Writing a Business Plan: Dato Pies Example
Executive summary
Dato Pies will be a lowly priced 40-seat restaurant that will offer hand-tossed Brazilian Style pizza, toasted subs and chicken for Delivery, dine-in and takeout. It will be family owned and managed by Kandisha Dato. It will be located in Porto Alegre and will emulate other family-owned restaurants in the City of Porto Alegre. It will be leasing a 3400 square foot space situated in Porto Alegre. The restaurant is seeking to become a market leader in the restaurant industry by its low-cost strategy. Its main competitors will mainly comprise of restaurants in Porto Alegre and Brazil at large, such as Le Bateau Ivre, Koh Pee Pee and NB Steak just to name a few. Dato Pies will focus on offering delicious meals and dines at moderately low prices to the people living in Porto Alegre and Brazil at large. The restaurant industry seems to thrive in Brazil. Any restaurant established may, therefore, have a potential to attract a good market, if correct marketing and promotional strategies are put in place. Mr Dato is seeking additional financing of $40 Million to supplement his contribution of 20 Million to fund the concept. This investment will cover all the startup costs including the employees’ salaries. The overall NPV of the project, after ten years, is $119 million. With this NPV, the ROI in ten years’ time will be 99%. Dato Pies is expected to start recording a positive ROI by the 5th year. The rest of this report will explain the strategic plan, ten-year cash flow evaluation, SWOT analysis, the business model, contingency plan and the metrics Dato Pies will be accountable for.
Business Model Proposal
The restaurant will be situated in the City of Porto Alegre. Porto Alegre is one of the biggest cities in Brazil (Brazil profile – Timeline, 2017). Dato Pies will prepare all its meals, Pizza and dines on its own. There will be a group of 20 experienced cooks who will be responsible for making different delicacies. It will be open seven days every week for dinner and lunch. Mr Dato will write all the schedules.
Proper labelling and rotation techniques accompanied by efficient storage equipment will ensure that high quality meals will be available to meet the customers’ demands. Mr Dato will also be responsible for making all the orders. The perishable products will be ordered multiple times a weak. Proper management and buying of materials in bulk from trusted suppliers will enable the restaurant to keep down the costs of its meals.
The primary products will be breakfasts, meals, dines and Pizza. These products can be delivered at customers’ conveniences or given as takeaways. The customers can also comfortably sit in the restaurant to munch the meals ordered for. Upon arrival, the guests will receive warm greetings and a smile from one of our waiters or waitresses. Drink orders will be taken, and the visitors can munch on the complimentary rolls provided. Once an order is accepted, it will be printed to a requisition printer stationed at the grill area automatically. The grill manager will use the printouts to keep records of all the orders taken for efficiency.
There are two primary features of Dato Pies’ value proposition- low costs and high quality. Like other restaurants, Dato Pies will focus on a specific client segment. It will mainly target the households, offices and tourists visiting Brazil. The restaurant has also set a low-profit-margin which will ensure it keeps its prices low.
High quality will be achieved by Dato Pies by employing high qualified cooks in its kitchens. The restaurant will also run a feedback system, which will enable customers to provide feedback on their experiences with Dato Pies. This will help it to improve the quality of its services from time to time and remain abreast with the competition. Besides, Brazil is quickly regaining from the recession period. Hence the restaurant business will gradually pick up, enabling a large number of customers to throng into the restaurant.
SWOT Analysis
Table 1
| Strengths | Weaknesses |
| · Prime location with easy access
· Exceptional staff · Catering Industry experience · Low cost and quality |
· Recruiting and retaining quality staff
· Tight Margins will allow no room for error · Lack of reputation
|
| Opportunities | Threats |
| · Offer additional catering services
· Little Barriers to entry |
· Government controls
· Consumers that believe foods made at home are healthier · Building and maintaining sales volume. |
Strengths
The prime location is a primary strength of Dato Pies. It has been situated in a major city in Brazil. This is a city with a high population, making it easy for the restaurant to derive market from the households, offices and other tourists visiting Porto Alegre. As depicted by FGV Projectos (2016), Brazil is the 8th largest economy in the world, with the restaurant industry forming one of the most thriving industries. Brazil also offers an enabling environment for restaurants to thrive (Monteiro & Cannon, 2012) Porto Alegre is also supplied with reliable transport systems which will make Dato Pies easily accessible.
