FRESH GARDENS RESTAURANT:

HEALTHY AND FRESH FAST FOOD

Ronald Esteban Moncada Ruiz

B0356PHPH0411

Presented as part of the requirement for the award of MBA at

University of Gloucestershire.

Supervisor: Dr. K V Shenai

November 2012

Acknowledgements

The development of this business proposal would not have been possible without

the support of my beloved parents, Milton and Luz Dary and my two younger

brothers Andres y Santiago who have helped me since I made the decision to

come to London. I would like to thank as well to my project tutors Dr. K V Shenai

and Professor Mr Mervin Sookum for their valuable teachings during the

realisation of this proposal.

I would like to thank specially to my girlfriend Diana whose love, support and

patience were fundamentals in getting to the end of this important stage of my life.

Additionally, I thank to my flatmates for their help, support and patience.

Finally, but more important I thank God who has given me the opportunity to be

here, to study and to met such a good people during my staying in London.

Table of Contents

Acknowledgements

Executive Summary

Chapter 1: Introduction 1

Chapter 2: The Business Concept 4

Chapter3: Feasibility 7

3.1 Market Research

3.2 Product Service Feasibility

3.3 Industry Feasibility

3.4 Market Feasibility

3.5 Organisational Feasibility

3.6 Financial Feasibility

3.7 Resource Requirement Evaluation

Chapter 4: Strategic Analysis and Business Model 30

4.1 Ansoff Matrix: Strategic Choice Analysis

4.2 Mckinsey 7 S Framework

4.3 Value Chain

4.4 Swot Analysis

4.5 Sources of Competitive Advantage and Sustainability

4.6 Selection of Strategies for Success

4.7 Development of Appropriate Business Model

Chapter 5: Business Plan 41

5.1 Overview of the company:

5.2 Business Plan Schedule

5.3 Critical Success/Failure Factors

References

Appendices

LIST OF TABLES

Table 1: Fresh Gardens Sales Forecast ................................................................. 23

Table 2: Fresh Gardens Cash Flows ..................................................................... 24

Table 3: Fresh Gardens Profit and Loss ................................................................ 25

Table 4: Fresh Gardens ROEI ............................................................................... 26

Table 5: Fresh Gardens Break Even Analysis....................................................... 27

Table 6: Fresh Gardens Salaries ............................................................................ 28

Table 7: Start-up Costs .......................................................................................... 47

Table 8: Activities and Schedule........................................................................... 49

LIST OF GRAPHS

Graph 1: Product Classification .............................................................................. 5

Graph 2: Acceptation of fast food ........................................................................... 9

Graph 3: Would you try fast food? ......................................................................... 9

Graph 4: Willingness to buy ................................................................................. 10

Graph 5: Quality .................................................................................................... 10

Graph 6: General thinking ..................................................................................... 11

Graph 7: Fast food market participation per cities. ............................................... 12

Graph 8: Consumption level for products. ............................................................ 13

Graph 9: Product life cycle. .................................................................................. 16

Graph 10: Fast Food Industry - Pestle................................................................... 19

Graph 11: Ansoff Matrix ....................................................................................... 31

Graph 12: Ansoff Matrix for Fresh Gardens ......................................................... 31

Graph 13: 7'S Framework for Fresh Gardens ....................................................... 33

Graph 14: Fresh Gardens SWOT .......................................................................... 35

Graph 15: Fresh Gardens Value Chain ................................................................. 36

Graph 16: Fresh Gardens Business Model ............................................................ 40

Graph 17: Fresh Gardens' Competitors ................................................................. 43

Graph 18: Fresh Gardens' Service Model ............................................................. 46

Graph 19: Gantt chart of Activities ....................................................................... 50

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Executive Summary

The Fast Food market in Colombia has been one of the most important and

profitable, because of its potential growth that despite of being much atomized,

people usually like to have a wide range of options. Bogota, as the main city is a

place in where most of the fast food chains are located offering different menus

under the same service concept: choosing the product, placing the order and then

waiting for it to be served. This represents disadvantage, as nowadays people

rather to have everything ready to take away. The idea of this business model is to

offer a different option of fast food shop in where the main emphasis will be the

freshness of the food, the importance of healthy and also the fact of have it ready

to eat. The company will start operations opening 2 shops in Bogota and its name

will be Fresh Gardens.

Fresh Gardens will be developed on a scenario of New company start-up as an

entrepreneur. This scenario is the appropriate one, as currently in Colombia there

is no business offering fresh and healthy food ready to eat; having that in mind, it

was necessary to make several initial assumptions in order to create a realistic

scenario of analysis.

The main purpose of this project is to generate a business plan that will supply a

growing demand for fresh and healthy food in Bogota, identifying the main

advantages, critical points of feasibility and also the economical resources needed

for the start-up of a company. Fresh Gardens will operate using a well developed

model from the big cities of the world such as New York or London in where the

coffee shops are an option for having lunch since the products offered are healthy

and ready to eat.

The segment of customer to which fresh gardens will focus its strategies is the

people aged between 20 to 35 years old, who are classified as socio-economical

level 4, 5 and 6, which means medium-high and high social level and represent

13.82% of Bogotas population.

Regarding to the strategy, Fresh Gardens will choose the differentiation as the

driver of its activities, where service, style and innovation will be the pillars for

the development of the company.

In order to identify the financial viability of the project some assumptions were

made:

It was estimated 5% growth for the market during the next 5 years as the

general trend has been 6%.

It has been estimated to sell 150 products per shop as an initial approach,

as the market is highly competitive.

The price will be 3 per deal.

Having in mind the above assumptions and according with the financial

assessment that was done for the project it was found that the initial investment

required will be 40.000 pounds that are going to be given 30% by the

entrepreneurs and 70% should be funded by a private investor; the other 26.200

pounds are going to be funded by a bank loan.

It will be offer a 27% of return over the initial investment having in mind that the

project offers an IRR of 27,52% and a Payback period of 2 years and 11.16

months.

This entire project aims to attract private investment, which is why a complete

strategic analysis and plan is developed through the chapters, giving realistic

close-up to all the factors that could affect the good performance of the business

when referring to internal and external environment.

1

Chapter 1: Introduction

1.1 Rationale for the business idea

The Fast Food market has been one of the most representatives in terms of

growth when talking about restaurants and food in Colombia. The trend in this

market has showed that despite it is a very atomized one, people like to have a

wide range of options offered under the model of fast food, where the simplicity

of the service does not affect the quality of this one or of the product served.

Colombia has been an appropriate scenario for establishing and developing new

models of fast food shops. As a result several companies have appeared over the

last 10 years offering products such as hamburgers, pizzas, crepes and

sandwiches. This evolution has been possible because of the influence of foreign

customs over the behaviour of native people in such a way that nowadays young

people and average adults (30-40 years old) prefer to have a take away lunch

rather than stay the lunch time sitting in.

Although there are many options for fast food places in Bogota, all of them have a

menu for people to choose the product, place the order and then wait for it to be

served, fact that means time-wasting for those that are in a hurry. The idea of the

business model proposed is to offer a different option of fast food shop in where

the main emphasis will be the freshness of the food, the importance of healthy and

also the fact of have it ready to eat.

As many young people have had the opportunity for going abroad and have a

touch of what is the trend in the big cities, the idea could be well accepted on the

market as nowadays people that works in offices, students and business people are

always attracted by the latest tendency that has been a success abroad; so that

combining a successful model from cities like London or New York with some of

the benefits that can be found on the Colombian market, it is possible to say that

this kind of business could be a really non-traditional proposal.

