Business- ENTREPRENEURSHIP Assessment Activity 3 Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    4
  • Words:
    2497

Counter Service and Sit-Down Bakery 1

Counter service and sit down bakery

(Location of university)

Executive Summary

The baking industry is a huge market that generates huge amounts of revenue. Research has shown that industry has the potential to grow. This is driven by intense consumer demand for healthy baked goods. This paper details the specifics of opening a retail bakery and shop as a Microenterprise. Research used to support the business plan is extracted from resources and research undertaken by reputable market research firms. Expected Project Implementation costs and Return-On-Investment costs have also been included, to provide a potential entrepreneur with the necessary knowledge from which they can start from in realizing their goal of opening a successful bakery microenterprise.

Contents

Executive Summary 2

Market Feasibility 4

Business Description 4

Demand for Baked Goods 4

Ability to Supply 5

Market Targets, Market Size and Competitors 5

Lifecycle of the Baking Industry 6

Technical Analysis 6

Human Feasibility 7

Financial Feasibility 7

Assumptions 7

Table 1: Estimated Project Cost and Financial Summary 8

Table 2: Expected Sales Forecast 8

Table 3: Itemized Cost of Implementation 8

Table 4: Project Return-On-Investment (ROI) 8

Conclusion 9

References 10

Market Feasibility

Business Description

I would like to open a small bakery-cum-eatery called ‘Dessert Den.’ This bakery will specialize in baking fresh breads, sweet breads, donuts, cakes of all designs and specialties, and other baked delights. In addition to selling baked goods, the bakery will also have a small eatery area where customers can enjoy the baked goods fresh off the oven if they so wish. To facilitate this, the bakery will also provide for sale various beverages to accompany the dough. The beverages are milk, coffee, tea and assorted soft drinks. The bakery will be located in an urban centre or in a suburban neighborhood. The targeted populations who will be the main customers are family people who can buy the breads for their home consumption, couples, and working class persons who can pass by and grab their breakfast breads on the way to the office.

The vision of this bakery is to ensure that sweet nutritious baked goods are accessible to everyone at an affordable price and at their convenience. The mission of this bakery is to provide fresh baked goods without compromising on quality.

Demand for Baked Goods

According to EuroMonitor International[ CITATION Eur14 n t l 1033 ], market research site analyzing market trends specifically in Europe, consumers in the United Kingdom are beginning to develop more sophisticated palates and varied tastes. Rising incomes are enabling them to support this tastes. There has been increased demand for specialty baked goods such as cup cakes, pies, sweet cakes, muffins and croissants. The Demand is also driven by the increased diversity among the common urban population. People from different places want desserts that are made using the ingredients from their homes. Additionally, others want to explore the various tastes available and will therefore appreciate and indeed buy products which have been prepared using exotic ingredients.

The demand for these products is driven by consumer preferences and rising trends where grocery stores are baking their own products for sale to customers as opposed to buying them from a large-scale manufacturer. Currently, the strongest market trend by consumers is geared towards health eating. Drewnowski & Darmon[ CITATION Dre05 n t l 1033 ] found out that consumers are willing to pay more in order to consume a healthy diet. They also found out the perception that fresh products are healthier compared to packaged goods. In light of this information, the bakery which will be selling fresh products only will specialize in healthy foods, ensuring the healthiest standards are applied.

Pastries are seen as the perfect gifts to present to people on various occasions such as birthdays, Christmas, Easters, Valentine’s Day, graduations, thanksgiving parties, and farewell parties and may more. On average, at any present time, there are numerous such parties going on around the world, and others which occur at fixed times of the year. During these times, the demand for parties is so high, that most bakeries are unable to supply the demand. This fact shows that the demand for baked goods is high

Ability to Supply

Baking for me is more than just a business idea, but a hobby which I love doing. Preparing baked delights has always made me feel happy ever since I was young. Provided I have the right equipment, raw materials and supportive staff, I will churn out baked goods of all shapes, varieties and flavors consistently. Therefore, the display shelf of the bakery will always boast of a variety of rich examples of the culinary prowess of the bakers. Variety is the main attractive e feature of the bakery, since we intend to offer the customer a variety of choices from which to choose from. The bakery will be equipped with the right equipment capable of mass producing pastry goods. In addition to the equipment, I will be assisted by two pastry chefs in making the products. Working in shifts during normal and surplus times and working together as a team in times when demand is high, the bakery will constantly be able to supply the demand at a balance that encourages a favorable price. Transportation of the products will be facilitated by the motor vehicle, to ensure that the products reach their destinations and their buyers all in one piece and still fresh off the rack.

