Case Study Analysis
Restaurant is providing barbecue as no other restaurant is providing it in the town. So it is giving customer the value of having barbecued food within their small town as it would not suffer any travelling cost to go out of town for barbecue. Customers are getting specialized barbecue with different flavors of sauces within the range of their small town.
The price of food and sauces were reasonable along with proving sitting facility with simple acceptable décor. It is a specialized barbecue in the town with reasonable cost along with seating area. Not only the décor and sitting area is good enough but the capacity of seating area is 80 which is valuable for customers to be provided at this cost in small town.
Along with seating areas at reasonable cost, parking area for customers is also ample enough as it is located in the mall and shares the parking space which is a good value for customers. They do not need to hassle around for getting parking. The shared parking space of mall also provides the safety to their vehicles.
One single restaurant is proving the taste four different styles of American sauces which includes Texan, Memphis, Kansas City and Carolina. Customers are getting flavors of whole American style of sauces at this small town at reasonable cost and environment.
By providing it to retail stores in different areas of town, customers are getting the taste of sauces without travelling to restaurant. Just go to retail, pay the price and get it without travelling to restaurant. As the sauces are loved by its customers, so they do not need to buy a food from restaurant to taste the sauce but they can just buy it from retailers and use it with homemade food without having the cost of restaurant food.
Possible options for Robert to expand father business:
Finding a larger location and then shifting to that location would cost too much. It includes the cost of increased fixed assets as well as current assets. It would also require to pay more wages and increase overall overhead cost. The restaurant will also suffer loss of sale until the shifting and opening of new larger location is done. In against to that cost, the benefits received by restaurant won’t match the value of investment. It will take much time to increase sales to that level as the area is same.
Adding a take away option for customers would cost low as compare to the benefits for restaurant by increasing sales. They do not need to increase fixed assets or any other large cost. Restaurant just needs to increase its workforce to handle takeout orders.
Opening new restaurants in new communities would be beneficial as it will cost much to restaurant but there would be a new whole potential target market to cover the cost and providing value to restaurant as compare to attracting more customers in same market for larger cost.
Incorporating web marketing for the advertisement of restaurant’s food and sauces would be most effective. Robert is already expert of web marketing so they do not need to hire a specialist. Along with this, the cost of web marketing is way too low as compare to benefits it provide by reaching to maximum potential target market.
Expanding sales of sauces by using web marketing and other marketing techniques like placing it to large retailers would not only increase the sale of sauces but it would also advertise restaurant at lower cost. Even in case of low turnout of customer at hotel, this side sale of sauces can cover the cost of overheads and other expenses of restaurant.
Robert’s approach for discussing ideas with father:
First of all, Robert must show complete interest and passion to his father for his restaurant. Robert should tell his father that he wants to adopt restaurant business as his profession and wants to succeed by expanding family business through his skills and experience. This would gain basic trust of Frank for Robert efforts for expanding business. Then Robert should explain all the possible options to his father with written feasibility report for each option. Tell him the positives and probability of success by conducting marketing research and how web marketing would expand Frank’s All American Barbecue. The cost benefit analysis for each option should be provided by Robert to his father along with the level of risk involved. Along with profitability, Robert must ensure to his father that not any of the options is going to harm the reputation of Frank’s All American barbecue. Making Frank sure about reputation is most important as restaurant is like his son to him. The negative sides of each option should also be presented to his father to give him a gesture that Robert has researched completely on negative and positive sides of each option. Feasibility report should also present that what Frank was doing right which lead restaurant to huge success would be retained despite of going for new options.
In case of expansions, Robert should consider his sister and her husband for roles in restaurant. Because Susan spent her childhood in restaurant and she knew the operations of restaurant. It would be easier for Susan to deal with restaurant operations. Also, Susan has observed the passion and obsession of his father towards restaurant, so she would try to make it successful with the same passion. The best role for Susan is Quality manger for food to supervise if SOP’s are being followed or not and for her husband, the best role would be to give him management of operations.
Assigning of responsibilities by Frank:
Frank should assign duties according to expertise and passion of each person. His son Robert should be assigned as manager for second restaurant along with the responsibilities of marketing. Making him the vice president of marketing would be best for him as well as for the success of restaurant. As his is an experienced web marketer, his experience and skills along with his passion for marketing and expansion of restaurant would probably take the success of restaurant to new heights especially by creative innovative style of marketing. This would also motivate Robert towards working for restaurant as he would be appointed for his favorite passionate job.
Ed Tobor is a reliable experienced employee who should not ignore and his motivation and satisfaction is important along with using his experience at the right place for the betterment of restaurant. Ed Tobor should be promoted to operational manager of second restaurant from assistant manager. This would give him a sense of promotion and restaurant would take advantage of his 14 years of experience in the first branch of Frank’s All American barbecue. It would motivate him to work harder and with high productivity ultimately leading restaurant to operational efficiency.