Another strength enjoyed by Dato Pies is Low cost and quality. Brazil is a middle-income economy which is just recovering from an economic recession. Therefore, as the nation’s economy will pick up, Dato Pies will be able to improve its sales and enjoy economies of scale. This will enable it to offer meals at relatively lower prices as compared to its competitors. The restaurant will also make its meals in-house, and derive materials from trusted suppliers at low rates. This will also boost its low-cost strategy. Besides, Dato Pies will practice selective recruitment of employees to ensure that only qualified staff get their ways into the organisation. This will enable it to make high quality and delicious meals.
The restaurant will employ exceptionally qualified staff, who are entirely motivated by a can-do spirit. It will also offer a conducive working environment to keep its employees as comfortable as possible. Mr Kandisha Dato has also had some experience working in the restaurant industry. Kandisha is therefore aware of all the risks and opportunities available in this industry. This will act as a boost.
Weaknesses
Dato Pies may experience a challenge in getting qualified staff to work in its kitchens and other management posts. This forms the first weakness. The second weakness is that Dato Pies is a new restaurant and has not gained reputation from its clients. It will, therefore, necessitate the restaurant management to work hard, providing quality meals, and services so that the customers may develop a preference for its products and services. Also, the restaurant has developed tight potential margins with little rooms for errors. Therefore, in case the management makes any mistakes, then it will not be able to achieve its objectives. Dato Pies should, therefore, ensure efficiency in its operations to reduce chances of making errors and mistakes.
Opportunities
Opportunities are the conditions existing in the external environment, which an organisation can pursue to become more competitive than other enterprises in the same industry. A significant opportunity available for Dato Pies is its ability to offer additional catering services. The restaurant can expand its services by offering catering services in meetings, ceremonies and other forums at a fee. Also, the Brazilian market is an open market with little barriers to entry (Euromonitor International, 2017). There are free entry and free exit in the Brazilian market. Therefore, it would be easier for Dato Pies to enter the Brazilian market and even expand its services into other cities in Brazil.
Threats
Government controls forms one of the threats to Dato Pies. These controls include restaurant operation rules, worker protection acts, food and safety rules and sanitation, health, safety and fire at the local levels (The Brazil Business, 2012). If Dato Pies is unable to cope up with these threats, then it may risk collapsing. The restaurant may also experience problems in maintaining a constant sales volume as the number of customers visiting the restaurant may fluctuate negatively. Also, there may be a rise in a group of customers who believe that homemade foods are healthier than those that are bought from the restaurants. This may lead to a reduction in the value of sales.
Strategic plan
Table 2
| Year One | Year Two and Three | Year Four | Year Five |
| · Startup a restaurant
· Recruit and induct employees · Promotion · Offer discounts to customers |
· Expand its services
· Hire more workers · Optimize operations |
· Offer additional services
· Train employees · Promote new capabilities
|
· Adopt online booking of tables and ordering process
· Adopt 24-hour operations · Recruit more workers |
Dato Pies has established a five-year strategic plan. If this plan is adequately implemented and monitored, then it may lead to the success of the restaurant as the restaurant will be able to keep up with the suggested four percent increase in revenues for the first five years. Its primary competitive strategy will be providing quality fries and meals at relatively lower prices as compared to its competitors. During the first year, Dato Pies will ensure that it recruits qualified cooks and induct them into the restaurants operating environment. It will also strive to obtain as many customers as possible by conducting active promotions. This will entail, providing free coffee after meals and making adverts in newspapers and social media about its products and services.
During the second and third years of operation, Dato Pies will major mainly in serving its customer with quality foods at low prices. It will also train more employees and ensure operational efficiency.
In the fourth Year, Dato Pies will start offering additional services such as outside catering I ceremonies, meetings and other social forums. This will enhance its revenue generation. It will also train its employees to be able to offer the additional services. These new services will actively be advertised in print media and other social media networks.
