Business Concept
Our business is an experience. Customers walk in and are greeted with two stairwells-one that leads to the upper level and one that leads to the lower level. The upper level is a restaurant influenced by fine French Cuisine accompanied by gentle live music for a superior fine dining experience. The lower level is a lounge/bar for a more relaxed environment. It is a lounge that caters to music enthusiasts but also includes the sporty types who love to watch the game and enjoy a glass of beer while doing so. Talented individuals will come and perform on a weekly basis while customers can enjoy our daily specials on food and drinks. The decor will consist of anything and everything music such as pictures of famous jazz musicians, legends, and records. A piano, double bass, and a basic drum set will be on site for the musicians we choose to hire and it will also add to the decor. Monday nights are dreaded, but customers can enjoy a karaoke night to lighten the Monday blues. This adds to the interactive experience that we aim to offer our customers.
Our business offers customers a similar dining experience to other restaurants in the Mississauga area, but we found that Mississauga lacks in providing customers with the experience of live music. We started off by wanting to open up a jazz music bar/lounge. It progressed to a two-story building that provides customers with an experience and they choose which experience they would like to be a part of. The newer generations thrive off of interactive activities and enjoy going to places where they can interact and be a part of an experience. It’s a large establishment that will require some time and expertise to execute and will most likely be built new rather than buying or leasing an existing property. Five years post launch, we would like this to become a franchise.
The name of our establishment is “Alternate Scale”
The logo is:
Market Analysis
In order for Canadians to afford a home in the GTA it will now require a household income of at least $100,000 and a stable position amongst the middle-class Canadians. The housing market actually leaped by 35.5% back in January of 2017; time will only present further increases in price and demand for the housing market. This demonstrates how the GTA is nearly a majority of middle-upper class income earners. More money coming into a populous also causes more money to flow out, in the form of expenditures.
Consumer expenditures, annually per person in 2017, for leisure and recreation concerning ages 20-29 was just under $5,500; meanwhile ages 30-39 had an average of $13,474.9. Consumer expenditures spent on food and nonalcoholic beverages for ages 20-29 was just over $6,000; while ages 30-39 had an average of $15,262.6. Age categories 40 and above had increasingly larger averages in both categories. Due to average expenditures spent on leisure and recreation, and food and nonalcoholic beverages being significantly less for age groups below the age of 30; our attention will be drawn towards a consumer group aged 30 and above. Though, we will still welcome all who are above 19 years old.
Since live music is very much the entire premise of our establishment, both casual and professional, it is very important to know how many people go to live music venues. In 2017 81% of Canadian consumers attended live music events; 45% of those consumers did so at bars, coffee shops, and other venues. That makes up a total of 36.45% of Canadian consumers. It can be reasonably assumed that because of Toronto and the GTA’s high population density, popularity, and economic pressures; the majority of that market is contained within Toronto and the GTA.
$4,064.64 – $6,849.38, per household, was spent on food purchased from restaurants in the GTA; according to Census Divisions in 2017. This expenditure bracket was the highest amongst all others listed, proving there is a consumer need to experience food outside the home. Canadian food and drink sales for full-service restaurants in 2017, as a percentage of total sales, was 74.2% and 25.8% respectively. Sales percentages in the same regard for bars/café were 10.1% for food and 89.9% for drinks.
Taking all of the above into consideration, our target market can be identified as; middle-upper class income earners, age 30 and above, those who seek live music from small venues, those who enjoy full-service restaurants, and those who enjoy bars/cafés. The population of people, within the Toronto area, over the age of 30 is roughly 3.74 million. Now if we take 36.45% of that population, we can figure a base number of people over the age of 30 within the Toronto area who enjoy listening to live music at bars, cafés, and other small venues. This figure is around 1.36 million people. We offer both a full-service restaurant experience along with a sports bar/café lounge experience. So we will be able to fully accommodate both those who prefer to spend money on dining in and those who spend money on a few drinks while watching a sporting event.
Geographical boundaries may include anywhere North of Algonquin Park and Ottawa. In areas north of these two points spend significantly less money on food purchased from restaurants; some have a bracket as low as $1,248.67-$2,723.16 per household. The only barrier to entry that can be seen is that a place as unique as Alternate Scale would need a completely unique building design in how there needs to be enough space and soundproofing between the two floors as to ensure separate experiences. So, deciding whether to do heavy renovations on a current building, or to construct a new building from scratch would have to be something we take into consideration.
Supplier Analysis
The general purchasing process for restaurants is conceptualized in a cyclical fashion that involves three main components: the restaurant, the consumer, and the supplier.
