XXXXX A Maeme’s Franchise in UK
Business Plan XXXXX
Contents
Particulars
Pg. No.
Executive Summary
3
The Market
5
The Competition
14
The Business
21
The Team
35
The Strategy
39
The Financials
44
2
Executive Summary
3
Executive Summary XXXXX - A Maeme’s Franchise in United Kingdom Uses of Funds
XXXXX is a private limited company in the United Kingdom that intends to start a Maeme’s franchisee restaurant in the country. Maeme’s is a Healthy Fresh Grilled Food Restaurant with numerous franchisee outlets in the United Kingdom that specializes in chicken based dishes. Takeaway and fast food restaurants are increasingly popular due to the busy schedules of people, increasing number of women in the workforce, need for a quick filling meal and the demand for variety at the same time.
7%
20%
The industry is specifically growing in the United Kingdom due to the demand from millennials, immigrant population, tourists as well as the locals. To cater to this increase in demand, the owner of XXXXX, XXXXX, will set-up a franchise of Maeme’s. He will be the driving force behind the business. He has been a part of a range of restaurants, undertaking versatile roles, hence, he possesses a profound knowledge of the industry.
15%
20%
28% 10%
XXXXX will bring in equity of £ 80,000 to fund the initial expenses to set up the franchise restaurant. The projected financial summary of the company is as reflected below:
97%
£ 237,457
Net Present Value
16%
Revenue CAGR
Particulars Revenue Net Profit Cash Balance
Internal Rate of Return
19%
Profits CAGR
2018 540,000 56,052 114,052
58%
Cash CAGR
2019 729,000 78,829 192,881
2020 801,900 84,396 277,278
2021 882,090 110,376 387,653
Lease Deposit
Premises Refurbishment
Equipment and Technology
Initial Inventory
Manpower
Marketing
Amounts in £ 2022 970,299 112,637 500,290
4
The Market
5
The Market Takeaway & Fast-Food Restaurant Market – United Kingdom The Takeaway & Fast-Food Restaurant industry has performed relatively well over the past five years. The consumer preference for cheaper, on-the-go food has persisted despite the improving consumer backdrop of the past five years. Takeaway operators have also reacted to higher levels of consumer expenditure by introducing higher quality food, often using organic produce. Furthermore, some firms have responded to consumer demand for low-fat, low-sugar and low-salt meal options by adding healthier options to their menus. Mobile and online technologies have had a considerable influence on the industry’s development and many operators now offer online ordering and delivery services. While revenue has benefited from digital ordering technology, it has also stoked internal competition by allowing consumers to compare menus and prices of different takeaways from their homes. Industry margins have come under pressure as a result. Recent increases to the National Minimum Wage have also put pressure on margins, given the industry’s reliance on low-income employees. However, strengthening economic conditions over the period relieved much of this pressure and the industry has generated stable growth. Revenue is expected to grow at a compound annual rate of 0.9% over the five years through 2018-19 to reach £18.2 billion, including growth of 1.1% in the current year.
The industry is expected to perform relatively well over the next five years despite a possible slowdown in economic activity as the process of leaving the European Union continues. Though some consumers are likely to cut back discretionary expenditure on fastfood and takeaways, others may trade down to cheaper fast-food options from full-service restaurants. The growing popularity of mobile and online ordering is expected to be a key driver of growth. As more people use their smartphones to order meals, online ordering portals used to find local takeaway options are also likely to increase in popularity. However, supermarket ready meals and takeaway boxes are anticipated to provide strong competition. Regulation in the form of taxes on fast food and bans on fast-food advertising are expected to threaten the industry over the next five years. Industry revenue is forecast to increase at a compound annual rate of 1.8% over the five years through 2023-24 to reach £19.9 billion.
6
The Market Key External Drivers Consumer confidence index Changes in consumer confidence have a direct influence on customers’ propensity to spend on discretionary items, such as fast food. In an adverse economic climate, consumers choose to save money rather than spending on discretionary items, such as takeaways. Rising economic uncertainty following the EU referendum is expected to cause consumer confidence to fall in 2018-19, which could be a threat to industry performance.
Demand from full-service restaurants Industry operators are subject to external competition from fullservice restaurants. Demand from full-service restaurants acts as a proxy for competition within this industry. During the past five years, improving economic conditions have encouraged consumers to trade up from takeaways. This trend is likely to continue in 2018-19, with demand from full-service restaurants forecast to increase. Real household disposable income Movements in disposable incomes are directly influenced by employment levels and changes in interest and tax rates. Trends in disposable income directly influence the funds available for discretionary purchases, such as takeaway food. Real disposable incomes are expected to grow slightly in 2018-19 after having declined in the two previous years. Health consciousness The growing number of health conscious consumers is likely to continue influencing the performance of the industry. Over the past five years, consumers have become more health aware, which has reduced demand for high-calorie fast food. While this has spurred some operators to introducing healthier options, the wider industry has suffered as consumers have turned away from high calorie foods. Health consciousness is expected to continue to increase during 2018. Average weekly hours of work A major driving force for the industry has been consumers’ desire for convenience. Consumers with busier lifestyles who work more hours are more likely to eat at fast-food restaurants or order takeaways than to cook for themselves. The average weekly hours of work is expected to remain at a high level in 2018-19, which is an opportunity for operators. 7
The Market Current Performance The Takeaway and Fast-Food Restaurants industry has grown at a steady pace over the past five years. Improving economic conditions and falling unemployment helped to boost disposable incomes and led to greater demand for quick and convenient food. In recent years, time poor consumers have embraced delivery services, with major chains like McDonalds and Burger King beginning to roll out deliveries from their stores. The growth of online ordering sites over the past five years has opened up the market and increased consumer expenditure thanks to the more convenient ordering process. However, these sites have also fuelled greater price competition between establishments as consumers are better able to compare prices. A rise in health consciousness over the period has also supported the growth of new menu offerings and establishments offering healthier cuisines, like Japanese food. Industry revenue is estimated to increase at a compound annual rate of 0.9% over the five years through 201819 to reach £18.2 billion. This includes growth of 1.1% in the current year. Convenience has been a key driver of growth over the past five-year period. Subway recorded solid growth in store numbers and sales as consumers flocked to