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Lab Business Plan
By definition of a business plan is a document that outlines the goals and objectives of a company and clearly states how they can be achieved. Business planning advocates for a prepared and harmonized approach for rising long term managerial objectives and strategies as well as achieving them (Entrepreneur). Consequently, this business plan aims to provide a structure for planning, development, and policy prescription for the company in the future.
Research shows that China’s fast food industry has undergone massive changes in the past five years, where people have shifted from traditional foods fast food such as KFC, McDonald, and Starbucks to emerging brands such as Hey Cha, Yi Dian Dian. Large firms have also discovered this trend and introduced new western brands such as Shake Shack, Tim Hortons, and Popeyes into China. Despite the competition challenges, the fast-food industry is still increasing, and demand has not decreased.
Our idea
For the hotel business to accomplish its objective of delivering quality service for its customers, it is essential to study how the hotel can believably meet and even go beyond customers’ service delivery expectations. Based on this, we are going to focus these determinants for excellent customer service; Reliability, Responsiveness, Assurance, and Empathy. We will provide a fashionable decoration place, very attractive and delicious foods which will be priced reasonably. We will have unique foods that will include fried food, special burgers, and smoothies. We will ensure that quality is our best policy to meet customer satisfaction and have a good market share.
Market
The term market refers to a place where buyers and sellers exchange commodities in direct competition to one another.
In our market, we will focus on fast foods .whereby, we will have both Chinese foods and western fast foods.
We will focus on fast food restaurants. In fast-food restaurants, commonly known as quick-service restaurants, customers order items, and, in most cases, pay before eating. There are both Chinese fast food and Western fast food.
In recent years, lifestyle changes and reduced free time have added to a consumer move from traditional full-service restaurants in the direction of fast-food establishments. Besides, enlarged Western influences in China have increased demand for fast food. Due to the rapid growth of fast-food service providers, good organizations in a chain store, and new brands and food styles, industry growth has been tough over the past decade. ACMR-IBIS World projects that the Fast-Food Restaurants business in China will produce $157.3 billion in 2020, reduced by 8.8% from 2019 due to the COVID-19 outbreak. Over the last five years through 2020, industry revenue is expected to rise at 3.8% per annum.
Competition
Competition is a rivalry among businesses selling similar products and services to gain revenue, profit, and market share growth in the same environment. The reason for the rival with one another is to boost the industry’s income by raising the sales and market share.
A hotel market must determine what hotel to compete with and to what degree and it should be done carefully.
We will use competitive sets to benchmark, marketing, and develop positioning strategies. Many hotels use rate shopping tools to compare their current pricing with their competitors to make proper pricing decisions.
The main competitors in the market are; Yum! China, McDonald’s Corp, and Restaurants Brand International. We will use all the available strategies to ensure we gain a large market share.
Market share
Market share refers to the volume a company commands in a given market segment.
Market share is a gauge of the consumers’ preference for a product above other comparable products. The higher the market shares, the higher the sales (Shaw 2020).
In the first stage (within three years of operation), we expect to reach a 162 million annual revenue. In the next phase (within the next ten years), we expect a 3.2 billion annual revenue, which means an approximate market share of 2%.
Our competitor
Our immediate competitors will be the Shake Popeye. These are emerging international fast food brands, as well as local fast-food restaurants in each city. In the next stage, our major competitors will be many common brands such as KFC and McDonalds because we will sink our market to small and medium cities in China.
Our Strategy
Running a hotel is challenging. It requires intense planning, organization, and capital to start and sustain it. Besides, innovation, creativity, and determination are essential to reach success.
We look forward to good management and working teams that will take the organization to the top level. We will use a smart pricing strategy and excellent advertising strategies to position the company in a good rank.
Besides, we will ensure good customer service to increase the level of satisfaction. Customers are satisfied after they find the service they have received equals or exceed what they expected. Correct understanding of the factors that manipulate customer satisfaction enables the service provider to design and deliver service to meet customer demand.
Additionally, we will open various branches in various cities to ensure services are taken near to customers.
Location
Being in the correct location is a key component of a business’s success. If a company selects the incorrect location, it may have insufficient access to customers, workers, transportation, materials, etc. When selecting a location, the needs and objectives of the company should be considered.
In the first phase, we will open restaurants in the downtown area of Shanghai, Beijing, and Shenzhen. These locations have a large population, and they are good income earners.
