The Lo-Cal Eatery: a Motown-themed restaurant business plan

Motown-Themed Lo-Cal Eatery

The Lo-Cal Eatery is a restaurant business basing its vision of profitability on (1) current eating trends, recently directed towards healthy more and more among the U.S. citizens and (2) the idea of the motown theme. The fact that the restaurant business is relying on two potential segment of consumers (both those interested in healthy eating and those who like the idea of soul music and motown approach) increases the chances of the volume of demand growing rapidly over the first months in business. Further more, this combination is something unique in the Detroit area, brining in the additional novelty factor as an extra argument for the businesses viability.

As mentioned, the targeted segments of consumers are quite generous, ranging from music lovers to healthy eaters. Both segments have not only a high potential, but they are also flexible enough to grow over time. The business will aim to reach its potential customers through a strong advertising campaign, both by distributing fliers and information in locations where potential customers might be met (in gyms or clubs, for example) and through a strong Internet campaign, especially via posting ads on health and music - related websites.

The restaurant's main objective is to create a stable base of customers during the first months of activity. This will help the business grow over time, increase its market share and attain profitability over the period of time to come.

With a flexible organizational structure, allowing the management and employees to multitask and, thus, achieve important expense reductions, the business will also be able to quickly react to market changes and adapt, if necessary, its approaches during time.

Organizational plan

As previously mentioned, the organizational structure for the Soul Lo-Cal Eatery will need to be both flexible enough, in order for the business to quickly adjust to any market changes and changes in consumer preference, as well sufficiently small, in the first phases of development, to keep costs down. The necessary managerial positions, proposed for the organizational structure, are listed below.

CEO/General Manager and Partner. At the very beginning of this business, since this will start as a privately owned business, the most important position is that of the owner/partner, who is also in charge with general development strategies for the future, in his position as CEO and General Manager.

Following the two main characteristics listed in this initial description of the organizational structure, the CEO/General Manager will be in charge of:

determining the general development of the business, on short, medium and long-term. In this sense, the CEO will produce strategic plans for the next period of time, strategic objectives and profitability aims that need to be reached etc. These will represent benchmarks against which the company's activity will be measured;

due to the necessity to keep the structure flexible and low-cost, the CEO will, at times, perform COO duties as well. The most important of this is related to HR issues. Indeed, he will be in charge with selecting and recruiting new personnel for the business, creating motivational packages that can increase employee performance, define a HR development plan for the next period of time etc. Further more, the CEO will also have to keep track of the financial situation in the organization, logistics and distribution chains etc.

A the third important function that the CEO will coordinate and work on is the advertising/marketing strategy. This will be designed to target the main categories of consumers as identified and will rely on varied channels such as the Internet;

Office/Supplies Manager. This is the second most important position within the organization, as this is virtually the acting chief operating officer (COO) for the business. The office and supplies manager will be in charge with all administrative and operational issues at the restaurant. In this sense, this person will be keeping track of what supplies are needed and will constantly coordinate with the chef in order to determine what else needs to be purchased. he/she is also in charge with the fundamental relationship with the suppliers.

Marketing/Public Relations Manager. At the beginning of the business, one will need to determine the necessity of this position, however, it will help the CEO with the operational issues related to marketing and public relations. In this sense, while the marketing strategy can be conceived at CEO - level (at most in consultation with the marketing/PR manager), the operational issues such as printing fliers and brochures and posting ads on different website are operational issues that can be left to the marketing/PR manager. The marketing and PR manager can also be in charge with music selection, with artistic programs and, possibly, band recruitment for soul soirees (keeping track of both of the business targeted segments of consumers).

Chef. The chef can also be referred to as the kitchen manager and, in his position, he not only coordinated all kitchen - related activity, but he also coordinates with the office manager on what supplies are needed. His role is determinant regarding the entire production and distribution (cooking and serving) mechanisms. He also coordinates serving in the establishment.

The managerial positions previously discussed are to be completed with 2-3 cooks and 4-5 waiters and waitresses. The waiters and waitress can be students who can take on a part-time position rather than a full-time one, with lower costs for the management. On the other hand, the cooks are to be specialized in low-fat/calorie cooking.

The organizational structure proposed respects the two main objectives fixed for it. It is low-cost, with the employees being able to cover more than one responsibility, and it is also flexible, the positions being easily interchangeable and adaptable to change. The organizational chart below clearly reflects the relationships between the main actors.

Fig. 1 - Lo-Cal Eatery Organizational Structure

The organizational chart presents all the fixed positions within the organization, for the first year. Other activities, such as it related activities (the construction of a website, for example, posting ads on different culinary and music-related websites etc.) and marketing and PR - related activities (brochure printing, for example) are to be outsourced, as the costs are lower this way.

Market analysis

Due to the fact that a general trend towards healthy food can be observed in the industry, the market analysis will be targeted on a general perspective of the market, without pointing out to a particular segmentation. However, the business plan will aim to cover more extensively those segments of the population that pertain more as potential clients for the business.

According to the 2005 U.S. Census (U.S. Census Bureau, 2005), the population of Detroit City was 836,056 inhabitants, with 46.1% males and 53.9% females (U.S. Census Bureau, 2). The total population in Detroit City has suffered a significant decrease from the 2000 Census of about 12.1%.

From the perspective of sex segmentation, given the business activity, the restaurant is directed to both males and females, with an emphasis on females (generally more interested in their physical appearance etc.). In terms of music preference, the sex criteria is not necessarily important, but, again, the restaurant will expect a slightly higher inclination from female customers than from male ones.

Fig. 2 - Sex Segmentation

Race segmentation (as presented in the chart below) shows that Detroit is a city with a large proportion of Black or African-American population (82.1% at the 2005 Census - U.S. Census Bureau) and only around 11.1% White population. The fact that, on a secondary plan, the business is also centered on the soul/Motown idea can pertain to the largely dominant African-American population. Detroit soul music is especially influenced by gospel music and can greatly appeal to this category of consumers. In this sense, the business can target both the health-oriented segment and the music-oriented segments, with potential strong results from both categories of consumers.

Fig. 3 - Race Segmentation

In terms of income segmentation, the chart below shows why the business will be oriented towards affordable prices rather than premium ones. Indeed, the chart shows that 59% of the Detroit population has an annual income of less than $35,000.

The idea of the business will thus be to offer products that can target this potential segment of consumers as well.

An idea would be to offer a sufficiently diversified portfolio of products (menu) to include in potential clients consumers from superior categories of income. This will keep in mind the company's strategy to have a large number of potential clients by offering services that can interest different categories of consumers. This is one of the reasons why the music soul theme can be combined with the healthy eating idea, in order to increase demand volume.

Personnel plan

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.

Personnel Plan

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.

IN USD

Number of employees

Payroll

Sales

Cost of Goods Sold

Gross Margin

Payroll

Marketing and Promotion

Administrative costs

Total Operating Expenses

Profit Before Interest and Taxes

Fig. 6 - Profit and Loss