its stores for on-the-go sandwiches. Online and mobile platforms have become increasingly important, with fast-food chains like Domino’s and Pizza Hut generating a rising proportion of their sales from orders made on smartphone apps and via their websites. Domino’s recently reported that more than 75% of sales were ordered online. The growth of online ordering and delivery sites such as Just Eat and Deliveroo has been a significant driver of industry expansion over the past five years, with Just Eat claiming to represent more than 30,000 restaurants in the United Kingdom. These sites operate through charging restaurants commission on orders made through their sites. Consumers using these services are able to find, compare, pay for and track a delivery through a website or app. This quicker and more convenient process has opened up the market and encouraged consumers to spend by making payments easier and faster. Establishments that do not subscribe to ordering sites can often go under the radar and lose customers. However, restaurants subscribed to ordering sites pay up to 10% commission on revenue made through the site. This has put many operators in a difficult position as they are forced to choose between losing out on potential customers or paying high commission fees. 8
The Market Current Performance Fast-food restaurants are usually positioned in high-traffic areas, making it easy for busy consumers to pick up meals as they travel home from work. Increasingly busy lifestyles support demand for quick, convenient meals. People have tried to find ways of increasing the amount of leisure time they have by swapping time-consuming cooking for purchasing takeaways or fast food. However, as consumers have become increasingly health conscious, demand for high-calorie takeaway meals has faltered. Operators offering foods high in fat, sugar and salt have been particularly damaged by the trend towards healthy eating. A rise in the number of government-sponsored health campaigns has also discouraged consumers from purchasing takeaways and fast food. Many of the larger fastfood operators have responded to this by expanding their menus to include healthier options. For instance, McDonald’s and KFC have both introduced a variety of salads, wraps and juices to entice more healthconscious consumers into their restaurants. Health-conscious consumers have also embraced alternative takeaway cuisines like Japanese and Mediterranean food that are considered healthier than more traditional Chinese and Indian dishes. According to Just Eat, sales of Japanese takeaways have exhibited an 80-fold increase since 2007.
The tough conditions associated with the saturation of the fast-food market have led to fierce price competition and the implementation of discounts on meals and products over the past five years. Fast food restaurants, especially those with a large market share, like McDonald’s, have boosted demand by offering value-for-money deals. The ability to keep up with changing customer needs is essential for operators in the Takeaway and Fast-Food Restaurants industry, as the marketplace is relatively fragmented. As a result, participants have introduced new services over the past five years. Both Burger King and McDonald’s now offer home-delivery services from certain restaurants in the United Kingdom, while Domino’s launched a new create-your-own pizza platform, aimed at improving the convenience and personalization of its services. McDonald’s has also upgraded a number of its restaurants to include digital ordering screens, which speed up the ordering process and reduce the number of staff required at the tills. In summer 2017, McDonald’s launched a new mobile app for ordering and payment in UK restaurants, though its reception has been largely indifferent or negative.
An increasing concentration of fast-food outlets, particularly in deprived areas, has sparked concerns, with some local authorities proposing limits on establishment numbers to slow rising obesity rates, particularly in children. Since 2010, more than 20 councils in England have introduced limitations aimed at regulating the concentration of fast-food outlets in an area on health grounds, including the imposition of 400-metre fastfood exclusion zones around schools. 9
The Market Industry Outlook The Takeaway and Fast-Food Restaurants industry is expected to record solid growth over the next five years despite somewhat difficult economic conditions as ongoing negotiations regarding the UK’s exit from the European Union weigh on economic growth. Demand for affordable takeaway food can sometimes be counter cyclical, as falling disposable incomes cause consumers to trade down from more expensive restaurant meals. The growth of online ordering sites and mobile apps has allowed consumers to more effectively compare costs between restaurant menus, putting greater pressure on operators to compete on price. The continuation of this trend is expected to weigh on profit margins over the next five years. Although the ease of ordering via a mobile phone is likely to support industry growth, the effect may be challenged by the rising popularity of home cooking, spurred on by TV chefs and cooking programmes. Rising health awareness is also expected to squeeze demand for high-fat takeaway options while supporting operators that have responded to these concerns by providing low-fat, healthy alternatives
Demand Determinants Demand for fast food and takeaways is driven in part by economic conditions. Rising disposable incomes over the past five years have helped to drive expenditure on takeaway and fast food and encouraged consumers to spend more on premium options. Middle and high income households are estimated to account for 85% of expenditure in the industry. Improving economic conditions over the period have also led to an increase in the average weekly working hours in the UK.
Less time at home has fuelled consumer demand for convenient food in recent years. However, as incomes have risen, consumers have become increasingly health conscious. Rising consumer health consciousness has affected the industry’s performance as consumers have moved away from fried foods with a high fat content and towards healthier alternatives. However, some restaurants have been able to capitalize on this by expanding their menus to include healthier options. Fast food giants like KFC and McDonalds have both introduced a variety of salads, wraps and juices to appeal to more health conscious consumers, while lighter cuisines like Japanese and Mediterranean have become increasingly popular.
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The Market Major Markets Most fast food customers tend to be concentrated in middle- and slightly lower-income households. According to a survey by online food delivery service Just Eat, the average household spends 1.2% of weekly income on takeaways, with proportion growing in line with income levels.
Households with young and teenage children are the key target consumers for takeaway and fast-food operators. Aged people collecting a pension are not a prime target market for the industry, as they have a low propensity to consume takeaway food.
Middle-income households According to the Office of National Statistics’ Household Expenditure Survey, about 50% of households with middle incomes allocate 1% of their total weekly expenditure on takeaway meals. However, this represents a greater share of the population, therefore this market segment is considerably larger than low-income households. It is estimated that middle-income earners account for 54% of total UK household expenditure on takeaway foods.