Finally, during year five, Dato Pies will adopt an online system for its customers to book tables and order for meals. Dato will offer delivery services for its meals. Therefore, this system will ensure that the customers receive their orders in time. It will also start operating for 24 hours to capture a large customer base. More workers will, therefore, be recruited and trained to enable the restaurant to offer these additional services. This will be an effective strategy as it will enable Dato Pies to increase its revenue and achieve the four percent revenue increase projection.
Projected 10-Year Cash Flow Analysis
The following tables three and four exhibits the projected cash flow for Dato Pies for the first ten years. Dato Pies is expected to gain 4 percent revenue increment for years one through year five, and 6 percent for years five through year ten. These projections have also taken into consideration the increase in percentage cost of goods sold of three percent for years one through year ten. Also, Table five presents the NPV and Returns on Investment (ROI) of the business over a period of ten years based on a $60 Million capital investment at a ten percent discount rate.Table 3: Cash Flows for Years 1-5
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
| Total Revenue (+4% 1-5, +6%) | $ 226,000 | $ 235040 | $ 244442 | $ 254219 | $ 264388 | |
| COGS (+3%) | $ (178000) | $ (183340) | $ (188840) | $ (194505) | $ (200341) | |
| Gross Margin | $48,000 | $ 51700 | $ 55602 | $ 59714 | $ 64047 | |
| Operating Expenses | $ (30000) | $ (30000) | $ (30000) | $ (30000) | $ (30000) | |
| Interest | $ (6,000) | $ (6,000) | $ (6,000) | $ (6,000) | $ (6,000) | |
| Taxes | $ (5,000) | $ (5,000) | $ (5,000) | $ (5,000) | $ (5,000) | |
| Net Income | $ 7,000 | $ 9,700 | $ 14,602 | $ 18,714 | $ 23,047 | |
Table 4 Cash Flows for year 6-10
| Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | |
| Total Revenue | $ 280,251 | $ 297,066 | $ 314,890 | $ 333,784 | $ 353,811 |
| COGS | $ (206,351) | $ (212,542) | $ (218,918) | $ (225,486) | $ (232,250) |
| Gross Margin | $ 73,900 | $ 84,524 | $ 95,972 | $ 108,298 | $ 121,561 |
| Operating Expenses | $ (30,000) | $ (30,000) | $ (30,000) | $ (30,000) | $ (30,000) |
| Interest | $ (6,000) | $ (6,000) | $ (6,000) | $ (6,000) | $ (6,000) |
| Taxes | $ (5,000) | $ (5,000) | $ (5,000) | $ (5,000) | $ (5,000) |
| Net Income | $ 32,900 | $ 43,524 | $ 54,972 | $ 67,298 | $ 80,561 |
Return on Investment
Table 5: ROI for Dato Pies
| Initial Investment- $60 million | Discount Rate- 10% | ||||||
| Year | Income | Expenses | Discounted Cash Flow | ||||
| Cash Inflow | Fixed Costs | Present Value of Cash Flow | Cumulative Present Value of Cash Flow | Present Value | Net Present Value | Cumulative Simple ROI | |
| 1 | $48,000 | $41,000 | $6,363 | $6,363 | -$53,636 | -$53,636 | -189% |
| 2 | $51,700 | $41,000 | $8,842 | $15,205 | -$44,975 | -$44,975 | -174% |
| 3 | $55,602 | $41,000 | $10,970 | $26,175 | -$33,825 | -$33,825 | -156% |
| 4 | $59,714 | $41,000 | $12,781 | $38,956 | $-21,044 | -$21,044 | -135% |
| 5 | $64,047 | $41,000 | $14,310 | $53,266 | $-6,734 | -$6,734 | -111% |
| 6 | $73,900 | $41,000 | $18,571 | $71,837 | $11,837 | $11,837 | -80% |
| 7 | $84,524 | $41,000 | $22,334 | $94,171 | $34,171 | $34,171 | -43% |
| 8 | $95,972 | $41,000 | $25,644 | $119,815 | $59,815 | $59,355 | -1% |
| 9 | $108,298 | $41,000 | $28,540 | $148,355 | $88,355 | $88,355 | 47% |
| 10 | $121,561 | $41,000 | $31,059 | $179,414 | $119,414 | $119414 | 99% |
All the numbers are in thousands except the Return on Investment which is expressed as a percentage.
