Business Plan for Entrepreneurship
The company must prioritize marketing, budgeting and operating strategies in the restaurant and food service industries continuously to preserve competitiveness while at the very same time achieving the highest possible return on investments (ROI). In order to increase marketing footing, increase market penetration and minimize total cost of any commitment, restaurer companies must be able to provide a clear and efficient multi-channel presentation online. (Paragraph 9, 2009). Restaurants which have to increase their popularity and market share must take reservations online and view websites as a strategy on the online channel. However these restaurants must be well equipped in order to identify the channels which have the greatest potential for generating leads. It is also necessary to revise marketing finance and resource allocations while considering directing more marketing finances towards this strategy so as to gain more visibility on online sites that are most effective. For these restaurants, there are several alternatives which may provide business value depending on relevance, geographical location, restaurant type and online reputation.
Market Size and Trends
Results of market research show that in the United States, sales in the restaurant industry are worth nearly 800 billion dollars with over one million restaurant locations. (Luca, 2011). Statistics available on how reviews and online reservations have impacted the restaurant industry such as A Harvard Business School study demonstrate that a rating of one-star from a reputable restaurant review site can result in a 9 percent increase in revenue. A presence on online reservation site increases the likelihood that a restaurant will sell all seats at peak hours by 30 to 49 percent and 15 to 20 percent during off peak hours. (Luca 2011). In addition to this, 68 percent of U.S restaurant owners keenly watch and manage online reservations and reviews on several sites at a time while 57 percent of restaurant customers report that they avoid restaurants with negative reviews and ratings. (Luca, 2011). It is evident that restaurant executives have acknowledged the impact of online restaurant review and reservation on their bottom line and this represents a formidable market and a strong case for online restaurant reservations, review and partnering business.
Competition and Competitive Edge
Slightly over 16,000 restaurants use OpenTable, the most popular online reservation and marketing site and this represents a mere 1.6% of the total market share. (NRA, 2016). Other visible online review and reservation sites are Rezbook by Urban Spoon, MySeat.us, Harbortouch, Freebookings.com and RestaurantReservations.com who together represent less than 5% of this market. (NRA,2016).These are the closest competitors and with these statistics, it is again evident there is still a huge potential for online restaurant review an reservations business in this market as it is not fully exploited. All these competitors have not integrated reviews, reservations, marketing and partnerships into their strategy, the competitive advantage targeted by Restaurant masters.
All these sites connect consumers and restaurants, however only our business, Restaurant Masters will provide the emphasis on partnerships and customer focus targets an initial market share of 3% within the first year of operation. By doing this, RestaurantMasters offer significant advantages for each of the customers. As a leading point, only Restaurant Masters provide online live preview ability enabling customers to both experience and see the food, services and ambience before they place reservations. Restaurant Masters are also the only business which will develop an online bidding system that enables restaurant customers to competitively bids from the restaurant while none of the competitors have this feature.
Estimated Market Share and Sales
The total available market (TAM) on the basis of the number of restaurants in the country has been established to be over one million. With statistics showing that there are about a million restaurants with interest in online presence, and spend an average of $ 15000 per year. The total available market is as follows: TAM = x 3% X 15000 = $2,700,000 per year. This demonstrates that with the business operating throughout the entire country with the present competition, potential revenues would be $2.7 million per year. However, not all of the total available market are able to use our online services. The market that is able to use our services will initially be limited, so the estimating for the serviceable available market based on the number of willing restaurants:
SAM = 0.25 million x 3% x 150 = 432,000 (16% of TAM)
This obtainable serviceable available market share represents the source for the revenue projection for the business plan.
Ongoing Market Potential
Even though the growth index in table reservations in restaurant seat sales from 2015 to 2016, the Restaurant Performance Index (RPI) dropped to 99.6 in 2016 indicating declining sales and customer numbers, data shows the potential of both the strengthening of the restaurant industry and increase in sales. (NRA, 2016). This is supported by the restaurants business trend accounted for by the ongoing growth of the U.S economy.
During the last summer months restaurants have seen larger customer numbers, up to 6% increase, which probably reflects the use of unique marketing approaches away from the traditional marketing methods. (NRA, 2016). National Restaurants Association’s (NRA) figures also show that even though table reservations fell slightly, Menu price growth was at 2.7% in 2016 in comparison to 2.9% in 2015. (NRA, 2016). NRA’s Expectations Index also continued to see a steady rise into 2018. (NRA, 2016).
Gross and Operating Margins
Profit Potential and Sustainability
The net profit potential measures of the profit the online business will realize if it conducted all operations at maximum efficiency. Net profit potential indicates the amount of profit the company will make when the maximum possible revenue is achieved and the lowest costs incurred. This is shown for three years projection.
Fixed Costs
Variable Costs
Months (years) to Break Even
Months to Reach Positive Cash Flow
MARKETING PLAN
Overall Marketing Strategy
The means to succeeding in this business is partnering with restaurants and establishments with product and service quality and in turn offering premium quality services to our partners and clients, the main line of products of food, coffee beverages, as well as entertainment are the products and they must be of high quality as well as value. (Kim & Kim, 2004). The Services that will be offered to our clients must provide them with the best experience of service quality with efficient and courteous staff. The marketing strategy is early targeting of the audience with advertising and marketing campaigns.
The next strategy is having a firm grasp on food, beverages, entertainment and labor costs so that the dining and entertainment experience is delivered such that customers are not only inspired to return, but are also encouraged to give word-of-mouth recommendations. The target market initially consist of a combination of Chicago residents, visitors and conventioneers but is projected to eventually cover the whole of United States. The direct market area is the Chicago metropolitan area, the central business district as well as the North, the west and the south sides
Pricing
The pricing strategy will be low price economy pricing approach. This will be achieved by keeping costs of operations and marketing to a minimum through efficiency and cutting edge business processes. The objective is to keep overheads low and then offering clients comparatively lower price.
Sales Tactics
The services offered will appeal to the resident urban professionals within the targeted market areas, including town hotel visitors and residents who wish to have a stylish yet relaxed eating, beverages and entertainment experience. (McCarthy, Stock & Verma, 2010). The business also plans to cater for the un-served needs of friendly dining establishments for the many residents in the Chicago area, both to residents and newcomers in this area. The audiences in this market segment eat out very frequently as families, at work and alone or with friends. This may approximately be four to seven times or more per week. This market segment is mainly composed of married individuals, singles between the ages of 17 and 50, accompanied children and families, students attending area institutions, professional, tourists, and other visitors.
Advertising and Promotion
The initial approach for the sales strategy is to establish and sustain a position with the main constituents of Chicago Metropolitan area residents by television and radio advertising, online advertising, brochures placement as well as billboard advertising. Another strategy is to use the hotel and conference business to develop and maintain relationships with planners of events, corporate functions, conventions and tourism operators. The business also target sales in the downtown Chicago area businesses who regularly have business lunch or dinner entertainment.
References
Luca, Michael. "Reviews, Reputation, and Revenue: The Case of Yelp.com." Harvard Business School Working Paper, No. 12-016, September 2011.
Kim, W. G., & Kim, D. J. (2004). Factors affecting online hotel reservation intention between online and non-online customers. International Journal of Hospitality Management, 23(4), 381-395.
McCarthy, L., Stock, D., & Verma Ph D, R. (2010). How travelers use online and social media channels to make hotel-choice decisions.
National Restaurants Association. (2016). Restaurant Performance Index. Retrieved June 11, 2017, from http://www.restaurant.org/News-Research/Research/RPI
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.
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