High-income households Higher-income households usually consume those meals not eaten at home in full-service, sit-down restaurants. Takeaway food purchases are often driven by the appeal of convenience. Many individuals who are cash-rich but time poor will often use the services of a fast-food or takeaway outlet. Therefore, households containing high-earning professionals are an important market for industry operators.
Low-income households Low-income households allocate about 1% of their total weekly expenditure to takeaway meals. IBISWorld estimates low-income households to contribute approximately 15% of total UK household expenditure on takeaway meals.
Low income households include those people who are either retired, unemployed or are receiving some form of income-support benefit. Therefore, this group does not typically have substantial However, high-income households have a lower propensity to spend on these meals than lower-income discretionary income to spend beyond the basic necessities. However, revenue attributable to this household brackets, with only 0.8% of total weekly market segment is expected to have increased in expenditure going on takeaway food on average. recent years. It has been widely claimed that he fast Consequently, it is estimated that high-income households account for approximately 31% of total UK food industry in the United Kingdom is targeting the poorest areas. Those with easy access to a fast-food household expenditure on takeaway foods. outlet are shown to be more likely to use its services. 11
The Market Business Location The distribution of the Takeaway and Fast-Food Restaurants industry generally follows the size and dispersion of the population, levels of disposable income by region. Levels of tourist activity in certain regions also have some additional influence on the industry’s geographic spread. Almost all locations are saturated given the mature life cycle stage of the industry. London and the South East London and South East account for a large proportion of establishments, with a combined 32% of establishments located in the regions, 19.4% in London and 12.6% in the South East. These are also the UK’s most populous regions, although the regions’ share of establishments still outstrips their share of population. This is largely because these regions also have higher levels of disposable income than other UK regions; consumers in these regions are therefore more likely to purchase fast food or a takeaway.
Other regions The North West accounts for an estimated 10.3% of the industry’s share of establishments, slightly under its share of population at 11%. However, consumers in this area have lower disposable incomes than London and the South East. Most other regions have similar industry shares in line with their population share.
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The Market Key Success Factors Ability to attract local support/patronage Restaurants must try to build brand and customer loyalty in order to succeed. This can be achieved by offering good-quality food and service, and by endeavoring to meet changing customer needs. Use of high volume/low margin strategy Industry operators face intense levels of competition and therefore need to operate on high turnover but low margins. Access to multiskilled and flexible workforce Having access to a pool of multi-skilled staff enables companies to adapt quickly and efficiently to any changes in customer demand. Proximity to key markets Firms that are located in high-visibility regions are likely to succeed in the industry. High levels of passing foot and vehicle traffic are important for maximizing food orders and revenue. Accessibility to consumers/users Consumers choose to eat fast food for the taste and price, but they also enjoy the quickness and convenience of dining in a fast-food establishment. Hence, accessibility is another key factor for the success of the business. Adapting to market trends Keeping menu items fresh and offering consumers new products to suit their changing tastes and needs is essential to keep them interested and encourage return business. Aggressive marketing The industry is extremely competitive, and the largest players have found success through notable ad campaigns across multiple media platforms. Hence, the goal will be to initiate creative marketing campaigns that will strike a chord with the target market and bring in sales revenues. 13
The Competition
14
The Competition Competitive Landscape Competition in the Takeaway and FastFood Restaurants industry is high. Industry participants compete based on price, product range, marketing, size of operations and reputation. The growth of takeaway comparison sites such as JustEat has increased competition in the industry by making it easier for customers to compare menus. Operators also face external competition from restaurants, cafes, pubs and supermarket ready-meals. Internal competition Takeaway and fast food restaurants operate on a highly localised scale. Internal competition varies depending on the location of an establishment, with operators in cities facing a greater competitive pressure than establishments in less concentrated areas. However, the increasing use of online delivery sites like Just Eat has also increased competition in the market by allowing consumers to compare menus and prices of different takeaways from their home. It has become increasingly necessary for operators to compete on prices in order to retain customers that would previously have frequented one or two local restaurants. The prominence of popular brands like McDonalds can also make it difficult for smaller operators to gain market share. External competition Industry operators face competition from other food outlets like restaurants, cafes and pubs, which serve similar food like burgers and pizza. Operators also face rising competition from supermarket ready meals and takeaway boxes, which have become increasingly popular over the past five years.
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The Competition Barriers to Entry The barriers to entry for the industry are relatively low. The main issue faced by prospective operators is securing the capital investment required to purchase or establish a new store. Capital costs can be high relative to fitting out the shop; installing a commercial kitchen is the most expensive task for any operator. However, leasing of both shops and equipment can significantly lower initial capital outlay costs.
Operators involved with major franchise businesses are required to pay royalty fees of up to 8% of annual revenue, together with an additional advertising levy of between 1% and 4% of revenue. There is also significant dominance of players in the franchised fast-food segment, with major players estimated to account for a significant share of total industry revenue. Their dominance may act as a deterrent to prospective entrants. This is reinforced by the high saturation level of the UK market; consumer penetration achieved by these operators is strong. However, competition and opportunities for new investment and entrants is still readily available on the basis of tapping niche food concepts that do not directly compete with franchised operators. Independent takeaway operators are also taking advantage of online ordering portals to expand their customer base and compete better with larger rivals. Low barriers to entry are expected to continue to characterise the industry over the coming five years, although barriers are expected to be higher in the franchised segment.
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The Competition Competitors McDonald’s is the global leader in the fast-food industry in terms of
Financial performance
McDonald’s has also announced plans to expand its delivery services, potentially in the United Kingdom, United States, France, Germany and Canada. Globally, McDonald’s last reported revenue of US$22.8 billion (£17.7 billion) in 2017.