As Susan is comfortable with the management of either restaurant, she should be assigned as a manager of the first restaurant. First, it would fulfill his wish to become a manger and she would be motivated to work hard and keep right things on the right path with more efficiency in the first branch. Another reason of assigning her the job of manager for the first branch is, she had been there since her childhood and she knew the culture and many operational activities of first branch. It would be a good decision for her and restaurant to manage the first branch effectively and efficiently.
Overcoming Frank’s concerns:
Robert should tell his father about latest marketing research methods and tell him how he has conducted research about customers for the new location. Through Robert’s research about their taste, income levels, behavioral patterns and other factors gave him a good idea of how to attract customers for the restaurant in new location. Modern ways of researching about customers gave Robert a good knowledge about my potential target market and what they like to eat in restaurant under which kind of ambiance. Research also gave me the way of advertising to attract the potential applicants in the opening months of restaurant and then retaining them. The use of BTL activities of marketing would be beneficial for the promotion and can generate good sales from the starting month. The success of internet marketing has breached the boundaries for marketing and targeted marketing through internet would also boost restaurant’s sales. Online order taking and providing delivery through online orders would also boost the sales of restaurant. Extensive distribution of sauces to retail market does not only create quick sales but also it would also advertise restaurant for minimal cost. We would deal with retailers to put our sauces on the main shelves to be more visible so that the probability of sales will be increased. We will also set separate kiosk for out sauces in retail stores to prominent the presence of our product. For advertising the sauces for retailers, we would do small activities of giving away samples so that people would taste the sauce and we would also be able to advertise sauces and restaurant. Application of this marketing research would help us to generate sales as per our feasibility report to overcome expenses and turning restaurant into profits as soon as possible.
Selection of Darien for expansion:
Factors considered by Robert and Frank for selecting a new location are those which definitely impact the attractive of potential target market. The population of Darien is 19275 which is a good number to set it as a target market for a restaurant which has gained success in other small town. The percentage of households of total population is 81.7 which is really good and high. This shows this town is more attractive for family outings and restaurant can gain customers if advertised properly. The average income of Darien population is 180,474 dollars per year which is also a healthy one which shows the sign of high purchasing power. When the population has high purchasing power, they spend more on restaurants. If we look at the results of the factors focused by them, we can the numbers favor the restaurant to be opened here. So yes I do agree with the decision of Frank and Robert to open the branch here. This market has well enough potential customers which can be attracted by effective and attractive advertising.
Even though they have done good job, they can also focus on some other factors to better identify about market. It was important to consider the trend of food and restraints in Darien. Do they prefer to eat BBQ or not? Or what price are they willing to pay for BBQ? How much competitors existing in the market as there were no one in competition for specialized BBQ earlier. Identifying the competition is highly important because it must be known if the market is already saturated or it has gap to fill which can make a market attractive or unattractive. Finding out these answers along with already researched factors, Frank and Robert can develop a much reliable feasibility report for the opening of restaurant in Darien.
The idea of Frank is good for at the time of lunch when people just came to have a good food in good environment. They normally do not have much time to wait and prefer to have and less costly food. It is better to offer pre packaged meals at lunch time with minimal pricing. Make a package and try to put the price lower than if the customer orders all the items separately. This would be easy for customers to choose and have a good meal within their range of price. This can also work when people come to restaurant for take away option. At that time, customers prefer to have food quickly. This can increase sales for takeaway customers and lunch timings by pricing the meal on average range.
At dinner time, the idea of Robert should be applied to offer a full menu and they can charge a premium price as compare to prepackaged meals for takeaway or lunch. The reason is, people usually come to dinner with their families and friends for the sake of enjoyment, not for just eating food. So they are willing to pay a little extra for the environment and relaxation of their mind. The purpose is not to just eat food but the purpose is to enjoy and they are willing to pay more. So this strategy would work at dinner time.
This is how Franks All American BBQ can gain maximum sales from every type of customers by applying different strategies for serving menu and pricing. It’s important to understand the type of customer and what are you offering them at what rates. This will also help restaurant to gain economies of scale which will ultimately lead to less cost and higher profits.
Financial ratios for the time period 2008-2010:
Current ratio = Current assets / current liabilities
Current ratio (2008) = 772,275/ 407,442 = $ 1.89
Current ratio (2009) = 686,291/ 346,178 = $ 1.98
Current ratio (2010) = 726,715/ 354, 650 = $ 2.04
The value of 1.89 for 2008, 1.98 for 2009 and 2.04 for 2010 for this ratio explains that Frank’s All American Barbecue possesses or contains the liquid able assets of 1.89 , 1.98 and 2.4 Dollars for 2008, 2009 and 2010 respectively against every short term obligation of 1 dollar. It means this company has excess short term or liquid able assets as compare to short term liabilities which is a great sign for a company and also it gives confidence to creditors. It also shows that company performed with preceding years
Quick ratio = (Current Asset – Inventory) / Current Liabilities
Quick ratio (2008) = 772,275- 391,238 /407,442 = $ .93
Quick ratio (2009) = 686,291- 331,045 / 346,178 = $ 1.02
Quick ratio (2010) = 726,715- 345,678/ 354, 650 = $ 1.07
The value of .93, 1.02 and 1.07 for 2008 , 2009 and 2010 respectively for this ratio explains that this company possesses or contains the highly liquid able assets of .93, 1.02 and 1.07 dollars for 2008 , 2009 and 2010 respectively which do not include the low liquid able assets against every short term obligation of 1 dollar. It means this company has excess short term or highly liquid able assets as compare to short term liabilities which is a great sign for a company and also it gives more confidence to creditors as compare to current ratio.
