Motown-Themed Lo-Cal Eatery the Lo-Cal Term Paper
- Length: 8 pages
- Sources: 10
- Subject: Business
- Type: Term Paper
- Paper: #25609117
Excerpt from Term Paper :
The idea that this can be available as much as any other kind of food is likely to boost sales, especially in the first months, given the product's novelty and potential enthusiasm for such a product.
Second of all, the business is thoroughly adapted (and, further more, even adaptable) to the general income distribution in Detroit City and the countries in the area. Its focus is on "affordable" products and services rather than expensive ones. The effect of this is two-fold. First of all, it adds a large number of potential clients from the very beginning. Second of all, this is the type of price policy that is likely to make loyal customers in a region with medium and low incomes. Even more, the population with income of over $50,000 (around 27%) represents a segment of potential clients, since these are generally the type of individuals interested in healthy food and a healthy food diet.
Third of all, it is also important to note that the business is in itself diversified to reach out to as many potential customers rather than focus explicitly on the characteristic of a niche market. The soul, Motown theme is not to be ignored, since it is likely to bring in potential clients who are not necessarily interested in healthy food, but like to serve it in a location that plays their favorite type of music and displays the type of atmosphere that they can easily identify with. Even more, Detroit is known as the centre of the Motown soul phenomenon, so part of the activity will be directed towards this type of artistic profile.
The table below shows the personnel projection over a period of 3 years. The personnel and payroll costs will hold most of the expenses, so a separate evaluation is appropriate. The CEO/General Manager will not receive a salary, since his retribution will be in the form of profit participation. On the other hand, the PR/Marketing manager and the COO will see their salaries gradually increasing over the analyzed period. Since it is best for the team to remain more or less unchanged over the interval of the business activity and while the chef is the most important character from an operational perspective, his salary will increase with approximately 15% after the first year on the job and with an additional 9% after the second year. The personnel growth will be coordinated with the business growth, but estimations and projections show that the cooks and waiters (4 from each category in the first year of activity) will need to increase in numbers with 3 of each after the first year and an additional two after the second. Payroll expenses will grow with 45.8% after the first year (mainly due to a doubling in the payroll costs for both cooks and waiters) and an additional 21.2% after the second year of business activity.
Number of employees Payroll Number of employees Payroll Managers 2-84,000-2-90,000-2-95,000 Chef 1-48,000-1-55,000-3-60,000 Cooks 4-81,600-7 142,800-9 183,600 Waiters 4-81,600-7 142,800-9 183,600 Total 11-295,200-17-430,600-23-522,200 Fig. 5 - Personnel Plan
Profit and Loss
The estimates are based on an initial volume of sales of $360,000, equivalent to approximately $1,000 sales per day. The cost of goods sold (basically equivalent to the cost of food products purchased) was estimated to 25% of the sales figure. The growth in the first year was evaluated at 100%, with the growth in the second year of activity will be at 50%.
In term of expenses, the payroll expenses were previously detailed in the personnel plan. At the same time, the marketing and sales expenses will proportionally drop from year 1 to year 3, mainly because of the fact that potential clients would have already become regular customers.
According to the calculations, the business will become profitable after the first year.
Number of employees
Cost of Goods Sold
Marketing and Promotion
Total Operating Expenses
Profit Before Interest and Taxes
Fig. 6 - Profit and Loss
1. Regional Detroit Profile. Detroit Economical Regional Partnership. On the Internet at https://www.detroitchamber.com/docs/RegionalDetroitProfile.pdf.Retrieved on July 20, 2007
CEO/GENERAL MANAGER and PARTNER