Market Targets, Market Size and Competitors

The customers targeted by the bakery are young persons, working persons, and family men and women. The best customers are parents who buy these sweet desserts for their children. This is represented by the demographic households with children[ CITATION Che14 l 1033 ]. These groups stand to benefit most from the products that are being made at the bakery. Thus the targeted age-range are persons between 15-50 years. In the UK, the number of persons meeting this criterion is about 34 million[ CITATION Off11 l 1033 ]. This is a substantial population most of whom live in or around urban centers.

Therefore, a strategically placed bakery can attract a significant market share. According to a report published late 2015[ CITATION Fir15 l 1033 ], the United States has 2800 commercial bakeries and about 6,000 retail industries. The combined revenue generated from this industry was $39.6 billion. The industry is concentrated, with the top 50 largest companies generating 75% of this revenue, while the combined output of the retail side is 15%. The large companies which specialize in making baking goods have numerous advantages over the retailers as a result of the advantages of scale working for their benefit in procurement, production and distribution. However, small companies can overcome this handicap by offering specialty goods, or having a better local distribution strategy.

Lifecycle of the Baking Industry

Baking products are ever changing as a consequence of human innovation and creativity. Therefore, no single product will completely replace the retail store. Customers prefer to buy such products from retailers with whom they share human connection, as opposed to buying products from a faceless corporation, accepting in blind faith that the product they are buying has met all the necessary health standards. As a bakery in a suburban neighborhood, the eatery has the potential of developing into a social point, and a part of the community, thus bringing in more customers. Expansion of services offered by the bakery is also possible since it is a cheaper cost that the actual startup. Bakery equipment need not be bought anew. Instead, a different branch will be opened elsewhere were there promises to be potential for success, and then products will be transported from the main bakery to the subsidiary bakery. This plan should also work for other subsequent bakeries.

Over time, the preferences of customers will be noted, and plans made in order to meet these preferences in a timely and efficient manner, to the customer’s satisfaction. In order to promote customer loyalty, the bakery will have special offers during holidays and birthdays for its patrons such as a free pastry or some such other delight.

Technical Analysis

The proposed project will be operational from 6 AM-10PM. These working hours can be extended to midnight depending on the safety and demand. Staff will be working two shifts. The number of working days is 365 days.

The chief equipment will be a 7 X 7 X 10 oven with 8 rotating stands with 5 trays on each stand. The oven will be able to bake 60kg of biscuits in 30 baking minutes at an average temperature of 150 0C. It can also bake 120 large pizzas at a go in 20-25 baking minutes at 150-180 0C. This equipment will be acquired from second-hand dealers since buying new machines is quite expensive

Water and electricity should be readily available at all times. Electricity should be delivered using 3-phase connection drawn from a 10KW distribution transformer. Water will be acquired from the local municipal. The space on which the bakery is located should be at least 500 square feet. Equipment and furniture to fill this space include tables and chairs, vertical freezers, air conditioners, weighing machines, computer, clock, microwave oven, cash register, neon sign and miscellaneous baking equipment. A vehicle is also necessary for grocery shopping and delivery on time.

Human Feasibility

In order to smoothly run this business, the staff required will be 2 trained pastry chefs, 6 assistant staff, four to work with the chefs, two to manage front office operations and a driver for the vehicle this is just a preliminary number. Optimization, in order to determine the exact number of employees, will occur after the project has started off. This will also require the development and implementation of a human resources plan in order to ensure that the bakery always has the right people to fill available positions at the right time. The work hours for the staff will have to be flexible allowing for reduced working hours and pay in case of surplus and paid overtime at times where there is a deficit of staff. Additionally, only the chefs will have a fixed salary. Other employees will be paid on a casual basis, being paid at those times which they are working. Additionally, contingency will be made for the possibility to hire temporary workers when the workload is high, especially during special holidays such as Valentine’s Day and Christmas.

There is going to be a human resource management plan in which HR objectives are clearly stated. Additionally, in the plan are forecasting techniques which will be implemented in order to predict times at which human resources will need to be adjusted as per the situation.

