Case Study Food Restaurant Management Marketing Essay

Case Study Food Restaurant Management Marketing Essay Jack Sprat is the owner of seafood restaurant in a coastal town. He is 63 year old and doctor has advised him to take rest so he had appointed a Manager to look after the business operations and he use to come to see the business once in a week. But once he handed over the business to the manager his business is not doing well and there is continuous decline in the business. So in order to find remedy owner has approached to the investigator to analyse the case and suggest as what should be done to bring back the business of the restaurant. The investigator has analyzed the business with the tools of business (case) analysis-SWOT and further financial data has also been taken into consideration to find out the declining trend and come to a conclusion as why business is going down. In order to evaluate the business operation and put the findings in the report the investigator has done extensive research-secondary research and analysed the case with his valuable suggestions. ACKNOWLEDGEMENT The investigator would like to convey his gratitude to those entire people who helped him to enhance his understanding of the case and analyzed the situation so that a valid conclusion of the case can be drawn. The investigator has completed this case successfully and has presented his findings with suggestion in this report. So author would like to thank the Module tutor for kind support and guidance. INTRODUCTION Jack Sprat is 63 year old owner of 60 seat licensed seafood restaurant that is situated in a coastal town. Before starting this business Jack was simply a Manager at a local Bluebeckers Restaurant. But an inheritance left this restaurant to him. Since the opening of this restaurant business it has given very good return. The belief of Jack towards success of this business is the Maintenance of high standards in food production and presentation. Other fact is Menu and beverage list has been fairly constant since beginning of this restaurant. Jack did not change menu and beverage list because business was giving modest return since beginning. But jack is not regular to the restaurant so he has appointed a Manager to manage the business operation and he used to come to the restaurant to see the business operation once in a week. This is because at this age (63) he has been suffering from health problem and his doctor has advised him to take rest. But business of this restaurant has gone down as soon as it was handed over to the manager. Absenteeism of the staff has increased. Keeping in mind the remedy of the situation author has established aim and objectives of this report, here are the aim and objectives written in detail: Aim of this report is to find remedy of the existing problem or discrepancies of the restaurant and give valuable suggestions to overcome from these problems so that business can be put on its old pattern-profitable. Objectives are: Finding most important problems Identification of further information that would be helpful in making realistic plans for the future of the business To list the priorities Drawing an action Plan The structure of this report is as follows: First of all main body has been presented wherein SWOT other detailed analysis has been done. Then conclusion has been drawn and bibliography (list of references) has been given followed by appendix section where additional information has been provided. MAIN SECTION Before providing solution of anything one has to find the problems first. So to find problems related to Jack Spart business the investigator has conducted SWOT analysis and financial analysis. Before going for the SWOT analysis of the business concerned it is important to understand SWOT first. SWOT ANALYSIS is the detailed search and listing of factors from situational analysis that might or will impact the businesss strategy. Strategic marketing is based on the SWOT analysis. The process by which SWOT factors are derived is to carefully review the internal analysis for strengths and weaknesses, and the environmental analysis for opportunities and threats, and to then record. (Reich, Z.A, 1997) According to Morrison, J (2002) The SWOT analysis is a commonly used planning tool, which assesses the firms strategic profile in terms of its strengths, weaknesses, opportunities and threats. Focusing on both internal and external environments, it serves to highlight a firms distinctive competences, which will enable it to gain competitive advantage. Based on the above information from the scholars it is true that business environment can be divided into two part-internal and external environments. Internal environment consists of all factors that are internal part of the business. These internal factors are within the control of the business. Strength and Weaknesses of the business can be found in the internal environment of the business. External factors are those factors which are not within the control of the business and to be into existence business houses have to change in internal policy and adjust itself to cope with the external environment factors. Opportunities and Threats are the factors that are part of external environment of a business. For SWOT analysis please refer to appendix1..SWOT ANALYSIS.docx FINANCIAL ANALYSIS REVENUE (SALES) POINT OF VIEW: Food sales has increased in 2007-8 by 4.3% compared to 2006-7, and it has gone down in the financial year 2008-9 by 3.95% compared to 2007-8 sales of food. Liquor Sales has increased in 2007-8 by 5.97% compared to 2006-7 and further it increase by 15.59% in the year 2008-9 compared to 2007-8. Overall Total Sales has been increasing in the financial year by 4.67% in the financial year 2007-8 compared to 2006-7, and further increased by 6.57% in the financial year 2008-9 compared to 2007-8. DIRECT COST POINT OF VIEW: In the financial year 2006-7 food