In the current competitive business environment, every size of business organizations faces issue related to their operation that needs to be addressed. Red & Blue Restaurants Ltd is a small restaurants business that is facing the issue in their daily operation.
This study is defining the issues that are facing by Red & Blue to operate their business in the current era. Majorly, it is facing financial issues to effectively complete the organizational tasks and satisfy the customer.
In addition to this, the study is also defining several factors that are becoming the cause of the problem. Moreover, the main focus of the study is on the alternative solutions that can be used by Red & Blue to minimize the issues that are facing by the organization.
After defining the alternative solutions, the study will focus on the selection of a suitable solution that can be used by the company to mitigate the organizational issues and improve the performance of the restaurant. At the same time, this study also explaining the reasons to select a particular solution for restaurants to increase sales.
Red & Blue is a small restaurant in England, the UK that is operating their business and providing services with effective quality to the customers (Red and Blue, 2019). The high skilled people are employed by the owners of the restaurant to increase the quality and value of the business among the customer.
It will also be helpful to improve the overall performance of the organization and get a competitive advantage. Current ally, Red & Blue Restaurants Ltd is facing issues related to the cash-flow where the organization has limited availability of the financial resources to operate the business in an effective manner.
The competitive environment of the industry needs a high growth of the business but the financial issue is one of the most important factors that are restricting business to get success in the industry (Parsa et al., 2015).
In order to grow the business, Red & Blue requires several human and physical resources that are costly for the firm such as highly skilled employees, waiter, and managers who can manage the organizational tasks in an effective manner.
On the other hand, the business owner also wants to increase the number of restaurants in other cities of the country to provide a growth opportunity. In concern of this, the requirements of different human and physical resources are also increased for the business.
But without effective financial resources, the business cannot purchase and hire these resources (Hua and Lee, 2014). As well, the next phase of the development and growth cannot be taken by the business owner to achieve success in the competitive business era.
The requirements of financial resources can be mitigated by the organizational people by focusing on the different financial source. At the same time, it is identified that the current operation is highly costly for the business because the restaurant is providing high quality and hygiene food to the customer.
In addition to this, the accounting employees are also not highly skilled in the restaurant that has a lack of awareness about the cash-flow and its management in the company.
Red & Blue restaurant needs to improve the accounting skills of the employees who are working because it can help to adjust financial transactions in an effective manner (Sanjeev and Jauhari, 2012).
Due to this, Red & Blue Restaurants are facing the issue of poor accounting that is affecting the business. Moreover, it is also identified that the finance department was not able to review the financial data that are affecting the business operation.
It is because the shareholders are not satisfied with the profitability of the company but it regularly tiring to satisfying them by providing dividends. This is one of the impartment issues in the organization to satisfy the shareholders and increase the potential shareholders and satisfy them.
It is necessary for Red & Blue Restaurants to improve the shareholders because they will help the company to provide financial support (Lee et al., 2013). However, it can be said that Red & Blue Restaurants is facing cash-flow or other financial issues that are affecting the growth and current operation of the company.
In concern of Red & Blue Restaurants, it is analyzed that there is a number of factors that are considered as the causes of the problems that have been facing by the restaurant in the UK. These factors are defined below in detail:
Recruitment of Skilled Workforce:
Generally, restaurants work for thin profit margin due to intensive labor as well as food costs covers around 60-70 percent of gross sales. In this manner, it has been determined that Red & Blue Restaurants provides the effective customer services in order to enhance the experience of the customers that require a high amount of investment in the skilled and talented workforce (Matthew, 2013).
In order to manage effective human resources within the organization, the restaurant owner needs to hire talented staffs and conduct effective training for the new as well as existing employees. These are the main things that are considered as the causes of increasing the expenses under the restaurant.
Quality and Hygiene Food
At the same time, Red & Blue Restaurants also serves its customers with quality and hygiene food that is also considered as one of the important factors that increase the financial problems in the restaurant
as in order to provide the quality food, restaurant has to invest in food-storing equipment and the quality and fresh ingredients that are used while preparing the food in the kitchen of the restaurant so that quality food can be served to its customers (Eravia and Handayani, 2015).
In the context of restaurants, it is determined that these are businesses and they also need post accounting information in an accurate manner. At the same time, this post accounting information includes all the financial information that requires appropriate accounting while preparing the financial statements for the restaurant business.
But, it is disclosed in concern of Red & Blue Restaurants that it has the problem of lack of skilled accountant for managing its financial operations effectively under the organization (Lee et al., 2016). On the basis of this, it can be mentioned that poor accounting is also the major cause of financial problems that have been facing by Red & Blue Restaurants.
This poor accounting can occur due to some specific adjustment that is common issues in accounting and missed by most of the accountants while managing the accounts.
Failure to Review Reports
In respect of financial reports, it is clearly defined that financial reports are the important tool of management but these reports do not work in absence of proper review procedure by the business owner and the finance manager.
Daily or weekly review is essential for ensuring that labor or food expenses are not getting too high, there are no unexplained losses related to food staples and the employee meals are not costing too much etc.
In addition, this report’s review is also important to identify whether discounts and complimentary meals affect profitability or not in the restaurant (Matthew, 2013). In this concern, there are several factors that lead the failure to review reports such as relying on bank balanced for account payables and fixed costs, lack of IT staffs, irregularity to update the portion costs on daily basis.