MacDonald’s has invested heavily in food quality over recent years to improve its public image in the United Kingdom. While supermarkets, restaurants and rival fast-food companies such as Burger King were part of the horsemeat scandal, McDonald’s was not implicated. The company was able to boast that all of its beef was sourced from Britain, unlike many of its counterparts. MacDonald’s has invested heavily in expanding its UK operation, hiring 2,500 employees and opening 24 new branches during 2013.
revenue. Since opening its first store in California in 1948, the company has grown to operate more than 37,000 restaurants across 120 countries. McDonald’s mainly sells hamburgers, chicken burgers, French fries, soft drinks and breakfast items. However, the company has expanded its menu over recent years to include healthier items such as wraps, sandwiches, salads and juices.
McDonald’s Restaurants Limited runs the company’s UK operations. It opened its first store in the United Kingdom in 1974 and currently has over 1,200 restaurants in Britain. Of these, approximately 40% are open 24 hours. McDonald’s is one of the biggest employers in the United Kingdom, employing approximately 90,000 staff, and serves more than 3 million patrons every day.
The majority of the company’s UK outlets are franchised. McDonald’s does not receive the full turnover of the franchised outlets, instead receiving rent and fees from the franchisee. It is estimated that approximately 70% of McDonald’s restaurants are franchises in the United Kingdom. The industry related revenue provided in the table is estimated to include all revenue from both company-owned and franchised outlets.
During the five years through December 2018, the company’s industryrelated revenue is estimated to grow at a compound annual rate of 6.9% to £2.9 billion. The company’s performance has been consistently strong over the period.
As a result, company revenue has grown strongly. McDonald’s has also registered strong sales of items on its saver menu, with prices that start at 89p. The company is increasingly focusing on its franchising strategy. This has been the key driver of profitability for McDonald’s, as franchised restaurants allow for much larger margins, although revenue is lower per establishment. This is expected to cause the company’s revenue growth to slow and margins to widen over the next five years.
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The Competition Competitors Subway is a major takeaway sandwich business and is privately owned by Doctor’s Associates
Inc. Subway International BV owns, operates and franchises the Subway restaurants in Europe. The company is based in Amsterdam and operates as a subsidiary of Doctor’s Associates Inc. The first Subway store was opened in Bridgeport, Connecticut, in 1965. The company later took the decision to move to a franchising model and the first franchise was opened in 1974 in Connecticut. Now all Subway stores are franchised and the firm only has a small group of headoffice staff. There are currently 44,000 Subway outlets across 112 countries, employing up to 330,000 people. Subway specializes in serving fresh, made-to-order sandwiches and promotes its products as healthy alternatives to other fast foods. The company takes a proactive approach to informing customers about the nutritional content of its products by listing the salt, fat, saturates, sugar and calorie content of menu items at its tills. The company website has a nutritional guide for customers that is also available in its stores. Subway’s UK operations commenced in 1996 with the opening of its first store in Brighton. In early 2015, Subway opened its 2,000th UK store. There are now more than 2,300 Subway outlets. Of these, approximately 500 are non-traditional stores, located in sites away from the high street, such as petrol stations, convenience stores, hospitals, transport hubs, universities and colleges. During 2014, the company announced ambitious plans to expand store numbers to over 3,000 by 2020, creating approximately 13,000 jobs.
Financial performance
Given that all Subway outlets are owned by individual franchisees, the revenue figures have been estimated to account for all UK Subway franchises. Subway franchises have grown strongly the past five years, becoming the second largest fast-food brand in the United Kingdom. According to the company, Subway franchisees contribute approximately £200 million to their local economies. Subway has benefited from rising health consciousness among consumers, as it is considered a healthier alternative to many of its rivals.
Burger King (United Kingdom) Ltd Estimated market share: 3.4% Burger King is the world’s second-largest fast food burger chain and was founded in 1954. It was purchased by global investment firm 3GCapital in late October 2010 and was merged with Canadian cafe and doughnut chain Tim Hortons. The company specializes in providing hamburger meals, chicken and fish sandwiches and operates approximately 16,000 locations worldwide, though only 50 of these are managed by the company, with the majority operating under a franchise agreement. Burger King has about 550 locations across the United Kingdom. Burger King was drawn into the 2013 horsemeat scandal, in which some beef products sold at Burger King outlets were found to contain horsemeat, which damaged the company’s reputation. In early 2015, the company launched a home delivery service. Plans to expand the service nationwide over the coming years should help to bolster revenue over the coming years. IBISWorld estimates that Burger King outlets will generate revenue of approximately £620 million in the current year.
During the five years through 2018-19, Subway’s industry-related revenue is estimated to grow at a compound annual rate of 7.6% to reach £2.2 billion. The number of franchises has grown rapidly, expanding from just over 1,500 outlets in 2012 to more than 2,300 in 2018. 18
The Competition Competitors Yum! Restaurant Holdings is the UK subsidiary of US
Domino’s Pizza Group plc is the UK based master franchisee of the global
In November 2012, it sold Pizza Hut’s restaurant business to private equity firm Rutland Partners. A sizeable proportion of KFC and Pizza Hut delivery outlets are owned by Yum! Restaurant Holdings, although the majority are franchised. There are currently over 870 KFC restaurants in the United Kingdom, which employ 24,000 people.
Domino’s Pizza Group plc owns the franchise rights for the United Kingdom, the Republic of Ireland, Switzerland, Luxembourg and Liechtenstein. The group also holds associate investments in Germany, Iceland, Norway and Sweden. The group reported system sales of £1.2 billion in 2017, up 15.1% on the previous year. At the end of the year through December 2017, Domino’s reported that it had 1,045 stores in the United Kingdom, with the company adding 95 new stores during the year.
restaurant group Yum! Brands Inc. Yum! Brands Inc operates or licenses KFC, Pizza Hut and Taco Bell worldwide. The company’s total global revenue reached US$5.9 billion (£4.7 billion) in 2017. In the United Kingdom, Yum! Restaurant Holdings owns Pizza Hut’s delivery business and KFC.
Approximately 75% of these are franchised. There are approximately 300 Pizza Hut delivery outlets and an estimated 76% of these are franchised. In February 2018, KFC was forced to temporarily close 750 of its stores after major supply-chain disruptions arose when switching to a different supplier. Lost sales revenue is estimated to have run into the millions during 2017-18.
