Feasibility Report for a Fast Food Restaurant

FEASIBILITY REPORT FOR A FAST FOOD RESTAURANT PREAMBLE: We have taken out time to write this report for several reasons among which are: [pic] This project serves as part of the â€Å"private-sector participation initiative† drive embarked by our company [pic] Our desire to make you reconsider your present stand about not wanting to invest in the Nigerian economy, for now [pic] Our belief that this report can form a base for an enlarged feasibility report, which we hope you, would commission us to carry out [pic] Our desire to make you see the financial viability of this project [pic] Our desire to make you see the potentials of the Nigerian market [pic] Our desire to bring viable investments into this country [pic] Our desire to portray the true image of Nigeria to the outside world [pic] Our desire to see your company operational in Nigeria It is therefore our firm belief that after reading through this report, there will be a burning desire to reap the benefits of investing in Africa's biggest market, and partnering with us in i ts quest to touch hearts through the McDonald's heritage. TABLE OF CONTENT 1. DATA GATHERING 2. CONCEPT DEVELOPMENT 3. SITE ANALYSIS 4. COMPETITOR ANALYSIS 5. FINANCIAL STATEMENT [pic] DATA GATHERING [pic]BASIC FACTS ABOUT NIGERIA: AFRICA's BIGGEST DEMOCRACY AND MARKET. FEDERAL CAPITAL: ABUJA COMMERCIAL CAPITAL: LAGOS POPULATION Nigeria with a population of 113,828,587 (July 1999 EST. ) is the most populous country in Africa. It has a Population Growth rate: 2. 92% (1999 EST. ) AGE STRUCTURE 0-14 YEARS: 45% (MALE 25,613,974; FEMALE 25,397,166) 15-64 YEARS: 52% (MALE 30,272,539; FEMALE 29,197,611) 65 YEARS AND OVER: 3% (MALE 1,678,732; FEMALE 1,668,565) (1999 EST. ) [pic]MARKET AREA We intend that McDonald's setup its first restaurant, in Lagos State. It has also pinned down any of these locations for its first restaurant, namely Broad and Marina Streets in Lagos Island, Awolowo Road in Ikoyi, and Akin Adesola and Ahmadu Bello Way, in Victoria Island. There is a school of thought that says that the Market in Lagos is bigger than the Market in other countries of West Africa put together. For people conversant with Lagos, these locations are prime locations, as they boast of the presence of Nigeria’s high rise buildings, Nigeria’s most successful shops and companies, with their attendant management and senior staff, who invariably are Nigeria’s creme de la creme. These locations can also be regarded as Nigeria’s Jugular vein in commerce. They also presently boast of hosting the best Fast Food Restaurants in Lagos. We are already looking forward to a healthy competition between you and them. Another feature of these locations is that they can be accessed within 5-10minutes of each other. It is therefore usual to see people working in Victoria Island moving over to a restaurant in Ikoyi, or Lagos Island, and vice versa. [pic]DEMOGRAPHY OF POTENTIAL CONSUMERS: Age: Infant – 60 and above (some fast food restaurants have playing pens for infants) Sex: Male: Female (55%: 45%) Income: $300/year and above Usage Rate: Worst Case Scenario: 500 consumers/day Average Case Scenario: 1200 consumers/day Best Case Scenario: 2000 consumers/day With McDonald's we expect figures to get as high as 1,500, 2,200 and 2,700 respectively. User Status: Ranges from first time users, Regular users and Occasional Users. For an average day in the 1ST year of operations: First Time Users: approx. 10% Regular Users: approx. 50% Occasional Users: approx. 40% Loyalty Status: Indifferent (None) 42% Medium: 35% Strong: 20% Absolute: 3% We are however confident that with McDonald's, consumers can be pulled from the indifferent categories, to being strong and absolute consumers with McDonald's. Occupation: Predominantly white collar workers, businessmen also form a sizable proportion of consumers. During weekends and evenings, the majority of consumers are whole families, couples, lovers etc. Educational Qualification: Secondary (High) school certificate holders to PHD holders. Religion: Predominantly Christian and liberal Muslims. This therefore means, a willingness/freedom to associate with people, including the opposite sex in public. Provisions for Takeaway snacks also allow the recluse patronize Fast Food Restaurants. Social Status: 80% of all classes of society BENEFITS: These are related to some kind of advantages looked for in patronizing any business. In the case of Fast Food Restaurants, the following parameters have been used to assess patronage: Economical Nature of Investment: Medium Rating Convenience: High Rating Prestige: High Rating Hangout Venue: High Rating LOCAL TRAFFIC PATTERNS: Lagos has a high traffic pattern. On a busy weekday afternoon in Lagos, traffic density is approx. 