Fast Food Chain Business Plan; A Sample for Organic and Healthy Approach

Executive Summary

The business plan is based on a start-up that will be known as “Herb & Serve”, which will operate on a fast food chain. However, it is not a traditional fast food restaurant and differs on the basis of its ingredients, which are organic and healthy for offering the taste of burgers and pizzas, while promoting healthy food habits. The first restaurant will be opened at Wangaratta, Victoria, in Australia. The new restaurants will be added over the period of time across the major cities of Victoria. This plan offers a blueprint for first three years between (January 2018 and December 2020) and captures the essence of marketing, financial, technical and human resource feasibility to support the business model.

1. Introduction

            Herfy is one of the largest fast food restaurant chains in Saudi Arabia and it has more than 212 restaurants and 4,000 employees within the nation. Herfy Food Services Co was founded in 1981 and over the span of more than three and half decades; it has opened overseas branches in the region of Middle East. The company has been looking forward toward growing opportunities outside of the region and aims at capturing market share in vegetarian and organic food market. At present, Herfy operates serves Super Herfy, kufta, French fries, fish fillet, and milkshakes.

            The new business plan of Herfy has been designed for Australian market; as it offers immense market opportunities for organic food restaurants. The new restaurant will be named as “Herb & Serve” so that it can be differentiated on the basis of its focus for vegetarian group of customers. An observation of recent trend suggest that fast foods are being considered as unhealthy eating practices which lead to various health-related issues (Metin and Kizgin, 2015).

            Herb & Serve aims at offering a wide range of fast food options including burgers, pizzas and other vegetarian fast food items. These items will be prepared with organic vegetables, spices and other ingredients. The company aims to providing refreshing experience to people of all age groups with a particular focus on teenagers and adults (13-40 years).  The restaurant will focus on changing the general perception that healthy and vegetarian food cannot be as tastier as unhealthy fast food. The business plan needs an analysis of external and internal business environments, which can be presented as following:

PESTLE Analysis of Australian Organic Food Market

            PESTLE stands for (Political, Economic, Social, Technological, Legal and Environmental) factors of external business environment. These factors are used for analyzing the existing business conditions and determine their overall approach towards business in terms of favorable and unfavorable.

2. Business Model Canvas

  • Customer Segments

Herb & Serve will essentially focus on teenagers and adults (aged between 13 and 40), who are more indulged in fast food habits. Also, people of these age groups look for more options in food items and are keen to try new products and dinning places. 

  • Value Proposition

The value proposition of Herb & Serve will include better and healthy fast food prepared with organic vegetables and ingredients at minimum price to its customers. The company focuses on nullifying the ill effects of unhealthy food and promoting healthy eating habits among people on order to contribute building healthier society. Also, there will some new and unique dishes which will be exclusively available at Herb & Serve outlets.

  • Customer Relationships

Maintaining strong customer relationship is one of the most essential attribute for the success of any business. Herb &Serve understands the significance of developing good relations with its customers by serving them the best quality of food with superior services. Herb & Serve also plans to provide free delivery services in some specific areas of the city. It also ensures to act promptly on any suggestions, issues or grievances from customers so that they can have a better eating experience.

  • Channels

Distribution channels have an imperative role in bringing products to customers’ reach. Herb & Serve will pay specific attention to the quantity of food serve in a dish as it positively impacts customers and they return to restaurant again (Okumus, Okumus and McKercher, 2007). Also, print and media advertising and internet marketing will be used as important channels to make customers aware of the new place for fast food. Herb & Serve will use channels like Dimmi, Zomato, TripAdviser and Quantas to increase the footfall in the restaurant.

  • Key Activities

The key activities of Herb & Serve will be marketing and selling healthy organic food and beverages. It will also constantly research and prepare new recopies in order to attract customers with a wide range of healthy and tasty fast food items. Moreover, in dynamic business scenario, the restaurant will have to adopt a strong marketing strategy to fight competition and attain leadership (Condon, 2017). With help of introducing special discount offers, coupons, special meals, and media promotion, Herb & Serve will strengthen its position in restaurant business.

  • Key Resources

In order to give value to customers, it is important for any business to attain optimum resources. Herb & Serve identifies four categories of resources which will assist in the success of the business; these are physical resources, human resources, intellectual resources and financial resources. Physical resources includes raw material for food and beverages, building where the restaurant will be opened has been taken on rent at the middle of the city, two vehicles for transportation of raw material and machinery for preparing coffee and other beverages. The human resources consist of serving staff, cleaning staff and managers. Every outlet will have two managers, two cashiers, seven waiters and three cleaners, who will work in shifts for the smooth functioning of the outlet. The entire human personnel will be employed as per the labor laws of the land and will work 36 hours per week. Herb & Serve also plans to maintain customer database as part of its intellectual resources. As far as a financial resource is concerned, loan from bank for $100,000 for start up business is obtained.