2

1.2 Scenario chosen

According with the research that has taken place before the selection of the idea

and also because of the experience and interest of being an entrepreneur, the

scenario under which the study and business development will be done is the

New company start-up as an entrepreneur. This scenario is the appropriate one

because there is no business like that working currently on the market and so,

several initial researches and assumptions are needed in order to have a real close

up to the feasibility of the business.

1.3 Aims and objectives of the work

The key aim of this work is to generate a business development proposal based on

a new idea. The business plan will help to identify the main advantages, critical

points, feasibility of the project, and sort and amount of resources needed for the

start-up of a company, on the basis of a reliable analysis and research about the

market and the economical, political and social context that could surround the

business. Another but not less important aim of this work is to give an explanation

about the project with all the variables that have a role into its execution so that it

could be presented to potential investors in order to have access to economical

support.

Objectives

Identify the feasibility of a fast food business in Bogota- Colombia.

Evaluate the market and future customers.

To analyze the business model, under a theoretical perspective using

managerial tools.

To make a decision about the investment required for the project.

Give a detailed view about the benefits of the business.

3

1.4 Structure of the work

The business proposal here presented will be divided by chapters according with

the process of decision, research, analysis and assessment that will be developed.

Chapter 2 will be about the business concept in general, which means a

description about the idea, product, the potential market, mission and vision

statements; Chapter 3 will be the one in where the research process and analysis

of data will take place, in order to evaluate the industry, competitors, financial

requirements as well as forecasting according with the market information

gathered so that it will be possible to conclude about the resources that will be

needed for starting the business. Chapter 4 will be a strategic evaluation of the

business model, so that a managerial analysis will be made in order to determine

issues such as competitive advantage, strategies for being successful on the

market, internal analysis of the boundaries of the business as well as the

identification of the opportunities and strengths over competitors. Finally, the

chapter 5 will offer a plan for the development of the business idea, presenting a

schedule of times and activities, as so an assessment about the circumstances or

variables that could mean success or failure for the business idea.

4

Chapter 2: The Business Concept

The business idea here presented is about the development of a new model of fast

food shop in Colombia that will be called Fresh Gardens. The purpose is to offer

food that should be prepared the same day of its selling but this one has to be

ready and packed by the time that the customer would want to have it. There will

be offered a set of products such as sandwiches, salads, fruits and also, and as an

especial feature, natural and freshly prepared juice, taking advantage of the

diverse range of fruits that Colombia is able to produce. The importance and clue

of this idea is to sell the food under the concept of freshness and healthy so that it

would be possible to compete against those others fast food chains that sell fast

food that is not healthy when people eat it too much.

2.1 Business Opportunity

According with the global trend, Colombians, especially those that are located on

important cities, are getting more interested in going out for a meal, fact that has

encouraged the market growth, allowing to the fast food chains have more

incomes and then invest more opening shops in different other cities. According

with statistics, last year the growth on sales was of more than 25% (Datos.com,

2011) compared with that of the year before.

One of the most important factors that are influencing growth on this sector is the

lack of time that is affecting people. Another important variable is the stable

growth of the Colombian economy which has been nearly 5%, this situation

improves the buying power of the inhabitants so that they feel free of spending

money eating out.

Fresh gardens is a new and different option because its principal objective is to

offer a portfolio of sandwiches, salads and fruits made with the freshest products

day by day. Those products will be displayed on the shop in different showcases

so that the customers will be free to have whatever they want and then take it to

the counter to be paid; with this process it could be granted that the customers will

not have to wait to be serve as the shop will use a self-service model.

5

2.2 Mission

To offer a different and healthy lunch option, using fresh products day by day,

offering natural fruit juices and having the food ready for those that are worried

about the time and look for a healthy but quick option when having lunch.

2.3 Vision

To change the concept of fast food that people have in Colombia, selling healthy

and fresh food in a modern and stylish environment and being recognized as the

first fast food shop that could develop a different concept among its competitors.

2.4 Products

Fresh Gardens will offer a range of products that are categorized into three main

groups: Sandwiches, Salads and Wraps. Additionally, there will be offered a range

of fresh fruit ready to eat and natural juices (These juices will be prepared at the

moment that the customers place the order).

Graph 1: Product Classification

Source: Authors design.

PRODUCT CLASSIFICATION

MEAT

CHICKEN

HAM

EGG

AVOCADO

KING PRAWN

CHICKEN

FRUIT SALAD POT

MANGO AND MELON

APPLE, STRAWBERRIES AND APRICOT

STRAWBERRY

PASSION FRUIT

ORANGE

BLACKBERRY

GUAVA

PINEAPPLE

SANDWICH

WRAP

FRUIT

JUICES

6

2.5 Positioning

The fast food market has evolved during the last years in a way where it is crucial

to have a powerful differentiator form the competitors. For that reason, Fresh

gardens will be a fast food shop offering healthy, natural and fresh food, and

natural juices prepared by the time of the purchase and also designed for those

ones that enjoy the style and service of an English shop. Fresh gardens will focus

its strategy to young professionals, business people and postgraduate students, that

know the importance of the time and will look for food healthy and ready to eat

(which is not the case with the traditional fast food shops), so that its locations

will be on strategic points of the city surrounded by offices, universities and

hotels.

2.6 Scale and Growth Anticipation

Fresh gardens will start with the opening of two shops located in strategic points

of the city one around the traditional well known Parque 93 which is a zone

surrounded by the most prestigious and moderns restaurants of the city, and the

area is full of enterprises and offices; the other shop will be located on the down

town of the city, in a zone called Centro Internacional which has been

recognized for being a place where most of the important companies of the

country have located their headquarters, the most important universities are close

there and also some prestigious hotels. According with the success of those two

shops and bearing in mind that there has been a constant growth of the general

economy during the last 10 years; the initial projection is that after 5 years of

operations, Fresh Gardens will open shops in three of the main cities of Colombia

after Bogota which are Cali, Medellin and Barranquilla.

7

Chapter 3: Feasibility

Once the business idea has been generally presented, it is important to analyze the

feasibility of the project in order to determine if the idea is viable as a successful

business, so that the investment that is required could be done expecting

appropriates returns (Scarborough, et al., 2010).

Conducting a feasibility study, it will be possible to recognize critical points for

Fresh Gardens, such as:

Market (Segment, potential customers, preferences of the customers)

Sales (Forecasting, pricing)

Profit (Financing requirements, expected returns, investment assessment)

Industry (External factors determining the behaviour of the industry,

competitors, suppliers)

Internal structure (Organisation of the future company, managerial style,

strengths)

3.1 Market Research

Although the industry is big enough, there is one branch of it in where Fresh

Gardens will be competing which is the fast food line; this segment of the industry

has been the most representative in that landscape, because it generates more

consumption, more sales and high growth potential; so, what is fast food?

Fast food is all kind of meal that could be prepared in short time. Examples of that

are hamburgers, pizza, pasta, chicken and oriental food among others. Another

feature of this segment is that the food is prepared with less details and quality

compared with the formal ones. However, the market should please the

requirements of an urban development in where inhabitants need speed of service

(La Barra, 2009).

Actually, the consumption per person on food services is still low when

comparing with other countries of the region, however, the potential growth of the

market is strong and in continuous increase. Colombia is becoming a strong

8

economy with more than 45 million of inhabitants being the third biggest one in

Latin America (Schaefer, 2011).

3.1.1 Primary Research

The definition for primary research states that it is the one that is collected for the

first time by the researcher in order to develop a firsthand analysis (Institute of

Hotel Management, Catering technology and Applied Nutrition, 2008). There are

certain tools that allow the researcher to gather accurate information in a massive

way generating quantitative and qualitative conclusions. The tools that were

useful for Fresh Gardens were interviews.

