Justification Of The Business Concept For Fast Food

Introduction

John Keells Holdings PLC (JKH) was originated in the early 1870s by the Englishmen Edwin and George John as an exchange broker company named E. John & Co. Subsequent to the company’s successful cross merger with two London-based brokering firms and acquisition of Keells & Waldlock Ltd brokering firm in Colombo, the company acquired the name John Keell Thompson White Ltd in the 1960s.

The company, then known as John Keells Ltd, took its initial steps in expanding and diversification of its business in the 1972.

Today under the chairman Susantha Ratnayake, JKH has become the largest listed company in Sri Lanka providing a wide range of goods and services. The key activities of the company include consumer foods & retail, transportation, leisure, IT, financial services, property development and plantation services (refer appendix A for further details).

The company employs approximately 10,885 people and recorded a revenue of Rs. 47.98 billion for year 2010 which was a 17% increase compared to its Rs. 41.02 billion generated in the year 2009 (John Keells Holdings PLC, 2010).

Company Values:

To change constantly, by re-inventing and evolving,

To strive to get things right at the very first time,

To do the right thing always,

To raise the bar constantly,

To foster a great place that is ideal for working, and

To build a strong relationship with a foundation of openness and trust.

(John Keells Holdings PLC, 2010)

SWOT Analysis

Strengths

Well established company with over 130 years of history and a strong brand name.

The biggest capitalised firm listed on the CSE (Group highlights, 2010).

The first Sri Lankan company to be listed in a foreign country (Group highlights, 2010).

A member of the world economic forum and the UN global compact (Group highlights, 2010).

Excellent organisational & financial position (John Keells Holdings PLC, 2010)

Largest business group in the country engaging in diversified business activities:

Transportation

Leisure

Property

Consumer food & retail

Financial services

Information technology

Plantation services and other

(John Keells Holdings PLC, 2010)

Well experienced and qualified board of directors and group management committee.

Highly skilled and dynamic workforce.

Weaknesses

Consist of high cost structure (19.5% of increase in the year 2009) (John Keells Holdings PLC, 2010).

Since the company emphasis differently on each industry, they lack experience and faces difficulties in generating brand and product awareness in those specific sectors.

Opportunities

Internationally recognised company therefore has a potential market for new products and services.

Due to the solid foundation and financial capability, it is easier to go into new markets.

High level of recognition thus easier to introduce new products.

Availability of resources that can be utilized in many areas of business.

The end of 30 years conflicts in the country, giving rise to many new business opportunities.

Threats

Large and increased competition from various companies in which most of them are specialising in only one industry

Table 1: SWOT Analysis for JKH

From the above SWOT analysis it is evident that, JKH is therefore comprise of significant human and financial resources which are significant in diversifying the company’s business operations.

Business Description

Company Name: Keells Meal-Assembly (Private) Limited (a subsidiary of JKH).

The “Meal Assembling Store” is the ideal solution to make home cooking possible and effortless for the people with hectic lives and also help them to save ample of time for family bonding and other leisure activities.

Hence the company mission is to unshackle busy families and individuals from the dilemma and stress of having to prepare food by tumbling the time it takes to put meals on the table devoid of forgoing the quality and nutrition.

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The “meal assembly” business is relatively new and an innovative concept in Sri Lanka. The business practically takes up all the work that is involved in preparing a meal. This includes the planning of the menus, shopping for the groceries, the washing, slicing, chopping, and grating, and finally putting together the fresh and healthy meals and packing them to be taken home by the customer.

The core benefits of the service to the customer include;

Saving customers time as they will have to spend less time for shopping for groceries, cooking and cleaning after meals, hence customers are able to have more time to enjoy with their family and friends.

Meals are prepared according to the customer’s individual preference but it is ensured that every meal includes the fresh nutritious ingredients, therefore it is an ultimate alternate for fast-food or take-away which are less nutritious and also customers are able to have home-style meals.

Saving customers money as they have to spend less on shopping, preparation and cleaning up after a meal.

The procedure of the business is illustrated in the diagram below.

Customer places the order through;

Telephone

Walk-in,

to the cashier.

The order is communicated to the meal assembling assistance.

Meals are assembled and packed under the supervision of the dietician.

Required ingredients are prepared by the food preparation worker assisted by the cleaners.

Food & beverages required are obtained from the local farmers and suppliers.

The customer picks up the order.

The order is being delivered to the doorsteps of the customer.

The payments can be made through cash or credit/debit cards.

Meals are cooked at home by the customer.

Figure: Business Procedure

(Author’s work)

Justification of the Business Concept

The idea of “Meal Assembling Store” can be identified as an organization that provides the service of allowing customers who are living an exceptionally busy life-style a fresh and convenient way to enjoy healthy, organic and delicious meals at a considerably lower price than take-away or fast-food.

