Entrepreneurship In The Hospitality Industry

Published Date: 02 Nov 2017

To identify an opportunity for which the student will need to develop a business plan

Submitted by

Zhang LiLi 30106971

27th May, 2012

Table of Contents

Executive Summary……………………………………………………………….3

Objectives………………………………….……………………………….….4

Mission………………………………….………………………………….….4

Key to Success……………………………….....……………………………..4

Business Description………………………………………………….…..……….5

Background of Fast Food Industry in Singapore…………………..………….5

Prospect of the Venture……………………………………………..………….5

Features of the Business…………………………………………….…………5

Products Segment………………………………………………………………….6

Product Description……………………………………………………………6

Sourcing…………………………………………………………..……….…..6

Marketing Segment………………………………………………………………..7

Market Segmentation/Target Market. ………………………..……..…………7

Market Positioning. ………………………………………………..….…….7,8

Market Share.……………………………………………………….…………8

Competition Pattern. ………………………………………………..…………8

Demonstration of Pricing Strategy…………………………………………….8

Advertising Plan…………………………………………………….…………8

Operation Segment. …………………………………………………….…………9

List of Facilities and Equipment…………………………………….……..….9

Access to Transportation…………………………………………….…..…….9

Suppliers. …………………………………………………………….…….10

Availability of Labor. ………………………………………………………10

Estimates of Operation Costs. …………………………………….…..……10

Management Segment………………………………………………….……..….11

Management Team………………………………………………….……..…11

Organizational Structure…………………………………………….…….….11

Personnel Plan…. …………………………………………..……….……….12

Financial Segment………………………………………………………………..12

Start-up Funding……………………………………………..……….………13

Break-even Analysis………………………………………………………….14

Pro Forma Profit and Loss………………………………………….……..…15

Pro Forma Cash Flow……………………………………………….………..16

Projected Financial Balance Sheet…………………………………...………17

General Assumption………………………………………………….…..…..18

Critical-risk Analysis……………………………………………………………..19

Milestone Schedule Segment……………………………………………….……20

Milestones Charter…………………………………………….……….…….20

Milestones…………………………………………………….………..…….20

References……………………………………………………………..………....21

1. Executive Summary

This business plan is prepared to create a blue print of the business and present the concept to all stakeholders.

“Lili Fries World” is a local fast food out that will be run as a sole-proprietary venture. Lili Fries World will offer variety of French fries dishes at fairly pricing, in a friendly serving atmosphere. Additionally, my outlet is to be established in Singapore Vivocity Centre, which is the most popular shopping mall in town. And also, it is nearby Resort Sentosa and Singapore Cruise Center.

In this plan, my financial projections are prepared for the next 3 years from 2013 to 2015. And the following chart is to highlight my forecasting report that the financial performance of the next 3 years.

Highlights of financial projection for 2013-2015

C=cv

B

A

C

B

A

C

B

A

A

B

C

1.1 Objectives

To make “Lili Fries World” brand known by most of Singaporeans

To make Lili Fries World outlet become the first choice of fast food outlet for shoppers in mall.

To become a model of “French fries expert” in fast food industry of Singapore

1.2 Mission

Our main goal is to become the first fast food outlet with focus on healthy French fries in Singapore.

1.3 Key to Success

To succeed in the business I must:

Create a unique style of menu to differentiate us from other competitors.

Keep our friendly service style consistent and never slide -down

Highly control and examine food quality to provide healthy food to customers

Control all of costs at all time so that we can support our “fairly pricing strategy” carrying on.

Keep friendly relationship with our suppliers to ensure a long-term cooperative relationship.

2. Business Description

My fast food outlet is named as “Lili Fries World”. The first operation day is the first day of year 2013. The outlet will locate at 2nd storey of Vivo City central, Singapore, and will range in size from 100 to 120 meter square and will seat from 50 to 60 guests. My outlet mainly provides variety style of fries from worldwide with our featured homemade sauces. Also, my outlet provides excellent personalized service to our customers in a friendly and warm lifestyle ambience.

2.1 Background of the Fast Food Industry in Singapore

Since the first fast food restaurant (A&W family restaurant) had been founded in 1966, as at end of 2010, there were total 376 fast food establishments located in Singapore. Moreover, it is still remaining a rapid increasing rate.

