indian dishes.

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2.0 Project Scope
The aim of the research is to identify the necessity of structuring food costing for
developing the reputed position of the restaurant and gain customer base. The scope of the
project is to analyze the collected data to understand the impact of food costing on the
consumers’ intention to visit the restaurant. The project would also provide the insightful
knowledge about the necessity of determining the food pricing strategy for developing the
competitive position of the restaurant.
2.1 Statement of the issue
By breaking down the food menu and records I come to realize that the eatery is not
deciding the cost of sustenance accurately and that is the reason their nourishment is costly from
different eateries. The restaurant need to review the food cost as some of the prices are very high
in compare with other restaurants due to which company have to face more competitions.
Customers usually prefer the good hospitality services and the high quality food while they are
visiting the restaurants with their friends or family. Similarly, the restaurant business is also
developed by considering such demands of the consumers. Along with this, the business
marketers concentrate on structuring the appropriate costing for the food that would be including
the labor charges and the costs of the ingredients for preparing the foods (Rummo et al. 2015).
However, The Spice Traders has been experiencing majority of the issues due to lack of proper
monitoring and reviewing the entire cost structure of the food. The lack of adequate cost
sustenance is the major issue that affects the profitability of the company. It is thus necessary for
the company to keep the focus on the proper cost structure to strengthen the customer base and
develop the competitive position. Development of the feasible pricing structure is necessary for

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the restaurant businesses. The food costing generally depends on the appropriate cost of
sustenance that is needed to be structured in an accurate manner (Mayne, Auchincloss and
Michael 2015). It is the major reasons behind the different cost nourishments in other eateries. It
is necessary for every restaurant to review the costs of every dishes included in the menu. It is
sometimes noticed that some price of the menu is much costly, which is ensuring more
competitors in the market. The business marketers are thus facing more competitions.
2.2 Catalyst
The Spice Traders eatery examines the nourishment costing of the sustenance things
which are accessible in their eatery. What's more, discover the explanations for the wrong
sustenance costing because of the reason that the basically business is experiencing less
customers which can create the loss and unable to compete with the competitors because of this
issues it might face fewer customers and lead to failure. To conquered all these kinds of
problems the Spice Traders restaurant proprietor should contiguous the hand and to interrogate
the price of its good and to properly maintain the cuisine value. The lack of proper nourishment
costing is the major issues visible in The Spice Traders. The major drawback is faced when
there is the lack of proper costing structure of the food. Hence, eventually, the number of the
consumers visiting the restaurant is decreasing in a recognizable manner (Campoy-Muñoz,
Cardenet and Delgado 2017). Automatically, it affects the business profits due to which the
restaurant is threatened by the other competitors in the market. Restructuring the food cost can
mend these gaps and develop the string customer base eventually.
The Spice Traders has observed the issues with the nourishment costing of such
sustenance things that are easily accessible in this eatery. However, it is noticed that the business

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has failed to structure the proper cost sustenance due to which the business is experiencing the
issues with the lesser number of customers (Spicetradersnz.com 2017). This issue can create the
considerable effects in the profit parameter and the business can be threatened by many other
competitors in the market. It is thus necessary for The Spice Traders to re-structure the food
costing in order to maintain the appropriate the cuisine value.

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3.0 Literature Review
The literature review provides the theoretical background of the subject matter. The study
is based on the impact of food costing on the consumers’ intention of visiting restaurant. In this
section of the study, the discussion will be based on the different aspects to be taken into
consideration for managing the cost sustenance. In addition to this, the study would also specify
the impact of such cost structure on the consumers’ intention and organizational profitability. It
is necessary for the administrative department of eatery enterprise to maintain the scheduled or
routine check up to understand the productive approach. Identifying the nourishment costs would
helpful enough in deciding the actual benefits of costing in the foods served in the restaurants.
Marian et al. (2014) suggested that the sustenance cost provides the clear feature of the customer
esteem, nourishment, and administration ability level. It is essential for the restaurant to take
more time in reviewing the entire pricing structure of the menu that will be served to the
customers. The food price has such significant impact on the reputation of the restaurants.
Moreover, it determines the extent to which the restaurant has the ability to participate in a
competitive business market (Anselmsson, Vestman Bondesson and Johansson 2014). The
competitive positioning of the restaurant would help in attracting more customers and sustain the
long-term position.
Restaurant industry usually needs to concentrate on the costing structure. The most
controllable costs are food costs and labor costs. According to Knezevic et al. (2014), the labor
costs and the food costs generally deal with the different types of food service operations. For
example, the luxurious hotels or restaurants apparently have the higher food costs and labor cost
percentages than the fast food restaurants or casual dining. In usual cases, the product sale

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depends on the quality of the food and hospitality service, product sales mix, and pricing and
hours of operations (Lewis and Lee 2016). These factors create the significant impact on both
labor cost percentage and food costs.
3.1 Food Costing: Conceptual Ideas
In the food service industry, the ‘prime cost’ is associated with the charges of the culinary
labor and the food products. Such components associated with the food costing ensure the
critical role in all pricing strategies. The food cost control depends on the management of proper
utilization of the food products. The application of the ‘cost control’ techniques requires
concentrating on the identification of cost and the budget. Accordingly, the corrective actions are
undertaken. According to Yandrasevich (2012), corrective action determines the operational or
budgetary aspects that depends on the particulars of the variance or the circumstances. The
realistic performance goals are accordingly established by concentrating on the budgetary
process.
With nourishment expenses and expansion climbing and clients spending less, eatery
administrators should routinely check their menus to guarantee they are productive. One of the
best weapons against benefit misfortune is to know your nourishment costs. An eatery's
nourishment taken a toll decides its benefit. Without comprehending what the sustenance cost is,
there is no real way to know whether the things on a menu is creating a benefit. Sustenance Cost
likewise demonstrates the nature of the nourishment and customer esteem and administration
ability level. Without any delay Spice Traders proprietor need to give time regarding reviewing
of the food price which will impact on the restaurants reputation as well as to maintain