Starting the business in Colombo, Sri Lanka has assorted important reasons. To begin with, Colombo is the main capital and the largest city of the country (Tourism-SriLanka.com, 2010), comprising eventful metro policies and a population of 2,488,000 (2008) at an average annual growth rate of 1.3% (Somayajulu, Abeyasuriya, Mukherji, 2005; Encyclopedia Britannica, 2010).

Furthermore, 54.7% of the urbanized population of the country is concentrated in the city of Colombo (Ranasinghe, 2006) making it the optimal location for this type of business start-up.

Moreover, under the inevitable effect of globalization and from the fact that the urbanized population in the country is growing steadily at an annual growth rate of 0.5% (Nationalsonline.org, 2010), people are constantly capitulated to change their life-styles to suit the environment and economic conditions, which consequently has a positive direct impact on their eating habits.

From a study by Katulanda et al. (2010) it was determined that Sri Lankans, especially who are residing in the urban areas and have a background of higher education and high income are associated with issues such as overweight and obesity.

According to the statistics from the Department of census & statistics of Sri Lanka, there is a gradual increase of the working population during the last 5 years (demonstrated in the graph below), especially in the female working population. Hence these figures illustrates that women are growing as a significant sector of the Sri Lankan working population (Gunesekera, 2009).

Figure

*Note: 2007 data were calculated excluding Northern & Eastern provinces (Source: Department of Census & Statistics, 2009)

Furthermore, according to a survey carried out by Miral Fahmy of Reuters (2009), 81% of mothers in the Asian region, including Sri Lanka, have stated that ‘they did not spend enough time with their children’.

Hence it is quite apparent from the above facts that the time available for domestic tasks (such as for house-work, shopping, cooking, and child-care), especially in households where both husband and wife who are working full time, are not sufficient.

Market Analysis

Country chosen to base the proposed business venture is Sri Lanka. This section will therefore analyse the market conditions of the country.

PEST Analysis

Political Factors

Sri Lanka is a democratic republic socialist country which has a executive presidency with currently President Hon. Mahinda Rajapaksha assisted by Prime Minister Hon. D. M. Jayaratne.

Economic Factors

Unemployment rate is estimated as 5.8% for the year 2009 which is higher than the 5.2% recorded in the previous year (Department of Census & Statistics, 2010).

The country’s inflation rate is 5.3% as of May 2010 (Central Bank of Sri Lanka, 2010) which is a dramatic fall from the previous year’s 22.6%

GNI per capita is at 4.8% (Central Bank of Sri Lanka, 2010).

The country’s real GDP growth rate in 2009 was 3.5% which was a considerable fall from 6% growth in 2008 (Central Bank of Sri Lanka, 2010).

Socio-cultural Factors

Demographics (age, gender, race, family size,)

Population: 20.1 million people (Rank 56th in the world)

Age: under 15 (26.3%); 15-29 (27.0%); 30-44 (22.0%); 45-59 (15.4%); 60-74 (7.1%); 75+ (2.2%).

Gender: Male 49.36%; Female 50.64%.

Ethnic Mix: Sinhalese (73.8%), Other (10.5%), Sri Lankan Moors (7.2%), Indian Tamil (4.6%), Sri Lankan Tamil (3.9%)

(Source: Britanica, 2009 & Wolframalpha, 2010)

Literacy rate: 90.8% ranked 66th in the world (Human Development Reports, 2009), hence a considerably well compared with many South Asian countries.

Technological Factors

Table 1: PEST Analysis for Sri Lanka

Overall, Sri Lanka is expected to benefit from rather a ‘significant peace dividend’ in 2010, in the form of ‘increased levels of public investment’ in services industries as a result of improved security conditions (PRSgroup, 2009). Although the country comprise of a ‘liberalised economic policy environment’ (Datamonitor, 2003), the economic growth of the country however, largely depends on the political stability, fiscal regulation and budget managing as well as the global economic conditions (US State Department, 2010). The inflation rate is expected to increase during the second half of 2010 as there is a strong upward pressure on prices for food and fuel. However, a better political stability and the government’s devotion to a conventional fiscal policy will assist to contain inflation, which will average 6.9% annually during 2014 (PRSgroup, 2009). The high unemployment rate indicate the problem of finding sufficient employees with requisite skills, however the country’s labour force consist of a high literacy rate and are generally trainable(PRSgroup, 2009).

Industry Analysis

Although the company will operate in the hotel & restaurant industry in Sri Lanka, the meal assembly service is regarded as a separate industry in foreign countries such as America. Based on projections by the Easy Prep Association in Wyoming (Young, 2006), the business revenues are expected to in the billion-dollar range by the end of year 2010.

In contrast, the restaurant industry Asia-pacific along accounts for 28.9% of the global restaurant industry, with McDonald’s corporation holding the most shares (1.7%) of the sector’s value (Datamonitor, 2010).

According to the Sri Lanka Equity Analytics (2009) the Hotels and Restaurants Sector have recorded a growth of 13.3% in the year 2009 compared to a negative growth rate of 5% in the year 2008, therefore it is evident that this industry in Sri Lanka is booming.