Sensitivity Analysis
Table 6: Change in Gross Margin with 4% Increase in COGS per Year
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||
| Total Revenue | $ 226,000 | $ 235040 | $ 244442 | $ 254219 | $ 264388 | |||||
| COGS | $ (178,000) | $ (185,120) | $ (192,525) | $ (200,226) | $ (208,234) | |||||
| Gross Margin | $ 48,000 | $ 49,920 | $ 51,917 | $ 53,993 | $ 56,154 | |||||
| Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | ||||||
| Total Revenue | $ 280,251 | $ 297,066 | $ 314,890 | $ 333,784 | $ 353,811 | |||||
| COGS | $ (216,564) | $ (225,226) | $ (234,236) | $ (243,605) | $ (253,350) | |||||
| Gross Margin | $ 63,687 | $ 71,840 | $ 80,654 | $ 90,179 | $ 100,461 | |||||
All the values are in thousands except the ROI
Table 7: Return on Investment with 4% Increase in COGS per Year
| Initial Investment- $60 million | Discount Rate- 10% | ||||||
| Year | Income | Expenses | Discounted Cash Flow | ||||
| Cash Inflow | Fixed Costs | Present Value of Cash Flow | Cumulative Present Value of Cash Flow | Present Value | Net Present Value | Cumulative Simple ROI | |
| 1 | $48,000 | $41,000 | $6,363 | $6,363 | -$53,637 | -$53,637 | -189% |
| 2 | $49,920 | $41,000 | $7,371 | $13,734 | -$46,266 | -$46,266 | -177% |
| 3 | $51,917 | $41,000 | $8,202 | $21,936 | -$38,064 | -$38,064 | -163% |
| 4 | $53,993 | $41,000 | $8,874 | $30,810 | -$29,190 | -$29,190 | -149% |
| 5 | $56,154 | $41,000 | $9,409 | $40,219 | -$19,781 | -$19,781 | -133% |
| 6 | $63,687 | $41,000 | $12,806 | $53,025 | -$6,975 | -$6,975 | -% |
| 7 | $71,840 | $41,000 | $15,825 | $68,850 | $8,850 | $8,850 | -112% |
| 8 | $80,654 | $41,000 | $18,499 | $87,349 | $27,349 | $27,349 | -54% |
| 9 | $90,179 | $41,000 | $20,857 | $108,206 | $48,206 | $48,206 | -20% |
| 10 | $100,461 | $41,000 | $22,925 | $131,131 | $71,131 | $71,131 | 18% |
All the values are in thousands except the ROI
It can be derived from the above analysis that ROI and NPV are highly sensitive to changes in the cost of goods sold. If the cost of goods sold were to increase by four percent, yearly instead of the original three percent, Then ROI will be negative until the tenth Year. In the tenth Year, ROI will be only eighteen percent instead of the originally predicted 99 percent. Therefore, it is clear that the restaurant should strive to consistently keep the cost of goods sold low.
Table eight and table nine that follows provides a display of a two percent increase in revenue, and its effect on the gross margin and Return on Investment.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Total Revenue | $ 230,520 | $ 239,740 | $ 249,330 | $ 259,303 | $ 269,675 |
| COGS | $ (178000) | $ (183340) | $ (188840) | $ (194505) | $ (200341) |
| Gross Margin | $ 52,520 | $ 56,400 | $ 60,490 | $ 64,798 | $ 69,334 |
| Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | |
| Total Revenue | $ 285,856 | $ 303,007 | $ 321,187 | $ 340,459 | $ 360,887 |
| COGS | $ (206,351) | $ (212,542) | $ (218,918) | $ (225,486) | $ (232,250) |
| Gross Margin | $ 79,505 | $90,465 | $ 102,269 | $ 114,973 | $ 128,637 |
| Initial Investment- $60 million | Discount Rate- 10% | ||||||
| Year | Income | Expenses | Discounted Cash Flow | ||||
| Cash Inflow | Fixed Costs | Present Value of Cash Flow | Cumulative Present Value of Cash Flow | Present Value | Net Present Value | Cumulative Simple ROI | |
| 1 | $52,520 | $41,000 | $10,472 | $10,472 | -$49528 | -$49528 | -182% |
| 2 | $56,400 | $41,000 | $12,727 | $23,199 | -$36,801 | -$36,801 | -161% |
| 3 | $60,490 | $41,000 | $14,643 | $37,842 | -$22,158 | -$22,158 | -136% |
| 4 | $64,798 | $41,000 | $16,254 | $54,096 | -$5904 | -$5904 | -109% |
| 5 | $69,334 | $41,000 | $17,593 | $71,689 | $11,689 | $11,689 | -8% |
| 6 | $79,505 | $41,000 | $21,735 | $93,424 | $33424 | $33424 | -4% |
| 7 | $90,465 | $41,000 | $25,383 | $118,807 | $58,807 | $58,807 | -0.2% |
| 8 | $102,269 | $41,000 | $28,582 | $147,389 | $87389 | $87389 | 46% |
| 9 | $114,973 | $41,000 | $31,371 | $178,760 | $118760 | $118760 | 98% |
| 10 | $128,637 | $41,000 | $33,787 | $212,547 | $152547 | $152547 | 154% |
All the values are in thousands except the ROI which is expressed as a percentage.