Restaurant orders to their suppliers are based off the essential requirements of the restaurant itself, but are typically forecasted through sales figures over previous weeks and months. Restaurants calculate their required inventory based on accounting methodologies following the FIFO method to ensure that the quality of their food is maintained at the highest level so customers don’t fall ill. A purchase requisition is drafted based on the differences between the desired ending inventory and the existing inventory. This information is the basis for the purchasing manager to be able to create the purchase order. The restaurants requirements, in terms of quality of product, determines their supplier; with which they file a purchase order for specific item quantities needed. The supplier matches the purchase order against their existing inventories to ensure that they are able to fulfil the order. If they are capable of doing so, the supplier will send a goods receipt along with the desired inventory. The restaurant will then match the goods receipt against their received shipment and against their purchase order to ensure that their order has been fulfilled fully. Upon receiving confirmation of order fulfillment, the restaurant accountant will invoice the required receipt with the payment for the goods back to the supplier. This process is typically automated through the information systems on both parties behalf.
The supplier creates the delivery for the restaurant order based on their own existing inventories; inventory is picked, arranged and shipped to the customer. Once the restaurant has received their order and acknowledged that all their required goods have been received, the supplier is able to send an invoice and create internal documentation of the order; making it easier to recall for future reference. The shipment process for food and alcohol is almost always conducted via climitized delivery trucks to maintain the quality of the goods that are being shipped; they typically arrive during the restaurants off hours to ensure mitigation of confusion during peak hours. Our establishment will be using TouchBistro POS™ systems to track consumption data and create detailed reports to make informed decisions in creating purchase requisitions and filing purchase orders.
There are a plethora of food suppliers that exist in the Canadian market that all offer different products to different regions in the country. The largest players in the Ontario industry are: Gordon Food Services, Sysco Corporation, and Flanagan Food Services
GFS: Gordon Food Services is the largest foodservice wholesaler in North America with 120 years of experience, over 3500 suppliers within their supply chain, 8 distribution centres located in Canada, making roughly 16,000 deliveries a day. Their product range consists of beef, poultry, pork, seafood and shellfish, specialty meats, dairy and egg products, bakery goods, fruits and vegetables, grocery items, small dish necessities, hygiene products, kitchen equipment and storage products, and serving products.
Sysco: Sysco Corporation has a large constituency of individual customers located all across North America with 22 distribution centres across Canada; they cater primarily to institutions that serve by the masses. Their product range consists primarily of dairy and egg products, baked goods, canned goods and coffee.
Flanagan: Flanagan Food Services is the largest Canadian owned and operated grocery wholesaler with 40 years’ experience; they provide food services for over 6,000 restaurants and foodservice operations across Ontario. Their product range consists of beef, poultry, pork, seafood, specialty meats, dairy products, baked goods, fruits and vegetables, dry grocery items, beverages, frozen foods and supplies and equipment.
Considering our menu will be centred around French cuisine, which involves a heavy reliance on dairy products and poultry with an assortment of vegetables, our food service of preference would be Flanagan Food Services. The convenience of having distribution centres located in both Kitchener and Whitby provides our restaurant with the reassurance of timely delivery, reliability of order fulfilment and goodwill in conducting business with a Canadian based company. Our orders through Flanagan will consist primarily of the grocer necessities such as dairy, eggs, and vegetables while our meats and poultry will be sourced through a smaller wholesaler known as The Butcher Shoppe. The Butcher Shoppe is run by a family this is close to a member of the managing staff; their relatively smaller size allows them to focus on solely butchery products with considerable care in quality control.
Following our desire to maintain Canadian based purchases, alcohol will be bought in accordance with an initial test market in order to determine exact preferences as they pertain to spirits. The restaurant will offer a wine, beer and cider as a selection of the house specials in addition to offering uncorking for BYOB customers. The house wine will be sourced from the Niagara vineyard Trius, the house beer will be sourced from Niagara brewery Oast, and the house cider will be sourced from Flamborough cider house Somerset Orchards. The kitchen utilities such as stoves, tables, ovens, sinks, refrigerators, freezers, etc. will be purchased from Etobicoke wholesaler Canada Food Equipment Ltd. Tables and chairs will be purchased from Toronto-based ACQ Seating while decor will be meticulously chosen from Montreal-based Structube. Personal decorative elements such as records and pictures of famous musicians and local artists will add a personal touch to the establishment.
Our music selection will be featured similarly on a scheduling basis to that of the Drake and Rex Hotels; talent acquisition will be conducted throughout the week, 1-hour before opening hours.
Customer Analysis
There are certain behavioral characteristics that are exhibited by the restaurant customers in Canada. These characteristics shape their preferences and decisions pertaining to a specific product. Having tracked some of the customers’ behaviors in Mississauga, our business will adjust its strategy to ensure that it is accommodative of all customer behaviors. Some of the behaviors about the customers that we noted includes: how they reacted to certain products, how well they know the products, their attitude towards service, portioning and menu items, how regularly the customers buy the product and their loyalty to good products.
