Assumptions

| June 19, 2015

 

Revenue

• Weekly inventory
• Restaurants already in business – 206 restaurants
According to 2009 data, there are approximately 21,000 operating restaurants in the province of Quebec (Demen-Meier, Pageau 2010). Of these 21,000 restaurants, 35% are located in the Montreal-Laval region (Service Canada, 2012). Therefore, there are approximately 7,350 restaurants located in our target region. However, we are only targeting small-medium sized restaurants with an average price of $25-30 a person. We are estimating that our target comprises around 15% of the 7,560. Thus, the final number of existing potential clients would be around 1,102. Of those, we will reach around 75% of them with our campaign and of those who are reached, we expect around 20% (206 restaurants) of them to become clients. Since we charge $350 dollars per unit we expect an anual sales revenue of $72100 in the first year of operations. Updating fees costing $50 per year will be recognized in the next year.
• New restaurants
• Yearly updates based on the number of restaurants we are servicing
Cost of goods sold
• Cost in labour: 2 technicians, who will install software and demonstrate it to customer.
o Programmer
o Two supports agents on phone for technical issues
• Materials

• Operating Expenses
• Head office

• Rent & Electricity – $1500/month
• Phone and internet – $100/month
• Insurance – $150/month
• Team Salary: 2 IT Directors, 2 Communications Directors, 1 Finance Director, 1 Marketing Director –
• Maintenance of head office – $100/month
• Legal fees – $1,000/year
• Interest expense based on bank loan – $20,000 loan, 6%/year, $1200/year
$72,100 first year sales, minus 24,400 in operating expenses
References:

Demen-Meier, C &Pageau, F (2010). RESEARCH REPORT Traditional Restaurant Entrepreneurship in the Province of Quebec. CENTRE D’EXPERTISE ET DE RECHERCHE EN HÔTELLERIE ET RESTAURATION, 1. retrieved November 12, 2012, from http://www.ithq.qc.ca/fileadmin/documents/Pages/CER/Traditional_Restaurant_Entrepreneurship_in_the_Province_of_Quebec

Service Canada. “Restaurant and Food Service Managers.” Service Canada. N.p., 6 July 2012. Web. 3 Nov. 2012. <http://www.servicecanada.gc.ca/eng/qc/j

add whatever you think is missing!!!
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Section 2: Financing Requirements
New and emerging products with high growth potential tend to have a negative cash flow in the first year of the launch. Based on our projected numbers we believe that we will yield a small profit because of the following.
We believe that $85,000 will be needed to cover $82,320 of costs that will be incurred in the first year. Our 5 owners invested $5,000 each in the company, another $10,000 was provided by family and friends without interest. We plan on getting a line of credit from the bank for $20,000 at an interest rate of 6% annually. With the first few years of growth we plan on paying back the loan in 3 years assuming we be profitable. We will secure this amount with assets of the company.
We have aspirations of expanding our application beyond Montreal and into Quebec and other provinces across Canada. To support this goal, we are seeking an investment of $30,000 from an investor to mainly cover our marketing expenses in the first year. The investor in exchange will receive 20% of the company. A suitable exit strategy for the investor would be to pay back his initial investment at the end of 5 years and giving him a percentage of the profits. Because of our potential of sales growth we believe that our company in the present time is worth $150,000. Based on our projections we will pay off all our expenses after the first year.
In order to know how much invest in the company we need to know what our costs will be made up of. $27920 of startup and development costs will be incurred in the first year along with $24,400 of operating expenses.

 

 

 

 
Section 3: Sources and Uses of Cash (First Year):
Sources of Cash Amount Uses of Cash Amount

Owner’s investment $25,000 Start-up Costs $10,000
Family and Friends $25,000 Operating Expenses 24,400
Line of Credit $25,000 Application Development $17,920
Seeking Investor for $10,000 Marketing Expense $30,000
Total 85,000 Total $82,320
COMM 320 – Second Report Guidelines
(a) Target Market Description (1 page) Drossie

Who is your target market? Crack open your marketing textbook and remember that a target market is much more than just “women18-32 years old”. Think demographics AND psychographics. Where do they live? What do they value? What do they read? Where do they hang out? Who influences them?
(b) Marketing Ideas
Upon completing our first report, we knew that our target was small to medium size sit-down restaurants in the Montreal and Laval region with the average price of $20-35 a person. We are targeting restaurants that are relatively busy, which is why we are going after locations that are highly populated and are also in high traffic areas.

