Business Plan For Room For Dessert Analysis

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Memo to: from: subject: Business Plan for Room For Dessert Date: [21. 09. 2010] In this memo I summarize my analysis of the business plan for Room for Dessert (RFD) and evaluate if the proposed venture represents a good investment opportunity. My analysis focuses on the fit between the people and the opportunity only. Successfully building a multi unit restaurant chain demands a team of people with considerable industry experience and execution skills. The people behind RFD have a deficiency in both. Also the business model lacks process innovation and is therefore easy to copy.

The identified market could be attractive to some extent but it is unlikely that it will develop outside a niche. This increases uncertainty that the business will be able to perform as projected and therefore I would not recommend investing in it. The People When analyzing the venture I was evaluating if the team of people possesses the necessary skills, experience, contacts and attitude required to start up and operate the proposed business. An experienced group with a proven track record in the industry increases the likelihood of the venture’s success and thus minimizes the risk nvolved. ) Skills and experience Kim and Paul are the two team members planning to launch the business; thus my focus is on their skills. Their CVs indicate very strong analytical skills and a drive to take initiatives. They have also some experience in implementing their suggestions and in supervising/managing people. These kinds of skills and experiences will be helpful in launching RFD. However, neither of them has sufficient work experience in the restaurant industry. Paul’s background is in the insurance/finance sector and his experience at Celebration!

Ice Cream cannot be regarded as sufficient for a restaurant start up. Kim’s background in TV production has nothing in common with running a restaurant operation. Also both are first time entrepreneurs with no experience in how to manage unexpected challenges. This lack of operational experience and knowledge raises the question of their ability to successfully operate and grow a restaurant. The success of the business thus heavily depends on the knowledge and skills of third party individuals, resulting in increased operating cost and risk. 2) Contacts

Given the high dependability on third party knowledge I would expect the presentation of a full board of advisors with relevant industry experience and an identified set of key contributions each member is going to make to RFD in the business plan. However this point is insufficiently addressed by Just providing the names and current Job titles of four potential board members. Furthermore analyzing the proposed floor plan I noticed that the kitchen and the dessert prep station are not adjoined, which will lead to challenges in daily operations.

An industry xpert would have picked up this detail straight away, so I assume the plan has not substantial flaws in the plan. 3) Motivation The motivation of the team members to shift careers to become restaurant operators cannot be evaluated based on the information given. A great possibility to show their interest in foodservice would have been to do their summer internship at a restaurant chain. Both choose a corporate Job in other industries instead. This raises doubt on their passion as well as their willingness to get their hands dirty on the shop floor if things are not going as well as projected.

The Opportunity When analyzing the Opportunity I was evaluating the business idea itself in terms of market attractiveness and business model viability. Tapping into an unserved need of a growing market segment by operating a hard to copy business model increases the likelihood of the venture’s success and thus minimizes the risk involved. 4) Market The business plan provides some qualitative evidence that a “favorable environment for a dessert-focused restaurant” exists but it fails to quantify the size and growth potential for a fine dining option in this specific market segment.

Forecasts for related product categories such as luxury chocolate in retailing would help in evaluating the potential market. The choice of the luxury segment in the market is thus Justified by the intensifying competition in the quick-service and casual segments and not by market data suggesting a need for a luxury option. 5) Business Model The proposed business model has very attractive cash flow characteristics like the restaurant industry overall: suppliers usually invoice after the customers have paid, salaries are paid at the month’s end and product margins are high especially for everages and desserts.

It would have been beneficial to provide some food cost calculations based on the sample menu in order to show the reasonableness of the data provided in the plan. However the restaurant industry has very low entry barriers and concepts are easy to copy. People, customized service, quality, portioning and ambiance are given as key differentiators but none of them can be protected. Thus the business model lacks sustainable process innovation that would give it a considerable competitive advantage.

There are also several opportunities for ew revenue streams, the company could launch its own premium line of chocolates, truffles or ice creams with gourmet food retailers and they could sell a line of desserts or back recipe books. However the business plan mainly addresses the very obvious possibility of geographical expansion. * The above analysis only presents a brief summary of the main points I find critical in evaluating the proposed venture. A formal presentation of the plan by the team would allow further investigations; such a meeting would also allow gaining more insight into the context and proposed deal structure.

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