Having segmented the customers using the criteria above, our business will incorporate some operational strategies that have not been adopted by other restaurants in Mississauga. Here are some of the strategies that we are going to develop based on behavioral segmentation
A menu based on Dietary preferences: since our products are mainly influenced by the French Cuisine, we are hopeful that our products will be highly acceptable as the cuisine relies majorly in Dairy and eggs (Ba, 2014). Since the restaurant will also be health conscious, there will be vegetarian dishes served as well. The decision to major on the French Cuisine however was influenced by the people’s love for dairy products, eggs and vegetables.
Consideration of Takeout orders: we realized that Take out guest is an important segment that should be considered. While other restaurants are reluctant to offer takeout orders and majoring in dine-in customers, our restaurant will be able to serve both segments (Ba, 2014). It came to our light that when a loyal dine-in customer asked for a take-out order and is denied, their loyalty to the brand is jeopardized. For that reason, we will consider both segments and serve them diligently.
Offering a Kid friendly menu; we anticipate that due to the accommodation provided by our restaurant, parents will be visiting with their children (Ba, 2014). Kids love creative foods that often lack in many restaurants. Our basic research revealed that most parents go for dinners in the company of their kids. For this reason, we will engineer a special menu for kids that will be creative and healthy at the same time in order to give the children a lasting experience.
Despite the significant population of restaurants across Mississauga, we realized that no restaurant offered an all-inclusive experience to their customers. This was an open opportunity for our business that aims at providing a holistic experience under the same roof. From the menu to the themes and music, our restaurants will ensure that customers get everything that they are denied in another restaurant. This will be topped up with sensible pricing of our products as well as generous portioning for the food items.
We acknowledge that media has greatly influence the way customers behave and influence how they make their decisions. Media habits among customers in Mississauga have been taken into account by our business. The fact that most customers have access to mobile phones and the internet, the often use these gadgets to look for an eatery that is near them. They look at the reviews and comments made by other customers who have visited the eatery before. Customers also explore the menus provided online by the various eateries and determine one that suits their preferences. This is an indicator of how media has significantly influenced customers. In this light, our business is optimistic of having excellent reviews owing to the all-inclusive nature of service. The business will play an active role in various social media platform such as linked and Facebook. We estimate that 85% of customers in Mississauga search for eateries via their phones and participate in conversation in social media (Ba, 2014). This provides a perfect opportunity for our business to engage in social media conversations and make our services, menu and cuisine known to the public.
Other Stakeholders
Our establishment does not fall under the direct concern of governmental agencies but does fall under the concern of the Region of Peel and other non-governmental agencies. The establishment will be monitored by the Restaurant and Food Service Inspection Agency of Canada, the Alcohol and Gaming Commission of Ontario, Technical Standards and Safety Authority, SOCAN, and the Region of Peel. In order for us to successfully launch our business, we will need to acquire a series of licenses and permits to be able to conduct our venture without running in to legal consequences. There are an abundance of different permits and licenses that will be required in order to establish our operation; they include but are not limited to:
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- Restaurant permit: This licence permits the operation of a restaurant
- Must be legally able to work in Canada, completed application for business permit, business registration papers, health clearance inspection for region of Peel, zoning certificate for use of location, committee of adjustment
- Cost: $174.00, Renewal period: Yearly
- Lunch Counter permit: This licence permits the operation of a lunch counter
- Must be legally able to work in Canada, completed application for business permit, business registration papers, health clearance inspection for region of Peel, zoning certificate for use of location, committee of adjustment
- Cost: $174.00, Renewal period: Yearly
- Liquor licences: These licences permit the sale and service of alcoholic beverages on the premises of the restaurant.
- Application fee, entry disclosure, personal disclosure, capacity information and approval, municipal information form, agency letter of approval, master business licence, pre-inspection, server training, regular ACGO inspections
- Cost: $30,000.00 , Renewal period: 2-4 years
- Building and Land Use permit: This license permits the use of a building or land for commercial or residential purposes
- Submission of application with relevant drawings, plans, photos, and supporting reports
- Cost: varies, Renewal period: none
- Certificate of Approval for Private Water & Sewage: Approval is required for the construction and operation of individual sewage collection and treatment systems with subsurface effluent disposal
- Will require expert advice and the services of professionals
- Cost: varies, Renewal period: varies
- Electrical permit: this permit is required for electrical work, renovations, modifications to original wiring
- Commercial Signage license: this permit is required for the use of signage to advertise in public domains for commercial purposes
- Elevating Device License: this license is required for the implementation of an elevating device through the TSSA
- Cost: varies, Renewal Period: yearly
- Ontario Business Name Registration: The Ministry of Government and Consumer Service requires the registration of a business to maintain a registry of business types – ours would be a partnership
- Cost: varies, Renewal period: 5 years
- Registration for a Partnership: Must file a completed registration for a business name for a Partnership
- Cost: varies, Renewal period: varies
- Federal Business Registration: registration of a business with the federal government is necessary to receive GST/HST, Payroll, Excise, Corporate income tax, Import/export account and required for a business that makes more than $30,000.00 a year
- Cost: none, Renewal period: none
- Sound license: To use recorded music in public for business purposes
- Cost: varies, Renewal period: varies
- SOCAN Musical Rights license: SOCAN licenses give you the freedom to play any music you want in your business, legally and ethically
- Cost: varies, Renewal period: varies
- Restaurant permit: This licence permits the operation of a restaurant
The list is non-exhaustive, we estimate that there will be a requirement for additional permit and license applications throughout the course of opening and operation. The preliminary permits will be required before the liquor licenses, they require to be registered after our establishment has been at the location for approximately 6 months.
