BSBINM601 Café Rome: Business Analysis Assignment Sample
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Executive Summary
Café Rome is a well-known restaurant and catering service in Melbourne that has been operating since 2009. Since then the business has been able to expand to three other locations. With the help of their well trained and knowledgeable staff they have been able to steadily expand over the past three years. The main issues faced by the business, as identified by the owners, is that of rising costs. In an effort to mitigate the issues, they have been trying to identify areas of cost reduction in operations and procedures. But, so far, they have been unable to succeed in the endeavour as their budget has remained unchanged with revenues earned consistently below forecasts. The report evaluates the existing business performance and customer feedback to identify three key recommendations that can aid the company in structuring their business such that it enables better decision making.
Introduction
Café Rome is a well-known restaurant and catering service in Melbourne that has been operating since 2009. Since then the business has been able to expand to three other locations. With the help of their well trained and knowledgeable staff they have been able to steadily expand over the past three years. They have observed a steady decline in revenues, footfalls and sales in their stores. The purpose of this report is to identify the predominant reasons for the consistent decline on sales that has been observed. The report will, therefore, analyse the business data and information to find the relevant information that would be helpful in decision making in the future.
Discussion
Café Rome witnessed a period of steady growth and expansion since its inception. However, following a steady increase in material costs for the business, the profit margins for the company have been observed to decline significantly. As most of the revenue is dependent on the office workers, the sales in the stores are also dependent on the number of businesses that operate in the area. In addition to these, some of the most prominent issues for the business have been identified below.
- Sales across all categories are down by the latter half of 2016 (Jul-Dec). Food sales are down by 10%, beverage and external catering is down by 15% respectively. The profits are also down for the overall business by 17%.
- Another major issue that could be identified is the rise in wages paid to the employees following the increase in minimum wage rate by 15%. This together with high staff turnover rates have also created additional financial burden for the business. This is mostly as a result of the costs incurred in training new staff.
- The effects of these issues are compounded by the fact that property rents have also gone up by 10% annually (Gillham, 2005).
Having discussed the issues that have been observed, there is also a need to evaluate the business performance to contextualise the issue more clearly (Rosemann, et al., 2008). Based on the analysis provided, from the first half to the latter half of 2016, the overall growth rate of food sales have dropped from -6% to -10%, growth rate of beverage sales have dropped from -4% to -15% and growth rate of external catering has dropped from -9% to -15% respectively across all stores. One of the outstanding facets of the data is the fact that despite November and December being the busiest periods of the year, the catering segment has been grossly underperforming with negative growth rate of 15% and 17% in the two months respectively. Although the performances of all the stores are below forecasted expectations, the data is skewed by the performance of Store 3 especially. The store has been performing in the negative across all metrics. Another concern is the degree of variance in consumer spending from 2013 to 2017. Despite prices going up for the products significantly, the average spending has increased at miniscule margins. Variance in consumer spending from 2013 to 2017 for coffee has been 15%, for takeaway food has been 13%, for dine-in food has been 16% and for catering services has been 22%.
Based on customer survey and internal analysis, one of the problem areas for the business is the lack of foot falls in the stores. With lower customer retention, slow customer acquisition and increasing prices for raw materials, it is imperative that the business should be able to identify areas that require actions and then prioritise them to take action. To aid in this, the business needs to incorporate the use of support systems to aid in decision making. Commercially available Executive Support Systems (ESS) and Management Information Systems (MIS) need to be used to clearly categorise the information and aid in decision making (Kimes, 2008). In the case of overall business performance, Store 3 has been found to perform exceptionally worse than the rest of the stores despite managerial impetus being placed on marketing the store predominantly. The use of ESS and MIS systems can aid the decision makers in identifying areas that are using more resources than necessary and areas with greater potential that could benefit from the investment of resources (Nayal, et al., 2012).
Reviewing the customer and staff feedback also revealed several key insights. From the customer feedback it is clear that there is contradictory information available to the business. The Facebook reviews suggest that there are generally no complaints regarding the product quality and taste. However, based on the results of the market survey conducted in December 2017, it was found that customers had mixed opinions regarding the available products in the stores. This discrepancy can mislead decision makers if improperly viewed. In this regard, a consistent format for data collection in a comprehensive manner is required. Further, regarding the drop in sales, customer feedback can be incredibly helpful in that regard. The recession and the uncertainty regarding the employment futures have also led customers to reduce spending. This is a result of the perception of the company’s products as expensive. Even the loyalty program has seen decreased participation suggesting that the cost benefit analysis from the customer’s perspective is not favourable to the business. This means that the management needs to re-evaluate its products and its prices to identify areas where costs can be reduced. New menu items with lower costs can be introduced to increase foot falls. In addition to that, greater discounts can be offered to loyalty card holders to drum up subscription revenue. This is especially important because subscription revenue could generate a revenue stream that could offset losses incurred by the new stores through sales in other stores. Finally, there is a need to focus on comprehensive integrated marketing campaigns that focus on increasing foot falls across all three stores (Raman & Naik, 2006). This can be done by offering new lower cost menu items and more attractive loyalty programs while ensuring same degree of customer service and delivery times.
Recommendations
Based on the evaluation done in the previous section, the following recommendations have been developed. These have been developed based on the evaluation of the existing data, evaluation of the relevance and accuracy of the data and estimating the future needs of the business.
- Introduction of ESS and MIS systems to assist the senior management in decision making.
- Create standardised formats for customer data collection so that parameters that are being tracked are clearly identified and evaluated. This will also eliminate the existence of contradictory information.
- Design and develop a comprehensive marketing campaign that drums up foot falls across all stores and increases the number of loyalty card holders. This will ensure separate revenue stream that can offset losses by new stores or periodic slumps in sales.
Conclusion
Café Rome is a well-known restaurant and catering service in Melbourne that has been able to expand to three other locations. With the help of their well trained and knowledgeable staff they have been able to steadily expand over the past three years. The report evaluated the existing business performance and customer feedback to identify three key recommendations that can aid the company in structuring their business such that it enables better decision making.
References
Kimes, S.E. (2008). The Role of Technology in Restaurant Revenue Management. Cornell Hospitality Quarterly, 49(3), 297-309.
Nayak, G., Sequeira, A.H. & Senapati, S. (2012). Management Information System for Effective and Efficient Decision Making: A Case Study. SSRN Electronic Journal. DOI: 10.2139/ssrn.2174035.
Raman, K. & Naik, P. (2006). Integrated Marketing Communications in Retailing. IN: Retailing in the 21st Century (pp. 381-395), DOI: 10.1007/3-540-28433-8_24.
Rosemann, M., Recker, J.C. & Flander, C. (2008). Contextualisation of business processes. International Journal of Business Process Integration and Management, 3(1), 47-60.
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