Financial performance
Industry-related revenue has been estimated to account for all KFC and Pizza Hut delivery outlets, regardless of whether they are owned by Yum! Restaurant Holdings or are franchised. During the five years through 2018-19, industry-related revenue is expected to grow at a compound annual rate of 3% to reach £1.8 billion. Pizza Hut’s delivery service is expected to have grown over the past five years, despite the fact that its loss-making restaurant business was performing poorly. KFC has also exhibited impressive growth, with both the number of outlets and revenue growing in each of the past five years. However, supply chain disruptions in 2017-18 are expected to have weighed on the company’s finances
pizza chain Domino’s Pizza. Domino’s commenced operations in the United States in 1960, was sold to Bain Capital in 1999 and was publicly listed in 2004. The company opened its first UK store in 1985 and the master franchise for UK operations was sold off to International Franchise Systems in 1993.
Domino’s was one of the first pizza franchisors to fully embrace online ordering. The number of orders placed using e-commerce has increased significantly in recent years. In the United Kingdom, online system sales represented 75% of all delivered sales in 2017, up from 71% in 2016. The company has invested heavily in technology over the past five years in order to further enhance the customer experience.
Financial performance Domino’s has performed exceptionally well in the United Kingdom during recent
years, with the revenue of all UK stores, including franchisees, growing strongly. Over the five years through December 2018, industry-related revenue is expected to rise at a compound annual rate of 11.7% to reach £1.1 billion. Sales have been bolstered by consumer demand for convenience, regular promotions and strong online sales. Operating margins have expanded over the past five years, although an impairment charge in 2013 had a negative effect on overall company profit. In 2017, UK like-for-like sales increased by 4.8%. The company benefited from additional orders placed during sports events and strong growth in sales of drinks and desserts. The financial performance figures recorded under Domino’s Pizza Group plc cover the net revenue that Domino’s receives, excluding revenue from franchisees. It is for this reason that the figures are lower than in the industryrelated table. 19
The Competition Competitors SAM’s Fried Chicken Company
Sam’s started in operation in 1990 with its first restaurant in Wealdstone,Harrow,Middlesex. It has expanded since then to more than 34 outlets nationwide though its main presence is in London. Sam has developed his own secret mix of spices that goes into the flour preparation and the process of cooking that gives the crispy golden brown chicken product lines, which holds the key to its business success. Sam’s has expanded so far through franchising its successful product. To ensure that the quality and service that has come to be associated with Sam’s are maintained by the new franchisees, the expansion is being carefully planned and managed. Sam’s chicken product line is prepared following a special method of food preparation, which involves the breading of the fresh chicken pieces with a secret blend of seasoning or breading-mix before it is slow-roasted at an appropriate temperature to ensure that the chicken pieces retain the natural juices and flavour, and so remain succulent on the inside. However, the breading mix and cooking style helps develop a crispy, golden brown coat on the chicken piece. This gives the customer a more satisfying experience in eating the product.
Store Locations
Menu • • • • • • •
Burgers Chicken Wraps Peri Peri Chicken Family Bucket Deals Wedges Fries
• • • • • •
Hash Brown Corn Spicy Rice Chicken Rice Salad Drinks & Desserts
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The Business
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The Business The Entity XXXXX is a private company limited by shares. The company was established on April 17, 2018 and registered under England and Wales. The Company intends to set-up a franchise of Maeme’s in United Kingdom. Maeme's is a UK based company with headquarters in London. The brand has outlets in Finchley, Watford, Horsham, Stechford Birmingham, Fratton Portsmouth and Euston. Maeme’s specializes in chicken based dishes and has a wide variety in its menu offering. The aim of the company is to ensure that most of the population in the region are aware of the company and the products that are available to the customers. Therefore, in the future it could lead to opening of more branches in different locations within the UK. The restaurants opening hours are from 11AM – 23:00 from Monday to Thursday, 11AM – 5AM on Friday & Saturday, 11AM – 23:00 on Sunday and the delivery hours are from 11 AM to 23:00. The restaurants deliver to service locations within 45 minutes.
Business Summary Name: XXXXX Entity Type: Limited by Shares Address: 2XXXXX Business: Franchise of a Fast Food Restaurant Location: XXXXX Franchisor: Maeme’s Target Customers: Business people, Tourists, Singles, Families, Young Couples, Children and Pedestrians
The franchisor supports the franchisee by providing printed literature to promote the business. This includes in-store menu, promotional flyers, special offer leaflets, discount vouchers etc. Maeme’s sources food online. Delivery Hours
XXXX
XXXXX
Sun Mon Tue Wed Thu Fri Sat Sun
11:00 – 23:00 11:00 – 23:00 11:00 – 23:00 11:00 – 23:00 11:00 – 23:00 11:00 – 23:00 11:00 – 00:00 11:00 – 00:00
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The Business The Franchisor Maeme’s is a Healthy Fresh Grilled Food Restaurant with numerous franchisee outlets in the United Kingdom. The Franchisor supports its franchisees by providing the following: Printed Literature: The franchisor supports the franchisee by providing printed literature to promote the business. This includes in-store menu, promotional flyers, special offer leaflets, discount vouchers etc. Advertising: Maeme's frequently enlist the services of local and National advertisers to promote Maeme's stores to ensure there is a real buzz around the opening of a new store. These items include National press advertising, telephone booth ads, bus-stop back lits, local newspaper advertisements etc. Online Presence: Maeme's has a fantastic website in place and each store has its own section where customers can Order Online to the specific store and view the Menu's Special Offers and location details.