We also knew that we were targeting the owners and managers of these restaurants,however, we did not know much about them in terms of demographics. After looking up statistics on these restaurant and food service managers, we found out that our targets are predominantly male, aged 25-44 (Service Canada, 2012).. Seeing as our service is to provide an app, we are targeting those who are open to technology and using smart phones. They have to be somewhat technologically advanced or be willing to learn how to use new technologies (i.e. the app).

Service Canada. “Restaurant and Food Service Managers.” Service Canada. N.p., 6 July 2012. Web. 3 Nov. 2012. <http://www.servicecanada.gc.ca/eng/qc/j

Marketing Ideas
Every business must come up with a marketing strategy to boost sales. Inventory management is very important in an organization because inventory is very dynamic and requires constant and careful evaluation. The inventory management application is very useful to those businesses that wish to control the inventory.

The Inventory Application Management
The management of the inventory is very essential because if the inventory is not well managed it will have an effect on the profits of the business. In the modern world, businesses are applying the just in time technique to control the inventory. The just in time technique requires that inventory is brought to the company just in time for manufacturing process to reduce the holding cost. For this technique to work out, the inventory management application is required to help the business to keep track of the inventory and to know exactly when to reorder.

Marketing the Inventory Management Application Using the 4Ps
In Montreal, most of the restaurant managers are complaining about inventory management. This product therefore will solve most of the inventory problems. The Inventory Management Application will help the managers to keep track of inventory, calculate changes in purchase stock and show the changes of the total and ideal cost of a single item on the menu. We have to make the managers understand the uses of the inventory management application so that they can purchase it. This application will satisfy most of the needs of the managers and if they understand its uses they will buy the product.
The best place to sell the inventory management application is the App Store and the Play Store. The targeted consumers are the restaurant managers in Montreal. We considered the App Store and the Play Store because we think these are the most popular app stores in the market. Also, the place will be easily accessible to the managers..
The price of the inventory management application should also be considered .This product is expensive, but it will be of great value to most restaurant managers in the Montreal. The marketing team has to ensure that the managers understand that the high cost of the application will be a small price to pay because the benefits that will come out of it are more.
We have to decide on which method will be the most appropriate to promote the inventory management application. We will place advertisements on television shows to ensure that the managers are aware of this product. Since most of the mangers are very busy and they are not available, we will book appointments with the managers and go to the restaurants and advertise the product directly. We will also place billboards in an area where the restaurants are concentrated to ensure that most of the managers have access to the information.
To market the product successfully the 4ps: product, place, price, and promotion must be applied. The marketing team must understand the targeted consumers to ensure that they come up with right marketing strategy.


(c) Preliminary Sales Projections

One of the challenges we faced when developing our application was determining the yearly price that should be charged to the consumer. In determining what yearly price we should charge our clients we should take into account our competitors, our markup for development and support costs, and our customers’ perceived value of the service.

There are a few apps that deal with restaurant inventory. Most of these apps give their customers a choice between a monthly or yearly fee. One of our competitors which is called Canvas charge 210 dollars for a year and 20 dollars per month. Another competitor called IPro Series 40 Restaurant Inventory charges 150 dollars per year.Our app will be more expensive because of the higher quality in terms of the service we will be providing. Another advantage that we will have over our competitors is the simple navigation through the system. Understanding how to use the system is an integral part of our app and we believe that this will help our potential users track their inventory with ease. Therefore our price will be steeper than our competitors.

In pricing our app we must take into account our total costs of development and support. We came to the conclusion that 17293 dollars will be used for the development costs and 10625 dollars will be used for customer service. This will total 27918 dollars of costs that will go straight to the product. We plan on not only covering these costs but to also make a profit in our first year.Since technology is always changing, yearly system updating fees will also be charged to customers.
Customers will be looking at all the benefits that our app has to offer and will make a decision on how much value it is really worth. The 2 main objectives that our service provides to clients are the use of keeping track of inventory on hand and knowing when to re-order when their supplies run out. In creating high customer value our app must create higher benefits than what the customer expects. As mentioned before not only does our app help customers solve their inventory problems but it also will be noticeable easier and of higher quality. We want to help our customers solve their problems and make their restaurant business flourish.

