Business Plan - Renata Speramus by Hong Kong Social Enterprise Challenge

Hong Kong Social Enterprise Challenge 2008 Business Plan Competition for Social Enterprises in Hong Kong

WANTED RENATA SPERAMUS - we hope! ü ü

CHAN YIN CHI CHOI MAN SUM

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CHOW LEONG YU MICHAEL TSE CHEUK LEE TANYA

TING FUN YAN

DEAD OR ALIVE $999,999,999

1. Executive Summary RENATA is a prison-themed restaurant that aims to provide employment to ex-prisoners, to change the social perception on ex-offenders, and to provide education and sharing to the public. RENATA is expected to locate at Mongkok in order to attract the most of our target customers: teenagers and middle-class families. Besides being an ordinary restaurant, we will include social responsibility element. Visits by primary schools and secondary schools will be arranged so as to let the future pillars of the society be aware of this matter in the early stage of their development. Sharing of ex-offenders will also be included. Since the vast majority of employers are ex-offenders, their role is not solely employees, but also a person who shares their experiences. RENATA serves a transitional workplace to ex-offenders. We will provide training and working opportunities to them. When they are fully trained and well-equipped with different skills, they can work in other restaurants, which means they can fully return to the society. After having a satisfactoey performance, RENATA can expand in terms of franchising in different districts in Hong Kong, or even mainland. We hope that not only the brand-name, but also the concept behind can be spread across the region.

2. Social Concept 2.1. The Problem For an ex-offender, a job search can be very frustrating. Nearly all employment applications will consider criminal records. Nowadays employers have become increasingly concerned about knowing if their job applicants have criminal records. More and more employers are conducting pre-employment background checks for criminal records and if any record of misdeeds is found, some employers may choose to reject the ex-offenders. The concern from the employersâ&#x20AC;&#x2122; point of view is that a person with a criminal past may have a propensity to re-offend in the future, hence, damaging the reputation of the company. This is understandable, but at the same time it is very unfair to those who are wholeheartedly willing to re-join the society. Even if they can successfully find a job, their career prospect is usually limited as well. 2.2. The Theory, Value & Mission We, SPERAMUS, believe society needs to have a vested interest in helping people with past criminal records to obtain and maintain employments. It is very difficult for an ex-offender to become a law abiding, tax-paying citizen without a job. Unless the society wants to continue to spend tax payments on building more prisons or rehabilitation centers, we see that ex-offenders need the opportunity to re-join the workforce. We believe that to change the current situation regarding the discrimination against

ex-offenders on employment, it is the society’s responsibility to help them by showing employers hiring those ex-offenders who are willing to work is no difference to hiring law-abiding people. It is our belief that if there are existing employers that aim at hiring ex-offenders to run or be part of a company, it would be a matter of time that other employers will follow, thus making job searches of an ex-offender become less frustrating. 2.3. RENATA “RENATA” is a prison-themed restaurant that aims at providing employments to ex-offenders as well as providing customers with an in-a-prison experience during the process of dining. The name of this restaurant, “RENATA”, is a Latin word for “reborn”, this corresponds to the purpose of this restaurant: to provide employments to ex-offenders by letting them rejoin the workforce and helping them put their past behind and have a brand-new and prosperous future ahead. This restaurant not only provides a fresh dining experience to customers, it also let customers have a taste of what a prison is like and therefore serves as a reminder of what will happen to criminals, hence, warns those who are about to act illegally to think twice. 2.4. Theory of Change The ultimate desired social change is to reduce employers’ discrimination against ex-offenders. Our theory of change is that the success of operating this prison-themed restaurant will spread the message in the community that hiring ex-offenders to work is no

different from hiring any people, this will ultimately change the perception of the employers; and ex-offenders will easily re-emerge back to society. This restaurant brings about social outcomes related to the change in the perception of the community towards ex-offenders, it is a message to the community that ex-offenders are also part of our society and it is our responsibility to bring them back to the community after their being punished for the crimes they have committed. The ex-offendersâ&#x20AC;&#x2122; career prospect is thus improved. 2.5. Social Impact By the operation of RENATA, we expect to provide sustainable employments to ex-prisoners, thus bring them back to a normal decent living. And by the successful demonstration of our business model by RENATA, we hope that the social perceptions on ex-offenders can ultimately be changed; their confession accepted; and their ability recognised. Education and sharings about prison life will also be provided to the public, to lead the teenagers to a right way hopefully.