cost was 42.05% of its sales and in 2007-8 it became little favorable by going down to 41.16% of its sales figure and in the year 2008-9 in again gone up to 43.63% Direct cost of Liquor is 59.72% of its sales in the financial year 2006-7, and 57.70% in 2007-8 and further 57.91% in 2008-9. So its favorable as it is in declining trend. Total direct cost is 54.01%, 55.11% and 52.88% in the financial year 2006-7, 7-8, and 2008-9 respectively which also seems favorable because in 2007-8 it gone little up but again it gone down by good margin-around 2 to 3% GROSS PROFIT POINT OF VIEW: Gross profit of food is 57.95%, 58.84% and 56.37% in the financial year 2006-7, 7-8, 8-9. This shows increase in 2007-8 and further decline in 2008-9. Gross profit of Liquor is 40.28%, 42.30% and 42.09% in the financial year 2006-7, 2007-8, and 2008-9 respectively. Overall it is in favorable trend. Gross profit in the financial year 2006-7 is 54.01%, 55.11% in 2007-8 and 52.88% in 2008-9 which seems declining trend. In the year 2007-8 it gone up but in 208-9 it came down. This is because there was declining of sales of food in the financial year 2008-9 by 3.95%, otherwise sale of liquor in this financial year was good and direct costs were also behaving favorably. INDIRECT EXPENSES POINT OF VIEW: There are three component of indirect expenses-labour, overheads and operating expenses and maintenance expenses. Amount spent in labour is in increasing order i.e., 29.76%, 31.51% and 33.21% in the year 6-7, 7-8, and 2008-9 respectively. This shows restaurant is spending more % every year in its staffing. Overheads and operating expenses seems within control as its 8.78%, 7.21% and 8.36% in the year 2006-7, 2007-8, and 2008-9 respectively. Maintenance expenses is 1.61% of sales in the financial year 2006-7, 1.40% in the financial year 2007-8 and 0.91% of sales of financial year 2008-9. This shows that organization is spending very less on maintenance expenses. Overall total indirect expenses is 40.15% of its sales in the financial year 2006-7, 40.12% in 2007-08 and gone up in the financial year 2008-9 to 42.48% NET PROFIT POINT OF VIEW: Net profit is 13.86%, 14.99% and 10.40% in the financial years 2006-7, 7-8, and 8-9 respectively. This shows that Net profit has going down, and in the financial year it has gone down with huge gap compared to previous years percentage. Overall its a matter of discussion and management should pay attention to the indirect costs as percentage of indirect cost is very high. As gross profit is in 50% so almost 40% of sales are being spent for indirect expenses. Although management is not spending much in maintenance component of indirect expenses but other components i.e., overhead and operating expense, and payroll expenses are very high that is the reason Net profit of the restaurant is not attractive. For further information please refer to financial ratios table in appendix2..FINANCIAL ANALYSIS.docx Aim and objective No.1: Finding important problems: Operational System A sales forecast is a prediction based on past sales performance and an analysis of expected market conditions. The true value in making a forecast is that it forces us to look at the future objectively. The hotel can takes note of the past and stay aware of the present and precisely analyzes that information to see into the future. It will also help the hotel to establish policies so that one can easily monitor prices and operating costs to guarantee profits, and make one aware of minor problems before they become major problems. Employee Morale Employee morale describes the overall outlook, attitude, satisfaction, and confidence that employees feel at work. When employees are positive about their work environment and believe that they can meet their most important needs at work, employee morale is positive or high which can lead to better service and customer retention. Since there is an increase in absenteeism in restaurant employee morale can be increased by treating employees with respect, recognition and empowering them. Menu choice is stale and boring Redesign menu to increase the average spend of the hotel customers, correctly categorize the items on the menu, improve the food presentation, increase food and beverage cost and thereby increase sales at the same time. Maintenance and Hygiene problem The organization is spending very less on maintenance expenses. In any food establishments, food handlers are either the first line of defense or the cause for the need for defense. This is because most types of foods can be contaminated and it is the responsibility of the food handler to ensure the safety of the consumers by eliminating or minimizing the contamination to safer levels for consumption.   The restaurant needs to have rules and procedures in place to ensure that Personal Hygiene is effectively managed. Aim and objective No.2: Identification of further information that would be helpful in making realistic plans for the future of the business: Information needed towards market segmentation-target market: Information to the case is very important to analyze any businesss health or problem. It is equally important like medical tests are important for human body for remedy of any kind of complain of a patient. There are other tests or scanning is needed for business analysis. Market segmentation is one of them. Market segmentation: market consists of buyers who differ in one or more ways. They may differ in their wants, resources, locations, buying attitudes and buying practices. Because buyers have unique needs and wants, each buyer is potentially a separate market. Ideally, then a seller might design a separate marketing program for each buyer. For example a caterer can customize the menu, entertainment, and the setting to meet the needs of specific clients. However, most companies are unable to offer complete segmentation. The cost of complete segmentation is high and most