Competitor Analysis
The initiative of our business is to compete in the leisure lounge and restaurant industry by offering an exclusive venue for restaurateurs and music-lovers alike. The market would be geared towards local and out-of-municipality individuals who are seeking to adopt an atypical experience that cannot be found at an ordinary sit-down establishment. As mentioned, the concept will embrace differences of tastes, expressions and desires; giving the customer the luxury of deciding when and how they would enjoy spending their afternoons and evenings. This provides an alternative to a market that are becoming increasingly more vocal and more desiring of products and services that are aligned with themselves and their individual tastes. Our establishment proves to be a means of expression for those who cannot seem to uncover an institution that corresponds with their psychological and behavioral desires as it relates to food and entertainment.
The immediate market is lacking such an inclusive establishment; there are plenty of restaurants in and around the Toronto area that offer a unique experience. However, they cater to singular relative experiences. There are no real restaurants or venues that offer an “all-inclusive” experience, by definition; there is a lacking of locations that are capable of adhering to more than one or a few experiences. Therefore, the existing market for such a restaurant as ours is relatively small or non-existent. For instance, the 360 Restaurant atop the CN Tower is unique for its amazing view of the Greater Toronto Area but has been unfortunate in receiving criticisms regarding the price of the meal relative to the portions they serve (as apparent by Google reviews over the past year). Another unique experience in the city is Medieval Times, the portions are generous and there is a constant spectacle to behold, however this venue typically caters to younger audiences and special occasions. The Arriba Restaurant is another unique alternative that offers great value for their customers, however being located with a view of Rogers field proves to feel uncomfortable for some customers during Blue Jays home games. Mariposa Dinner Cruises offer a great venue for special occasions on a yacht sailing Lake Ontario but with a price; their services depend on the weather conditions and climate.
Outside of these extremely unique offerings exist more lounge-oriented restaurants that cater to specific interests, such as 3030 Dundas that serves more as a beer hall with arcade games. The Sultan Tent & Cafe Moroc provides beautiful interior decor that matches its North African menu but consulting the online reviews highlights a mismatch between the ambiance and experience with the quality of food and service. O.Noir is a unique restaurant that offers customers the experience of eating their meals in the dark, but a slew of online reviews pinpoint customer satisfaction with the overall experience but a dissatisfaction with their meals considering the absence of sight. Mysteriously Yours Dinner Theatre is a restaurant that provides dinner-goers with the experience of watching and being involved in a theatre performance while they enjoy their dinner; but performing arts is a very distinct and unique preference. The Fifth Grill & Terrace is a beautiful location and experience for dinner and cocktails with very well-regarded online reviews, but further analyzation reveals that their menu caters to more of a boutique-esque experience.
The most comparable venues in the area are the Drake and Rex Hotels in Toronto. These establishments have a well-diversified menu that has received a considerable amount of praise through online reviews. There is a constant flow and change of live music with a schedule prepared well in advance that alters throughout the evening to which customers can choose to attend. A portion of their businesses are devoted to providing affordable nightly accommodations in the instance a customer or group decides to spend the evening in the city and enjoy their favourite music. These establishments do not pose a direct threat to our business venture considering the differences in the relative geographies and differences in demographics between the city of Toronto and the city of Mississauga. Our goal is to present an offering similar to that of these hotels but in the west end of the Greater Toronto Area, attracting customers who travel in to Toronto for similar experiences without the hassle or inconvenience of taking public transportation or paid methods of transportation.
The size of our competition is relatively small; these restaurants are not chains or franchises seeing as they offer unique services that make them differentiated. In Mississauga, the largest potential threat is Dave & Buster’s which offers customers the arcade experience in addition to providing a restaurant style service. The difference here however is the arcade experience and ambiance that may influence a large grouping of potential customers to experience our establishment rather than being engulfed in a more juvenile experience. In a manipulative fashion, our restaurant will be exploiting the weaknesses of our direct competitor by offering a service that is distinctly unique in the city of Mississauga, a product that customers can rave about and an experience that will make customers feel welcomed and acknowledged.