Taking into account all these factors we have determined an appropriate price for our app. We found that in order to promote the product, we plan on visiting approximately 500 small- to medium-sized restaurants where we will point out the practical aspects and general advantages of using the application to our potential clients. Based on our sample size, we can safely estimate that 280 restaurants, more than half, will begin using the inventory costing system. Customers are expected to pay yearly fees of 350 dollars per year. This price is a small fee to pay for restaurant owners who want a reliable inventory app. After every year customers will be charged 100 dollars to upgrade the system as we will be continually working on creating a more user friendly app. Our revenue is expected to be 98000 dollars in its first year. We trust that sales with steadily increase through time with promotion and word of mouth through our clients. We plan on increasing our target market in the future which will boost sales steadily.

http://www.foodsoftware.com/Product_0008_01.asp?Keyword=&ViewMode=&NavURLs=Restaurant_Inventory_Software%2Easp%7CProduct_0008_01%2Easp%3FKeyword%3D%26ViewMode%3D&NavNames=Restaurant+Inventory+Software%7CIPro+Series+40+Restaurant+Inventory%2C+Recipe+%26+Menu+Software

http://m.entrepreneur.com/blog/224857

 

(d) Preliminary Operation Plans

Preliminary Operations Plan
Developing and marketing a solid, useful mobile application is only half the battle in successfully placing the product in the hands of consumers. Proper operations and logistics must be put into place to ensure smooth operation and distribution of the mobile application.

The Team:
The team will consist of 6 hardworking partners; 2 IT directors, 2 communication directors, marketing director and finance director. The IT director will be in charge of our website, server, and the technical upkeep of our social media outlets, Facebook and Twitter. The IT director will work closely with our marketing director with regards to the social media outlets. Aside from social media marketing, the marketing director will be in charge of developing marketing schemes for the application and discovering beneficial advertisement outlets our team should take advantage of. The communication directors will be in charge of contacting future clients, responding to general interest in the application as a result of our marketing efforts, and facilitating meetings. Finally, our finance director will be in charge of the financial operations of our company. Having an in-house financial manager is more economical, given the small scale of our growing applications company.
Systems:
Our website will be our main storefront, given the nature of the product we are selling. The website will be hosted locally on a rented server to ensure its reliability. As mentioned in the marketing plan, we will be making the application available in the Apple App Store and Android’s Play store, with links to these stores on our website. Payment will be accepted through these application stores directly. As far as communication, email and phone calls will be the main outlets. We will be taking advantage of VOIP services to save money on potential long distance charges.
We believe that starting small and growing as our client base grows is a successful operations plan for a mobile application company such as ourselves. Operating this company in a self-sustainable manner is the most reliable and economical business plan. We can grow or shrink as needed at any time, without the constraints of third party contracts or other obligations.

FIRST REPORT
Comm 320

COMM 320 – First Report Guidelines

Montreal is a city with an abundance of restaurants that presents plenty of opportunities for entrepreneurs. But for any prospective entrepreneur to be successful our team had to pick a restaurant niche whose problems can be solved. We knew chances were that franchised restaurants such as McDonald’s didn’t have too much trouble in their day to day operations. We had spoken to a McDonald’s manager in Ville saint Laurent, Montreal and he told us that his main problem was dealing with lineups at lunch hours. Fast food Franchises with high sales revenues generally have an automated way of doing their operations which can make it hard for us to solve their problems. We then thought that it would be a good idea to look at small to medium sized “family” sit down restaurants who might need our help in making their lives easier. These restaurants are classified as having stable to constant growth over time while also being located in the Montreal/Laval region. We decided to focus on restaurants who charge 20 to 35 dollars per head. Middle class families are the consumers that typically visit these establishments. Annual total sales dollars of sit downs in the province of Quebec totals approximately 5.2 billion dollars.(Statscan) Several group members have previous experience working in service restaurants and highlighted the numerous problems that they have. There are hundreds of restaurant applications that try to solve problems for the consumers but little have been developed for the business owner. Concentration will be on helping the owner and creating an app that solves his day to day hardships.