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The Business Products and Services As a Maeme’s franchise, the company will sell all the standard items on the menu. It will have 20 different items on the menu. Maemes Grilles (Chicken): This includes quarter chicken with rice, chicken wings, tender strips, half chicken, whole chicke, grilled baguette etc. Maemes Collection (Chicken): This include chicken burgers, wraps, pitta, strips and rice, wings and rice, strips and pasta etc. Grilled Chicken Pieces: This includes chicken single, meal and pieces. Family Platter: This includes two types of family platter, wings platter, combo platter, jumbo platter, mega platter, family platter. Buckets: This includes grilled mini buckets, family buckets etc. Burgers: This includes single and meal burgers in gourmet style, pounder, cheese, chicken steak and fish. Vegetarian: This include veggie burger, paneer wrap, falafel in Pita bread, bean burger, Halloumi wrap, etc. Kids Meal: This includes fish burger meal, kids nuggets meal, kids chick steak burger meal and kids cheese burger meal. Sides: Sides includes fish fingers, meatballs, pasta, roast potatoes, fries, nuggets, wedges, corn on the cob, onion rings, mozzarella sticks etc. Extras: This includes baked beans, coleslaw, hummus, pan pita, hash brown and cheese slices. Salad: This includes feta salad, fresh salad and salad with chicken/chicken meal.
Drinks: This includes Coke, Pepsi, Fanta, Sprite, Ginger Beer, Orange Juice etc. Sauces: This includes ketchup, mayonnaise, maemes chilli sauce, garlic sauce, and extra hot sauce. 24
The Business
Customer
The Process Exteriors
Ambience
Customer Arrives
Customer Walks In
Furniture Seated by the Host
Menu Views Menu Card
Staff Places Order
Receives and Eats
Customer Pays
Support Process
Greeted by Staff
On Stage Back Stage
Contact Person
Line of Interaction Receives Order
Delivers the Order
Informs Kitchen
Receives Items
Generates Bill
Line of Visibility
Line of Internal Interaction Prepares Food
Quality Checks
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The Business Operational Flow Supply Chain Flows • Building relationships with suppliers of the franchisor – that manages the purchase and supply chain activity for all food, packaging, equipment.) • Quality control, and periodic audits • Vendor payments and reconciliations Franchisor Flows • Restaurant design and initial setup • Training of staff • Periodic royalty payments • Customer referrals and marketing support
Restaurant Flows • Renting premises • Paying taxes • Advertising • Housekeeping Customer Flows • Receiving orders • Preparing food • Delivery of food • Customer feedback
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The Business Key Functions - Company
Marketing Business Setup The company is incorporated in the UK. Proper trading locations have been chosen and initiated.
Initially, the company will target the local markets. It will use a combination of online and offline strategies to capture the market.
Training Establishing Partnerships The company will focus on establishing strategic partnerships.
Recruitment The recruitment process involves finding the right people with the right qualifications. Locals will be recruited and will be supported by the Management Team.
The company will provide complete training to the staff on various products so that they can help the customer choose the right product from the menu.
Food Safety and Quality One of the key success factors is food safety and quality control. All food safety norms will be strictly followed and quality control will be rigorously implemented.
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The Business Key Functions - Restaurant Procurement Procurement and preparation of necessary agricultural produce, meat, seafood and other supplies is the primary function of a restaurant.
Kitchen Management The chief chef of the restaurant will be in-charge of overseeing the kitchen operations and dealing with issues.
01 02
03 04
Order Processing The restaurant will have an established operational flow to process the customers’ orders.
Compliance The company will ensure compliance with applicable food and safety regulations as well as with labor laws.
Inventory Management Managing perishable as well as nonperishable edible inventory along with non-edible inventory at an optimum level is another key function of the restaurant.
Quality Control The restaurant will have strict procedures to maintain the quality and standard of the products it offers.
05 06
Customer Relations Dealing with customers and catering to their requests and demands is another important function for successfully running the barbecue restaurant.
07
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The Business Location & Floorplan Location: XXXXX Region: XXXX : The proposed location of the franchise outlet is a prime spot in the town. It is easily accessible from High Street. Thus, attracts the visitors of town centre, nightclubs and pubs in High Street. According to PwC’s report on the growth of businesses in East Midlands of England, leisure and experience destinations continue to replace traditional high street stalwarts. With the East Midlands economy thriving, as the fastest growing regional economy, there is a growing focus on leisure outlets, filling the void left by clothing shops, department stores and banks. Floorplan •
The outlet will be structured on an area of 750 sq.ft.
•
It will consists of three walls. Wall A will be the reception with a small lounge. Wall B will consists of order placement, serving & billing counters. Wall C will be the dining hall accommodating 12 seaters.
•
At the back of these walls will be the kitchen spacious enough to set-up cooking tools and equipment, freezers, and old room.
•
There will be a staff wash room and fire exit at the backside of kitchen.
Kettering Map
Source: https://www.pwc.co.uk/who-we-are/regional-sites/midlands/press-releases/Milton-Keynes-high-streets-continue-to-evolve.html
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The Business Floorplan
30
The Business Floorplan
31
The Business Target Market The restaurant aims to target the 21 – 45 age group customers with expendable income, who enjoy a night out with loved ones, colleagues or friends. This will include the following market segments: Businesspeople UK attracts a lot of businesspeople from across the globe. Businesspeople generally look for food that is served quicker than normal restaurants and, at the same time, is filling but not an elaborate meal. This makes Maeme’s the ideal place for businesspeople to have a quick business lunch.
Singles The restaurant will attract singles who love to have a good meal. The restaurant’s menu offering, excellent service and engaging clientele will confirm the feeling that this is a good place to eat.
Families Chicken remains a highly prevalent part of every family’s diet in this part of the world. However, due to a large working population which includes two working parents and single parent households with less time to cook; the elaborate meal affair is less likely to be undertaken at home. Hence, Maeme’s will encourage families to enjoy a good meal by dining here.
Tourists Along with finance and business, the history attached to this country attracts a lot of tourists every year. Hence, the restaurant will capitalize on this opportunity to cater to customers from across the globe by targeting visitors.