The research developed for Fresh Gardens was conducted bearing in mind that the

service will be related with the preparation and sale of healthy food, ready to eat,

using high quality standards in where the freshest products are used delivering a

delicious food, free of preservatives. As Bogota is the city in where Fresh Gardens

will locate its operations, the interviews and surveys were conducted to people

aged between 20 to 35 years old, who are classified as social level 4, 5 and 61,

which means medium-high and high social level and represent 13.82% (259.255

inhabitants) of the total population (Bogota, 2011); this population represents the

potential market for Fresh Gardens.

SURVEYS

For this project and in order to gather relevant information about the customer

preferences it was defined to distribute 200 surveys that were answered personally

and through social networks such as facebook, linkedin and email. The model of

the survey can be found in appendix 2.

The main purpose of the survey was to know about the customer preferences and

acceptation about a different option for fast food. The survey has 10 questions that

aim to answer matters such as age, actual professional situation, enthusiasm about

1 The socio-economic classification is a grouping methodology that allows identifies the income

level of the people so that the public services fares, taxation and benefits could be distributed by

the authorities fairly. It goes from 0 to 6 being 0 the level with less income and 6 the one with

more. Source: www.dane.gov.co

9

fast food among others; for the complete information about the tabulation of

questions please refer to appendix 1.

After the tabulation and analysis of the information gathered, the main findings

were:

a. Most of the people that answered the survey like fast food and have it at

least once a week which means that there is a real potential in the market.

Graph 2: Acceptation of fast food

Source: Primary research

b. People have heard about fresh and healthy fast food and they are really

interested on this option as for them the most appealing variable is the

healthy feature.

Graph 3: Would you try fast food?

Source: Primary Research

25 27

54

76

18

0

10

20

30

40

50

60

70

80

Yes, always.Yes, weekdays.Yes, weekends.Yes, once a week. No

DO YOU LIKE FAST FOOD?

No. Of People

62%

2%

34%

2%

Have you heard about fresh and healthy fast food, would you try it?

Yes, yes Yes, no No, yes No, no

10

Graph 4: Willingness to buy

Source: Primary research.

c. The general acceptation of the business concept is good as people are

becoming more aware about the importance of quality and freshness when

having fast food.

Graph 5: Quality

Source: Primary research.

48%

36%

16%

Why would you buy fresh food?

Healthy Time saving Different and innovative option

57%24%

17%2%0%

How important is product quality?

Extremely important

Very important

Moderately important

Slightly important

Not at all important

11

Graph 6: General thinking

Source: Primary research.

From the analysis of the interviews it could be conclude that the people is more

interested about healthy and fresh food so that Fresh Gardens has a potential

opportunity on the market for establishes itself as a pioneer of healthy and fresh

fast food.

3.1.2 Secondary Research

Fast food market is the biggest segment in Colombia when talking about

restaurants and food industry. Currently, and bearing in mind the effects of the

global crisis, it is crucial to highlight that Colombia offers great expansion

opportunities, allowing so that, the most important fast food chains to start their

expansion around the country; as an example, the CBC group, which is the owner

of Kokoriko, is a big and well known chicken chain that has opened 20 new

shops and aim to become the biggest chain over the country, the same is the case

with McDonalds and Burger King that have planned to expand more during the

coming years.

The actual trend on the market has been the acquisition of franchises because

these ones offers knowledge, experience and save great amount of money in

promotion and marketing, nonetheless, acquiring one franchise is usually

expensive because its price depends on the brand recognition plus insurances,

guaranties and monthly payments for the owners. The fast food market is

It is a good way for saving time.

29%

It sounds interesting

because of the fresh products.

39%

Do not think it is going to

work.8%

It is better to know the style before saying

something about it.

24%

General Thinking About the Idea

12

composed by 83,5% of franchises and 16,5% of local owners (LaNota.com,

2012).

Who is the customer of fast food?

Around 58% of fast food customers have it between 10 and 14 times per month,

being lunch the most recurrent one with 68% of the total of consumption.

According with the statistics, the second and third social level are the ones with

mayor consumption of the segment but with preferences on chicken because this

product is categorized as the cheapest one so that people with low incomes go for

this option when going out for a meal.

According with previous researches, the market share in the country is divided as

follows:

Graph 7: Fast food market participation per cities.

Source: La Barra Magazine, Comida Rpida: El segmento ms grande del pas. 34th Edicin, 2011

As it can be seen on the graph 1, Bogota is the city with more participation on the

market in where the fast food market has presence with more than 500 places that

offers a wide range of menus, sizes, drinks, sides and entries that bring several

options for several tastes.

Among the market, there were identified three main modalities when having a

meal: take away; having on the same place, or for delivery. These options have

made the market an attractive one, when there is not enough time or money but

when a fresh and good food is wanted.

27.8%

11.7%

11.3%

4.3%

3.9% 3.0%

Bogot

Medelln

Cali

Barranquilla

Bucaramanga

Cartagena

13

In order to analyse the trend about consumption of fast food , the mayor of

Bogota, conducted a study among the population of the city finding that 72 people

over 100 that were asked, said to be consumers of fast food and more than 50%

said to visit one of those places frequently. Besides, it was also found that 21 out

of 100 people are classified as an average consumer as they eat out between 5 to 9

times in a month (Bogota, 2011).

Ranking the preferred food for the population, it was found that:

Graph 8: Consumption level for products.

Source: Proyecto de Acuerdo 208 de 2011 Alcalda Mayor De Bogot, 2011.

www.alcaldiabogota.gov.co

Despite of that trend of consumption, people is getting worried about the

overweight problem that comes as a result of the consumption of junk food since

recent studies have found that 1.700 millions of people are suffering of

overweight and 300 millions are already considered as obese. As a result, there is

an increasing search for healthy food but keeping some of the benefits that fast

food market offers such as low time consuming. In Colombia and even more in

Bogota, the healthy trend has gained importance and people are willing to

consume fast food since this one offers healthy options (Martinez & Masmela,

2011).

67%53% 49% 45% 37% 29% 28% 27%

0%10%20%30%40%50%60%70%80%

LEVEL OF CONSUMPTION

http://www.alcaldiabogota.gov.co/

14

3.2 Product Service Feasibility

Bogota, as the main city of Colombia is where most of the global fast food chains

look first when thinking about invest and open new shops; thanks to that boom, it

is possible now for the customers, to find several options when looking for places

and different menus instead of cooking at home. This particular trend has allowed

to the already established chains to expand its operations beyond Bogota and now

they are looking into intermediate cities where the competence is not that big.

However, there is a growing concern about the obesity of the people so that, the

governments and authorities have been generating new regulations in order to

ensure that fast food market has to re-accommodate their menus, diets and

nutritional value in order to minimize the negative impact over the population

(Bogota, 2012).

According with the District Department of health of Bogota, the fast food has an

enormous nutritional charge with high levels of calories, saturated and sugars,

factors that have contributed enormously with the obesity problems. Bearing that

in mind, Fresh Gardens was thought to be the solution for those who like and

enjoy fast food but offering fresh and healthy products with high standards of

quality and committed with the health regulations of the city.

This idea is supported by the primary research in where was evident the particular

interest for young professionals to find a different option that represents an

appropriate meal without having to wait for it, and also because it gives a sense of

high class habit as this model is particularly used and well accepted in the big

cities and Bogotas people want their city to be recognized as a big and

cosmopolitan city such as the developed ones.

3.2.1 Product/Service Concept

Fresh Gardens is about fresh and healthy food that means that all the products that

will be sold in the shops are made with fresh vegetables and precooked meats

(without any preservative or animal oil, just water, vegetable ingredients and

natural seasoning). The shops will count with standardized kitchens in where the

15

food should be done every single day according with the demand of the day so

that, trough the day all the products are fresh as they cannot stay more than 4

hours displayed on the showcases. Another important fact and competitive

advantage is that instead of offering coffee as most of the traditional shops even in

the UK, the concept will be to serve natural hand-made juices that are going to be

prepared at the time that the customer place the order at the counter so instead of

waiting for the coffee to be done, the customer will wait no more than 1 minute

for the juice.

