Information Interview: Restaurant Sphere
The Entrepreneur’s Goals, Skills, and Service Provided
I have interviewed my friend John who opened his own restaurant two years ago. The restaurant is specialized in seafood dishes. In this research paper, all the important details of the venture will be discussed. My assessment to the venture will be also provided.
John decided to open that restaurant when he was a student. In those times, he worked in several cafes and restaurants in his native city. He liked his job and restaurant business in general, however, his salary was not very high. Therefore, after his graduation, John decided to start his own restaurant and to become a successful business person. He already had some skills for that. John knew that the restaurant industry is running well because he had not only worked, but also communicated with restaurant directors and managers, and was interested in the restaurant business and its details. Moreover, John had several friends who had their own restaurants and were quite successful. They promised John to help him in a new venture. John had also some business skills because he was interested in entrepreneurship since his childhood and read a lot about it.
In order to make his venture successful, John needed to form clear and reasonable business goals. Of course, the most important goal was to make business stable and profitable. Other goals were formed for special periods (months and years). John planned his expenses and expected profits for every month of the year. He also formed some goals considering business as a whole. The mission of his future restaurant was to provide good services for customers, reasonable prices and tasty food. John also made some goals about the specialization of his restaurant. He decided to open a seafood restaurant because other seafood restaurants in his area were not very good. Therefore, John planned to become an owner of a competitive restaurant and to attract clients. As to services, the goal was to provide typical restaurant services including takeaway services.
John also designed long-term goals and ways to reach them. He planned to open one or two new restaurants in the same area if the first restaurant is successful. Moreover, he planned to create a restaurant chain, specialized on seafood dishes.
However, John faced some challenges while opening his restaurant. The most challenging of them was choosing the location for a future restaurant. John knew well that it is very important. The place should be near the road, shopping malls or other crowded locations. Therefore, the restaurant would have more clients. Moreover, it would be better to open a new restaurant quite far from competitors – old restaurants with their constant clients. It would help to be more competitive and profitable. Therefore, John chose a location near cinema and supermarket. There were always many people there; moreover, there were no good restaurants in that area.
One more challenge included partners and vendors. It turned to be difficult for John to find reliable suppliers with low prices and good quality of products. Seafood should be fresh and better chilled rather than frozen. Finally, he found them after several months of search and started his business.
Advertising also brought some problems. Firstly, John could not decide how to advertise his restaurant better: via Internet, local radio, TV or newspapers. Therefore, he used all those media for his advertisement. Attracting clients was a challenge, as well. John spent much money on advertising, however, the number of clients was not very high. A friend’s advice helped John: he made special discounts and proposals for clients. They included discounts for large orders, discounts for constant clients etc. After that, a number of customers increased.
The Financial Plan, Challenges and Goals
Financial plan was an important key to the restaurant business success. John understood it and did his best to create the financial plan for his restaurant. Unfortunately, John did not have enough business and financial skills to make the plan himself. That is why he decided to hire a financial planner. John used some recommendations to find a good planner. He searched and found a person who was licensed and experienced. These key factors guaranteed that the financial planner would create plan professionally, and it would be real to implement.
The goals of financial planning for John’s restaurant included:
· Determining capital requirements. They depended on such factors as cost of current and fixed assets, promotional expenses and long-range planning. Capital requirements were divided into two groups: short-term and long-term requirements.
· Determining capital structure. It means that the financial planner determined the proportions of capital required for John’s restaurant. He decided about several financial ratios, including debt- equity ratios, both short-term and long-term.
· Designing financial policies with concerning cash control, lending, borrowings, expenses, taxation etc.
· Finally, the finance planner ensured that the scarce financial resources were maximally used in the best possible manner at the lowest cost in order to get maximum returns on investment in John’s restaurant.
Therefore, the financial plan was formed of generally accepted recommendations (Wiener, 2013) and included the following sections:
· Overview of the Economy
· Overview of the Industry
· Sources for Funding
· Capital Equipment
· Balance Sheet
· Break-Even Analysis
· Income Projections
· Cash Flow Projection
· Deviation Analysis
However, creating of a financial plan brought additional challenges to John. The most important of them included unstable cash flow and lack of capital.
