SunShine Café: A Breakfast Restaurant Business Plan

UNLV Theses, Dissertations, Professional Papers, and Capstones
Summer 2011
SunShine Café: A Breakfast Restaurant Business Plan
Lillian I. Burrow
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Repository Citation Burrow, Lillian I., "SunShine Café: A Breakfast Restaurant Business Plan" (2011). UNLV Theses, Dissertations, Professional Papers, and Capstones. 1093. http://dx.doi.org/10.34917/2491056
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SunShine Café: A Breakfast Restaurant Business Plan
By Lillian I Burrow A professional paper in partial fulfillment of the requirements for the Master of Hospitality Administration Department of Hotel Administration
Pro Paper Chairs Carola Raab
Yen-Soon Kim
Summer 2011 William F. Harrah College of Hotel Administration
University of Nevada, Las Vegas

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Table of Contents
Part 1 Introduction ............................................................................................................4 Purpose........................................................................................................................... 5 Justifications ...................................................................................................................6 Constraints......................................................................................................................6
Part 2 Literature Review...................................................................................................8 Introduction ....................................................................................................................8 Why use a Business Plan ...............................................................................................8 Benefits ..........................................................................................................................10 Considerations ..............................................................................................................11 Structure of a Business Plan .......................................................................................12 Business Plans and Restaurants .................................................................................15 Restaurant Business Plan Needs.................................................................................15 Marketing ...................................................................................................................15 Finance .......................................................................................................................17 Operations ..................................................................................................................19 Summary Table ............................................................................................................21
Part 3 Business Plan ........................................................................................................22 Executive Summary .....................................................................................................22 Company Description ..................................................................................................23 Mission Statement......................................................................................................23 Development and Status ............................................................................................24 Industry Analysis.........................................................................................................25 Restaurant Industry ....................................................................................................25 Trends and Strategic Opportunities ...........................................................................25 Product and Related Services .....................................................................................26 Menu ..........................................................................................................................26 Production ..................................................................................................................26 Services ......................................................................................................................27 Target Market ..............................................................................................................27 Market Locations .......................................................................................................27 Customers ..................................................................................................................28 Market Trends ............................................................................................................29 Competition ..................................................................................................................29 Direct Competition.....................................................................................................29 Indirect Competition ..................................................................................................30 Marketing and Sales Plan ...........................................................................................31 Market Penetration.....................................................................................................31 Marketing Strategy.....................................................................................................31 Marketing Effort ........................................................................................................32 Future Plans and Strategic Opportunities ..................................................................33
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Operations ....................................................................................................................33 Facilities and Offices .................................................................................................33 Hours of Operation ....................................................................................................34 Employee Training and Education.............................................................................34 Systems and Controls.................................................................................................35 Food Production.........................................................................................................35
Management Structure................................................................................................26 Key Employees and Principals ..................................................................................36 Compensation and Incentives ....................................................................................37 Consultants and Professional Support Resources ......................................................37 Management Structure ...............................................................................................37 Ownership ..................................................................................................................38
Future Development and Exit Plan ............................................................................38 Goals ..........................................................................................................................38 Strategies ....................................................................................................................38 Milestones ..................................................................................................................39 Risk Evaluation ..........................................................................................................39 Exit Plan.....................................................................................................................39
Financials ......................................................................................................................39 Conclusion ...................................................................................................................40
Future Opportunities ..................................................................................................40 Appendices ................................................................................................41
Sample Menu............................................................................................................... 41 Financial Forms ...........................................................................................................50
References .........................................................................................................................68
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PART ONE Introduction SunShine Café is a restaurant that is being planned to open in Pasadena, California within the next few years. Pasadena currently has no restaurants the focus on serving breakfast and light lunch, and by creating an environment that is not only comfortable and inviting, but with hospitality and delicious food SunShine Café plans on building a core clientele. Unfortunately, restaurants are one of the most commonly started and mostly likely to fail of new businesses that entrepreneurs open. This holds true in Pasadena, a city of 23 square miles and 362 restaurants, last year there were 30 restaurant openings and 27 restaurant closings (Pasadena Convention & Visitors Bureau, 2010). One way to help reduce this large risk is with careful planning and proper capital. These ambitions are both best achieved by creating a proper business plan. Start-up businesses today invariably need business plans to help secure financing and set goals and strategies to allow the business to succeed (Burke, Fraser, & Greene, 2010). While business plans are by no means a way of guaranteeing success, studies have found that there is a highly significant relationship (p<0.0001) between planning for a business and financial performance of that business (Bracker, Keats, & Pearson, 1988). Additionally to get financing, most financiers require a business to help evaluate the risk and benefit that the possible endeavor. Finally business plans help a business from its initial planning and gaining financing stages through its infancy as a running business and on towards the long term goals of creating a restaurant group.

