Project>ProSim_RESTAURANT MOGUL OVERVIEW. Open multiple restaurants and build a profitable restauran

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RESTAURANT MOGUL OVERVIEW

In this project, you will open multiple restaurants and build a profitable restaurant empire.

You will begin by following a series of steps to open your first restaurant. These include market research, location selection, menu design, pricing, purchasing, layout, staffing, and advertising. After following the steps, you will have a restaurant generating revenue but operating at a loss. You will work to improve profitability by listening to customers and controlling costs. A troubleshooting flowchart is available if needed. After making your first restaurant profitable, you will open one or more additional restaurants to reach a total profit goal for your empire.

STRATEGIES FOR BUILDING YOUR RESTAURANT EMPIRE Picking a Target Market and Location Your restaurants’ success will depend largely on your ability to focus on a particular target market and serve it well. In ProSim-Restaurant, your city is made up of three major demographics (groups of people): businesspeople, couples, and families. You can build a successful restaurant to serve any of these, but the business plan you put together must align your resources to serve the target market.

The first key choice is location. In general, the closer the customer, the more likely they are to frequent your restaurant. You should choose a location with a high concentration of your target demographic nearby. Different locations will have different rents. You should also choose a location with a rent that you can afford. Restaurant owners often look for rents that will be between 5% and 10% of their eventual revenues. The following is information on how to estimate potential revenues and determine if a rent is affordable.

Is The Rent Affordable?

Determine whether a rent is affordable by picking a target (say 8% of revenue) and then estimating the revenue a location can generate.

To estimate potential revenue in the simulation, use the following formula: Number of target customers within 2 blocks x 20% = + Number of target customers within 2-5 blocks x 5% = = Total likely customers per week x Amount willing to pay for meal (from segmented survey data) = = Potential Revenue If rent is less than 8% of potential revenue (our target), then it is affordable.

Designing your Menu and Setting Prices Designing your menu means choosing food and beverage offerings and pricing them. It also means arranging the entrees. Picking menu items should begin with understanding the preferences of your target market. In ProSim-Restaurant, you do this through surveys and analyzing the responses of segments of the population. From this, you can get a list of the most popular entrees and beverages for each of the demographics. Your menu choices will require the purchase of certain equipment from stoves to beverage stations. The placement of items on your menu will also affect their popularity. Items listed first will tend to sell better.

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Pricing involves both understanding food costs and the willingness of customers to pay for certain items. In starting up your restaurant, you will likely want to set your prices so that food costs are around 30% of the selling price and beverage costs are around 10% of the selling price of beverages. As your restaurant gets going, you can experiment with raising or lowering prices on individual items. In general, items with high cost ingredients (such as proteins) may support lower margins, while items with low cost ingredients (such as starches) may support higher margins. See the sidebar for how to set prices based on a target food cost percentage.

Setting Prices Based on Food Cost Price= Ingredient cost / target food cost percentage Example: Ingredient cost = 3.45 Target food cost percentage = 30% Price= 3.45 / 0.3 = 11.50

Purchasing The menu you design requires a certain set of ingredients. If you purchase too few ingredients, customers will be unhappy when they can’t get the entrees they want. Eventually your restaurant’s rating (called Gazats ratings in the sim) will fall and fewer customers will come in. If you purchase too much, perishables will go bad and that waste will cut into your profits.

It’s common to think of purchasing a certain amount per week. But restaurants tend to talk about inventory “par values” -- the amount they want on hand to begin the evening. Purchases are then planned to bring the inventory up to that level. In ProSim-Restaurant, you can purchase ingredients daily to replenish inventory to par values.

The following is an analytical approach to setting initial inventory levels—par values.

Setting Initial Par Values To give us some estimate of ingredient use on a busy night, you can estimate entree sales. Begin with the number of seats you have and multiply by the estimated times a table will turn over in a night (about six in the simulation). This gives you total entrees sold per night. At the very coarse level, we can divide entrees sold per night by the number of entrees on the menu. We could also adjust this based on the surveyed popularity of each item.

Using this forecast of entree sales, you can estimate ingredient needs. For each entree, count the units of each ingredient needed. In the simulation, the Ingredient Use Detail report gives you this information. Multiply the sales forecast by the ingredients needed for each entree. Calculate the sum for each ingredient across all entrees. This will give you a beginning par value from which you can adjust. Since your entree forecast estimated peak daily sales, you can also use your Week-Part Sales report to adjust par values down for less busy periods of the week.

Once your restaurant is running, you should closely monitor “stock-outs,” times that an ingredient was needed but not present. You should also monitor waste, times when a purchased ingredient went bad before it was used. In the event of stock-outs, increase purchases. In the event of waste, decrease purchases.

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Laying Out your Restaurant You control layout in the front of the house and the back of the house. In the front of the house, you set the number of tables and how they are configured to seat different size parties. You will probably want to begin your restaurant with a range of two-tops, four-tops, six-tops, and eight-tops. As your build clientele from your target market, you can see the sizes of parties that are arriving. If you have long waits, for certain table configurations, you can change them by dragging and dropping tables.

Your back of the house layout involves equipment in the kitchen. You will probably begin with at least one piece of equipment needed to prepare the meals on your menu. You can then watch the kitchen on busy nights to see which pieces seem to be in constant use. After observing this, you can try adding additional pieces of the most heavily used equipment. See the sidebar for a more analytical method of estimating how many pieces of each type of equipment you will need.