 
Section 2:Market Research Methodology

Montreal is known worldwide as being one of the cities with the highest number of restaurants per capita. As a result, we knew that the only way to accurately conduct our research was to narrow our search to different types of restaurants. We decided to research various contemporary European restaurants, these included such as bring your own wine eateries within the 20 to 35$ price range per person. More specifically these restaurants were located on crescent street, in downtown Montreal, St-martin in Chomedey Laval and Little Italy / Little Portugal on St-Laurence street. These restaurants are located in popular areas that are densely and have a constant flow of tourists.

Seeing as restaurants are establishments that prepare and serve food to customers, the managers are constantly busy supervising the employees and making sure the restaurant is properly cared for. For this reason we thought it would be more appropriate to contact the managers by phone instead of email. The first time we called a couple of restaurants we had difficulty speaking with the managers for more than two minutes since they were extremely busy. However, they then informed us that the best time to contact them was between 2pm and 5pm and by calling back we were then able to get all our questions answered.

We asked open-ended questions such as “Can you tell me what a typical day looks like for you?” and “Is there a problem that often occurs that you would like to get rid of?” Depending on the answer, we often asked “how many times a week do you need to perform this activity?” The question “Is there something that you always want to avoid doing but have no choice but to?” was the one that provided us with all the answers we needed. Once our interviews were completed, we thanked them for their time and some restaurants actually asked us if we had any solutions to provide them with that would in return help solve some of the issues the restaurants were encountering.

Many managers did not want to conduct their weekly inventory. It is time consuming and most of them require their business partner to assist them to consistently verify the counts. Once they finished manually writing the information down, some restaurants have accounting software that takes more time to figure out once information is written. Their frustration keeps increasing and they find it unfortunate to repeat this process once a week to keep their inventory level up to date.

Some managers also informed us that they had trouble keeping up with the equipment maintenance. It is can be very expensive when a defect occurs with the equipment and preparing the food is crucial in the restaurant industry. The problems seemed to occur at the worst moments, for instance when they were in a dinner rush. However this type of common problem is not something that we can solve.
Another common issue that they mentioned is reservations. There are customers that come late that delay other reservations, or customers that take too long to finish up so they can prepare the table for the next reservation. This is an issue that occurs mostly on weekends when it is the busiest.
The main problem that arises is mainly with the under skilled staff, scheduling and seating arrangements. Managers sometimes have difficulty in finding the appropriate staff for their restaurant in order to excel there customer service. Employees sometimes call in sick and they then need to find quick replacements.

On other occasions some employees simply just do not show up for their shift because they are not happy with their schedule. These are everyday issues that occur within a restaurant and managers need to find efficient solutions to learn to deal with such issues.
Customer satisfaction is also a very important aspect in the restaurant, since they are the ones that keep the establishment running. Unsatisfied customers can run the restaurant out of business. Managers try to do what they can to change that by giving them a discount or free appetizers and desert. This is a very common issue that all restaurants have that and it relates to customer service.
Section 3:Market Research Analysis

After looking at the common problems we came across, we have come to the

conclusion that the best candidate for a solution is inventory management. We think that

this is more than just a surface problem for many reasons. The main one being that

when we asked our selected restaurant managers what problem they would

most appreciate a solution to, inventory management was the one that constantly came

up. In addition to being the most reported problem, it was also the problem that the

managers discussed the most.

We recognize that inventory management is a broad problem and because of

this we re-contacted our leads and asked them to specify exactly what about inventory

management is the most painful problem. Inventory management problems lead to

more problems, creating a domino effect. One of the main examples we were given was

over or under ordering and how it can lead to spoilage or not having enough of an item

which in turn leads to customer dissatisfaction. Another main problem that came up was

keeping track of all the items coming from various suppliers/distributors. It seemed as if

they could have gone on for hours complaining about it. With the help of this information,

we have narrowed it down to two specific departments within inventory management;

re-ordering and keeping track of stock from different distributors.

Upon completing our competitive research we found that there is software out

there that solves these inventory problems and much more. For example,

foodsoftware.com provides restaurants and food manufacturers with the necessary

software to not only keep track of inventory and re-order quantities, but also calculate

changes in purchase costs, total and ideal costs of a specific menu item and recording

sales of menu items. Although this software fits the needs of our niche in terms of

solving their inventory problems, it is expensive (anywhere from $100-$500) and only

accessible through a PC making it not readily available(Restaurant Inventory Software,

2012). It also requires a certain degree of skill in excel making it a little more difficult for

the average person to use. We recognize that anyone can acquire excel skills, however,

not everyone is willing to take the time to learn how to use it. Therefore, we think that this

software doesn’t completely fulfill the needs of our market niche.