The shops will be serve by kind and educate people, worried about the customer

service and although there will be no waiter service, the team will always be

attentive to what the customers requires. The environment in every shop will give

the idea of freshness, offering the products as a self-service mode, displayed in

show cases from where customers can decide what they want; there will be also

sitting place for those that are not in a hurry and want to enjoy a time having their

nutritive meals.

3.2.2 Target Customer Definition

The customer that has been defined for Fresh Gardens is a young and professional

person, aged between 20 to 35 years old that knows about style, the importance of

a different service and that is willing to pay a little more when is possible to have

better choices even more when is about food.

The segment of people in which Fresh Gardens will focus its efforts is the one

classified as 4th

, 5th

and 6th

social level. Why? Because this segment of people

usually have had the opportunity to travel abroad, to know the customs of

developed countries, moreover, they are most of the time busy people that know

the importance of having the best when talking about their wellbeing and also they

know that time is a valuable source so that they do not want to stay every lunch

time roughly one hour in a restaurant.

16

3.3 Industry Feasibility

3.3.1 Product Life Cycle

The current economical situation of the country and particularly of Bogota, has

allowed determining that the fast food industry is on the growing stage when

referring to the life cycle. During the last 10 years, the industry has increased 6%2

in sales volume, situation that has encouraged the opening of new restaurants and

shops from foreign and local competitors. It could be said that according with the

economical and political factors that have improved and because of new trade

agreements that the growing trend would remain at least for the next 5 years. On

the other hand, it should be remarked that as long as the new competitors and the

general industry focus their efforts satisfying the demand with more healthy and

innovative menus, improving the service offering quality attention to the

customers and investing on technological development s it would be possible to

keep the industry on track in where every single part has a significant market

share.

The advantage with this industry is that with some improvements, changes or

innovations on the menus offered, it is possible to avoid the declining stage

because these actions give the idea to the customers that the product offer is

totally new maintaining the interest from the customers. (SURA, 2011)

Source: Authors Design.

2 Colombian Asociation Foodservice Industry ACODRES. www.acodres.com.co. June, 2011.

INTRODUCTION

GROWTH: CURRENT STAGE OF

FAST FOOD INDUSTRY

MATURITY

Graph 9: Product life cycle.

SA

LE

S

TIME

http://www.acodres.com.co/

17

3.3.2 Five Forces Analysis

Analysing the external variables that could affect the business is a strategic and

must do activity, since it gives an idea about the field in which the new business

is playing. The five forces analysis, developed by Michael Porter, is a tool very

helpful because using it, is possible to make decisions about how to face the

competitive structure of an industry.

Rivalry of the Competitors

Although the pace of growth in this sector is high, during the last 10 years the

portfolio of products and services has increased,generating competence in prices

and quality. Another crucial factor is the imitation on the sector, which is very

easy when there is no big differentiation between one to other competitor. That is

why big and local chains have focused their efforts on the refurbishment of the

shops in order to compete with style and service. (COLOMBIA APRENDE,

2009)

Bargaining Power of Buyers

This particular market has the advantage of being accessible for all the social

levels, which means that too many people are willing to eat fast food at least once

a month. Having such a big demand, the competence between different shops is

evident when trying to keep the loyalty of their customers. However, as there are

so many customers, it is important for the restaurants to satisfy their needs as they

easily could change to another shop. In that sense, a key advantage is to satisfy a

small niche as their tastes are different allowing focusing strategies on unusual but

healthy food.

Threat of new Entrants

According with the market data for the industry, lately more international chains

have entered to the country opening shops in big and intermediate cities. That is

the case of Burger King, which has returned to the country opening 4 shops and

has plans of opening 20 more on the next four years (La Barra, 2009). The sector

is very accessible so there is a constant danger of being simulated and also having

18

less market share, that is why it should be emphasized the importance of a healthy

option, innovative and also focused on a particular market rather than the general

one.

Threat of Substitutes

The substitutes represent a real threat of displacement for the fast food products.

Currently, the hamburger market is a clear example of that, with McDonalds and

Burger King as international chains, and El Corral as a local one. These three

offer hamburgers in different presentations but at the end what is happening is that

they could not keep the same market share that they enjoyed at the beginning,

because the customers get bored easily and change to another option that they

could even been waiting for.

Bargaining Power of Suppliers

Colombia offers a wide range of suppliers when talking about the food industry.

Despite there are big suppliers for the big chains which in such a time could ask

for more incomes, increasing the cost of the raw material claiming that their

quality is the best among the others, there are so many small and local producers

that also offers great quality, accessible prices and even the possibility of being

part of the supply chain of the company adjusting themselves to the requirements

of the client. (COLOMBIA APRENDE, 2009)

3.3.3 Pestle Analysis

There are several macroeconomic factors that should be taken into account when

analysing the fast food industry as those can affect indirectly the performance of

the market. The most representative factors identified for this particular industry

are described in the graph bellow:

19

Graph 10: Fast Food Industry - Pestle

Source: Authors design with information from Restaurantes, Sura 2009.

FAST FOOD INDUSTRY

POLITICAL

New trade agreementsbetween countries such asUS and China.

Development of strategies inorder to enhance thecompetitiveness.

ECONOMICAL

Stability and growth.

Low impact from theinternational crisis.

Incentives and benefits forinvestments.

SOCIO/CULTURAL:

The current change onlifestyle.

Less time for eating at home.

Low unemplyment rates.

TECHNOLOGICAL

Local suppliers are using thebest technology producingwith high quality.

More access to loans.

LEGAL

New regulations aginstobesity.

Development of the law'MIPYME' for theeconomical support ofentrepreneurs.

ENVIRONMENTAL

Bogota is recognized as one ofthe best latinamerican cities ofrbusiness.

The life quality has improvedover the last 10 years.

More security for new investors.

20

3.4 Market Feasibility

3.4.1 Customer Definition

Based on the results of the primary research is possible to say that the customer of

the fast food market is the average Colombian that sometimes does not have time

for cooking at home or simply enjoy the idea of eating out as a relaxation method.

Depending of the product that is offered, there are variations of the type of

customers that go frequently to the restaurants. Nonetheless, the main segment for

this industry is the one composed for young and professional people aged 15 to 45

years old to which different food options are always attractive.

There is not a particular concentration of consumption in a determined social

level, however, the principal levels that use to go to those places are 3,4,5 and 6

which means people classified as medium, medium-high and high class. The

particular description for this customer is the one that has got an employment,

single or married, that worth the time so that they rather to eat something out and

quickly. In most of the cases in where they are married, both husband and wife are

workers so for them the fact of eating out is crucial as anyone stays at home

cooking (Escobar, 2012).

3.4.2 Market Size

According with the data gathered, Colombia is a country with the third biggest

population over the Latin American region (DANE, 2006), with 45 millions of

inhabitants, its economy is establishing as a strong one. The most important fast

food chains have expanded their operations around the country thanks to the

growth rate of 15% over the last five year, registering sales of more than $880 US

dollars. There is an expected average growth of 7% per annum over the total sales

being the fast food sector one of the more dynamics and important of the national

economy that remains evolving and growing continuously. (Gomez, 2011)

21

3.4.3 Customer Analysis

Everything is about service, style and innovation among the price and menu that

make one place different to another. The profile of the customer that uses to eat in

a fast food shop could be divided into two groups: the business and timeless

people who look for a place that could offers quality food without having to stay

in waiting long time to be served; the second group is conformed for those that

like to go out and have a meal on their free time, for a meeting, for sharing with

friends or any other activity framed on the informality.