The above analysis confirms that ROI and NPV are also sensitive to change in revenue. The restaurant can achieve a positive ROI of 46 percent in the eighth year, with a change in revenue of as low as two percent. Also, the ROI at the end of ten years jumps from 99 percent to 154 percent, due to a two percent increase in the value of revenues per year.
Risks Contingency Plan and Metrics
Dato Pies will formulate appropriate contingency plans to handle the risks that are exposed to. Risk refers to the possibility of an unfortunate event occurring in a business (NZI Risk Solutions, 2016). For instance, Dato Pies may face the risk of failure. In a study conducted by H.G. Parsa and publicised in 2005, it was found that nine out of ten newly established restaurant fail due to strategic failure (Chron, 2018). Chron (2018) also added that strategic failure results from the inability of an organisation to successfully implement and monitor its growth strategies. Therefore Dato pies will come up with precise contingency measures such as allocating some funds above the budgeted amount to cater for unexpected expenses. Dato pies could also prepare a solid strategic implementation plan and monitor every step of its strategic execution process. This will ensure that impending risks are identified and reliable, proactive measures taken to tackle them.
The second risk that Dato Pies could face is its inability to cope up with the labour laws and Safety regulations in Brazil. There are particular hygiene and safety regulations enacted by the Brazilian government to regulate restaurants and other food joints’ operations (FGV Projectos, 2016). If the Restaurant is unable to respect these regulations, then fines and other government sanctions may be acted against it. Therefore Dato Pies will strive to comply with all the legal requirement about the restaurant industry in Brazil.
Finally, Dato Pies runs the risk of fires. The restaurant will prepare all of its foods in-house. This means that there will be heating in the restaurant’s kitchens making it be exposed to the risk of fire outbreak. Therefore the restaurant will come up with strict fire safety procedures. It could also install fire extinguishers in its kitchens and provide its employees with access to accurate fire handling and evacuation policies. Also, Dato Pies could have fire assembly points to enable its employees and customers to converge at safe places in case of fire breakouts.
Metrics
The success of Dato Pies will be evaluated based on three metrics- ROI, Operating costs and Revenues. Metrics refers to the ways set by a firm to accomplish specific goals (Terrier & Jacquinet, 2016) Dato Pies is expected to increase its revenues by four percent from year one to year five. After year five, from year 6 to year ten, Dato pies has projected to increase its revenues by six percent. The management of Dato Pies will hold itself accountable for this projection and the growing trend of the restaurant. The revenue growth will regularly be monitoredregularly and reviewed quarterly to identify any changes. In case the expectations are not met in any quarter, an in-depth evaluation will be conducted to find out the reasons. Another primary metric will be the costs of operation. The restaurant’s management will do what it takes to either maintain the operating costs at a constant level or keep them low. The restaurant intends to provide its meals at low prices. Therefore it will monitor its costs on a quarterly basis and formulate strategies for keeping them low. The final metric is the Returns on Investment. The restaurant has projected achieving a positive ROI of 47 percent in year nine. It will, therefore, meet its expectations by the end of year nine or sooner. The ROI will be analysed on a yearly basis.