Macro Environment Analysis
There are a variety of different macro-environmental factors that can impact, both positively and negatively, the success of Alternate Scale as a new establishment. Not every single type of factor may be present as a direct opportunity or threat, but there are still some that are apparent. Factors that will be discussed below are based on economic, demographic, political, and technological forces. Family housing in the currently developing city of Mississauga, large influential generations reaching retirement age, new government tax revenue streams, and music streaming trends can have quite a large influence on the success or failure of Alternate Scale.
As touched upon in the marketing analysis, to live in the GTA it will now require households to have at least a 6 figure income to be sustainable. The cost to live within the GTA will only increase over time. This poses as a threat as well as a potential opportunity. In the respects of it being a threat, the cost of operating our establishment within such an expensive and growing area will surely increase as well. The old saying is “location, location, location” after all. However, this does show a fairly large opportunity and benefit to our business. Because the population within the GTA, as a whole, will have more housing expenses; there will also be more income necessary to be stable. With more income means that there will also be more disposable income, that of which can be put towards a lovely musical experience by Altered Scale.
The housing market is not the only thing being developed however. Mississauga is actually putting a lot of effort into promoting and implementing its city-wide development. It seems that the goal is to act as the “second Toronto”. More entertainment, housing, shopping outlets, etc. This can pose as again, both an opportunity and a threat to our business. An opportunity because it is a perfect window for us to begin our venture as a newly established business. However, this does remain mostly as a threat due to how many other businesses will seek to do the same. With city wide development, the businesses that will sprout will increase our competition in the market. Even though this threat is very much real, it does not mean we cannot benefit from it. This simply means that we must strive to further differentiate ourselves from the rest of the market and provide as much value as possible.
The Baby Boomer generation shows a more prominent opportunity that initially thought. Babies born between the years 1946-1965 fall into the “Boomer” category. More than 8.2 million children were born within this timeframe; averaging 3.7 babies per woman, this heavily outweighs the 1.7 babies per woman statistic gathered in recent years. As we all know, technology was not as integrated in society as it is today. This generation grew up and lived in a world where live music was a deeply rooted aspect of life, especially during the rebellious years of the 1970’s. There was also no such thing as Uber Eats, or delivery of food beyond pizza, during their development. The Baby Boomer generation is currently the largest generation, soon to be surpassed by Millennials however, and are all reaching retirement age. Consumer expenditures on food and non-alcoholic drinks, as well as leisure and recreation, is the largest at ages above 60-years-old. Because the Boomers fall under this category, there is a large opportunity to provide a unique music and cuisine-based experience to this large populous. Since their old-fashioned culture is more attuned to live music and dine-in experiences, and because we offer both a formal and casual experience show great signs toward success.
Going from the one of the older and the largest generation, to the newest and soon to be largest generation; the Millennials. The Millennials, or Generation Y, are often found to be the children of the Baby Boomers; which is why they can also be referred to as “echo boomers”. This growing and second largest generation evolved in an environment when accessibility and convenience had really started to take hold of society. An example of this kind of convenience is how they get access to their music. Unlike the Boomers, Millennials can simple click “download” to have access to hours on hours of music right from their phones or computers. Streaming is another avenue for accessing almost endless amounts of music. This poses as a potential threat because if music can be so easily accessible, especially for a generation who did not grow up with reliance on live music; then why would they go out and spend money to get something they can stay home and get for free? A valid perspective. However, a potential opportunity also presents itself in conjunction. Due to their reliance on music streaming and downloading services, there is a demand for the emotional experience that live music offers.
SWOT Analysis
Market Analysis:
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- Canadians living within the GTA will now need a household income of at least $100,000 to be sustainable. The more financial stability needed to live in the GTA means more potential disposable income.
- 40-year-olds and people of older age groups have increasingly larger average consumer expenditures than that of younger age groups regarding: leisure and recreation, and food and non-alcoholic beverages. However, there is still a significant increase in these types of expenditures from age brackets 20-29 to 30-39.
- 45% of the Canadian consumers attend live music events at bars, coffee shops, and other small venues. Due to Toronto and the GTA’s high density and financial requirements, it is relatively safe to estimate that a majority of that market is contained within those geological boundaries.
- The amount of money spent on food purchased from restaurants in the GTA was $4,064.64 – $6,849.38 per household, according to Census Divisions 2017. When referring to percentages of total sales: full-service restaurants have food make up 74.2% or sales, while bars/cafés have drinks contribute to 89.9% of total sales.
- Our target market is identified as being: middle-upper class income earners; ages 30 and above; those who enjoy small music venues, full-service restaurants, and bars/cafés. Within the GTA this makes up 1.36 million people.
