1.) Preliminary Planning

Overview

 Defines the scope of a project, which determines the complexity of the planning process & the professionals involved in design & implementation.

 Explains the process of concept development for hotels, chains, restaurants, & institutions.

 Discusses the decision-making process regarding menu, market, management, money, & method of execution.

 Introduces the elements of a feasibility study

Scope of a Project

 Level I: equipment addition/replacement or renovation of small area (example: new dish machine).

 Level II: renovation of a significant portion of a facility (example: renovation of serving area).

 Level III: complete renovation or new construction of a facility.

 Level IV: development of a prototype restaurant for a chain.

Scope of a Project

 Level I:

equipment addition/replacement or renovation of small area (example: new dish machine).

Scope of a Project

 Level II:

renovation of a significant portion of a facility (example: renovation of serving area).

Scope of a Project

 Level III:

complete renovation or new construction of a facility.

Scope of a Project

 Level IV:

development of a prototype restaurant for a chain.

Professionals Involved in a Project

Project Time Lines by Scope

Concept Development

 Concept: the overall plan for how the operation will meet the needs & expectations of the target market.

 Concept is expressed in many ways, including menu, theme, décor, hours of operation, form of service, pricing, & location.

 Examples of broad concepts include fine dining, theme, casual, fast-casual, quick-service, ethnic, & family.

 Concept development is critical for design because it provides direction to planners – it is critical for operational success as well!

The Five “M”s of Concept Development

The Five “M”s: Market Questions

 To whom is the food operation being marketed?

 Is the market large enough to generate sales & produce a profit?

 How will the market be identified?

 What level of competition exists?

 What method will be used to communicate to this market?

 Will the potential customer want or need the food product?

 Will a quality assurance plan be developed that will encourage the customer to return because of superior service and/or product quality?

 Will internal marketing successfully sell the customer additional services or products after he or she arrives at the food facility?

The Five “M”s: Menu has an impact on …

 Amount of space required.

 Service area size & design.

 Types & capacities of cooking equipment.

 Size of the dishwashing operation.

 Size of storage areas.

 Number of employees.

 Amount of investment.

The Five “M”s: Money

Successful capitalization of a food facility includes funds for:

 Planning costs.

 Building construction or renovation.

 Equipment (fixed).

 China, glassware, utensils.

 Furniture & fixtures.

 Décor.

 Start-up & operating costs.

 A two-step process: estimating the necessary investment & identifying sources; then, when design is complete & actual costs are known, securing commitments from investors.

The Five “M”s: Management

 Who will operate the facility, & what skills/ experience must he/she have?

 Who will assist this person in covering the long hours that are usually required to operate a foodservice facility?

 What level of pay will this person receive?

 Will this person be rewarded in some way for excellent sales & profit results?

 How will the owners set operational policies & communicate these to the management staff?

The Five “M”s: Method of Execution

 Production approach: cooking “from scratch” or using “convenience” (partially prepared) items.

 Control systems: production management systems (menu, recipe, inventory, costing); sales management systems (cash control); & service systems (reservations).

 Personnel: labor staffing & scheduling, time keeping, payroll, etc.

 Production approach:

cooking “from scratch” or using “convenience” (partially prepared) items.

 Control systems:

production management systems (menu, recipe, inventory, costing); sales management systems (cash control); & service systems (reservations).

 Personnel:

labor staffing & scheduling, time keeping, payroll, etc.

Feasibility: Two Related Approaches

Market Feasibility

 Will the sales revenues be great enough to generate a reasonable profit?

 Emphasis on the income statement & revenue sources.

Financial Feasibility

 Will the profits generated by the operation be sufficient to satisfy investors’ expectations for financial return?

 Emphasis on the balance sheet & retained earnings.

 Market Feasibility

 Will the sales revenues be great enough to generate a reasonable profit?

 Emphasis on the income statement & revenue sources.

 Financial Feasibility

 Will the profits generated by the operation be sufficient to satisfy investors’ expectations for financial return?

 Emphasis on the balance sheet & retained earnings.

Market Feasibility

Calculating Projected Sales

• Step 1: Estimate Customer Counts & Capacity.

 # of seats X turnover for each meal period.

• Step 2: Estimate Average Check.

 Use menu mix & price projections.

• Step 3: Multiply Customer Counts by Average Check.

• Step 4: Prepare a Sales Projection for the Year.

Financial Feasibility: Balance Sheet

Estimating Assets:

 Operating capital.

 Accounts receivable.

 Land, building, furniture & fixtures.

 Inventory (food & supplies).

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Estimating Liabilities:

 Accounts payable.

 Short-term debt.

 Long-term debt.

 Owners’ Equity.

Estimating Assets:

 Operating capital.

 Accounts receivable.

 Land, building, furniture & fixtures.

 Inventory (food & supplies).

Estimating Liabilities:

 Accounts payable.

 Short-term debt.

 Long-term debt.

 Owners’ Equity.

Financial Feasibility: Income Statement (Pro Forma Profit & Loss)

Estimates of the following:

 Cost of goods sold, involving menu pricing & recipe costing.

 Labor costs, involving projections of staffing levels, wages & salaries, benefits.

 Marketing costs.

 Utilities.

 Occupancy costs (example: rent).

 Repairs & maintenance.

 General & administrative.

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• These estimates result in a projected profit/loss for the operation.

Feasibility Analysis

 The net income – “the bottom line” – from the income statement is transferred to retained earnings on the balance sheet.

 Investors receive return on their investments through either dividends paid from retained earnings or through growth in the value of their equity.

 Market & financial feasibility studies work together to demonstrate that investment in the foodservice facility will generate the desired financial return.

The Go/No-Go Decision

 If the project looks financially sound, the market is identified, a need for the foodservice exists, & the capital is obtainable, the decision to go ahead can be made.

 If one or more elements are uncertain, there are three alternative courses to explore.

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 Correct the problem area that has been identified.

 Abandon the project & look for another place to invest the funds.

 Delay the decision until the final go/no-go decision point.

Site Selection & Planning

• Includes the calculation of foot traffic, automobile counts, & distance to travel as a part of the feasibility study process.

• Other considerations:

   Visual recognition.

   Convenience.

   Code restrictions.

   Environmental issues.

Agency Approvals

Typical approval agencies involved in foodservice projects include:

 Zoning board.

 Health department.

 Municipal engineers (water, sewer, gas, & electrical).

 City planner.

 Fire marshal.

 Liquor control board.

 Telephone company.

 State or federal agencies (on state or federal projects).