In the second phase, we will open more restaurants to the downtown area of medium-sized cities around these cities. After three years, these cities have been spread information about our brand long enough. According to Chinese consumers’ curiosity about big things, some customers in these cities may have already visited our restaurants. The other part is waiting for us to open new restaurants in their city. Because of lower housing prices and prices, residents’ consumption power in these cities is not worse than that of the first three cities.
Key for successful
For a hotel to be successful, it has to put into consideration various factors. These critical factors include; location, quality management, and flexibility.
Location
Despite the changes in the business, location is still imperative. We are going to locate our business in a good strategic point on the highways.
Quality Management
Quality management is a key factor in the success of the hotel industry. We will ensure satisfied customers by employing a good management team. We will also make sure that all employees are well trained to give excellent customer service.
Flexibility
Managers must make decisions on their own, preferably for the success of the business. We will ensure favorable policies that will create favorable working conditions. This will increase a good reputation from customers and eliminate unnecessary expenditures.
Financing
Financing refers to asking any lending institution to lend you money and repay later with some interest.
Pro Forma Financial Statements
A pro forma income statement refers to a projected income statement. The income statement is also called profit and loss account.
Lab
Proforma income statement
For the year ended 31/12/2020
Year 1 year 2 year 3
Revenues
Room 500,000 1,000,000 1,000,000
Food and beverages 2,000,000 3,000,000 4,000,000
Total revenues 2,500,000 4000000 5,000,000
Operating expenses
Room 200,000 300,000 300,000
Food and beverage 100,000 200,000 300,000
Administrative expenses 50,000 100000 150,000
Depreciation and amortization 50,000 50,000 50,000
Total operating expenses (400,000) (650,000) (800,000)
Operating income before tax 2,100,000 3,350,000 4,200,000
Less tax @30% 630,000 1,005,000 1,260,000
Net profit 1,470,000 2,345,000 2940000
Lab
Proforma income statement
For the year ended 31/12/2020
2020 2021 2022
Opening balance 1000000 2820000 1,615,000
Cash received
Rooms 500,000 1,000,000 1000000
Food and beverages 2,000,000 3,000,000 4000000
Total receipts 3,500,000 6,820,000 6,615,000
Cash paid for
Supplies 50,000 200,000 300,000
Income tax 630,000 1005,000 1,260,000
(680,000) (1,205,000) 1,560,000
Net cash flows 2,820,000 1,615,000 5,055,000
2020 2021 2022
Non-current assets
Equipments 2,000,000 3000000 4000000
Current assets 2970000 4000000 3440000
Total assets 4,970,000 7,000,000 7440000
Equity
Owners equity 1,000,000 2,000,000 3,000,000
Retained earnings 1470000 2345000 2940000
Non- current liability
Loan 2000000 4000000 3000000
Current liability
Accounts payable 500,000 1000000 1,500,000
Total equity and liabilities 4,970,000 7,000,000 7,440,000
Break-Even Analysis
A break-even analysis is a fiscal tool that aids a business in deciding the stage at which the business, or a new service or a product, will be cost-effective. It helps to know the relationship between the variable cost, fixed cost, and revenue.
Break-Even Analysis Components
Fixed costs
These are the costs that remain unchanged at the end of the production, irrespective of production volume.
Fixed costs include taxes, salaries, rent, depreciation costs, labor costs, etc.
Variable costs
Variable costs are costs that change depending on production volume—E.g. Raw material, packaging costs, etc.
Formula
It is calculated as follows
Breakeven point = FC/contribution per unit
Contribution = selling price per unit – variable cost per unit.
2895000/9650000 =0.3
Uses of break-even point
It helps to know the highest profit on a particular product/service that can be generated.
It aids to find out the changes in profits if the price of a product is altered.
It aids to find out the volume of losses that could be sustained if a sale goes down.
Sensitivity analysis
Sensitivity analysis is an instrument used in economic modeling to analyze how a range of values of a set of independent variables affect a certain dependent variable under precise conditions.
Advantages of sensitivity analysis
Adds credibility to any financial model by testing it in a wide set of possibilities.
Enables the analyst to make informed decisions
Works Cited
Entrepreneur. “Business Plan Definition – Entrepreneur Small Business Encyclopedia”. Entrepreneur, https://www.entrepreneur.com/encyclopedia/business-plan. Accessed 7 Aug 2020.
Shaw, AA. “What Is Business Competition? Types, Benefits & Examples”. Marketing Tutor, 2020, https://www.marketingtutor.net/business-competition/. Accessed 7 Aug 2020.