- Areas north of Algonquin Park and Ottawa have financial spending brackets, regarding spending on food from restaurants, are as low as $1,248.67 – $2,723.16. These areas would not be ideal for out kind of establishment.
Supplier Analysis:
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- The basic supply chain exists for restaurants too: Purchase->Supplier->receive purchase order, Store->Restaurant->Prepare, Serve->Customer->Consume.
- Forecast future orders using sales figures from previous week. Use FIFO method.
- General manager creates purchase order by finding the difference between desired inventory and existing inventory. Supplier matches order and fulfills the order then sends order with goods receipt. Restaurant matches matches complete order with goods receipt and purchase order. Accountant (usually the owner or general manager) pays supplier.
- POS system tracks sales, inventory, and other data. Useful when making orders.
- Alcohol will be locally sourced like wine from Niagara. Monthly purchases made from LCBO and beer will be shipped from popular distributors.
Customer/Consumer Analysis:
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- Provide a variety of options to meet dietary needs of consumers; vegetarian/vegan dishes.
- Offering takeout will not exclude those who do not wish to go out and dine in. Takeout is convenient and this generation loves convenience.
- Kid friendly menu that also provides kids with delicious authentic meals that aren’t often seen on the kid’s menu. Classic kids meals will be served but there will be options for the kids who have a mature pallete.
- A generation that relies heavily on smartphones, media, and the internet, it is imperative that we have a strong platform on social media to invite and entice the young generation to visit us. We hope to build a business that encourages customers to write excellent reviews about our restaurant.
Other Stakeholders:
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- It’s extremely expensive and costs add up when thinking about all the permits and licenses needed. Most likely have not exhausted all permits and licenses needed.
- Restaurant permit, lunch counter permit, liquor license (essential for profit).
- Building and land use permits, certificate of approval for private water and sewage, electrical permit.
- Commercial signage, elevating device license
- Ontario Business Name registration, registration for partnerships, Federal Business registration, sound license and SOCAN tax.
Competitor Analysis:
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- New generations value experience-style entertainment.
- We need a balance of experience, quality, price/affordability, and location. Location is one of the biggest factors that affect our competition because there are rare businesses that offer music experiences combined with dining. It is seen more in Toronto but rarely in the Mississauga core.
- Dave & Busters is a large competitor also providing an experience for customers. They combine arcade style games with dining and a bar/lounge.
- We are more competitive because of our ability to make people feel welcome and acknowledged.
- We provide both sides of the coin; fine dining and lounge combined in a music lovers themed/styled restaurant. Someone can walk in, experience amazing quality food and peaceful jazz music, then go downstairs and enjoy the lounge area with live urban music.
Macro-Environmental Analysis:
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- High and growing financial requirements to live within GTA offers both a threat and opportunity. The threat being a potential increase in operational expenses. The opportunity is that because the financial standards of living in the GTA are so high and increasing; household who are committed in living within the GTA will have more disposable income.
- The planned and current city-wide development of Mississauga will provide Altered Scale a window of opportunity to enter a growing market. However, this growing market also introduces additional competitors.
- The Baby Boomer generation is reaching retirement age. As the largest generation, and one that culturally relied on live music as opposed to modern avenues, they would be an excellent market to target. Consumer expenditures for both: food and non-alcoholic beverages, and leisure and recreation are greatest in ages 60 and above.
- The fast-growing generation of Millennials will soon surpass the Baby Boomers as the largest generation. They have a heavy integration and reliance on music streaming and downloading services as sources for their music. This possesses a potential threat in that they may rely on the convenience of technology for their music. However, an opportunity to strike their emotional cravings through the use of live music also presents itself.
Preliminary Timeline
Having identified the opportunity and conceptualized the operations and cuisine, timing comes in as a success determinant of the enterprise (Associates, 2016). Since the opportunity could be exploited by another entry, the business hopes to open its doors in the next two months. During that period, here are the key activities that will be partaken to enhance a successful integration of the restaurant in the competitive restaurant segment.
1st Month
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- Determine the budget that will be spent to start the project
- Envision and share the image of the business with the developers.
- Start the process of acquiring legal documents and licenses.