These factors increase the prices of different activities that are considered as the causes of the financial problems in Red & Blue Restaurants.
Adoption of Different Marketing Strategies
It is also determined as the cause that leads the financial problems under Red & Blue Restaurants as the management of restaurant adopts a number of marketing strategies that are too expensive and require a skilled workforce to be managing its promotional activities and marketing strategies so that these can be implemented effectively without having any miss-happening or unexpected outcomes.
In this context, it is found that an advertisement is an important tool for any kinds of businesses for promoting it within its target market and on the basis of this, it can also be mentioned that no business can avoid advertisement (Mealey, 2019).
This is the main reason that Red & Blue Restaurants adopt different marketing strategies which also lead the several financial issues under the organization. In this way, the adoption of different marketing strategies increases the promotional expenses of restaurant that create the problem in front of it while arranging the funds.
Red & Blue Restaurants can focus on the different alternative options to resolve the issue. In concern of this, first of all, the company should hire skilled employees for the business operation.
It will help Red & Blue to manage their financial data in an effective manner and short out issues. The skilled employees in the financial department will focus on the transactions, cash flow and financial decisions to solve the issue of the business (Kwok and Yu, 2013).
In addition to this, the company can provide training to the employees who are working in the finance department. At the same time, the financial position and growth of the business can be possible by increasing the liquidity. For this, the company can focus on the loans and use other option to increase the fund and cash.
On the other hand, the organization can use an effective cost reduction strategy to improve the financial performance of the organization. In concern of this, employees will select the stores which provide high-quality raw material food products or hygiene food products at lower cost (Batocchio et al., 2016).
Currently, Red & Blue is purchasing food equipment from the stores that have a very high cost due to cold storage facilities. In concern to this, the company can purchase this food equipment from the different suppers who provide fresh ingredients at a lower cost to reduce the overall cost.
The company is adopted several marketing strategies to improve brand awareness among the potential customer. This strategy needs a very high amount of cost for the success of the business.
In concern to this, the cost reduction strategy may also be helpful to reduce the overall cost of the business. For this, the marketing department of Red & Blue should focus on social media marketing that provides an option to reduce the cost of advertisement (Rhou et al., 2016).
Similarly, the company can reduce the marketing cost by implementing social media marketing and use only some other advertising methods only those are effective.
At the same time, the accounting department is also providing lower quality that increases several kinds of related to rectification of the errors. Due to this, the cost of the accounting department is very high that can be reduced by the outsourcing of the accounting work from other expert accounting firms. It will be helpful for Red & Blue to reduce the accounting cost of the company.
In addition to this, it can be said that the review of the report was also failed that also increased the financial issues (McGowan et al., 2015). In concern of this, Red & Blue should employ enough staff members for organizational development.
The highly skilled staff members will help the company to review the organizational reports in a successful manner. It will be supportive to make a value of the business among the external stakeholders.
However, it can be said that the above options are very effective to solve and mitigate the financial issue that is facing by the company.
Red & Blue has several options to improve the financial performance of the company but the increment in the cash and other liquidity. In concern of this, Red & Blue can improve the liquidity by applying for a loan and issuing shares. It is highly necessary for organizational growth.
Through this, the company will be able to increase the number of restaurants in other cities and increase the overall profitability of the business (Hua et al., 2013). At the same time, through the use of this fund, Red & Blue can provide training to their employees who have a lack of financial management skills.
It is because this training will improve the knowledge and skills of the employees who are working in the Red & Blue’s finance and accounting department. As well, they will be able to effectively manage financial transactions and improve profitability.
The training program will improve skills related to cost reduction and increment in the profitability because the talented workforce will improve the performance.
This particular solution is effective for the business to increase profitability and organizational performance. In concern to this, the improvement in the liquidity position will be helpful for Red & Blue to purchase new equipment for the business (Rahman et al., 2012).
In addition to this, business management can develop an effective training program for the employees who have low financial management skills. Another kind of find requirements can also be fulfilled by the company through using funds that will available for the success as well as the growth of the business in this competitive environment.
The regular business expansion and modernization is also very helpful for a restaurant business as well as it will satisfy the shareholders (Kwok and Yu, 2013). However, it can be said that increment in the fund and liquidity position of Red & Blue will be supportive to maintain and create jobs for the people to gain competitive advantage.
On the basis of the above study, it is concluded that Red & Blue is facing financial issues in their restaurant business. It is necessary for the owners of the business to provide effective solutions to these issues.
Due to this, it is concluded that several factors that are causing this issue like high costly employees to gain the advantage of good quality service. In addition to this, the restaurant has focused on the very high-quality food and service that is improving the overall cost of the business.
Similarly, it is also concluded that the financial management department of Red & Blue is not very effective. It is facing several issues to manage work-quality that is impacting on business growth and profitability.
In order to solve these issues, it is concluded that the company has several options as a solution such as provide training to employees by improvement in the liquidity position.
This solution will provide a fund to Red & Blue by which the organisational can grow their business in other areas of the UK. Finally, it can be said that the effective solutions of the financial issues will be helpful for Red & Blue to gain a competitive advantage.
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