It was quite hard to predict future cash flows. John did not know how many clients he would have in the future. Therefore, it was difficult to calculate cash flows. For this reason, John tried to focus more on short-term planning, and less on the long-term one. It was impossible to create long-term plans with unstable cash flows.
Also, John needed a large sum to buy land, build a restaurant, decorate it, hire staff, advertise his restaurant and start providing services. His personal money was not enough for all those tasks. Moreover, John planned to open more restaurants in two or three years, and that venture required capital, too. Therefore, John needed to borrow money. He needed to find a reliable lender with quite low interest rate and appropriate terms of lending. John borrowed money from several lenders.
Assessment of the Business
Generally, I felt positive about John’s interview. I liked his detailed description concerning all sides of restaurant opening. It is important to mention that John’s restaurant became successful and profitable. As it was stated, John did not have serious competitors in his local area. Due to that, restaurant became popular very quickly. More and more new clients appeared, many of them became permanent clients because the services were of a high level, the food was tasty, and its price was reasonable. Therefore, John managed to pay off all his debts in about a year, and after that, he started the building of another restaurant. He hopes it will be as successful as the first one.
To my opinion, the choice of business was right for John. He had already some skills to manage a restaurant, and he had friends who could help him. In addition, he liked restaurant business and knew much about it. It is important to mention that the restaurant business has its own benefits and drawbacks. Main benefit is that the restaurant business is growing and becomes popular: “The number of food-service grew from about 155,000 in the late 1970s to about 900,000 as of 2009, according to the Entrepreneur website. The trend was expected to continue as busy people choose to eat out as opposed to taking the time to prepare meals at home. This means that the right restaurant at the right location can be a lucrative enterprise. Successful restaurateurs often become popular figures in the local community” (Joseph, 2013). Therefore, John can expect that his business will be successful in the nearest years.
However, restaurant business also has some problems and disadvantages. “Restaurants are not easy businesses to operate. You will need to know the proper equipment to purchase and become versed in food-handling procedures and local health codes. You may also have to conduct extensive market research before taking the plunge to see if your particular specialty, such as Italian, seafood or something more exotic, including offering Indian or Thai cuisine will be accepted by the people in your area” (Joseph, 2013). To my opinion, John did his best to avoid the difficulties mentioned above. He used the experience of his friends and bosses to open his own restaurant. He did not make a proper market research. However, John knew that he would not have a serious competition, and his opinion turned to be right.
I think that John’s business type was chosen successfully. The restaurant provides not only traditional services, but also takeaway. It helps to attract new customers well. Takeaway is more effective in areas with many clients and few competitors (as in John’s case). “The major benefit of distributing takeaway menus within your catchment area is that you are reaching your clients directly” (Moyse, 2013). To my opinion, takeaway services can help John’s business stay successful for a long period.
John had some problems with starting his business, and the lack of capital was very important. This challenge is common for many new restaurants. “Rarely do restaurants open and become overnight successes. Gaining awareness and popularity in your community takes time. Meanwhile, you have to have the ingredients on hand to make anything on your menu at anytime as well as the staff it takes to serve however many patrons may come” (Feigenbaum, 2013). Therefore, John’s restaurant was successful, and it helped John to avoid financial problems. He managed to pay his debts off very quickly.
Restaurant business can bring some more problems, for example, bad staff and theft (Feigenbaum, 2013). John managed to hire good staff, and he avoided such problem. I would like to advise him to hire staff accurately for his second restaurant, too. It would help to avoid theft and losses in the future.
John is not very good in finances; therefore, a financial planner helps him. However, he may need to find a new planner. Some advices can be provided for John. A financial planner should be licensed. He/she should better work for a fee. Reading a code of ethics can also be important (The Wall Street Journal, 2013).
To sum up, I consider that John’s restaurant is likely to stay profitable. There are many reasons for that. There are no serious competitors. The financial plan is created accurately and professionally. The profits are high and stable. The restaurant has many clients already. In addition, John is a good businessman, he likes restaurant sphere and has many positive skills.