3. Target Market & Competition 3.1. Target Market As the Chinese society is relatively conservative, prison-related topics are taboos to certain Chinese. To solve this problem, we will focus our business on teenagers and middle-class families who are more open and more likely to accept our business ideas. Teenagers are generally more open to new ideas. RENATA is a brand-new restaurant

with its unique features and prison theme in the region, we are confident our special business ideas can attract a large group of teenagers. On the other hand, middle-class families are generally more willing and more capable of trying new things out. With our education elements, they will be very willing to bring their children to dine together at RENATA. They will therefore be our target customers too. 3.2. Competition Like setting up a normal restaurant, RENATA is facing competitions from various types of counterparties. Our major competitors will be those middle-priced restaurants with western style cuisine. Yet since most restaurants in Hong Kong only occupy a small portion of the market, there are still great opportunities for newly-emerging business like RENATA to develop into a profitable one if the marketing of brand is done successfully. We have a number of competitive edges over other competitors. RENATA is a themed-restaurant, which is very rare in Hong Kong. The prison theme of RENATA is even the only one in the region. This special feature will differentiate RENATA from the counterparties. Public attention will be arisen; and myriads of customers attracted. The social responsibility elements of RENATA will also be another unique feature of us attracting different interested customers. RENATA is also a hybrid of cafĂŠ and restaurant with a mix of cuisines attracting more different kinds of customers.

4. Implementation Plan To turn our unique concept into reality, an implementation plan considering the location, design of the restaurant, licensing, menu, organizational structure, financial projections is drafted as follows. 4.1 Location After the searching and selecting procedures, several vacant stores are recognized as potential locations for RENATA. Among those stores, the one located at Argyle Street in Mongkok is chosen as our target1. The size is desirable for us, i.e. about 1600 sq. ft. It is very close to one of the Mongkok MTR station exits and is opposite to Langham Place, a major shopping mall where draws a large flow of people. Despite a higher rent expense, Mongkok is a suitable location as RENATA is exposed to as many of our targeted customers, who are teenagers and middle-class families, as possible. 4.2 Floor Plan After determining the location for RENATA, a detailed floor plan2 is designed accordingly. In the middle of the restaurant, there is an open dining area where a maximum of 32 customers can be served. On one side of the restaurant, 5 specially designed jail-cell booths each for 4 customers are situated where customers can experience the prison life looking through some steel bars. There is a total capacity of 52 customers. On the other side,

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Appendix I for exact location Appendix II

there is a special displaying area for seasonal promotion and anti-crime information to suit our commercial and social goals. A corner is reserved for the counter selling prison-related merchandises to strengthen our theme and to earn additional profits. Kitchen and toilets are designed to fulfill the licensing requirements. Emergency exit, fire siren and fire extinguishers are also located in the floor plan. 4.3 Licensing Application 3of licenses would be an important issue for opening a restaurant. It needs some time to apply for licenses and it may disturb our expected operation of our restaurant. To acquire licenses for our restaurant, we need to cooperate with several departments: Ă&#x2DC;

The Food and Environmental Hygiene Department (FEHD)

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Building Department (BD)

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Fire Services Department (FSD) To get a full license from FEHD, the period required is about several months to half year.

We will therefore apply both Provisional License and full General Restaurant License. The advantage is we can start our business before getting the full license, which can make our payback period be shorter. It only needs about 1 month to get the provision license, and its duration is 6 months, it is believed that we can acquire the full license within the period. We need to acquire the following certificates in order to get the full license:

Appendix III for procedures

Compliance with Health Requirements to FEHD

Certificate of Compliance with Building Requirements to FEHD

Compliance with Fire Services Requirements to FSD

Compliance with Ventilation Requirements to FSD We have already put the licensing requirements as our concern in the floor plan.