Planning Equipment Needs Estimating your equipment needs can be complex and is best done on a spreadsheet.

Begin with your forecast of how many units of each entree you will sell. Then identify which pieces of equipment the entree will require. In ProSim-Restaurant, the approximate capacities of key kitchen equipment are: Stove: 175 meals per night Grill: 200 meals per night Deep Fryer: 200 meals per night Divide the expected meals per night using a piece of equipment by the equipment’s capacity (in meals per night) to get the number of pieces of equipment needed.

Don’t forget to purchase several racks of plates and at least one dishwasher. Without these, a restaurant can’t operate.

In ProSim-Restaurant, cooks, servers, and dishwashers will collide with each other if your kitchen layout makes them cross paths frequently. Try to arrange your kitchen so that these employees will cross paths as little as possible.

Staffing Staffing will be one of your largest expenses. It normally runs about 30% of revenue at a restaurant. The consequences of understaffing can be severe—unhappy customers, lost revenue, and a poor reputation.

In the simulation, understaffing can cause: • Customers to leave if they wait too long • Poor Service ratings by the Gazats restaurant rating service • Poor Food Quality ratings by Gazats if cooks are overworked • Lost revenue if tables are not turned quickly enough On the other hand, overstaffing can quickly eat away some or all of your profits.

The best way to determine whether your staffing is adequate is to observe your restaurant’s operations.

Personnel that are idle throughout the evening indicates obvious overstaffing. Customer complaints about service and wait times indicate understaffing at some positions. Staff complaints about the workload can also indicate understaffing.

You should also be careful to balance your equipment with your staff. For example, five cooks equipped with only one stove is likely to be a waste of money.

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You can determine initial staffing levels analytically based on your forecast of entrees (customers) served. See the sidebar for this methodology.

Estimating Staffing Needs In the previous section, you saw how to build a forecast of entrees sold on a busy night.

In the simulation, one entree equates to one customer. Based on that forecast and the following work capacities of various staff members, you can calculate the right staffing level.

Servers: 75 customers per night Hosts: 150 customers per night Cooks: 75 customers per night Dishwashers: 400 customers per night Bussers: 150 customers per night The number of staff needed = Projected Customers per Night / Work Capacity (in Customers per Night). Round up to ensure enough capacity.

As your restaurant operates, you can use your Week-Part Sales report to find the ratio of customers on slower nights to busier nights. You can reduce staff on slow nights by this ratio.

Advertising Marketing can boost the revenue of your restaurant by attracting additional customers who would not otherwise try your restaurant.

Since there are almost always more advertising opportunities than you can afford, most restaurants begin with a budget. It is frequently in the range of 5% of forecasted revenue.

Once you have a budget, you will need to choose how to spend it. In the simulation, there are four opportunities for marketing: advertising in print media, Internet advertising, TV/radio advertising, and distribution of menu flyers. Within each of these are choices. You should allocate spending to the choices which best reach your target demographic. This will result in the least “waste” -- advertising that reaches customers who are not likely to come to your restaurant anyway.

In real-life and in the simulation, customers respond best to advertising impressions from multiple sources over time. You should try to hit your target customers from different angles on a consistent basis.

Monitoring Your Restaurants’ Success (or Failure!)

The main measure of your restaurants’ business success will be the Income Statement. Also known as the Profit and Loss (or P&L), this is the statement for every business that shows the “bottom-line” -your profit or loss over time. It also shows your revenue, gross margin and expenses. You should monitor this closely. It is updated every week (on Sunday) in the simulation. All items on the income statement can be shown in dollars or percentages of revenue. Since many of the benchmarks for expenses discussed above are given in percentages of revenue, this view can be very useful.

For convenience, a number of key items from the income statement are shown in the status bar at the bottom of your screen. These are also updated weekly.

Your Product/Menu Mix report gives you more detail. It shows the total number of entrees and beverages sold and gives you detail on the sales and margins of each item. In general, you will want to sell the most possible units of high margin items. To do this, you can use internal marketing techniques such This study source was downloaded by 100000859607764 from CourseHero.com on 01-03-2023 01:40:57 GMT -06:00

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as rearranging items on the menu, creating table tents to promote certain items, and directing servers to push certain items (suggestive selling). There is even a graphical view of this report to help you more easily identify items by their margin and unit sales.

Improving Your Restaurants Once you have planned a restaurant and run it for a while, you will undoubtedly find some things that work and some that don’t. The ability to troubleshoot and adjust is critical to your business’s success.

The flowchart on the following two pages (also used in the Turnaround assignment) will help you diagnose and solve your restaurant’s problems.

STRATEGIES FOR REACHING THE GOAL 1) Get your first restaurant profitable before opening a second restaurant.

2) Try to achieve similar results to those below: • Revenue: $12,500 • Profit: $2,500 • Waste: 1% • Staffing: 30% • Food Cost: 25% • Gazats Rating: 4.5 3) Your initial setup was designed to meet busy days. Find out the slow times of the week and reduce expenses there, particularly staffing.

4) Target your second or third restaurants at different demographics. They may provide greater profit potential.

5) If you are stuck, use the Troubleshooting Flowchart to improve your restaurants’ profitability.

6) Meeting your goal is based on the total profits of ALL your restaurants. Don’t ignore any of them!

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TROUBLESHOOTING FLOWCHART

Continued on next page.

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