There are also apps currently available for smart phones to help managers keep track of inventory. The most popular ones include, Tapas, Canvas’ restaurant inventory mobile app and their restaurant produce inventory app. While these apps provide basic inventory management components such as re-order points and keeping track of stock, they do not address the more complex problems such as categorically keeping track of items from different distributors. From the information we gathered, these apps are not exactly user friendly and can be difficult to navigate. Thus, they do not fulfill the needs of our market niche.
references:
“Tapas Technologies – Restaurant Analytics and Forecasting.” Tapas Technologies – Restaurant Analytics and Forecasting.N.p., n.d. Web. 10 Oct. 2012. <http://www.tapastech.com/inventoryapp.html>

“Restaurant Produce Inventory – Mobile App.” Canvas. N.p., n.d. Web. 10 Oct. 2012. <http://www.gocanvas.com/mobile-forms-apps/395-Restaurant-Produce-Inventory->.

“Restaurant Inventory – Mobile App.” Canvas. N.p., n.d. Web. 10 Oct. 2012. <http://www.gocanvas.com/mobile-forms-apps/355-Restaurant-Inventory>.

“Restaurant Inventory Software / Food Cost Software.” Restaurant Inventory Software / Food Cost Software.N.p., n.d. Web. 10 Oct. 2012. <http://www.foodsoftware.com/Restaurant_Inventory_Software.asp?NavURLs=Restaurant_Inventory_Software.asp>.
Section 4:Preliminary Industry Analysis and Market Analysis

In downtown Montreal, there are four main market segments the restaurants target. The first market segment includes the tourists frequenting the area. The second market segment comprises of the middle-class professionals working in the vicinity during the day looking for convenience and walk-in good quality food for late breakfast and lunch. Host of surrounding businesses are another market segment. These businesses are usually looking for phone-in lunch whenever they have business meetings. The last market segment is made up of those working in the vicinity with families at home. They are normally looking for take-out food to carry home for dinner in the evening (Service Canada, 2011).
As it has been revealed, the target market segments working in the vicinity and flowing through the area at some point in the ordinary workweek, the requirements that have to be fulfilled by a restaurant establishment are; healthy food, fast service, available fast food, and pleasant atmosphere. In these, it can be seen that effective inventory management has to be ensured to avoid any obstructions (Spencer, 2012). Most suppliers and distributors are available in the neighborhood and can be quickly contacted incase of any shortages. There are also several service providers available in the area.
The NAICS code for the business is 722511 which cover full service restaurant (North American Industry Classification System, 2012). The restaurant industry was also affected during the recession in 2009 as the tourist numbers plummeted. But with the recovery going on, it is expected that the industry will benefit from the modest growth aimed in this forecast period (2010-2014). Statistic Canada data shows that food sales have in the past 30 years rose more sharply in restaurants (more than 70%) than in food stores (just under 45%). This can be attributed to the improved economic climate as well as social and demographic factors and is expected to increase further. The industry structure trend has over time leaned towards fewer and larger restaurants. There are problems associated with the service in more than 50% of the restaurants along St-Laurence Street. Most are slow in customers’ service. The average waiting period that a customer waits to be served can be shortened from the current 4 minutes to 2 minutes. With more than 60% of the customers in the area being on tight schedule, this needs to be considerably addressed. Large restaurants make huge investments in technology; smaller restaurants are finding it hard to effectively compete with them (Service Canada, 2011).
References
North American Industry Classification System. (2012, June 19). Introduction to NAICS. Retrieved October 19, 2012, from U.S. Census Bureau:http://www.census.gov/eos/www/naics/2012NAICS/2012_NAICS_Index_File.xls
Spencer, M. E. (2012).Industry Analysis: Restaurant. Retrieved October 17, 2012, from Value Line:http://www.valueline.com/Stocks/Industries/Industry_Analysis__Restaurant.aspx
Service Canada. (2011, December 2012). Restaurant and Food Service Managers. Retrieved October 18, 2012, from Service Canada:http://www.servicecanada.gc.ca/eng/qc/job_futures/statistics/0631.shtml

 

 

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