Cash ratio = Cash / Current Liabilities
Cash ratio (2008) = 102,665 / 407,442 = $ .25
Cash ratio (2009) = 125,172 / 346,178 = $. 36
Cash ratio (2010) = 102,665 / 354, 650 = $ .28
The value of .25 for 2008, .36 for 2009 and .36 for 2010 for this ratio explains that this company possesses or contains the cash amount of .25 for 2008, .36 for 2009 and .36 for 2010 dollars against every short term obligation of 1 dollar. It means this company does not have enough cash to cover its short term obligations. But mostly creditors do not look for cash ratio because most of the times for every company, the value of this ratio will be low. Creditors do not usually decide on the basis of cash ratio. But if a company’s cash ratio is more than 1, it will be exceptional and you can say the creditors will have the highest confidence to give credit to that company.
Comparison with industry averages:
The current ratio average of restaurant industry in US for 2008, 2009, and 2010 are 1.5, 1.7 and 1.8 respectively. This shows Franks’ All American barbecue is performing above average in terms of having current ratio. They are performing well in this regard and they should keep their performance up to the mark for continuous financial growth. Performing better than industry in this aspect gains the confidence of creditors which helps the company to get loan easily. It is important for company to keep performing like that constantly to continuously gain support of its creditors and it will help them the most in times of crisis.
The Quick ratio average of restaurant industry in US for 2008, 2009, 2010 are .45, .42 and .52 respectively. This shows Franks’ All American barbecue is performing below average in terms of having quick ratio. They need to improve their quick ratio as compare to industry as investors seek quick ratio while giving debts or loans. Declining in quick ration can hurt the financial relationships with creditors so it is of utmost importance to at least manage this ratio with industry average.
The cash ratio average of restaurant industry in US for 2008, 2009, 2010 are .39, .4 and .43 respectively. This shows Franks’ All American barbecue is performing below average in terms of having cash. Even though creditors does not give much importance to this ratio as compare to quick and current but still it is good for the financial health of a company to have a healthy cash at least better than the industry average to stay strong in crisis situation.
Financial ratios for the time period 2011-2015:
Current ratio = Current assets / current liabilities
Current ratio (2011) = 1,523,636 / 344,745 = $ 4.4
Current ratio (2012) = 2,566,983 /294,338 = $ 8.7
Current ratio (2013) = 3,909,241 / 306,350 = $ 12.6
Current ratio (2014) = 5,375,249 / 323,120 = $ 16.6
Current ratio (2015) = 6,995,341/ 343,926= $ 20.3
If we compare the ratios of these five years with the above mentioned three years of 2008 to 2010, we can see a huge increase in the results. This shows that Franks All American BBQ realized the importance of liquid able assets and how it can impact their creditors and overall financial well being. They have done a great job regarding this aspect.
Quick ratio = (Current Asset – Inventory) / Current Liabilities
Quick ratio (2011) = 1,523,636 - 72,421 / 344,745 = $ 4.2
Quick ratio (2012) = 2,566,983- 79,197 /294,338 = $ 8.4
Quick ratio (2013) = 3,909,241- 109,296 / 306,350 = $ 12.4
Quick ratio (2014) = 5,375,249-117,245 / 323,120 = $ 16.2
Quick ratio (2015) = 6,995,341-125,954/ 343,926= $ 19.97
By comparing quick ration f these five years with those 3 years, we can say company has performed extremely well in these years for quick ratio exactly they have done for current ratio. The high liquidity of firms shows the ability to cover its liabilities which increases the confidence of creditors and continuous improvements in this aspect kept on increasing the trust of creditors on Frank’s All American Barbecue.
Cash ratio = Cash / Current Liabilities
Cash ratio (2011) = 1,172,844 / 344,745 = $ 3.4
Cash ratio (2012) = 2,209,415 / 294,338 = $ 7.5
Cash ratio (2013) = 3,521,573 / 306,350 = $ 11.49
Cash ratio (2013) = 4,979,631 / 323,120 = $ 15.41
Cash ratio (2013) = 6,591,014/ 343,926= $ 19.1
Even though this ratio does not hold as much significance as the other two but company improved its cash health realizing the importance of each financial factors which can add towards the financial strengths of company. Increment in all three ratios shows the ability of covering the short term debts of a company which strengthens the trust of creditors.
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