2.2 Prospect of the Venture

Firstly, the fast food industry in Singapore is in growth period; secondly, large daily visitors flow rate. Vivocity central is one of the most popular shopping mall in Singapore and resides nearby world-class resort Sentosa and Cruise Centre; thirdly, we provide variety of fresh exotic fries-cuisine as our core offering.

2.3 Features of the Business

Variety: Besides of different style of fries cooked, my outlet will offer variety of unique homemade blend sauces for each customer to choose.

Promotion: Daily promotion will is offered to guests. Each day of a week will have one specific type of fries-meal discounted.

Customer service: My outlet will provide friendly and customized service style to each customer.

Cooking display: My store will display the cooking method of our exotic-style’s fries from cutting to frying.

3. Products Segment

Our outlet is planned to focus on selling different styles of fries. And also, we will offer non-alcoholic drinks desserts and other snacks to complement our fries.

3.1 Product Description

We primarily sell fries with our homemade sauces complemented. The table below presents all the products we will sell in the grand opening period in 2013

Fries

Sauces

Snacks

Beverages

Soup/ Desserts

Greek poutine

Caribbean islands

Chicken nuggets

Coke Cola

Mushroom soup

Baked bacon fries

Sweet chili sauce

Crispy/spicy chicken wings

Mountain Dew

Creamy tomato soup

Patatas ravas

Pesto mayo

Chicken pakora

Root Beer

Miso soup

Curly fries

Teriyaki sauce

Chicken/ beef warps

Sprite

Ben&Jerry’s half baked

U.K. chips

Creamy wasabi

Vegetarian spring rolls

Lemon Tea

Ben&Jerry’s vanilla

Chili cheese fries

Roasted pepper mayo

Beef vindaloo

Green Tea

Ben&Jerry’s cheese cake

Original fries

Barbecue sauce

Beef sticks

Orange Juice

Vanilla pudding

Tornado fries

Andalouse sauce

Fresh salad

Mango Juice

Caramel pudding

Baked fries

Garlic dip

Sweet corn cup

Lemon Juice

Mango pudding

Black pepper sauce

Mineral water

Fresh tropical fruits cup

Lava cheese

Latte

Hot chili sauce

Teh Tarik

Cappuccino

3.2 Sourcing

All potatoes we use will be directly delivered every two week by our supplier X in the U.S. to ensure that quality of all the potatoes used in the outlet is best. Then, the sauces, fresh vegetables salad, fruits and all the frozen chicken/beef will be outsourced from the local X central kitchen in order to ensure all the items’ freshness. Lastly, the beverage will directly come from the X Company’s distribution central.

4. Marketing Segment

As Singapore’s economic is recovering, consumers expenditures for fast food industry rose rapidly in last decade. The increasing number of new entrants of the fast food establishments shows a significant growth rate in this industry. As the end of 2010, fast food outlets in Singapore created total amount of $803 million operating receipts and $245 million value added. In this year, fast food industry of Singapore registered growth of 11.0 per cent in turnover and 9.7 per cent in value added over the previous year.

4.1 Market Segmentation/Target Market

The first consumers group I intend to target is young Singaporeans. They will become my primary target market and business supporters. Sentosa is the destination which attracts many young people to spend their weekends and holidays. Hence it created large number of “possible” customers for my business.

The secondary target market is “shoppers”. So far, Vivocity centre has become a destination for foreign tourists and locals shopping in the area. Hence tourists will have little time spared to have a full meal during shopping. Hence, my outlet will become one of the ideal outlets in the place for those shoppers to have a quick but nice meal.

Lastly, I choose “family” to be my third target. Vivocity centre is also one of the entry points of Resort Sentosa. Many parents bring their children and prefer to dine out of the resort, because of expensive food provided inside.

4.2 Market Positioning

The focus of my outlet in marketing is to let the public know the differences and uniqueness of our fries. We will price our product fairly and meanwhile keep a high quality standard of our food and service. The channel of our distribution is that customers are able to obtain our products through counter service.

4.3 Market Share

As a sole-proprietary venture, my prospective of future market share that we suppose to obtain is around 1% market share. Comparing with those giant franchise ventures, this actually should be a quite considerable goal for us

4.4 Competition Pattern

The main competitors of my store are four fast food outlets which are Burger King, Long John Silver’s, Carl’s Jr and Subway. They provide fries as a side order or even no fries available. Hence, my outlet will be the first one that devotes to providing variety of fries. This is our core differentiation point. And also fairly pricing strategy and friendly service will become other two competitive advantages of my outlet.