000 cars/sq. kilometers. [pic] CONCEPT DEVELOPMENT Concept development means making decisions about the components of the fast food restaurant concept, including theme, menu, service style, hours of operations. Since this feasibility is for the setting up of an already established name, its concept would basically be c entered upon what is presently obtainable. It is however important to make some recommendations, as the data from the population in the market area would help in evaluating a fast food restaurant's concept that fits the area’s needs and preferences. Lagos Island and its sister island, Victoria Island, form what is called Lagos City or EKO. It is a city with a high rate of hustle and bustle. In some parts of this city, the lights never go out. It is a city in which 70 percent of its work force comes from smaller towns (3-70 kilometers) from within and outside Lagos State, on a daily basis. This scenario automatically creates needs in the minds of some migrants to Lagos City, which must be met, such as: 1. Where do we eat breakfast, considering that we might have to wake up very early so as to avoid the early morning rush, which results in traffic jams? 2. Where do we eat lunch, considering the fact the demands of work and the distance between workplace and home will prevent us from going home? 3. Where do we eat dinner, considering that we might need to allow the traffic jam caused by motorists leaving Lagos City, subside? Apart from these variables, fast food restaurants in Lagos play host to people who live in Lagos City, and also provide a conducive environment for businessmen. We would therefore recommend that hours of operation span from 6. 45am to 9. 45pm daily. [pic] SITE ANALYSIS Specifically, we would like to narrow down our site search to Akin Adesola Street, in Victoria Island. This road is directly linked to the bridge that connects Lagos Island at the Ikoyi and Old Ikoyi end of Lagos Island: a drive of less than 5 minutes. It is important to note that Old Ikoyi is the most expensive residential area in Lagos State, and it is followed closely by Victoria Island, which also houses the most expensive office apartments in Lagos State. What this means is that McDonald's would be neighboring the rich and tasteful people resident in Lagos State. Akin Adesola Street, which spans about 1. 1Km is directly linked to the major streets in Victoria Island such as Ahmadu Bello way, Ozumba Mbadiwe, Adeyemo Alakija, Adeola Odeku, Sanusi Fafunwa, Karimu Kotun and Bishop Oluwole Streets. It traffic density is not too high as the road is dualised. At the other end of this street is the famous Bar beach; with Kuramo beach around the corner. McDonald's would therefore benefit from people coming to the beach who require Take-away. The presence of the beach also guarantees a constant supply of fresh air. Presently, only one major fast food restaurant operator has an outlet on this major road. Around Victoria Island there are presently about six fast food restaurants and based on the potentials of this area of Lagos State it would be an understatement to say that that Akin Adesola Street, would comfortably house another restaurant, most especially the first McDonald's restaurant in Nigeria. It is important to note that apart from Lagos City, other towns in Lagos State, such as Ikeja and Apapa can comfortably host a McDonald's restaurant. [pic] COMPETITOR ANALYSIS Fast foods in Nigeria are as old as Nigeria itself. From the time of Nigeria’s independence fast food shops have been opened in the major towns of Nigeria. It was however not until 1986 that United African Company of Nigeria (UACN) in a diversification bid opened the first real fast food chain of restaurants in Nigeria. Since then a number of other operators have graced the fast food restaurant industry stage. Presently, it is one of the fastest growing sectors of the Nigerian economy and it would not be out of place to say that there is already a fast food craze in Nigeria, and this is just the beginning. In financial term, the fast food industry is approximately a $40 million dollar market, with over 83% of this market in Lagos State alone. In doing a proper competitor analysis, it will be appropriate to first identify the major competitors whose presence will bring out the best of McDonald's. The major players are MR. Bigg's (a fast food restaurant operated by UACN), Tantalizers, Tastees Fried Chicken, Sweet Sensations, Munchies, Favorites, Friends Eatery, Kas Chicken, Fingers (a fast food restaurant operated by United Trading Company), St. Elmo’s (a South African Franchise). For this analysis, only the three major fast food joints will be discussed. MR. BIGG’S This is a subsidiary of the big conglomerate, United African Company of Nigeria (UACN). It started operations in 1986, and is noted for being the first real operator of fast food restaurants in Nigeria. Presently, there are thirty-seven outlets spread all over Nigeria, with a massive twenty-two in Lagos State. Plans are on the ground to increase the total number of restaurants to fifty-seven by the end of the year. An estimated 1200 people visit an average Mr. Bigg's outlet per day. STRENGHTS †¢ Biggest financial muscle †¢ Brand Name recognition †¢ Good Knowledge of the Nigerian market †¢ Complete support of the UACN conglomerate as it is rumored to be the only subsidiary presently making a profit †¢ Strong emphasis on family and catching the young †¢ Formation of alliances with companies providing complementary goods †¢ Good use of the electronic and print media †¢ Starts operations as early as 6. 