  • Key Partners

Herb & Serve is co-owned by three partners who are agreed on equal share of profits and losses incurred by the fast food restaurant. All three partners are committed sustainable growth and development of the new business venture.

In restaurant business, the initial cost structure needs to be planned effectively and strategically as it includes fixed and variable costs incurred during a trading period. The cost structure for Herb & Serve will focus on occupancy cost, cost for equipments, raw material for food and beverages, staff, repair and maintenance cost and marketing expenses. Moreover the fixed cost for the restaurant will be rent, property taxes, insurance, depreciation and loan interests.

3. Market Feasibility

            Currently, Australian market serves a great market potential to vegetarian fast food industry due to the growing awareness for healthy and organic food items. A study suggests, due to the changing trends and preferences of customers, a large number of fast food operators have added healthy items like salads, yoghurt, vegan wraps and other such food items in their menus. According to the data, the vegetarian food market in Australia is increasing at a fast pace which will reach from $136 million currently to $215 million by 2020 (O’Brien, 2017).

            This is a great opportunity for Herb & Serve as it promotes healthy and organic food items. The company targets people between the age group of 14 to 40, who mostly eat outside and look out for options in fast food category. The distinguished features of Herb & Serve are healthy and tasty food, preparing burgers according to customer’s choice of ingredients and use of organic vegetables.

            Fifteen outlets and five takeaway centers will be opened all over the city, which will cater to maximum number of customers. This is the plan, which would be followed in next two years. The outlets will be opens in commercial, as well as, populated areas of Victoria with optimum dinning space and attractive ambiance in order to attract customers. Most outlets will be located near colleges, hangout places and offices so that the target segment of customers can be fully catered. In addition to this, the take away centers will allow customers to get food packed and take at home, if they do not have time to dine outside. It is evident from a report published by Australian Organic Market Report (2017) that Australia ranks 16th, when it comes to spending on organic packaged food. They spend an average of AU$26 per capita on organic food items. The report further notes that growth in this industry will be likely to 3.8% between 2017 and 2020. All these figures and inclination of Australian towards organic and healthy food show a bright future for this restaurant chain due to its concept of healthy and organic fast foods (Australian Organic Market Report, 2017).

            Victoria has a total population of around 6 million people and they are spread over its large territories. Melbourne is the largest in Victoria and a favorite destination for commercial activities. The first restaurant will be opened in Wangaratta, which has a population of less than 20000 people and the restaurant aim at serving at least 5% of Wangaratta’s population on daily basis (Wangaratta, 2017). This brings the number to 1000 and expected to attain a total sales of AU$ 5000 for initial three months. Herb & Serve will give a first mover advantage in this industry; even if the entry barriers are not very high, it has huge opportunities due to rise in health concerns among youth population.

4. Technical Feasibility

            Herb & Serve will offer in house products, which are healthy fast food items to its customers. These items will be initially made in-house by kitchen staffs. The technological requirement of a restaurant business does not add to worries as it is already easily available. The focus need to be given on promoting the use among buyers. The use of technology has changed the dynamics of service industry as well. Herb & Serve will also make use of apps and technologies to sparkle innovation and quick service in its outlets. It plans to introduce a mobile application to facilitate customers placing orders and making payments through phones (Pride and Ferrell, 2012). Also mobile check in services, online reservations, digital menus and iPad cash registers will be maintained for quick and superior services and maximizing the customer base in Victoria City.

            By employing a combination of distribution channels will help Herb & Serve to effectively manage the demand for its products and services. The InHouse sales will allow the restaurant to develop a direct contact with customers by taking order through personal visits, mails, apps, and online. Also the direct feedback will assist in fruitful interactions and analyzing their preferences for food items (Ling, Konana and Tanriverdi 2004). Moreover, Herb & Serve will tie up with some offices and schools, where it will supply food items and beverages to fulfill their daily lunch requirements.             This will increase the company’s sales and make the brand popular among masses.

            The most important part of any restaurant is its kitchen, where a large number of machinery and equipments are required (Condon, 2017). Herb & Serve has purchased refrigerators, ovens, food processers, safety equipments, counters and other necessary functional equipments for smooth functioning and food preparations at the outlets. These items have been purchased for the first restaurant and will be added as per the increasing numbers of outlets. The fast food restaurant would be required to meet industry standards or regulations for health and food safety. These requirements are mentioned under provisions of AGES – Austrian Agency for Health and Food Safety.