Young Couples The restaurant will be a popular place for young couples looking to have a good time at a hip place that serves good food. The restaurant will encourage people to bring dates, partners or spouses for intimate meals together. The restaurant intends to be a place for couples to explore and spend quality time enjoying their food and ambience.
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The Business Suppliers & Partners The major supplies of the outlet will be sourced from the franchisor. Besides that, it will also tie-up with key suppliers in the locality to source quality supplies for its products. It will also establish partnership with delivery companies operating in the UK. Some of the key suppliers and partners of the store are as follows:
DIBS DIBS is a supplier of the fresh Halal chicken in the United Kingdom. DIBS Distribution is a family run business formed in 1987 at the birth of the independent fast food chicken industry. We offer a wide product range which is certified and sourced from Halal approved suppliers. It is monitered and approved by the FSA (Food Standards Agency) and our EC number is UK6397. Just Eat Just Eat plc is an online food order and delivery service. It acts as an intermediary between independent take-out food outlets and customers. It is headquartered in the United Kingdom and operates in 13 countries in Europe, Asia, Oceania, and the Americas. The platform allows customers to search for local take-out restaurants to place orders online, and to choose from pickup or delivery options.
Uber Eats Uber Eats is a food delivery app from Uber that makes getting great food from the favourite local restaurants as easy as requesting a ride. Uber Eats is available seven days a week, whenever restaurants are open and accepting orders. Uber Eats is currently available throughout most of the London area. Specific neighbourhoods in their coverage zone include Downtown London, East London, South crest and more. ATP The Company will tie-up with ATP which is Maeme’s online food delivery partners.
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The Business SWOT
Strengths
Established brand name Existing suppliers Support from Franchisor Low-fat & healthy food
Weaknesses
New to the market Yet to build a reputation Controlled by the franchisor High employee turnover
Opportunities
Threats
Busier lifestyles leading to more demand for quick service restaurants New customer groups Opportunity to open more outlets
Food and safety risks Threat from new market entrants and established players Healthy food trends
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The Business Roadmap and Milestones Short Term • • • • • • • • • • •
Lease premises Renovate premises Tie-up with suppliers Create strategic partnerships Launch website Recruit staff Create social media pages Prepare stationary and branding Initiate marketing campaign Open the restaurant Build customer base Long Term • • • • • • •
Ongoing inventory planning Ongoing marketing Capture market share Build the brand Ongoing growth strategies Establish brand name Expand product & service offering
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The Team
36
The Team Organization Structure Manager Oversees operations Monitor KPIs Creates menus Prepares new recipes
Shift Manager Ensures controls are in place Quality control Monitors KOTs
Chef Prepares food Adheres to customer requirements
Delivery Drivers Receives orders Delivers food Billing and collection
Manager
Shift Manager
Cashier
Cashier Documentation Compliance MIS Reporting
Chef
Delivery Drivers
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The Team Staffing Plan Amounts in ÂŁ
Particulars Designation Manager Shift Manager Chef Delivery Drivers Cashier Total
Annual Salaries Per Person Manager Shift Manager Chef Delivery Drivers Cashier Total Salaries Manager Shift Manager Chef Delivery Drivers Cashier Total
2018
2019
2020
2021
2022
1 1 2 2 2 8
1 1 2 2 2 8
1 1 2 3 2 9
1 1 2 3 2 9
1 1 2 4 2 10
27,000 24,000 22,000 20,000 18,000
28,350 25,200 23,100 21,000 18,900
29,768 26,460 24,255 22,050 19,845
31,256 27,783 25,468 23,153 20,837
32,819 29,172 26,741 24,310 21,879
27,000 24,000 44,000 40,000 36,000 171,000
28,350 25,200 46,200 42,000 37,800 179,550
29,768 26,460 48,510 66,150 39,690 210,578
31,256 27,783 50,936 69,458 41,675 221,106
32,819 29,172 53,482 97,241 43,758 256,472
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The Team The Management XXXXX is the Owner and CEO of the Company. He is a very driven and capable person with excellent time management skills and the ability to lead and work as part of a successful team. His key skills include:
Experienced in running the businesses Ability to manage a small team of people Experienced in dealing with staff issues, payroll and holidays/sickness Excellent customer service skills, with the ability to communicate with people on all levels Strong team leader and team player Cash handling and banking experience Ability to offer flexibility towards working hours and overtime when required
His employment history includes:
He studied ESOL Entry Level 1,2,3 from Southgate College, London. He has also qualified for Pearson BTEC Level I Certificate (Workskills RQF) at Learners Progress College, London.
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The Strategy
40
The Strategy Business Strategy
Future Expansion Strategy
Promotion Strategy
Operational Strategy
Franchising Strategy
To ensure quick service to customers and to maintain a clean and relaxed ambience.
To expand operations to include franchise outlets across the city.
To target college students and working adults. To have promotional offers for special occasions, as well as for those residing nearby.
To get trained by the franchisor with respect to the quality standards and service requirements of the franchise.
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The Strategy Business Strategy The business strategy will be to focus on long-term, sustainable and organic growth. Operations The overall operational strategy will be designed to invest in low-cost growth initiatives that produce immediate cash-flow-positive results. In addition to this, the management will analyse the suppliers’ brand and the quality of food (taste, prices), collect data on the quantity that is sold and be up -to-date with the products and their stocks. Location Location is the most critical factor in the success of this business. Hence, the management will select strategic locations with maximum viewing ability, that will attract a high level of customers. Pricing The pricing strategy will be based on medium and low segment depending on the location and the competition. The margins will be 70% and an average meal will be priced between £4.99 and £25.99. The expected weekly volumes will be £8,000 to £10,000.