These customers usually visit fast food places that are near to their study or work

locations so that it is highly probable that a loyalty between them and the shop

could be developed. However, those customers are not engaged with the place but

with the kind of food that they offer, so that for the shops to maintain their clients

it is extremely important to keep developing different alternatives on menus,

decoration and promotion in order to avoid boredom and monotony on customers

who are mainly characterized because of their changing tastes and requirements

becoming a population highly suggestible from competitors and other products

(Escobar, 2012).

3.5 Organisational Feasibility

The managerial style and the way in which a company is run is a crucial point to

have into account when developing a business proposal. It is important when

starting a business to be as organized as possible but also to be flexible, open to

change, always looking for new ways to do the activities and to assess every

single result in order to improve day by day; if that combination is possible, then

the good environment and the idea of flexibility will be bring to the final

customers from the inside of the organisation to the outside of this one, giving to

the people the sense of being in a new, well structured and flexible option for

them.

Fresh Gardens will be a limited company with head quarter in Bogota; the

company will be run by a general manager that should have a minimum of three

22

years experience on the field. The managerial style that will be develop inside

Fresh Gardens is a participative and flexible one, in where rather than being just a

manager, is crucial for the company to be a leader with character, competent,

consistent and committed with the innovation, change and flexibility required in

this business (Adeniyi, 2007). Fresh Gardens will develop a model of part time

shifts, with flexible times and schedules for its employees giving them a complete

feeling of freedom so that they could come to work relaxed and happy of being

part of the company.

3.5.1 Competence, Training and Skills Development

People that want to join Fresh Gardens should be flexible, passionate and

enthusiastic about the customer service and also delivering the best of them for a

new concept. The best profile that could define the employees for Fresh Gardens

is a creative person with high sense of initiative, proactive, excellent

communication skills as him/her will have to deal with customers, efficacy and

efficiency when managing resources; a key competence will be the ability for

learning as Fresh Gardens will held continuous workshops about leadership,

industry best practices, good workplace environment among others.

In order to accomplish with the market regulations and also because of the

importance of offering healthy and nutritious food with an appropriate diet, Fresh

Gardens will hire a nutritionist and a chef who will be responsible of the creation

and renovation of the menus offered at the shops. They will also be in charge of

the training about the food, ingredients and their manipulation; this training

should be given to all the employees of the shops because it is crucial for Fresh

Gardens to pass down all the information through the employees.

The personal that will be serving customers and also working on the kitchens will

be selected according with their qualification in areas like customer service and

food handling, however, Fresh Gardens will always be looking for young and

fresh people, preferably students that want a part time job with different and

flexible schedules because giving a nice, flexible and appropriate environment to

the employees will grant an excellent service for the customers.

23

3.6 Financial Feasibility

In order to determine the feasibility of Fresh Gardens a financial study was

developed. It is important to clarify that all the expenses and cost were calculated

for two shops as it is expected to open one in the central area of Bogota and

another at the northbound.

3.6.1 Sales Forecast

The forecasting of the sales for Fresh Gardens was developed under the

assumptions that:

The general growth trend for the sector according with the secondary

research is 6% per year, so that it was estimated 5% growth for the market

during the next 5 years.

It has been estimated to sell 150 products per shop as an initial approach,

as the market is highly competitive and at the beginning it is important to

develop a massive marketing campaign in order to enhance the population

for the healthy consumption of fast food.

The products that are going to be sold are presented as a deal of fresh

natural juice and sandwich, so that it is possible to manage a standard price

per deal of 3 regardless the kind of sandwich or juice.

As the shops will be located on areas surrounded by offices and

universities the shops will be open just Monday to Friday. Under that

assumption, the shops will be open 264 days per year.

Table 1: Fresh Gardens Sales Forecast

As it can be seen on the table above, there is expected to have a continuous

growth among the first five years. It is important to state that there will be none

policy about sales so that there will be not sales by credit as this product is

Year 0 1 2 3 4 5

Units 79.200 83.160 87.318 91.684 96.268

Sales Value @3/unit 237.600 257.563 278.798 301.374 327.518

SALES FORECAST

24

commercialized under the retail3 concept, that is why the sales value here

represented will be the direct cash flow on sales for the company.

3.6.2 Project Financing Requirement

Fresh gardens will require an initial investment of 66200 that is expected to

come from owners, private investors and a bank loan. In order to support the

investment required, the following table show a summary of the cash flows for the

first 5 years:

As it can be seen on the graph, the initial investment will be used all before the

starting of the operations. After the first year, the cash flow levels will start

increasing progressively without any financial support as the business should

perform in a self-sustaining way. Therefore, the cash inflows will be enough for

covering the cash outflows of Fresh Gardens. The initial investment required will

be 40.000 pounds that are going to be given 30% by the entrepreneurs and 70%

should be funded by a private investor; the other 26.200 pounds are going to be

funded by a bank loan.

The complete cash flow statement could be seen on appendix 3.

3Retail is the concept that defines the sale of goods from a specific location such as malls, stores,

markets, directly to the final customer in small quantities for the direct consumption. Source:

www.managementstudyguide.com

CONCEPT 0 1 2 3 4 5

TOTAL CASH INFLOW 66.200 237.600 257.563 278.798 301.374 327.518

TOTAL CASH OUTFLOWS 66.200 231.968 249.213 262.280 279.780 249.572

CASH FLOW SUMMARY

NET CASHFLOW FOR PERIOD - 5.632 8.350 16.518 21.594 77.946

OPENING CASH BALANCE - - 5.632 13.982 30.500 52.094

CLOSING CASH BALANCE - 5.632 13.982 30.500 52.094 130.039

EQUITY INVESTMENT 40.000

BORROWINGS 26.200

TOTAL 66.200

FRESH GARDENS FINANCING REQUIREMENT 5 YEARS FORESCAST

INVESTMENT REQUIRED

Table 2: Fresh Gardens Cash Flows

25

3.6.3 Profitability

In order to estimate the profits that Fresh Gardens activity could generate some

assumptions were crucial:

There is estimated an increase on the price according with the annual

inflation projected by the Bank of the Republic of Colombia.4

Costs of sales are expected to be 35% of the total sales. (Dinero, 2011)

A dividend of 10% will be paid every year after the second one.

The reserves will be used for reinvestment and expansion plans.

The above graph is a summary of the profit and loss statement that could be fully

seen on appendix 4. It could be remarkable here that the gross profit is supposed

to be increasing year after year roughly 10% which represent more capability to

cover general expenses and to increase the reserves for expansion plans. Although

on the first year there will be a negative performance as the expenses will be

bigger than the gross profit, after the second year Fresh Gardens will be capable to

offer a positive profit even covering the corporate taxes and the dividends agreed.

3.6.4 Investment Appraisal

Fresh Gardens will offer a return over investment of 27% which will be 5 units

more than the general market trend according with the institution that controls all

corporations activities in Colombia. (SUPERINTENDENCIA DE

SOCIEDADES , 2012)

4 Informe de Proyecciones Macroeconmicas 2011-2017; Direccin de investigaciones

econmicas y estrategias Grupo Bancolombia. Chapter 9, pg. 5.

Year - 1 2 3 4 5

Revenue - 237.600 257.563 278.798 301.374 327.518

Cost of sales - 83.160 90.147 97.579 105.481 114.631

Gross profit - 154.440 167.416 181.219 195.893 212.887

Total Expenses - 162.788 155.619 158.139 160.512 163.477

Profit before tax - 8.348- 11.797 23.079 35.381 49.410

Tax @25% 862 5.770 8.845 12.352

Profit after tax 8.348- 10.935 17.309 26.536 37.057

Dividends - 1.180 2.308 3.538 4.941

Transfer to reserves 8.348- 9.755 15.001 22.998 32.116

PROFIT AND LOSS FORECAST

Table 3: Fresh Gardens Profit and Loss

26

A financial assessment to Fresh Gardens activity was developed in order to

determine the attractiveness for investors from where the next results came up5:

Payback Period: The initial investment will be recovered after 2 years and

11.16 months.

