Brief overview of case
Shortly after Amanda West graduated with Master of Business Administration, she had one main idea of starting a fast food restaurant as a business enterprise. The thought of venturing into food industry was not easy bearing in mind that the industry is highly competitive amid the high amount of capital required. In spite of the glaring challenges, Amanda went ahead and drew the entire business plan with thorough consultation and assistance form colleagues. She even made sure that she had familiarise herself with the food industry environment by gaining necessary experience. Her concern however, still remains to be how to start more than one unit of the fast food restaurant because getting the desired real estate location has been quite hectic.
Analysis – Problems / Major Issues Identification
one of the main challenge facing Amanda towards starting then fast food restaurant is the capital amount and potential investors who may join her in vestment as business partners.
Applications of SWOT method to analysis
Strengths
Amanda’s strength lies in her educational an d experience background. She has strong business knowledge and has equally worked in the food industry as well as retail sector.
Weaknesses
Her main weakness is the inability to work independently in starting the business venture. She has to consult a wide array of individuals ranging from former classmates to professionals. Much of her business strategies are being developed by the second party.
Opportunities
Amanda has a great opportunity of investing in the fast food industry because she can manage to obtain capital from various sources. Another window of opportunity is on the wealth of sources through which she can obtain investment information from.
Threats
Amanda’s main area of threat is the high level of competition in the fast food industry as well as the dynamic its nature which requires investors to re-evaluate strategies regularly and validate business ideas.
Develop Alternatives
Amanda West has several alternatives in her bid to start the food restaurant. She can opt to start with a single unit and then work on an expansion plan. Alternatively, she can set up more than one outlet in order to accelerate the process of business growth.
Recommendations
It is highly recommended for Amanda West to critically survey the market needs of the fast food industry. Furthermore, she should start with one food restaurant and then expanding it gradually.
Justify Recommendations
It will be more favourable for her being a new entrant in the food industry because she needs to learn the basic business ideal and practices before advancing further.
Detailed Implementation Plan and Supporting Documents
In order to succeed in the fast food industry, Amanda has drawn a through plan on how she expects to achieve her idea. This can be observed in the supporting documents
and Exhibits like the budget analysis and marketing plan.
Amanda’s Restaurants (A)
1. Is the concept viable and scalable; i.e., would you advise Amanda to launch the business?
The fast food restaurant business is very tricky and highly challenging to start. To begin with, the high cost of starting the business is a major hindrance for any other entrepreneur who would like to ruin this business. For instance, Amanda West would require one million dollars to start up this business. Raising this amount would be an uphill task and as can be observed from the case study, she has to look for like-minded partners who would act as co-investors as they assist in building up the capital pool. Besides, there are other technical requirements which West will have to take care of if the business was to stand and well sustained. For example, developing viable strategies right from marketing of the restaurant to meeting the needs of consumers in fast food provision in spite of the heavy market presence of other competitors is a real impediment to her plan. Nevertheless, Amanda’s concept of starting a fast food restaurant is viable and an idea well thought out. It would be advisable for her to start the business in spite of the innumerable challenges.
The higher the operating risks in any business, the higher the returns and vice versa. If she however, opts for a business venture with less challenges and possible risks to encounter, the prospects of growing her finances will equally be minimal. She is also well endowed with business skills and knowledge having gained necessary educational background up to Masters in Business Administration as well as relevant experiences in a similar field to a her business idea. Furthermore, she has at great length managed to raise the one million dollar mark capita which she requires to start the restaurant business. These business merits at her disposal are fairly adequate as triggers to her business plan.
2. Evaluate the job West has done on (a) validating her idea; (b) raising money and (c) forming a board? What has she done right? What could she have done better?
Initially, West had the general liking for a food related business because according to her, food is one entity which is handled by all and sundry across all walks of life and therefore running an enterprise related to food would definitely lead to high returns. Although this is universally true, West had to validate her idea of starting a fast food business enterprise by first of all conducting research work on the food industry as well as meeting important people in this industry who would probably furnish her with relevant ideas. This was a right step in the right direction bearing in mind that she could not just sink her idea and finances into the fast food business without some fine details, challenges and requirements of the business venture.
Another idea which West initially possessed was that of operating a single fast food restaurant. However, after getting new ideas from a team she appointed to help her work out on the modalities of the setting up the business, a proposal came up that starting the business with one restaurant in mind would limit growth prospects for the business because most factors of production would more or less remain the same therefore limiting any possible growth in returns. This suggestion form her expert team may have been sound but the fact that Amanda West was just a starter in the food industry, it would not be wise to start the business on a large scale but rather from a smaller bit and then strategise for growth in future. Additionally, West validated the idea that it was not imperative to focus on how healthy the fast foods were because most consumers were least interested on the nutritious part but rather most of them preferred indulging themselves.
West needed to raise one million dollars to start the fast food restaurant. She had planned to raise this starting amount and then rate it according to the current values in the market. Nevertheless, she had to validate this idea after being advised by experts in the industry that she would be putting herself at high level risk. This piece of advice was indeed right owing to the fact that she needed to spread the risk level among several potential investors. Moreover, she was capable of rising 700,000 dollars while the rest catered for by potential investors. However, she later realised that she needed to form a board of advisors who would increase the credibility of her business venture and boost investor confidence. Hence the board of advisors came in handy because they could provide the much needed advice. She did not however, have a shrewd procedure of selecting the advisory board; she merely picked them based on a few conversations and this did not produce the best team of advisors. As she notes, this method did not work at times. Amanda West would have opted for professional services from experts in fast food industry and only select a small advisory board based on pure merit and not just on mere pleasant conversation.
3. Consider the range of outcomes that Amanda might face if she is successful in finding a location: (a) the first restaurant fails; (b) the first restaurant succeeds but does not scale; (c) the first restaurant is a home run and allows Amanda to expand according to plan.
There is a wide range of possible outcomes which Amanda can go through in course of starting the fast food restaurant. For instance, in the event that the first restaurant fails, she will find it critically difficult to start another similar enterprise considering the high capital margin required. Her restaurant business idea will substantially lose trust from investors and reselling the idea in order to raise fresh capital, if at all she may be interested in pursuing her plan, may be practically cumbersome. Investors will not be comfortable to pool their finances in a business plan which does not guarantee security of their investments.
In the event that the first restaurant succeeds but fails to scale, it will imply the marginal overhead costs like wages and salaries, utility bills and raw materials will remain virtually the same. This business experience will have a direct impact on the returns expected. Since the ability to expand the business unit will null and void, the profit margin of the restaurant will also stagnate. If such a scenario persists for long, the restaurant business will miss out on the benefits accrued from economies of scale and consequently thrown out of the competitive and dynamic market.
On the other hand, if the first restaurant expands according to Amanda’s plan, then there will be higher probability of her restaurant business being among the pace setters in the food industry domain. This will translate into higher returns due to economies of scale.
If Amanda opens up more than one restaurant, her partner investors will also have a sense of security o their investments and will be more than willing to double their capital investments. Notwithstanding this profound success upon expansion according to plan, Amanda West will have to validate her ideas and reinvent new strategies to match the needs of the dynamic food industry and growing business.