RENATA has been developed to meet all requirements for a full license. The license fee of full restaurant license is predicted as about $10,000 per year. Provisional license fee would be about $1,500. 4.4 Menu4 RENATA’s menu is similar to major themed restaurants in the world such as rainforest café and hard rock café. RENATA wants to create a relaxing, yet mind-awing and inspiring dining experience for the customers, hence there is a great choice of food compared to other local restaurants. RENATA is a western cuisine restaurant due to the fact that it is more appealing to young people and middle to upper class customers. Not only is it more appealing to our target customers, western cuisine also requires a longer dining time, hence, customers can fully emerge into the dining theme. 4.5 Merchandise5 Apart from the core business model, catering service, RENATA will also consider selling

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Appendix V Appendix IV

merchandises related to prison to advance the profit and at the same time raise the awareness of abiding laws. These merchandises include toy handcuffs key chains, T-shirts, baseball caps and the like. Some possible items are listed in Appendix. 4.5 Organizational structure

Structure of employment consists of 4 layers, with the first being the board of directors, 2 consultant directors and 1 general manager, 2nd layer being the head waiter/waitress and head cook and 3rd layer being junior waiters, cooks, cleaners and a salesperson. RENATA believes that it is crucial to hire two consultant directors from major food and beverage companies, such as â&#x20AC;&#x153;Maximâ&#x20AC;&#x2122;s Catering Limitedâ&#x20AC;?. This aims to provide general guidelines of providing the best service to customers. These personnel need not be full-time employees, but must be dedicated and passionate. Another crucial hire is the general manager, the general manager serves as a bridge between the consultant directors and head waiter/waitress and chef and directly manage the cleaners and the salesperson. RENATA

expects to hire an experienced manager. The general manager monitors the general services standard provided, provides general guidance and direction to the restaurant along with the board of directors and handles cash, marketing, customer service, purchasing, human resources, health & safety, administration and training and development. RENATA expects to hire experienced waiter/waitress with at least 7 years of experience. The head waiter/waitress should provide training and guidance to juniors and monitor the services provided by them. The head waiter/waitress should treat the juniors as fellow employees and also trainees. As for the head cook, similar to the head waiter/waitress, the head cook should provide guidance and trainings to juniors. As for the junior cooks and waiter/waitresses, they should be selected from partner organizations, such as some Christian fellowships and rehabilitation centres with established base of ex-offenders. Employments are given based on evaluations and suggestions of partners and interviews. Employees with no triad society involvement, positive attitude towards society are hired and allocated to the post of junior waiters/waitresses, junior cooks, cleaners and salesperson according to their interests. The waiters/waitresses will be responsible for stock rotation and cleaning of dining areas; cooks for food preparation and menu renewal; cleaners for washing of dishes and cleaning of cooking area and floors. Any decision on the dismissal of the staff is to be passed by the board of directors so that the power is not solely in the hands of the headwaiter or chef. The general manager,

the head waiter/waitress and the head cook will all participate in the mentorship program of RENATA acting as the mentors of the ex-offenders to help the ex-offenders re-emerge into the society more easily. Junior staffs are encouraged to go and find new jobs in the market. RENATA serves as a re-training restaurant so as to let ex-offenders gain confidence to re-emerge back to society. Agreement may be made with chain restaurants so that the juniors with satisfactory performance are employed by the market once again.

5. Financial information6 5.1 General assumptions According to the current situation, there is a financial crisis which weakens consumption power. People will be more conservative in terms of spending. As a result, it is reasonable to assume the situation will continue for a period of time. In addition, the US low interest rate policy allows us to assume the interest rate will be low in the following years. The assumptions are summarized as follows: Ø

no unfavorable change in consumers’ taste or catering industry.

sales growth rate remaining the same in the following years at 3% p.a.

growth rates of salaries, overall cost of sales being 2% p.a.

tax rate, rental expenses remaining the same in the following years.

Appendix VI

license obtained as soon as we buy in the equipment and rent the restaurant.

5.2 Summary & Fund Request In the first year, there is a negative cash flow and annual loss as our business just starts to operate. It is very common for a new business to incur loss at the beginning state. We however can see that in the last few months of the first year, there is a positive operating gain. The total profit in the second and third year will step up a lot. As more customers know RENATA and a stable customer base is obtained, our profit will be less volatile. The payback period of RENATA is predicted to be 6 years. Our expectation of growth rate is very conservative due to the current financial crisis. If the economy recovers in a faster pace than we have expected in the following years, the growth will be much faster than the expected one and the payback period will even be shorter. The total funding required is HKD 400725. To fund our RENATA, we can seek partnership with strategic investors or directly seek sponsorship, and even approach private equity firm and find “Angel investors” who are interested. A low level of gearing will be maintained since our business is new and emerging, the cost of borrowing will be very high as we do not have a track record of operating cash flow. In our prediction, we do not include the case when we expand by opening branches. However, if we obtain a stable base of customers and have a good track record of cash flow, we can seek more partners interested in our business or borrow money from banks with

lower interest to expand. It is also possible for us to merge with well-developed chain restaurant to obtain a strong backup. Franchising may increase profits as well in later stage.