customers cannot afford completely customized products. Companies therefore, look for broad class of buyers who differ in their product needs or buying responses. The restaurant industry offers many examples of segmentation by a variety of variables. (kotler,p 2004) The reason why knowledge of market segmentation is needed because until unless it is not known that which segment is being targeted by the organization concerned (in this case Restaurant of Jack Sprat), it would be very difficult to compare the strength of that segment for the business. In this case it is not given in the case so its important to analyse this business from its segment point of view. Information Needed for competitors analysis: To get success of the business its needed to deal with customers, suppliers, employees, and others. In almost all cases there will also be other organizations offering similar products to similar customers. These other organizations are competitors. Objective of the other organizations is the same as yours to grow, make money and succeed. Effectively, the businesses are at war fighting to gain the same resource and territory; the customer. And like in war, it is necessary to understand the enemy: How he thinks; What his strengths are; What his weaknesses are; Where he can be attacked; Where the risk of attack is too greatà ¢Ã¢â€š ¬Ã‚ ¦.. And so on. And like in war, the competitor will have secrets that can be the difference between profit and loss, expansion or bankruptcy for the business. Identifying these secrets is thus crucial for business survival. (http://dspace.dial.pipex.com) accessed on 2/01/2011 Other information needed is about its competitors. Information of competitors is very important to know the business of competitors and further business concerned can be compared with the competitors. So competitor analysis is very important. Aim and objective No.3: To list the priorities: First of all instant action should be taken to solve Hygiene problem. Proper forecasting of guests so that underproduction and overproduction both can be kept under control Extra manpower has to be reduced so that there will be less burden on payroll cost Choice of menu has to be increased Manager should be empowered or can be changed (as information is not given properly and in detail so it is impossible to say to change) Somehow owner has to be in touch even over the phone to monitor the business operation and if possible frequency to visit may be increased. Local bank should be approached for short term loan for the refurbishment activities. Aim and objective No.4: Drawing an Action Plan: Action plan is a process that includes assessments of own strengths, available resources and market opportunities. There must be idea about marketing objective of the organization concerned then a plan can be prepared and further implemented to achieve the determined objective. In other words these informations are basic and needed at very first step towards making action plan: Market and trading environment of the business concerned Decision about market business is targeting to Knowledge about differentiation or advantage of uniqueness of own product and services Deciding marketing mix Estimation of Fund etc. ACTION PLAN: PRODUCT: Option in Menu list will be given PRICING : May charge little higher than what has been charging PROMOTION: There is need to promote the product and create awareness to remove the negative image of the organization. So it can be done through normal aids of advertisement-Newspapers or T.V Channels. Through T.V Channels it may be a little costly affair in that point of view daily is better. Other Actions to be taken: It could have opened even on Sunday to attract customers who want to utilize their holidays. So it will be open all 7 days. Funds should be managed instantly- It can be done by approaching Commercial Banks for short term loans. Refurbishment will have to be done as soon as loan is approved. Employees have to be re-motivated so that absenteeism of staff can be kept under control. CONCLUSION The investigator has analysed the case of Jack Sprats restaurant and found that major problem is its hygiene and maintenance and indirect expenses. These two factors have to be kept under control and converted into favorable mode only then this organization can earn profit like previous time. There are other areas also that needs attention i.e., arrangement of fund, manpower management, empowering manager etc. BIBLIOGRAPHY Britton, C and Worthington. I (2003) The Business Environment, 4th Edition, UK:Prentice hall. Hooley.G(2004) Marketing Strategy and Competitive Positioning, 3rd Edition: UK: Prentice Hall Kotler, P. (2004) Marketing for Hospitality and Tourism, 3rd Edition, Delhi:Person Luck.D and Rubin, S.R (1996) Marketing Research,7th Edition, USA:Prentice hall Morrison, J (2002) The International Business Environment, 1st Edition, New York; Pal Grave. Reich, Z.A (1997) Marketing Management for the Hospitality Industry,1st Edition,: Wiley and Sons Canada. Wearne.N (2001) Hospitality Management, 1st Edition, New Delhi: Global www.netmba.com/strategy/pest/ Accessed on 2/01/2011 http://dspace.dial.pipex.com) Accessed on 2/01/2011 APPENDIX 1 SWOT : Strength, Weakness, Opportunities and Threat Analysis of Seafood Restaurant Business of Jack Sprat STRENGTHS WEAKNESSES It is an established organization Maintaining high standard in food and presentation Customers feel that restaurant is conveniently placed and charges reasonable price Owner is not able to give full time attention to the business Maintenance and Hygiene problem Menu choice is stale and boring OPPORTUNITIES THREATS Restaurant is old so having established market Market Image is good- reasonable price and consistent standard Dilution of market share due to inability to refurbish Environment Health officer may not be informal in future and there will be time when formal notice will be issued.