- Evaluate suppliers and probate those that qualify until operations start
- Outsource the kitchen equipment
- Follow up timelines provided by suppliers as well as evaluate the progress
- Arrange with a furniture company for customized products
- Obtain health license for opening a restaurant
- Obtain liquor license and use tax
- Establish the restaurant’s bank account
- Bid for garbage services and other services such as laundry, security and extermination
- Select a site for conducting interviews for the workers
2nd Month
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- Prepare to hire workers
- Supervise the progress to ensure everything is going as planned
- Suet up communication channels such as fax and billing machines
- Ensure the amenities are installed and well labeled
- Conduct the interviews
- Ensure all kitchenware has been delivered
- Revise the Menu if need be
- Receive and arrange the furniture as desired
- Set up décor appropriately
- Conduct a final inspection of everything
- Begin operations probably with a launch party that had been earlier advertised
Financial Plan
Start-Up Costs
As per the estimates of restaurant buildings up for sale in Mississauga, the price ranges from $79,000 to $229,000 depending on the Square foot covered, location, and interior (Kijiji, 2018). Our modest estimate is based on the research conducted by the US Centre for Food Service Education (Center for Food Service Education Inc, 2018)and on the estimations of a construction company Rockford Structures. The construction company has given an estimate of $120 per sq feet for fine dining and $85 for a lounge or bar (RockFord Structures, 2018). As we are doing both in one place, we are assuming the cost that would be enough for both would be $150 per sq foot. We are assuming that the Restaurant will be built on a total of 2000 sq feet.
The estimation is based on:
Fine dining needs 20 sq feet per person
60 seats x 20 sq feet = 1200 sq feets
We know that the sitting area is 60% of the restaurant, the rest 40% is covered by Cooking, kitchen, preparation, storage, etc. (Total Food Service, 2013). Therefore, the total area covered would be 2000 sq feet.
About 2000 sq feet of land, the building and construction cost is;
2000 sq feet x $150 per sq feet = $300,000
Assuming that the decoration of the building will cost 7%, it will cost
$300,000 x 7% = $21000
We can accommodate more seats in the lounge/bar area as it needs 11 sq feet per person (Total Food Service, 2013).
Total Sq feet x 60% = dining area
2000 x 60% = 1200 sqft
(Lounge area)/( per sq feet needed per seat) = no of seats
1200/11 = 100 seats
As for the other costs involved, we have analyzed that our restaurant fits into the average estimations provided by the US Centre for food services education. Thus, we are assuming the same costs as our startup costs. The startup costs with land purchase as suggested by the US firm are around $735,000. It will be considered as the start-up cost for Alternate Space including the estimations of costs we have put forward for the construction and building.
Total Startup Costs=$735,000
(Total Food Service, 2013)
Income Statement
For the income statement, we first need to know the product, its cost of producing, its cost of operation, and its sale price. However, here, again, we are using the estimates of the survey conducted by the US firm to get the annual sales per seat value.
As we fit in the average division, we will use the same for sales per seat as well.
We could have used the sales per sq feet value, but we are using two levels of 2000 sq feet so it can be misleading. Thus, our sales per seat would be on average $ 10, 534. It means that our annual sale of 160 seats would be $1685440. We are assuming that a major portion of sales will come from fine dining i.e. 60% and the remaining 40% from the Bar.
We are assuming that our operating costs would be less than 85%. It will provide us with a healthy 15% of Operating income. The federal net tax rate is 15% (Government of Canada, 2018) and the interest on the loan is at 4% (CIBC, 2018). We are hoping that our sales will grow at a modest 5% a year. The Proforma income statement is shown below;
| Alternate Scale | ||||||
| Proforma Income Statement | ||||||
| Year 1 | ||||||
| Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | |
| Sales Revenue | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 |
| Fine Dining | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 |
| Bar | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 |
| Operating Costs | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 |
| Operating Income | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 |
| Interest Expense | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 |
| EBT | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 |
| Tax | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 |
| Net Income | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 |
| Profit Margin | 11% | 11% | 11% | 11% | 11% | 11% |
| Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
| Sales Revenue | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 | CAD 140,453 |
| Fine Dining | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 | CAD 84,272 |
| Bar | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 | CAD 56,181 |
| Operating Costs | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 | CAD 119,385 |
| Operating Income | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 | CAD 21,068 |
| Interest Expense | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 | CAD 3,333 |
| EBT | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 | CAD 17,735 |
| Tax | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 | CAD 2,660 |
| Net Income | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 | CAD 15,074 |
| Profit Margin | 11% | 11% | 11% | 11% | 11% | 11% |
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales Revenue | CAD 1,685,440 | CAD 1,769,712 | CAD 1,858,198 | CAD 1,951,107 | CAD 2,048,663 |
| Fine Dining | CAD 1,011,264 | CAD 1,061,827 | CAD 1,114,919 | CAD 1,170,664 | CAD 1,229,198 |
| Bar | CAD 674,176 | CAD 707,885 | CAD 743,279 | CAD 780,443 | CAD 819,465 |
| Operating Costs | CAD 1,432,624 | CAD 1,504,255 | CAD 1,579,468 | CAD 1,658,441 | CAD 1,741,363 |
| Operating Income | CAD 252,816 | CAD 265,457 | CAD 278,730 | CAD 292,666 | CAD 307,299 |
| Interest Expense | CAD 40,000 | CAD 40,000 | CAD 40,000 | CAD 40,000 | CAD 40,000 |
| EBT | CAD 212,816 | CAD 225,457 | CAD 238,730 | CAD 252,666 | CAD 267,299 |
| Tax | CAD 31,922 | CAD 33,819 | CAD 35,809 | CAD 37,900 | CAD 40,095 |
| Net Income | CAD 180,894 | CAD 191,638 | CAD 202,920 | CAD 214,766 | CAD 227,205 |
| Profit Margin | 11% | 11% | 11% | 11% | 11% |
The Proforma income statement shows that with the current model we will be able to earn 11% net profit margin after deduction of taxes and interest expense. With the established restaurant profit margin in Canada, earning a profit margin of 4.5% (Resturantscanada.Org, 2012), this is a fabulous start. The Profit margin can be seen at the same level at 11% in five years showing its profitability.