5. Financial Feasibility

            The price for burgers at Herb & Serve will range from AU$ 5 to15 and beverages will range from $6-20, as ingredients for these products will be organic. In first year, the restaurant will focus more on sales of burgers and pizzas that are preferred by most of the fast food buyers. The cost of pizza has been set between AU$ 10 to 30 that is quite reasonable from perspectives of competitors like Freshness Burger, Absolute Burger, KFC, etc. From the market research the project volume sold by the restaurant has been kept as 700-800 burgers and around 200 pizzas that would attract revenue of around $ 5000 a day. The gross margin has been kept at 25% for the overall revenue and after deduction of operating expenses and fixed cost like rent, EMI on loan, it lies somewhere between 12 and 15% for the next three years. This shows an average of 15% of return on early basis on revenue that would be used for expansion of the business after 6 months of opening the first restaurant. Each of the restaurants is likely to attract an investment of AU $100,000 and continuing with the same trend for the first year the break-even will take 13 months with a net profit of 12% at the minimum. This indicates towards a huge potential in this market.

6. Human Resource Feasibility

            Herb & Serve clearly recognizes the significance of an efficient staff and management, which is the key for smooth functioning of any restaurant (Meier and Stormer, 2009). Every outlet of the restaurant will hire total 14 people for different activities like serving, cleaning, management and cash. This means that in first year 70 staffs will be required to meet the needs of the business for 5 outlets in Victoria.  The addition of outlet has been planned with a rate of 5, 7 and 12 by the end of first, second and third years respectively. It shows in next 2 year 91 additional staffs, and next 3 years 168 new staffs will be required to run the business. The company is planning to conduct walk-in interviews for hiring the staff, which will be followed by orientation and educational training programs (Overbeck, 2009). The training program will include introduction of hospitality, restaurant, policy, mission, service standards, code of conduct, behavior, settings, and basic skills to attend customers with superior mannerisms.

            The managers and cashiers will be hired on basis of their management skills and must have at least two years of experience in this industry. In addition to this, two chefs will be employed with necessary qualification in cooking and at least five years of experience in fast food preparations. At each location, entire staff of 14 people will work shift wise, which will be divided as one manager and one cashier, three waiters and one cleaner in non peak hours; and one manager, two cahiers, four waiters and three cleaners in peak hours, which is during lunch and dinner hours. Both chefs will be present in restaurant for entire duration, and will be paid higher salary for their extra-ordinary services. In order to sustain efficiency and loyalty of employees and prolonged growth of new business venture, there will be monthly performance appraisal. Both monetary and non monetary appraisals will be used to motivate the staff for better service delivery.

            Herb & Serve is owned by three co- founders, who will directly monitor the business. Each of them is assigned specific areas to supervise, which include marketing planning, accounting functions information technology and human resources. The growth strategy of Herb & Serve will concentrate of some key attributes like understanding customers, using demographics, research and modeling tools, innovation and maintaining quality (Haberberg and Rieple, 2008). With an empirical research on the tastes and preferences of customers in Victoria, Australia, it is learned that most people have become health conscious and switching on vegetarian food. At the same time, they have strong liking towards fast food, which is a positive feature for Herb & Serve as its characteristic is healthy vegetarian fast food.

            Herb & Serve also plans consistent market analysis in order to ascertain the feasibility of outlets at varied locations. A good understanding of the service market will help in enhancing the service quality and customer relationship in comparison to competitors. The business will grow; the organizational structure will change according to the needs of personnel in order to manage the business effectively (Richter, 2012).

Summary

            On the basis of above plan, it can be stated that healthy fast food concept is a new idea to implement on such a huge scale. Although such types of restaurants are there, but they are unorganized retailers and do not have an organized business model to replicate the success story of big fast food chains like McDonald’s, KFC, etc. Hence, Herb & Serve offers new opportunities for creating a new brand name in this industry while focusing on differentiation on the basis of healthy and organic food items.

References

AGES – Austrian Agency for Health and Food Safety. (2017). [Online]. Available at  https://www.ages.at/nc/themen/krankheitserreger/salmonellen/?tx_abaagespublikationen_pi1%5Bdownload%5D=SD0dPUBLIKATIONEN24c6e3eac5-060c-40dd-be66-6f3374bed021182014-01-30T10%3A31%3A34.820Z011&tx_abaagespublikationen_pi1%5Bschema%5D=Publikation&type=2345 [Accessed on: 11th October 2017].