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This paper will explore the literature on the restaurant market and the reasons behind creating business plans before creating a business plan for the first restaurant for the “Shine” restaurant group and create a template for future business plans for the Shine Restaurant Group. This restaurant group will focus on breakfast and light lunch, while having a strong focus on hospitality and creating a regular customer base. Pasadena is the ideal location for such a restaurant as despite the large number of restaurants, there are no restaurants that focus on breakfast. A short literature review of breakfast in the popular media will also be included.
The main focus of this paper will be on the nine key areas that most business plans entail. Most basically these are an executive summary, a company description, a description of the target market, a description of the competition, a sales and marketing plan, a section of on operations, a section on management structure, future development goals, and finally a section on the financial statements (Barrow, Barrow, & Brown, 2009; Pasadena Convention & Visitors Bureau, 2010). Ultimately this business plan will be written to obtain financing and guide this restaurant from its infancy into the future. Purpose
The purpose of this paper is to create a business plan for the SunShine Café. While the commonly known statistic of 90% of restaurants fail within the first year is false, approximately 60% of restaurants do fail within their first three years of operation (Parsa, Self, Njite, & King, 2005). The problem for entrepreneurs starting a restaurant is how does one reduce this risk of failure.
One way to minimize this risk is to create a business plan. Thus the main objective of this paper is to create a business plan that will not only help the restaurant
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develop and plan for the future but will also help the restaurant gain capital, the other common reason restaurant fail. As the two most common reasons restaurants fail are poor planning and undercapitalization (Parsa et al., 2005). A business plan is not a static document, but a document that must be modified as the business develops and grows. A subsequent objective of this business plan is to create the foundations of a business plan that can be modified as the business grows out of its infancy of a single restaurant into a more mature and growing restaurant group. Justifications
With so many restaurants failing the literature shows that one way to reduce the risk of failure is to have a solid business plan cite references here. One can therefore reduce the risk of failure by creating a business plan (Bracker et al., 1988); (Mandabach, Siddiqui, Blanch, & Vanleeuwen, 2011); (Parsa et al., 2005). The other way to reduce the risk of failure within a restaurant is to have capital. Increasing capital can also be associated with having a business plan as most financial institutions require a business plan including a feasibility study to determine if they will finance the business (Parsa, et al., 2005). Constraints
This paper is not written without some fairly large constraints. The first major constraint is that the business plan is only an estimate of both the costs and needs of the restaurant that is being planned. The need for estimates are based upon the timing of the plan and do not consider how things within the hospitality industry can change very quickly. These changes can be caused by a variety of things, but the most prevalent today is the economy. The economy is having a huge impact on everything in the
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SUNSHINE CAFÉ hospitality industry, from numbers of guests to the amount of financing available. By recognizing that the economy and other estimates may change one can create a business plan that is flexible and incorporates many different scenarios
An additional constraint of this business plan is that it is being written by one researcher and not a team of business advisors. This means that the paper may have biases based upon the researchers own opinions and experiences. Other business advisors would help reduce these biases, but as an academic exercise having or hiring advisors would be unethical. This researcher will attempt to remove their personal biases from the paper. If this researcher were to move forward with this plan, a financial advisor would be hired to help prepare formal financial forms and acquire proper financing.
The final constraint recognized by this researcher is the lack of peer-reviewed articles on restaurants serving breakfast, or even business plans for restaurants and their likelihood of success (Mandabach et al., 2011). This researcher will provide information from trade journals on the subject as much as possible, but most information on this subject must be deduced from information on other subjects such as general business.
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PART TWO Literature Review Introduction As many as 800,000 new businesses are started in the United States every year and it is estimated that 50% of those fail (Small Business Association, 2011) with some estimating that 90% of restaurants fail (Riesco, 2011). Some of the main reasons that businesses fail are poor planning and lack of start-up capital (Castrogiovanni, Justis, & Julian, 1993). Research has shown that business plans can help reduce this risk by both doing the planning and helping a small business gain capital. This paper will also explore the different types of business plans and look into the trade literature on restaurants and business plans. Why Use a Business Plan Bracker, Keats, and Pearson (1988) found that approximately 400,000 small businesses fail each year; in 2010 that number was closer to 96,000 business failures in the first quarter (Small Business Association, 2011). Furthermore, 65% of start-up firms close within five years (Bracker & Pearson, 1986). Entrepreneurs must be aware of these risks and do all they can to reduce them so that their business will thrive. One of the ways that has been shown to help reduce this risk is having a business plan. Business plans have been defined multiple ways, but are generally recognized as formal written documents, that describes the current and future goals of the business in question (Honig & Karlsson, 2004). Business plans can take on different forms but seem to have a positive influence on the financial strength of a business. Multiple studies have been done to examine the correlation between business planning and financial strength
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including Castrogiovanni (1996), which summarized the previous literature on business plans and the value they give. While there are somewhat mixed conclusions, most research shows a correlation between business plans and business performance (Ackelsberg & Arlow, 1985); (Bracker et al., 1988); (Bracker & Pearson, 1986); (Schwenk & Shrader, 1993). One of the earliest studies of this correlation was Thune and House (1970) that found that firms with business plans had 44% higher earnings per share than firms without business plans.
Alternately, some studies have reported no benefit to firms if they have a business plan (Robinson & Pearce, 1983); (Shrader, Mulford, & Blackburn, 1989). Pearce, Freeman, and Robinson (1987) found that this difference in results of business planning might stem from the different contexts of the business’s effects the business plans and the businesses organization. This was further explored by Mintzberg (1994) who concluded that there are different types of planning in different types of businesses. Overall it has been suggested that industry specific studies of business planning and would give the most accurate results (Boyd, 1991).
Despite the conflicting research, most investors and financiers require a business plan to even consider investing in a small business (Mason & Harrison, 1996); (Mason & Stark, 2004); (Mintzberg, 1994). Thus if a business wishes to get outside financing, one must create a business plan to even be considered for financing. This has lead to as many as 44% of businesses surveyed claimed they only created a business plan to first acquire financing rather than for actual planning purposes (Mason & Harrison, 1996).
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