The staff will wear uniforms which are different based on their position as either support staff or chefs. The uniform will bear the name and logo of the eatery. In order to ensure professionalism in their service, staff will be trained on the appropriate actions and behavior that is expected of them when undertaking their professional duties. The goals of the training exercise will be to develop competency among the employees that matches the objectives of the bakery, foster commitment and cohesiveness among the staff and to the bakery, ensure long-term employee commitment and improve the competitiveness of the bakery. Needs of the employees will be addressed appropriately and in a timely manner. The needs are recognized as being either demographic, personal, job or organizational needs. Each of the needs will be addressed separately and cohesively in order to ensure that they act to increase synergy[ CITATION Eri12 l 1033 ].

Financial Feasibility

Money to start off this bakery will be acquired from investors and loans from financial institutions. The financial instruments will be equity and debt. Key project costs are as summarized in the tables below,

Assumptions

  • Bakery will be located in Manchester. Press and Journal online magazine [ CITATION The159 n t l 1033 ], prime spots in Manchester retail at an average $27 per square feet.

  • Debt: Equity ratio is 50:50

  • Grace period of 1 year before loan repayment begins

Table 1: Estimated Project Cost and Financial Summary

Estimated Project Cost

Capital Investment

Working Capital

Total Investment

Financial Summary

Debt: Equity Ratio

Projected life of project

Repayment of long-term loan

Grace period before repayment begins

Long Term Market rate for loan

Table 2: Expected Sales Forecast

Percentage Sales

Retail sales

Bulk Sales

Total Estimated Sales

Table 3: Itemized Cost of Implementation

Building and civil works

Equipment, furniture and fixtures

Installation costs

Preliminary and pre-production costs

Contingency costs(5% of total cost)

Table 4: Project Return-On-Investment (ROI)

Initial Rate of Return (IRR)

Payback Period

Net Present Value (NPV)

IBISWorld[ CITATION IBI14 n t l 1033 ], a reputable financial research stated in their report that revenue for firms in the baking industry is expected to grow at an average rate of 0.6% per year over the next 5 years. This growth will be driven by the effects of a recovering economy, as well as market trends which predict increased demand for healthy foods by consumers. Due to stabilizing food production in developed countries, food prices are expected to stabilize too. The price of wheat, a primary ingredient in the baking industry is expected to drop at annual rate of 1% per year over the next 5 years. Despite increased competition from larger companies, small retailers will also experience growth as a result of increased demand for these products.

The end goal of the business is to sell the bakery to investors once it has become a profitable venture. Therefore, all activities are geared towards ensuring that the bakery is profitable in the long-run in order to fetch a good price.

Conclusion

The above report is a detailed business plan for a bakery to be established in an upscale prime spot in a large urban center. Should the plan be implemented carefully, the bakery ought to be successful and give back to the entrepreneur a sizable return-on-investment. Additionally, it is a good investment if one intends to sell it later for profit.

References

Drewnowski, A. & Darmon, N., 2005. Food choices and diet costs: an economic analysis. The Journal of nutrition, 135(4), pp. 900-904.

Euromonitor International, 2014. Market Research on Baked Goods. [Online]
Available at: http://www.euromonitor.com/baked-goods
[Accessed 19 January 2016].

First Research, 2015. Bakery Product Manufacturing Industry Profile, Austin, TX: Hoover’s Inc.

Flamholtz, E., 2012. Human resource accounting: Advances in concepts, methods and applications. New Jersey: Springer Science & Business Media.

IBISWorld, 2014. Fresh Bread & Bakery Goods Wholesaling in the US: Market Research Report, Santa Monica, CA: IBISWorld.

Office for National Statistics, 2011. 2011 Census: Population Estimates for the United Kingdom. [Online]
Available at: http://www.ons.gov.uk/ons/dcp171778_292378.pdf
[Accessed 19 January 2016].

Russel, C., 2014. Best Customers: Demographics of Consumer Demand. 10th ed. New York: New Strategist Press.

The Press and Journal, 2015. Aberdeen setting the pace for office rents outside London. [Online]
Available at: https://www.pressandjournal.co.uk/fp/business/488053/aberdeen-manchester-best-cities-office-rents/
[Accessed 19 January 2016].