Net Present Value: Assuming a 27% of cost of capital and according with

the cash flows for the first 5 years, the NPV of the project is equal to

21,178 pounds which means that the project is feasible as the amount is

major to zero.

IRR or Internal Rate of Return: Fresh Gardens offers an IRR of 27, 52%,

according with the rule of IRR, the project is profitable as the IRR is

greater than the cost of capital which is 27%.

Another important fact is that the ROEI for the project which is the return over

equity investment shows that after the second year, this relationship starts to

increase gradually representing major attractiveness for investors as the profits are

improving year by year.

3.6.5 Break Even Analysis

Fresh gardens will be a business highly affected by the variation of the inflation,

so that its fixed costs, prices and likewise variable costs and sales will increase

year by year. The breakeven analysis was done with an average of fixed costs,

prices and profits of the first 5 years; from the analysis it is possible to conclude

that Fresh Gardens will reach break-even point during the first year as the required

units to be sold are 76.974 which are less than the forecasted units that are 79.200,

in pounds the break-even value is 246.318, 35.

5 For calculations of payback period, net present value and IRR please refer to appendix 5.

YEAR 1 2 3 4 5

EQUITY 40.000,00 40.000,00 40.000,00 40.000,00 40.000,00

PROFIT AFTER TAX 8.348,00- 10.934,97 17.309,40 26.535,95 37.057,27

ROEI= -20,87% 27,34% 43,27% 66,34% 92,64%

Table 4: Fresh Gardens ROEI

27

Table 5: Fresh Gardens Break Even Analysis

No. Units Sales Contribution Fixed Cost Profit Befor Tax

0 0 0 160.107 -160.107

20.000 64.000 41.600 160.107 -118.507

40.000 128.000 83.200 160.107 -76.907

60.000 192.000 124.800 160.107 -35.307

80.000 256.000 166.400 160.107 6.293

100.000 320.000 208.000 160.107 47.893

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

0 100,000 200,000 300,000 400,000

S

A

L

E

S

V

A

L

U

ESALES TO BREAK-EVEN

CONTRIBUTION

FIXED COST

PROFIT BEFORE TAX

-200,000

-100,000

0

100,000

200,000

300,000

400,000

0 20,000 40,000 60,000 80,000 100,000120,000

S

A

L

E

S

V

A

L

U

E

UNITS TO BE SOLD

SALES

CONTRIBUTION

FIXED COST

PROFIT BEFORE TAX

28

3.7 Resource Requirement Evaluation

Fresh Gardens will start with the opening of two shops in strategic points of

Bogota. As it is known, initially it is difficult for any company to start with a big

staff, even more in Colombia in where the regulations and taxes are very

demanding when related with the size of the company. Fresh Gardens will have

for both shops one General Manager professional in Business Administration with

specialization on Marketing and International Business; one Accountant; one

Nutritionist specialized on healthy diets, and one professional Chef who will be

responsible of giving taste and good presentation to the food; these four people

will be responsible for the general performance of the shops.

Additionally there will be two kitchen people and two front shop people for each

shop. These people will be responsible for delivering the best products among the

best service to the customers.

The salary and wages for the personal is explained on the table below:

Source: Authors design.

The concepts exposed on the payroll taxes and benefits section represent legal

obligations of social security that the employer should pay to the employee

according with the Colombian regulations.

SALARIES AND WAGES

POSITION # ASSUMPTIONS MONTHLY

General Manager 1 1.000 1.000

Nutritionist 1 1.000 1.000

Chef 1 700 700

Accountant 1 700 700

Kitchen Staff 4 300 1.200

Front Shop Staff 4 300 1.200

5.800

PAYROLL TAXES AND BENEFITS

Health 493

Employee Pension Programs 696

ICBF 174

SENA 116

Compensation 232

1.711

7.511

3%

2%

4%

TOTAL PAYROLL TAXES AND BENEFITS

TOTAL SALARIES AND RELATED EXPENSES

TOTAL SALARIES AND WAGES

FRESH GARDENS

9%

12%

Table 6: Fresh Gardens Salaries

29

3.7.1 Technology Gap Recognition and Planning

As Fresh Gardens aims to offer fresh and healthy food day by day, with natural

ingredients, there will be required to have appropriate fridges in each shop in

where the ingredients should be storage day by day keeping the appropriate

temperature according with the specifications of the nutritionist.

The sandwiches will be displayed in show cases that will work like fridges so that,

each show cases should have a refrigeration system that will keep the food already

prepare in an adequate temperature for freshness and quality.

The monitoring of the sales and waste will be a fundamental work, which is why

the most modern tills will be used, the technology of those till will allow to have a

direct and in real time record of sales as they will be linked with the shop system

allowing to the managers the control, recognition and feedback of the market

behaviour.

30

Chapter 4: Strategic Analysis and Business Model

Every idea of a new business could be successful as long as it goes stick to a

proper strategic planning and analysis. Nowadays, when modelling a business

there are different scenarios that make the business cycles shorter than before

because of the use of internet and the possibility of spreading faster the

information and so the requirements of the customers and then because of this

trend, companies should be able to move and adapt their strategies faster and

appropriately in order to satisfy their markets (Instant Strategist, 2008). Fresh

Gardens will be combining the traditional business concept known as brick-and-

mortar business in where a face to face service will be offer to the customers

along with online services in where the menus, services and specifications of the

products will be available for everyone who wants to know a bit more about the

company.

According with the way in which a business model will be developed it is

extremely important to define a strategic path that supports the business process.

The strategic analysis should contemplate the internal and external environments

in order to choose the appropriate techniques and to make the adequate decisions

so that it is possible to come give an idea about the company structure,

competitive advantage, strengths and weaknesses when implementing the

business concept. (Hill & Jones, 2012)

4.1 Ansoff Matrix: Strategic Choice Analysis

This strategic tool was proposed by Igor Ansoff (1957)6 and it helps to identify the

companys strategy according with the chosen market and the product

development, generating 4 different growth scenarios: market penetration, market

development, product development and diversification. (Stone, 2001)

6 Igor Ansoff Known as the father of strategic management developed this tool that was first

published in Harvard Business Review in 1957. www.businessdictionary.com

31

Graph 11: Ansoff Matrix

Source: www.tutor2u.net

Graph 12: Ansoff Matrix for Fresh Gardens

EXISTING PRODUCTS NEW PRODUCTS

EXISTING

MARKET

The current market in which fast food is

highly profitable is the one located in

social levels from 2 to 6 in Bogota. This

market has already a wide range of

products such as hamburgers, hot dogs,

sandwiches and pizzas. Fresh Gardens

does not aim to compete with the same

products on the existing market. (Bogota,

2011)

Fresh Gardens aims to develop a new

concept of healthy food focusing its

strategies on adding new values to existing

products like sandwiches, changing the

way of making them, implementing new

quality standards of production and using

natural, fresh, and healthy and no frozen

ingredients.

NEW

MARKET

This kind of food is always related with

people that do not have time, money or

interest on eating in a proper restaurant.

According with this, it is unlikely to say

that a new market could be developed

with the same products as there is no

incentive to other style of people on

having this kind of food.

Fresh Gardens will bring a new style for

the fast food market, having as a core

value the importance of healthy and ready

to eat food; under this conception, the idea

is to attract more people from the high

social levels such as 4, 5 and 6 to whom

the idea of eating best with the best

ingredients is gaining more importance

year by year according with the global

trend.