Strategic • • • • • • •
Build brand awareness Build relationships Achieve synergistic effect Outsource non-core activities Identify optimum locations for expansion Be socially responsible and environmentally friendly Offer high-quality, but pocket-friendly products
Managerial • • • • • • • • •
Structure business processes Improve processes continuously Build relationships with partners and suppliers Build brand awareness Use existing relationships of the management team to expand the business Obtain catering contracts Be cost effective and efficient Market development Cater to customers’ need for healthier food options
Tactical • • • • • • •
Recruit qualified staff Provide high-quality products Provide a wide range of menu offerings Provide excellent service Enhance customer satisfaction Create a visually appealing website Provide customized services for specific occasions
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The Strategy Marketing Strategy The restaurant’s marketing strategies and activities will mostly be covered by the franchisor. However, the restaurant will undertake internal marketing moves to enhance its individual identity in the locality. Some of these marketing strategies for the restaurant are as follows. Website The entity will launch an appealing website encompassing useful features to make it stand out from the crowd. The website will have a mobile friendly interface, online bookings, automated marketing, social monitoring, social media integration, etc., in addition to featuring sufficient information about the restaurant, the menu, a gallery of specialty dishes of the restaurant etc. Social Media Social media is one of the most cost-efficient digital marketing methods. The entity will create a strong presence on social media websites such as Facebook, Instagram, Twitter to share special discounts, exclusive coupons, photos of newest dishes, and promote the business’ own news accolades. This way, the entity will syndicate content and increase the business' visibility. Issuing Handouts The entity will issue handouts to the targeted audience, specifying the uniqueness, the specialty dishes, booking, location and address of the restaurant.
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The Strategy Marketing Strategy Partnering with Online portals and Apps The company also have plans to partner with several popular online portals and applications such as food service apps, travel websites such as Trip Advisor, Booking.com, Expedia etc., to get its business listed on these sites. Offline Marketing The internet reaches 30% of the global population and there are more than 2bn users worldwide. Hence, offline marketing serves as the best way to reach out to other audiences. Offline campaigns stay for a longer time and can be utilized time and again. Print Media The traditional print advertising retains many of the advantages that made it the lifeblood of marketing communications for decades. The benefits of print ads may outweigh even the most-used digital media. Hence, the entity will advertise in popular magazines of the region.
Radio Advertising Radio advertising can be an effective, low-cost medium through which a business can reach their target consumer. Studies show that radio ads create emotional reactions in listeners. Hence, the restaurant will associate with popular radio stations in the locality.
Word of Mouth Marketing Word-of-mouth marketing is a powerful way to spread your company message and create a brand reputation. Hence, the entity will focus on obtaining customer confidence. Others The restaurant will also offer attractive offers to boost customer traffic. It will also provide specialty menus and offers during appropriate seasons.
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The Financials
45
The Financials Sources and Uses of Funds Particulars Uses of Funds Lease Deposit Premises Refurbishment Equipment and Technology Initial Inventory Marketing Total Sources of Funds Equity Total
Am ount ÂŁ 7,000 35,000 20,000 8,000 10,000 80,000
Uses of Funds Lease Deposit 12% 9% 10% 25%
80,000 80,000
Premises Refurbishment 44%
Equipment and Technology Initial Inventory Marketing
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The Financials Projected Income Statement Amounts in £
Particulars Revenue Revenue Total
540,000 540,000
729,000 729,000
801,900 801,900
882,090 882,090
970,299 970,299
Expenses Cost of Goods Sold Manpower Rent & Utilities Royalty Marketing Repairs and Maintenance Professional & Legal Total
189,000 171,000 26,000 54,000 15,000 10,800 5,000 470,800
262,440 179,550 27,300 72,900 72,900 11,340 5,250 631,680
280,665 210,578 28,665 80,190 80,190 11,907 5,513 697,707
299,911 221,106 30,098 88,209 88,209 12,502 5,788 745,824
329,902 256,472 31,603 97,030 97,030 13,127 6,078 831,241
69,200 13,148 56,052
97,320 18,491 78,829
104,193 19,797 84,396
136,266 25,891 110,376
139,058 26,421 112,637
Net Profit before taxes Taxes Net Profit after taxes
2018
2019
2020
2021
2022
Note • Revenues have been assumed based on a sale of £1,500 per day on a conservative basis. • Rent & Utilities includes rent, power, electricity, gas etc. • Royalty refers to franchising fee. • Professional & legal includes accounting fees and consulting fees.
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The Financials Projected Cash Flow Statement Amounts in ÂŁ
Particulars I nflow s Revenue Equity Total
540,000 80,000 620,000
Outflow s Cost of Goods Sold Manpower Rent & Utilities Royalty Marketing Repairs and Maintenance Professional & Legal Taxes Lease Deposit Premises Refurbishment Equipment and Technology Total
189,000 171,000 26,000 54,000 15,000 10,800 5,000 13,148 7,000 35,000 20,000 545,948 74,052 74,052
Opening Balance Surplus Closing Balance
2018
2019
2020
2021
2022
729,000
801,900
882,090
970,299
729,000
801,900
882,090
970,299
262,440 179,550 27,300 72,900 72,900 11,340 5,250 18,491
280,665 210,578 28,665 80,190 80,190 11,907 5,513 19,797
299,911 221,106 30,098 88,209 88,209 12,502 5,788 25,891
329,902 256,472 31,603 97,030 97,030 13,127 6,078 26,421
650,171
717,504
771,714
857,662
74,052 78,829 152,881
152,881 84,396 237,278
237,278 110,376 347,653
347,653 112,637 460,290
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The Financials Financial Charts Structure of Expenses
Financial Summary 1,200,000
2%
1,000,000
3%
Cost of Goods Sold
1%
800,000
Manpower 6%
12% 40%
600,000
Rent & Utilities
Royalty 400,000
36%
Marketing Repairs and Maintenance
200,000
Professional & Legal -
2018
2019
2020
2021
2022
Revenue
540,000
729,000
801,900
882,090
970,299
Net Profit
56,052
78,829
84,396
110,376
112,637
Cash Balance
74,052
152,881
237,278
347,653
460,290
Amounts in ÂŁ
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The Financials Key Performance Indicators Particulars Revenue CAGR Profit CAGR Cash CAGR Net Present Value at 10% Internal Rate of Return
£
Value 16% 19% 58% 237,457 97%
50