6. Impact monitoring and evaluation 6.1. Impact monitoring and employee satisfaction evaluation Surveys are given out at the end of every meal. The survey includes the perception on ex-offenders from the dining experience, questions and knowledge about discrimination against ex-offenders. Results will be analyzed by the general manager. Head cook and waiter/waitress, as well as customers will do Junior Staff satisfaction evaluation. While the heads can evaluate the juniors through direct observations, customers can give direct feedbacks on the food, services and the general dining environment The head cook and waiter/waitress will collect the evaluation and give feedback to the board of directors so that improvement can be sought out. To further ensure the junior staffs are given the trainings needed and the positive attitudes towards life, mentorship program is to be introduced at the beginning of the employment. Mentors include the general manager, head cook and waiter/waitress. Special workshop series, including goal setting workshops, are to be introduced in the program and mentees are encouraged to interact with mentors in leisure time. They will together develop a close relationship and help the ex-offenders lead a better life.

7. Social marketing

RENATA can only be sustainable under the support of the society and other different organizations so that we have to publicize our concepts of regeneration to the public. We are exploring 3 possible directions at the set up stage. a.

Educational institutions are ideal targets that RENATA is looking for. We will invite small

groups of students from local primary and secondary schools to visit RENATA on every student-featured Fridays. We hope that we can have a relative stable base of young customers rather than volatile walker-bys. Schools can ensure us this prospect. As RENATA is prison themed and our employees are primarily ex-offenders. Customers can have a direct and interactive realization of what it might look like in a prison and how one might feel as a prisoner. We hope we can therefore dissuade the students from walking the same path as our employees, and hence bring along positive social impacts on society. It is the first restaurants in the region with an educational value behind and schools will be attracted .The collaboration with moral education unit is a very promising approach to get RENATA known by target customers and arouse maximum effect in the society. b.

We are exploring possible cooperation with the famous television program Hong Kong

Connection. RENATA has a positive social effect and can be made into a hot topic for public discussion. Through the RTHK program, our message can go into a larger bunch of people. Besides, we are looking for featured news coverage by most television news programs. The news coverages allow RENATA to obtain a maximum public exposure as millions of

citizens will be looking at them. The marketing effect will be prominent. Besides, we are considering internet applications to get more young people to know RENATA as a theme restaurant. As we are targeting at a younger generation, internet applications like Facebook and forums, will have an extensive reach into the new generation. We hope RENATA can increase the awareness of the public on the well being of ex-offenders and meanwhile successfully get a foundation of customers in the target groups through social marketing scheme.

8. Partnership RENATA is actively seeking strategic partners for cooperation from various parties. We are now seeking possible leads in the following three parties. 8.1

Existing concern groups RENATA is hoping to gain assistances from the existing concern groups, whose

experience is vitally important in helping us to understand the successful method in treating the issues and working with the ex-offenders. Because they have long been in this field, the cooperation with them can reduce our effort in coordinating our employees. We think the concerning groups are useful in giving advice in setting up the criteria for selecting the employees and promoting RENATA among ex-offenders. As some of the ex-offenders are looking forward to changing, they may not know that RENATA can help them. Through the concerning groups, more ex-offenders can reach RENATA.

Besides, we have to select right employees for the restaurant. Experiences from those organizations can help us better understand the ex-offenders. We cannot easily tell if they are really determined to change without people in the field. Therefore, we hope the organizations can actively recommend on suitable ex-offenders to become our employees. The largest group concerning rehabilitation is the Society of Rehabilitaion and Crime Prevention. It has its employment service unit which we are making contact with to get a further extend into the problem. 8.2

Government Like any other social plans, the support from the government is very critical to us. As a

very new social enterprise to promote the rehabilitation of ex-offenders, we are desperate for the funding from different parties. We hope the government can sponsor part of our initial capital. Besides, government has to consider RENATA to become an officially recognized way for assisting the employment of the ex-offenders. In this sense, the restaurant can get the message across more effectively as we are more authoritative. Normal citizens and ex-offenders can have a better confidence in us. 8.3