Source: Authors design.

32

The matrix presented is applied to Fresh Gardens in order to determine which will

be the most suitable strategy for the company. In that sense, it shows that Fresh

Gardens has great potential developing the Product development strategy as

there will be an improvement on a current product offered in the market aiming to

gain customers with the idea of healthy and fresh food. Additionally, it is also

possible to state that Fresh Gardens could also develop a diversification strategy,

as another important success factor, to attract customers highly interested on

healthy food as an alternative when the time is short or simply because they do not

like the traditional restaurant service.

4.2 Mckinsey 7 S Framework

This model that was developed in 1980 by Tom Peters and Robert Waterman,

both consultants of the McKinsey and company firm, offers a framework of seven

variables that come from the inside of the organisation and are supposed to work

in an intrinsic way so that the success could be achievable. (Abraham, 2012)

This model is very useful for Fresh Gardens as its use, allows identifying the most

important factors that will position the company as one with a well established

structure and policies.

33

Graph 13: 7'S Framework for Fresh Gardens

Source: Authors design.

Fresh and healthy food (sandwichs, saldas and natural fruit juices) creating a new style on the fast food market in Colombia.

Adapting english model of this business into a Colombian culture in where people is always interested on customes and habits from the first world.

Offer the services of healthy food to the local government in order to supply public schools as part of the social program.

STRATEGY

Flexible company in where innovation should be the most important aim among the shops.

Fresh Gardens will be a private company registerd on the Chamber of Commerce in Bogota.

Fresh Gardens will work under the flexible shifts models for their employees offering part time positions with adjustable schedules.

STRUCTURE

Should be enthusiastic about the healthy food.

Young students interested on a flexible job but also on delivering the best of them for the customers.

Qualified professionals on food and nutrition in order to create the best menus.

STAFF

There will be a system in where all the tills will be linked with the central system in order to keep a close control over the sales and then to determine the production for the kitchens.

The compnay will use SAP as the main system allowing integrating all the areas of the company in one system for decision making porcesses.

SYSTEMS

Fresh Gardens will develop a continuos training program in order to deliver the best of knowledge about the importance of an excellent customer service, the latest trends of healthy eating and also training about the new products and style of service.

Fresh Gardens will hire people regarding their passion, learning ability, food control knowledge, adaptability and iniciative.

SKILLS

The main theme of both shops will be the healthy and fresh food environment. According with that, the staff should ensure the delivering of friendly attitude, smiles and quality service.

The shops will be characterized because of their fresh and illuminated spaces, with music that estimulates feelings and emotions making the spaces unique and different.

STYLE

Sustainable development ensuring the inclusion of local producers of the ingredients.

Commitment on delivering the best on customer service.

Promoting the importance of healthy habits.

Delivering fresh and healthy options even when people do not have enough time for themselves.

SHARED VALUES

34

4.3 Value Chain

The value chain analysis is one common and useful tool developed by Michael

Porter in 1985. The general idea with the tool is to identify and separate primary

activities, which are the ones that generate value to the company and so to the

customers, from the support activities, which are the ones that work as the basis

for the adequate development of the general activity of the company. (Porter,

1998).

The graph 15 shows the complete value chain for Fresh Gardens in where all the

primary and support activities are clearly identified and described in order to give

a wide overview of the general activity. What can be analysed from the value

chain for Fresh Gardens is that the primary activities are based on a daily activity

in order to deliver the best of service and quality to the customers, is because of

that that coordination of times and volume of ingredients from the inbound

logistics will be basic for operations and outbound logistics in order to create the

perfect products that should be adequately displayed in the shops.

Additionally, it is also noticeable that from the support activities depends most of

the success of the primary activities as the former are about an appropriate internal

environment in where the continuous development and adequate relationships

should be the pillars of the organization.

4.4 Swot Analysis

Among the theory, many things has been said about the SWOT analysis, however,

this tool is widely used as it represents the possibility of understanding the

internal and external environment together with the advantage of generation of

strategies that integrates both environments. SWOT stands for strengths,

weaknesses, opportunities and threats and together; the assessment of these four

aspects allows structuring plans knowing what the company is and is not able to

do and so unveiling competitive advantages that at a naked eye is not possible to

see (Ferrell & Hartline, 2011).

35

The SWOT analysis for Fresh Gardens is presented on graph 14, this graph

exhibit the four elements giving the most important characteristics identified on

the environment. What could be identified as key factors is the potential growth

that this industry has in Colombia and also among the region, however there is no

doubt that the low entry barriers are also a possible issue for new and small

competitors, that is why Fresh Gardens should focus its strategies on promoting

the fresh and healthy food as the most needed product that will satisfy the needs of

the market.

Graph 14: Fresh Gardens SWOT

Source: Authors Design.

STRENGHTS

Main focus on healthy food.

Strong emphasis on qualitycustomer service.

Continuous innovation on menus.

Adaptation of english coffe shopsmodel to the colombian market.

OPPORTUNITIES

Expansion to other LatinAmerican countries.

Exploitation of local resourcessaving money on imports.

Cosmopolitan environment andmore sophisticated customers.

WEAKNESSES

Small competitor for big fastfood chains.

No hot food offer.

No alliance with dirnkproducers for gettingsponsorship.

THREATS

High informality on the sectorthat could generate unfaircompetence.

Appreciation on prices ofingredients.

High prices on rent because ofinflation.

36

Graph 15: Fresh Gardens Value Chain

Source: Authors Design

37

4.5 Sources of Competitive Advantage and Sustainability

Having a competitive advantage means that competitors cannot copy the idea

easily because the product or service offered has a particular characteristic that

indentifies the company with its customers. However, not always the competitive

advantage is unique for the company and most of the time; competitors copy it in

order to expand their market share. The important thing on having a competitive

advantage is to make it sustainable through the years (Lamb, et al., 2009).

It is important that the company implements a value-creating strategy that the

competitors will be unable to duplicate. According with Anthony Henry in his

book Understanding strategic Management, 2008 the resources for an

organisation should have four attributes for a sustainable competitive advantage,

these attributes analysed for Fresh Gardens are:

a. Valuable Resources: As Fresh Gardens will have capable people for

delivering the best on customer service; Fresh gardens will also hire local

producers that should deliver the best of fresh and natural ingredients for

the company, encouraging the production of raw materials in order to

generate welfare among all the productive chain.

b. Rare resources: Referring to the managerial style which will be completely

flexible, inclusive and adapted to the English model which has worked

pretty well on the coffee shops. Fresh Gardens will focus its efforts in

differentiation of products and service delivering style into a cosmopolitan

environment.

c. Difficult to Imitate: Fresh Gardens will pact exclusive relationships with

local producers. On the other hand the style of service, the idea of healthy

and fresh ready to eat food and the managerial style will be an adaptation

of foreign models so that it could be said that the company will be pioneer

on this kind of business around the country.

d. Substitutability: The fast food market is full of different options for eating

outside but according with the current trend on eating healthy and also the

lack of time for what professional people in suffering there is not a single

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option for these people, maybe some shops give solution for the lack of

time but any of them have focused their efforts offering healthy and fresh

food ready to eat as the cost of managing fresh ingredients without

preservatives or without being frozen is costly. (Martinez & Masmela,

2011)

The above four attributes give to Fresh Gardens the capability of having a

sustainable competitive advantage among the industry as all of them look after the

differentiation form the competitors.

4.6 Selection of Strategies for Success

Fresh Gardens wants to be recognized as a different option when talking about

fast food restaurants. According with Michael Porter and his model of generic

strategies (Eldring, 2009), in which he proposed that there are three generic

strategies that companies can choose in order to develop a competitive advantage

which are cost leadership, differentiation and focus strategy, Fresh Gardens will

always look for the differentiation strategy.