Competitor Analysis

Although there are no organisations providing meal assembly services in Sri Lanka, with the dramatic change of dining trends amongst the locals, there are various dining options for families and individuals that range from Asian to Western cuisine. The indirect competitors can be divided in to two categories:

Family Restaurants – Colombo’s prominent family dining venues include Raja Bojun, Spices, Chinese Dragon Cafe, Mango Tree, Dine Mor and Curry bowl restaurant just to name a few.

Fast-Food Restaurants – Kentucky Fried Chicken (KFC), McDonald’s, and Pizza Hut are among the leading fast food restaurants in Sri Lanka

However, the following organisations have been identified as potential competitors for Keells Meal-Assembly as they provide home-delivery of food in addition to their dine-in service.

Chinese Dragon Cafe (CDC)

CDC is one of the oldest and recognised family restaurants in Sri Lanka. Established in 1942, the restaurant provides a unique dining experience for the entire family. In addition to their services on reservations, outdoor catering, and take-away, they also provide a leading delivery services and let their customers enjoy their dishes in the comfort of their own home (Chinese Dragon Cafe, 2010). The menu comprises of authentic Chinese food, hence ranges from Rs. 400 upwards. The company currently has 3 branches operating in Bambalapitiya, Mount Lavinia and Rajagiriya.

Pizza Hut

Franchised by Gamma Pizzakraft Lanka (Pvt) Ltd., Pizza Hut is a fast-food restaurant which currently possesses 18 pizza hut stores throughout the country. The company provides dine-in, takeaway and home delivery services to its customers. At Pizza Hut, the prices of the menu are set at such price that it is affordable for everyone. The company also includes online ordering system (Pizza Hut.lk, 2010).

However, Keells Meal-Assembly service has a high degree of competitive advantage as the company will be initiators in the meal assembling (or preparation) division. Hence this will be a strong substitute for the dining out or take away for consumers and the switching costs are insignificant. Aside from the cost advantages, the meals will be much healthier as the customers are given the control of choosing the necessary ingredients and cooking methods. The process is much similar to home-cooking except that the process of preparing the meals is being handled by qualified staff under the guidance of food professionals.

Market Segmentation

The key target markets for Keells Meal-Assembly are the affluent families and individuals who are residing in the Colombo area.

The table below summarises the profile of each target customer segments.

Working Mothers

Busy mothers between the ages of 25- 45 who don’t always have the time to cook for their families.

Working Couples

Busy couples between the ages 25- 35 who don’t have the time to cook and don’t always want to eat out.

Health-conscious People

People who are concerned about eating healthy foods. This segment includes people who are facing issues such as in weight-loss and diabetes and are interest in diet plans.

Elderly

Elderly above the age of 55 who are unable to prepare meals themselves yet concerned about eating healthy.

Table: Customer Profiles

Marketing Strategy

The business objectives for Kells Meal-Assembly are as follows.

Business Objective for the First Year

To establish a reputation for providing high quality and customer friendly service.

To build a solid customer base by the end of 1st year through increasing the awareness level about Kells Meal-Assembly service.

Business Objective for the Second Year

To increase sales throughout the store chain by 5%

To increase the customer base by 30% at the end of 2nd year.

Business Objective for the Third Year

To further increase sales by 10%

To become the number one choice of families and individuals when it comes to eating healthy.

Price

Place

Promotion

Sales strategy

sales forecast

Operations

Form of Ownership: Keells Meal-Assembly will be a private limited company established according to the “companies act No. 3 2007” (Trade Chakra, 2008). Hence, the company will function as a fully owned subsidiary of JKH.

Management Team will consist of:

Mr. S. C. Ratnayake – Chairman

Mr. A. D. Gunewardene – Deputy Chairman

Mr. J. R. F. Peiris

Mr. E. F. G. Amarasinghe

Mr. T. Das

Mr. S. Enderby

Mr. P. D. Rodrigo

Mr. S. S. Tiruchelvam

The diagram below illustrates the structure of the organisation.

Board of Directors

General Manager

Food & Beverage Manager

Marketing & Sales Manager

Finance Manager

HR Manager

Dietician

Food Prep. Worker

Food Prep. Assistants

Cashiers

Cleaners

Purchasing & Stock control

Accountant

Sales Executives

Delivery Workers

Figure Organisation structure

Staffing

Training

Daily Operations & Production

Customer Service

Suppliers – materials localisat

Management Controls

Administrative Systems

industrial cooking and ventilation equipment

refrigerators

freezers, tables, bar stools, shelving and counters with stations for cutting, heating and cooling.

Financial Projections

Business start-up

Budget

P & L

Cash flow–

Detailed Statement of Income & Cash Flow Year 1

Summary Statement of Income & Cash Flow Year 1

Summary Statements of Income & Cash Flow Years 1-5

Break-Even Cash Flow Projection

Ratios

References