Investment Profile
The investment profile for the next ten years regarding the opportunity presented by the restaurant venture is measured for its profitability. It is done by using Net present value, Internal Rate of Return and Payback Period. The Net Present Value is computed by comparing the cash inflows and cash outflows for the next ten years. The operating income is considered as the cash inflow, and the loan repayment is deducted as the cash outflow. The discounted rate used is that of the inflation rate of Canada, i.e. 1.6%. The NPV is found positive by $1,914,294.87. Similarly, the IRR of the project is also positive 37% showing the profitability of the project. The payback period of the restaurant is found to be 3.69 years. It is an appropriate period of payback. However, the investment profile shows that the project showing promising profit margins is not risk-free as all calculations are based on assumptions.
| Years | Cash Inflows | Cash Outflows | Cash Flows | Payback Period |
| 1 | 252816 | -1,000,000 | -747184 | ($747,184.00) |
| 2 | 265456.8 | 265456.8 | ($481,727.20) | |
| 3 | 278729.64 | 278729.64 | ($202,997.56) | |
| 4 | 292666.122 | 292666.122 | $89,668.56 | |
| 5 | 307299.4281 | 307299.4281 | $396,967.99 | |
| 6 | 322664.3995 | 322664.3995 | $719,632.39 | |
| 7 | 338797.6195 | 338797.6195 | $1,058,430.01 | |
| 8 | 355737.5005 | 355737.5005 | $1,414,167.51 | |
| 9 | 373524.3755 | 373524.3755 | $1,787,691.89 | |
| 10 | 392200.5943 | 392200.5943 | $2,179,892.48 | |
| 11 | 411810.624 | 411810.624 | $2,591,703.10 | |
| 12 | 432401.1552 | 432401.1552 | $3,024,104.26 | |
| 13 | 454021.2129 | 454021.2129 | $3,478,125.47 |
| Payback Period | NPV | IRR |
| 3.69 | $1,914,294.87 | 37% |
Conclusion
The results show that the project Alternate Space is profitable if it is considered a long-term project with more than 10 years of life, as the loan payback period is 4 years. The NPV is also 37%, which means that in 4 years there is not going to be any earned profit. The profits will be earned in the later 6 years of operation.
References
Associates, A. A. (2016, December). Open a Restaurant: Timeline to a Grand Opening. Retrieved March 3, 2018, from aaronallen: http://aaronallen.com/blog/opening-a-restaurant/opening-a-restaurant
Ba, M. (2014, May 10). Marketing theory. Behavioural segmentation. Retrieved March 3, 2018, from slideshare: https://www.slideshare.net/monikaba5/marketing-theory-behavioural-segmentation.
Center for Food Service Education Inc. (2018). How Much Does it Cost to Open a Restaurant? Retrieved April 10, 2018, from https://www.restaurantowner.com/public/Survey-How-Much-Does-it-Cost-to-Open-a-Restaurant.cfm
CIBC. (2018). Loans and Lines of Credit Rates. Retrieved April 10, 2018, from https://www.cibc.com/en/interest-rates/loans-and-lines-of-credit-rates.html
Government of Canada. (2018). Corporation tax rates. Retrieved April 10, 2018, from https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html
Kijiji. (2018). Restaurant in Commercial & Office Space for Rent in Mississauga / Peel Region. Retrieved April 10, 2018, from https://www.kijiji.ca/b-commercial-office-space/mississauga-peel-region/restaurant/k0c40l1700276
Resturantscanada.Org. (2012). Restaurant Profit Margins Improve Slightly To 4.2 Per Cent. Retrieved April 10, 2018, from https://www.restaurantscanada.org/restaurant-profit-margins-improve-slightly-to-4-2-per-cent/
RockFord Structures. (2018). How much does restaurant design and construction cost? Retrieved April 10, 2018, from http://rockfordstructures.com/index.php/restaurant-design-and-construction/
Total Food Service. (2013, July 25). How to Create a Restaurant Floor Plan. Retrieved April 10, 2018, from https://totalfood.com/how-to-create-a-restaurant-floor-plan/
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