Chain Restaurants One of the major concerns at this point is that we cannot afford a very large operating

size at the very beginning. Before we build enough goodwill to support a large chain of

restaurants, we are depending on other restaurants to support the turnover of employees. The plan is that we carry out collaboration projects with large food enterprises in the city. We will encourage them to hire our employees with good working performance. Therefore, we can help more ex-offenders because some well performed employees can go to other restaurants and places left can be filled by new members. Large food enterprises which show good social responsibilities are our primary targets as they are more willing to have a better standard of employees which have once been worked in RENATA. We hope we can achieve agreements with them so that we can constantly admit well performed employees to them. Through this plan, we hope the ex-offenders can really get back into the society and be recognized as a part of normal work force.

9. Risk and Opportunity RENATA has its advantages in the sense that it is the newest and only one in the local market. Theme restaurants are very rare in Hong Kong and even China. Most of the existing ones are of insignificant scale. RENATA is not only a theme restaurants but it is also acting like a training center. The values behind is absolutely fresh in the catering business. Theme restaurants are very successful in other regions, e.g. Japan and Taiwan. Due to special elements other than food, these restaurants attract young customers seeking new

thing. Many of the public have either little or no sense what it is like to be in prison. A prison-themed restaurant is refreshingly interesting and eye-catching. However, no success is guaranteed for RENATA as we still face many risks. One thing we cannot reverse completely is the traditional perception in the society. Many of the public will consider ex-offenders as bad people. Like for any other social issues, time is required when talking about forming or altering a way of life or a perception over customs. We hope RENATA can arouse awareness in the public but we cannot assure anyone that all of the public will alter their perception against the offenders. Second, the performance of the ex-offenders is in doubt. As most of them may not have experience in the business before, we cannot ensure the service quality of RENATA. What can we do is that we try to bring in some experienced managers to help the employees to pick up the work quickly.

10. Possible expansion When our business becomes mature, i.e. a stable customer base has been established and a stable profit been made, expansion may be considered to further develop our unique business model. This stage is estimated to be achieved in the third year of operation. Instead of opening branches which may involve a large amount of investment and a higher risk, focus will be put on franchising. After looking at comparable franchisors at the moment, the royalty charged will be

determined and adjusted annually. Franchising will guarantee us additional profits without having to increase the normal operating costs to a great extent. Our message of accepting the ex-offenders will also be further spread in the community, which suits our ultimate social goal. With a 3-year track record of gradual development of success and being the only one prison-theme restaurant in the region, there is a large room for us to expand through franchising. Those normal and traditional restaurants struggling on the verge of bankruptcy will most probably be attracted by our successful business model and join us since buying our franchise is one of the feasible new ways to lead their old business out of the adversity. Our franchising plan will also interest those start-up entrepreneurs since the fame of the restaurant will have been well-established and operations been structured. It will be much easier for them to manage their new business and a stable return is more likely guaranteed. Meanwhile, training and professional advice will be offered to the franchisees to ensure that the style and quality of the restaurants meet the standard. Special programmes for RENATA will also be adopted by franchisees according to the situations of individual restaurants. A mix of experienced employees and ex-offenders will again be the source of labour in accordance with the operation of RENATA to keep our core value unchanged. In the first five years, three franchisees located in Hong Kong Island, Kowloon and New Territories respectively are expected. In the following five years, a total of eighteen

franchisees located in eighteen districts are expected. This gradual expansion further assures a stable and sustainable development of the business model with the greatest exposure and the least intra-competition for customers. When the business becomes well-developed in Hong Kong, expansion opportunities should be seek in the mainland China market which comprises more than 1.3 billions of people. The potential profit is unlimited as the mainland economy blooms steadily still even under the global financial recession. At the beginning, the locations within Pearl delta should be considered since the region is relatively well-developed and its demand for theme restaurant will be higher and higher along with the rise in living standard in the region. It is also easier to manage as the restaurants will be closer to Hong Kong.

We, SPERAMUS, hope that â&#x20AC;&#x153;RENATAâ&#x20AC;? can offer a new life to all those ex-offenders.

SPERAMUS â&#x20AC;&#x201C; We hope!