The aim and philosophy of Fresh Gardens is to deliver fresh and healthy food. In

order to make that possible, it is crucial to have fresh ingredients day by day on

the shops kitchens. This production process could result expensive but it is also

important to keep in mind that the segment of customers to what Fresh Gardens is

looking to attract is classified as high socio-economical level and that is why the

final price for a meal is not as cheap as the one of the competitors.

4.7 Development of Appropriate Business Model

An appropriate business model is useful for understanding the organization,

interactions, relationships, strategies and value delivering processes for an initial

idea. A business model is helpful when communicating to others what is meant to

do and how it will be done (Bridgeland & Zahavi, 2009), it should clarify the key

points of the idea emphasizing on the creation, delivering and capturing of value

for a specific customer.

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According with Osterwalder & Pigneur (2010) the business models have similar

patterns that could be classify in five different general model styles (Osterwalder

& Pigneur, 2010). From those patterns, the model that concerns the creation of

Fresh Gardens is called Unbundling Business Model as this idea will be related

with a product innovation business rather than a customer relationship business or

infrastructure business. In order to clarify what Fresh Gardens is about, the

Canvas Model7 proposed by Osterwalder & Pigneur was used as can be seen on

graph 16.

It is important to highlight the relationship between all the components of the

model starting from the customer segmentation that, as was mentioned before will

be people characterized because of their high socio-economical classification,

young and professionals that know about the necessity of having healthy food but

also the crucial of good service and style when choosing places to eat. In order to

satisfy their needs and requirements, the customer relationship will be a total

responsibility of the staff that should create an appropriate and friendly

environment when serving customers so that the channel of promotion including

shops and their decoration style will be adequately exploited.

There are also key elements such as the partners, activities and resources that

should be choose and managed according with the value proposition for the

customer, having that in mind, Fresh Gardens will be on a constant control and

communication of those resources in order to guarantee the delivery of the best

value for the customers. Finally, the right combination and use of the above

elements will be translated in satisfactory levels of revenue, having in mind that

the strategy of Fresh Gardens will be differentiation focusing on delivering the

best of service and quality to the customers.

7 Tool preformatted with the nine blocks which allows painting pictures or concepts about new or

existing business models. (Osterwalder & Pigneur, 2010)

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Graph 16: Fresh Gardens Business Model

Source:Fresh Gardens adaptation of Canvas proposed by Osterwalder and Pigneur.

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Chapter 5: Business Plan

This final chapter aims to develop an overall assessment of the entire business

proposal for Fresh Gardens. Every main aspect related with the company,

marketing, production, operations, financing and plan of action will be described.

5.1 Overview of the company:

Fresh Gardens will be a limited company registered to the Chamber of Commerce

of Bogota. The company will be operating on the market of fast food restaurants

with two shops located in Parque de la 93 and Centro Internacional. The style

of the company will be an adaptation of a well worked model in cities such as

London and New York as the current environment on Bogota is characterized by

busy people, professionals that worth the time, healthy habits and different

options that leave behind the traditional stereotypes.

The main idea and competitive advantage of Fresh Gardens is to offer fresh and

healthy food ready to eat in order to benefit those that do not have enough time for

having a proper lunch or simply because they are tired of the traditional and

unhealthy fast food but still like the kind of service and speed that this model

offers. The friendly service and passion that the staff should deliver to the

customers is a core value for the company for this reason, there will be continuous

training about this matter.

Objectives

To deliver an innovative option on fast food market, changing the traditional

concept for one in where the healthiness and freshness of the products are the

most important and core drivers of the company operations. In order to have

success into the market, it is important for Fresh Gardens to focus on:

Fresh and healthy ready to eat food for busy professionals, business people

and postgraduate students.

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Deliver quality service to the customers reflecting passion and enthusiasm

to serve them.

Innovation on menus in order to keep the interest of the customers and

also for attracting new ones.

5.1.1 Marketing Plan

Market Analysis:

Fast food market in Colombia, especially in Bogota is a high competitive market

because of its potential growth that results from the positive behaviour of the

economy over the last 5 years. Many big fast food chains have decided to move in

to Colombia as their plans of expansion over the region; that is why big chains

such as McDonalds, Burger King, Pizza Hut among others have started plans of

expansion into the national territory mainly focused on intermediate cities.

Despite the high competition, there is a big advantage on this market as people are

always looking for different options when going out for food, which is why lately

the healthy concept has gain importance becoming a feeding trend.

Buying Behaviour:

Nowadays people are not that loyal to a company or brand that do not do anything

new constantly; the customers of the fast food market generally are people that

worth time and do not like to spend hours on a place waiting to be serve even

more when they are professionals or busy people because of their studies or

business.

According with that, customer always is looking for a short and easy menu

expecting to be served as quick as possible and to have its meal in a short time so

that they can have and keep going with their other activities; if they cannot have

this benefits, they will change their mind and choose another option.

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Competitors:

As it can be seen on graph 17, there are several competitors on the fast food

market. The list presented is a mix between local and international competitors

that already have participation in most of the big cities in Colombia. However, all

of these competitors do not offer sandwiches, salads and natural fruit juices as the

main products of their menus, they just have one or two different options for those

that would like to change their feeding habits.

Source: SURA Restaurants Inform (SURA, 2011)

Market Segmentation:

Fresh Gardens will focus its strategy attracting young people aged 20 to 35 years

old that are classified as 4, 5 and 6 socio-economical level according with the

current classification on the city. Most of the people included in this range of age

are professional, postgraduate students or own their proper business what makes

them value the time because usually they are busy on their stuff. This people is

also moved by international trends as they have had the possibility of knowing

different cultures so that they know that the healthy and fresh food ready to eat is

an option that could satisfy widely their needs.

Graph 17: Fresh Gardens' Competitors

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Marketing Strategy:

Fresh Gardens will attract customers offering a different option when having fast

food out of home. The main features of the menus offered by Fresh Gardens will

be the freshness of its products which will be done over a healthy basis using the

best ingredients coming from local farms and producers.

Fresh Gardens will add value to the food that customers look for eating when time

is not enough for a traditional lunch. What Fresh Gardens will do is to offer food

with the adequate combination of nutrients that could replace on a healthy way the

traditional food.

Pricing Strategy:

Fresh Gardens will not compete with prices as the company will fix a price for a

deal of 3 which is made-up of one sandwich with natural fruit juice. This price

will be on average of the current prices on the market that normally are 2.5 to 4

pounds for a basic deal.

Promotion Strategy:

Fresh Gardens will promote its products mainly through the distribution of leaflets

in front of universities, offices and gyms. Additionally there will be billboards

posted on the area in where the shops are going to be located; this promotional

campaign will be supported by the creation of a web site in where people will be

able to find all the information about the products and the main values of the

company. Other important strategies are:

Partnership with the most important gym chain called BodyTech as the

people worried about healthy food uses to go constantly to the gym in

order to keep themselves healthy and actives.

Strategic alliance with the Secretary of Education of Bogota in order to

distribute among schools and universities sandwiches and natural juices

as part of a campaign against the bad feeding habits.

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5.1.2 Management Style and Structure of the team:

The flexible style in order to promote innovation and passion about Fresh

Gardens activity will be the key driver for the company. The company will be

manage as a friendly place in where employees will feel as a part of a team that

work together for the welfare of the customers.

The company will use the model of part-time shifts in order to avoid the boredom

of the staff and also giving them the possibility of managing their time according

with their needs.

It will be crucial to maintain a continuous training about customer service, healthy

food, enthusiasm and team work as all the stuff should work with a positive

thinking about what they are d