5am, with the intention of attending to people who want a good meal breakfast before working hours commence WEAKNESSES †¢ Its strength fizzles out at the arrival of the other major fast food operators to the neighborhood †¢ It is presently not noted for its excellent food, as it places emphasis on its snacks †¢ The initial excitement that heralded its entrance to the market seems to have been lost, as there seems to be â€Å"an out of fashion†, cover on it with the presence of the new entrants. This feeling is however peculiar to Lagos, as the opening of any Mr. Bigg's restaurant outside Lagos gives a feeling â€Å"at long last†, to the residents of these towns TANTALIZERS One of the most promising fast food restaurants in Nigeria. They began operations in the Festac area of Lagos State in 1995, and within the space of about six years have opened seven other outlets. The management of Tantalizers can be regarded as very aggressive marketers. Their marketing strategy seems to be directly aimed at their competitors. In the last four outlets they have opened, they have set up shops almost directly opposite or at best, a little close to their competitors in the process of drawing customers to their outlets. STRENGTHS: †¢ Effective Marketing Strategy †¢ Improving Brand Name Recognition †¢ Commendable Customer Service †¢ Vastly improving financial muscle †¢ Marketing emphasis is on catching couples and lovers WEAKNESS: Increasing complaint about the quality of their food †¢ Diversification into Africa Meals may be their undoing as they would be dividing their effort between the Fast food restaurant and the new African food restaurant †¢ There seems to be an emerging class distinctio n within the fast food industry, and the feeling is that Tantalizers falls within the middle class category. In other words, for serious minded businessmen and the upper-class, Tantalizers would naturally not come as their first choice of a fast food restaurant TASTEE FRIED CHICKEN It is one of the most promising fast food restaurants in Nigeria. It began operations in Surulere, Lagos State. It is attributed to be the second new generation fast food restaurant, after Mr. Bigg's. At the time of this report they have only three restaurants. When one considers the time they have spent in the fast food industry in Nigeria, and the fact that they only have three restaurants to show for it, one would want to mistakenly write them off as underachievers. Doing this will however be at ones peril as they seem to be carving a niche among the business and upper classes. STRENGTHS: †¢ Improving Brand Name Recognition †¢ Commendable Customer Service †¢ High taste and consumer conducive environment †¢ Regarded as having the best food in the industry Marketing emphasis seems to be on, catching the business class WEAKNESS: †¢ Ineffective class distinction. Class distinction which they claim to be their marketing strategy for luring the business and upper classes, has not seen them charging higher prices for their service with the belief that consumers who value t heir products and service will be willing to pay for it. In other words, even though it may seem that they are providing better products and service, it has not accrued to relatively bigger profit, as it seems that their expenses are relatively higher than their competitors, while the profit, which should be proportional to expenditure, is lower. †¢ Marketing is not aggressive [pic] FINANCIAL STATEMENT Financial Analysis will be based on the demography of potential consumers of McDonald's as arrived at in the demographic studies (USAGE RATE) on page 4 of this report. According to the survey carried out on existing fast food restaurants, Usage Rate: Worst Case Scenario: 500 consumers/day Average Case Scenario: 1,200 consumers/day Best Case Scenario: 2,000 consumers/day With McDonald's we expect figures to get as high as 1,500, 2,200 and 2,700 respectively per restaurant. Using these figures, assuming an average consumer spends $1. 5/visit/day, expected income: For Worst Case Scenario: 1,500 X $1. 5 X 360 days per year = $810,000 per year For Average Case Scenario: 2,200 X $1. 5 X 360 days per year = $1,188,000 per year For Best Case Scenario: 2,700 X $1. 5 X 360 days per year = $1,458,000 per year In reality, consumers presently spend between $0. 4 – $5 per visit, making our estimated income analysis of $1. 50 per visit very conservative. CONCLUSION: The nature of this report has made us only able to do extensive work on areas such as Data Gathering, Concept Development and Site Analysis. It has only been able to peripherally touch areas such as Competitor Analysis and Financial Statement. A proper analysis on areas such as Competitor Analysis and Financial Statement which form an integral part of any Feasibility work, will only be possible if the company for which this report has been done and sent to, finds it necessary to commission us on a more extensive feasibility study.