4.5 Demonstration of Pricing Strategy

My pricing strategy is set as “fairly” that means not too high and too low. Average price of our meals is around $7. Moreover, weekly 70% promotion of specific meal is available. But when my business just set up, we also provide $2 meal vouchers free to customers to assist my outlet to penetrate quickly and smoothly. In the future business career, my outlet aspires to achieve $12,000 weekly revenue in the first financial year and follow by $14,000 and $16,000 of weekly sales in the next tow years.

4.6 Adverting Plan

Advertising Plan

Cost

Descriptions

Color Brochures

$1000

2,000 color brochures will be distributed throughout the shopping mall during the grand opening in Jan 2013

Magazine

$4,000

Half page magazine reviews in SG’ lifestyle magazines

5. Operation Segment

The location of the outlet is at 2nd storey of Vivo City central close to Sentosa resort, Singapore cruise centre and nearby harbor. The outlet will range in size from 100 to 120 meter square.

Furthermore, in financial terms, as the research of economic developments Singapore shows, average nominal wages per month is S$4089 and total expenditures for fast food is S$3597 million in 2010. This provides considerably potential profits to make my future business succeed.

5.1 List of Facilities and Equipment

The following chart show the facilities and equipment my outlet required to support the future business.

Facilities

Equipment

Frozen, chilled and dry storage room

Office room

Service counters

Open-style kitchen

Staff area

Dining area

Service stations

Back of house

etc

Furniture

Cookers

Machineries

Lights

Computers

Cutleries

Stereo and speakers

Misc

etc

5.2 Access to Transportation

Location of my outlet is easy to access. Taxi, bus and MRT services all are available in the place. Even the Singapore Cruises Centre is just nearby. The location of the outlet does provide convenience for both customers and deliverers.

5.3 Suppliers

The potatoes my outlet ordered is from the U.S and will be delivered by our supplier directly from the origin place every two weeks. We also have a contrast with local central kitchen to exclusively provide other items we need, such as frozen chicken cutlet, pan cakes and our signature sauces. Then, the sauces, fresh vegetables salad, fruits and all the frozen chicken/beef will be outsourced from the local X central kitchen in order to ensure all the items’ freshness. Lastly, the beverage will directly come from the X Company’s distribution central.

5.4 Availability of Labor

The labor source of my outlet mainly comes from local and foreign young people. I will also offer job opportunities as a part-timer to local poly or colleges’ students.

5.5 Estimates of Operation Costs

The financial table below shows the detailed expenditures for operation activities from year 2013 to the end of 2015.

Operation Expenses

2013 2014 2015

Payroll $100,000 $140,000 $170,000

Payroll taxes $15,000 $18,000 $21,000

Marketing and other expenses $20,000 $24,000 $27,000

Depreciation expenses $5,000 $5,500 $6,000

Rent $144,000 $144,000 $144,000

Maintenance $6,000 $7,000 $9,000

Utilities $8,000 $8,500 $10,000

Total Operating Expenses $298,000 $347,000 $387,000

6. Management Segment

At present time, the outlet is preset as a sole-proprietary venture. I will hold the absolute administration and determination authority. But as the business grows up and gets bigger, I will also accept new partners to join in and then convert sole-proprietary into partnership.

6.1 Management Team

As my outlet is small in nature, I will make all major management decisions in the future. In the initiation phase, I will commerce on conducting marketing, procurement and other operating activities

6.2 Organizational Structure

Due to the small size of the venture, my business only requires a simple organizational structure. I will be responsible for accounting and administration activities as a manager. Furthermore, I will have one site manager to assist me in business development, human resources, marketing and procurement business in the future. The chart below shows the projected organizational structure of my outlet.

6.3 Personnel Plan

My initial full-time employees will include 1 unit manager, 2 cashiers, 2 cooks, 2 busboys and 1 dishwasher in the outlet. Each employee will work for 44 hours per week. Furthermore, I will employ some part-timers if it is necessary. As I expand the business, I also intend to look for more people that are suitable in the middle-level management to ensure our focus of work.