Australia Organic Market Report. (2017). [Online]. Available at   https://d3n8a8pro7vhmx.cloudfront.net/ofa/pages/74/attachments/original/1492724931/AOMR-2017-REPORT.pdf?1492724931  [Accessed on: 11th October 2017].

Condon, K. (2017). How Regional Fast Food Restaurants Build Brand Identity to Reach Local Consumers. Elon Journal of Undergraduate Research in Communications, 8(1), pp. 76-85.

Haberberg, A. and Rieple, A. (2008). Strategic Management: Theory and Application. Oxford University Press.

 Ling, Ge. Konana P. and Tanriverdi H. (2004). Global Sourcing and Value Chain Unbundling. California Management Review, 46 (3), pp. 77-79.

Meier, A. and Stormer, H. (2009). EBusiness & ECommerce: Managing the Digital Value Chain. USA: Springer.

Metin, I., and Kizgin, Y. (2015). Multinational Fast Food Chains’ “Global Think, Local Act Strategy” and Consumer Preferences in Turkey. International Journal of Marketing Studies, 7(1), pp. 106-116.

O’Brien. S. (2017). Growing debate: Victorian families spending big on organic food. [Online]. Available at   https://www.heraldsun.com.au/news/victoria/growing-debate-victorian-families-spending-big-on-organic-food/news-story/8ce2e88afe32bdad73147b64e773e03d  [Accessed on: 11th October 2017].

Okumus, B., Okumus, F., and McKercher, B. (2007). Incorporating local and international cuisines in the marketing of tourism destinations: The cases of Hong Kong and Turkey. Tourism Management, 28, pp. 253-261.

Overbeck, S. (2009). Supply Chain Management – a Critical Analysis. Germany: GRIN Verlag.

Pride, W. M. and Ferrell, O. C. (2012). Foundations of Marketing.Mason: Cengage Learning.

Richter, T. (2012). International Marketing Mix Management: Theoretical Framework, Contingency Factors and Empirical Findings from World-Markets. Berlin: Logos Verlag Berlin GmbH.

Wangaratta. (2017). General information. [Online]. Available at https://www.travelvictoria.com.au/victoria/population/  [Accessed on: 11th October 2017].

Appendices

Appendix 1

Start-up Costing for [Business name] – [Herb & Serve, January 2018]
START-UP COSTS Cost (in AU$) EQUIPMENT/CAPITAL COSTS Cost ($)
Registrations $8,080 Business purchase price  
Business name   Franchise fees  
Licenses   Start-up capital  
Permits   Plant & equipment  5,000
Domain names   Vehicles  
Trademarks/designs/patents   Computer equipment  
Vehicle registration   Computer software  
Membership fees   Phones  
Accountant fees   Fax machine  
Solicitor fees   Security system  
Rental lease cost (Rent advance/deposit)  $20,000 Office equipment  
Utility connections & bonds (Electricity, gas, water)   Furniture  20,000
Phone connection   Shop fit out  30,000
Internet connection      
Computer software      
Training      
Wages      
Stock/raw materials      
Insurance  $ 6,020    
Building & contents      
Vehicle      
Public liability      
Professional indemnity      
Product liability      
Workers compensation      
Business assets      
Business revenue      
Printing      
Stationery & office supplies      
Marketing & advertising      
Total start-up costs $34100 Total equipment/capital costs $55,000
Assumptions: AU$10,900 is reserve for contingency
   All figures are GST exclusive.

Source: business.vic.gov.au

Appendix 2

Profit & Loss for [Herb & Serve] as at [Financial Year 2018-19] for 1 Restaurant    
PROFIT & LOSS Month 1 Month n Year 1  
Sales      $18,00,000  
less cost of goods sold      $1314100  
More…      135900  
Gross profit/net sales $0 $0 $0  
Expenses        
Accountant fees      $35000  
Advertising & marketing      $ 150000  
Bank fees & charges      $ 12000  
Bank interest      $ 600  
Credit card fees        
Utilities (electricity, gas, water)      $ 15000  
Telephone      $ 6000  
Lease/loan payments      $ 25000  
Rent & rates      $ 30000  
Motor vehicle expenses      $ 60000  
Repairs & maintenance      $ 6500  
Stationery & printing      $ 3500  
Insurance      $ 1000  
Superannuation      $ 6,60000  
Income tax      $3,00,000  
Wages (including PAYG)        
More…      $3500  
Total expenses $0 $0 1314100  
NET PROFIT (Net Income) $0 $0 $300000  
 
Assumptions:  
 All figures are GST inclusive.  

Source: business.vic.gov.au

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