Personnel Plan

2013 2014 2015

Unit manager $16,000 $18,000 $20,000

Supervisor $0 $14,000 $16,000

Cashiers $25,000 $37,500 $42,000

Cooks $35,000 $41,500 $52,000

Busboys $20,000 $22,000 $32,000

Dishwasher $6,000 $7,000 $8,000

Total People 8 10 12

Total Payroll $100,000 $140,000 $170,000

7. Financial Segment

I have developed a detailed and conservative financial forecast model for the first 3 years of my business. The information adopted in the model is based on the research and available knowledge of current economic status of Singapore, while aligning with contemporary fast food industry of Singapore. Also, all of the historical financial data involved in the model officially came from the website of Inland Revenue Authority of Singapore (IRAS). As a result of this work, this model is used for forecasting business profits projections of my venture for the next 3 years (1/1/2013 to 31/12/2015).

7.1 Start-up Funding

This outlet is belonging to a sole-proprietorship. As the only founder, I will contribute S$400K to cover all business start-up requirements over the first 3 financial years.

Start-up Funding

$000

Start-up expenses to fund $40

Start-up assets to fund $302

Total Funding Required $342

Assets

Non-current assets from start-up $57

Current assets from start-up $245

Total Assets $302

Liabilities and Capital

Liabilities

Current borrowing $10

Long-term liabilities $24

Accounts payable $0

Other current liabilities $0

Total Liabilities $34

Capital

Planned investment $400

Less start-up expenses $30

Total Capital $370

Total Capital and Liabilities $404

Total Funding $400

7.2 Break-even Analysis

My break-even analysis indicates that we need unit sales over 4586 units per month to break even. And break-even sales volume is around $32,102 per month.

Break-even Analysis

Break-even Analysis

Monthly break-even in units 4586units

Monthly break-even in revenue $32,102

Assumptions:

Average revenue per unit $7/unit

Average variable cost per unit $1.55/unit

Estimated monthly fixed cost $25,000

7.3 Pro Forma Profit and Loss

As the estimate report shows, the projected sales of the outlet will increase from $624,000 in 2013 to $832,000 in 2015 and its net profitability will increase from 15.33% to 16.65%. As the sales increase, I will expand into new location, e.g. Orchard road, to spread the brand. The table below outlines the projected Profit and Loss Statement for 2013-2015

Pro Forma Profit and Loss Statement

2013 2014 2015

Sales $624,000 $728,000 $832,000

Cost of sales $220,000 $255,000 $290,000

Gross Margin $404,000 $473,000 $542,000

Gross margin % 64.74% 64.97% 65.14%

Expenses

Payroll $100,000 $140,000 $170,000

Marketing and other expenses $20,000 $24,000 $27,000

Depreciation expenses $5,000 $5,500 $6,000

Rent $144,000 $144,000 $144,000

Maintenance $6,000 $7,000 $9,000

Utilities $8,000 $8,500 $10,000

Payroll taxes $15,000 $18,000 $21,000

Total Operating Expenses $298,000 $347,000 $387,000

Profit Before Interest and Tax $106,000 $126,000 $155,000

EBITDA $111,000 $131,500 $161,000

Interest expense $4,500 $3,925 $3,250

Tax paid $5,823 $8,850 $13,200

Net Profit $95,677 $113,225 $138,550

Net Profit/Sales % 15.33% 15.55% 16.65%

7.4 Pro Forma Cash Flow

The following table shows the Projected Cash Flow for 2013 to 2015 of the outlet.

Pro Forma Cash Flow Statement

2013 2014 2015

Cash Received

Cash from operation

Cash sales $624,000 $728,000 $832,000

Subtotal Cash from Operations $624,000 $728,000 $832,000

Additional cash received

GST received $0 $0 $0

Net current borrowing $0 $0 $0

Subtotal Cash Received $624,000 $728,000 $832,000

Expenditures

Expenditures from operation

Cash spending $100,000 $140,000 $170,000

Bill payments $420,000 $470,000 $507,000

Subtotal Spent on Operations $520,000 $610,000 $677,000

Additional cash spent

GST paid out $0 $0 $0

Other liabilities principal repayment $0 $0 $0

Repayment of current borrowing $5,000 $5,000 $5,000

Long-term liabilities repayment $0 $5,000 $5,000

Purchase other current assets $0 $3,000 $4,000

Purchase long-term assets $0 $1,000 $2,000

Dividends $0 $0 $0

Subtotal Cash Spent $525,000 $624,000 $693,000

Net Cash Flow $99,000 $104,000 $139,000

Cash Balance $469,000 $573,000 $712,000

7.5 Projected Balance Sheet

The outlet’s net worth is expected to increase from $469,000 in 2013 to $712,000 in 2015. The statement blow shows the Projected Balance Sheet for this period.

Projected Balance Sheet Statement

Assets 2013 2014 2015

Current assets

Cash in hand $308,587 $390,561 $492,955

Inventory $132,980 $145,821 $169,041

Other current assets $25,110 $35,520 $35,456

Total Current Assets $466,677 $571,902 $697,452

Long-term assets

Equipment at cost $100,000 $101,000 $103,000

Less accumulated depreciation $5,000 $5,500 $6,000

Total Long-term Assets $95,000 $95,500 $97,000

Total Assets $561,677 $667,402 $794,452

Liabilities and Capital

Current liabilities

Accounts payable $32,000 $32,500 $34,000

Current borrowing $10,000 $6,000 $1,000

Total Current Liabilities $42,000 $38,500 $35,000

Long-term liabilities $24,000 $20,000 $15,000

Total Liabilities $66,000 $58,500 $50,000

Paid-in capital $400,000 $400,000 $400,000

Retained earnings $0 $95,677 $208,902

Earnings $95,677 $113,225 $138,550

Total Capital $495,677 $608,902 $747,452

Total Liabilities and Capital $561,677 $667,402 $794,452

Net Worth $469,000 $573,000 $712,000

7.6 General Assumptions

The financial chart below shows the interest rates and tax rates of Singapore. All the data is based on the economic report of IRAS Singapore gov-website for 2000-2010 time periods.

Interest Rates Assumption for 2013-2015

Interest Rates

2013

2014

2015

Plan month

1

2

3

Current interest rate

5%

5%

5%

Long-term interest rate

10%

10%

10%

Tax Rates Assumption for 2013-2015

Chargeable Income

Rate (%)

Gross Tax Payable ($)

First $80,000

Next $40,000

-

11.5

3350

4600

First $120,000

Next $40,000

-

15

7965

6000

First $160,000

Next $40,000

-

17

13950

6800

8. Critical-risks Analysis

This part is to analyze the potential risks I perhaps encounter with in the future and present the approaches to solve or mitigate them.

Price cutting by competitors: Our competitors may adjust their products price to enhance their competitive advantage. Due to this, I may take some actions, such as distribute meal vouchers throughout the facilities like cinema, information counter and MRT centre.

Healthy trend: As the contemporary trend of food consuming is tend to be healthy; fried fries are considered as “high-risk” food for human health. So my marketing strategy is aimed to highly spread information that our production greatly focus on health care. E.g. our fries 100% are fried in fresh olive oil.

Breach of contract by suppliers: Our suppliers may breach the contract in the half way, especially the supplier in the U.S. So, when I am looking for the supplier, I have to cautiously make the choice based on their reputation, history transaction records and credit.

Sales projections not achieved: Our future sales may not achieve the target, especially the first year. Hence, in the first year, all the expenditures of operating activities must be highly monitored and controlled.

Costs are underestimated: This kind of risk can severely influence the entire financial aspect in future and make it trouble. So, if the scale of the financial analysis is actually beyond my capacity, I will choose to employ a director to help me out and keep this work on the right track.

9. Milestone Schedule Segment

During the initiation stage of the outlet, my unit manager and I will in charge of all the planning and execution activities. This will take approximated 6 months and will launch on 1st/6/2012.

9.1 Milestones Chart

1/5/2012

1/6/2012

1/8/2012

1/1/2013

1/10/2012

1/9/2012

1/11/2012

1/12/2012

1/7/2012

9.2 Milestones

Milestone

Start Date

End Date

Responsible

Licenses applications

1/5/2012

1/6/2012

GM

Supplier contracts signed

2/6/2012

20/7/2012

GM

Sign contacts with developers

2/6/2012

1/7/2012

GM

Printing material

15/6/2012

15/7/2012

GM,UM

Marketing program

15/7/2012

15/11/2012

GM, UM

Renovation

1/7/2012

15/12/2012

GM,UM

Decoration

1/11/2012

25/12/2012

GM,UM

Staff recruitment

29/8/2012

20/ 9/2012

GM,UM

Training staff

24/9/2012

24/12/2012

UM

Grand opening

1/1/2013

-

GM,UM