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Business Management HL Internal Assessment Research Proposal Question: How can Frais and Fresh maintain their market share in Montreal 2021?

Student Code:

Word count: 370

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Research Question: How can Frais and Fresh maintain their market share in Montreal 2021?

Rationale: Since the lockdown in Canada, F&F have been suffering from a great decrease in sales which could be the result of poor marketing. Should they increase their marketing budget, I believe that it could potentially boost their sales.

Theoretical framework: 1.3 Organisational Objectives- Analysing F&F’s internal strengths and weaknesses, external opportunities and threats and factors affecting the market position of the restaurant through a SWOT analysis.

3.5, 3.6 Ratio analysis- Using profitability ratios in order to evaluate the financial position of the business. By evaluating the gross profit margin, I will be able to identify the expenditure that the business uses for marketing.

4.1, 4.2 Role of Marketing & Market Planning- identifies F&Fs place in the market and marketing objectives, also justifies strategic tactics that the restaurant may perform .

Methodology:

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Primary sources will consist of Cash flow forecast for two years in order to Compare sales between the years, an Interview with both the founder and the business development director, to recognize issues the business is facing and learn if management is aware of other potential issues. Secondary sources will include articles/newsletters to understand if the restaurant currently stands at a good position in the market, has a good reputation and high brand awareness.

Complications: Anticipated difficulties

Potential solutions

Bias information from the business in

Signed letter of confidentiality that the

order to protect the reputation of their

information will not be disclosed to

restaurant.

anyone

Employees may not any useful

Guide them and ask unbiased, specific

information, may give vague answers

questions that will help with my investigation

Firm reluctant to provide financial

Provide them with a signed letter of

information

confidentiality

Action Plan

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TASK NAME

START DATE

SOURCE

ANTICIPATED DIFFICULTIES MODIFICATIONS

28th December

Business development director

Delays from the business

Founder + Business development director

Biased information

Pre- Write up Complete and sign all letters of confidentiality Collect all legal documents Conduct interviews Study theoretical framework First Draft Write up report First draft due Final Draft Complete Amendments Final draft submission

6th January 12th January

Interview was delayed 3 days

14th January 17th January 31st January 17th February

BM Teacher + Business development director

18th February

Gantt Chart for investigation

Complete and sign all letters of confidentiality Collect all legal documents

Amendments were completed on 19th Final draft was extended to 20th

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Business Management HL Internal Assessment How can Frais and Fresh maintain their market share in Montreal 2021?

Proposal for business development director of Frais and Fresh Montreal

Session: May 2021 Word count: 1849

Acknowledgments:

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I would like to begin by thanking my business teacher and mentor Christopher Johnson whom guided me throughout the course of this investigation. I would like to thank Mr Khaled and Mr Billal Yamak for their time, resources and support.

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Table of contents Executive Summary

…………………………………………………………...

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Introduction

…………………………………………………………...

10

Methodology

…………………………………………………………...

11

Main results and Findings

…………………………………………………………...

12

Results from Interviews

…………………………………..…………

12

Findings from articles

………………………………………..……

13

Results Income Statement

………………………………………….......

13

Results of the balance sheet ………………………………………………

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…………………………………………………………...

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Analysis and Discussion SWOT Analysis

………………………………………..……

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Liquidity ratios

………………………………………..……

18

………………………………………..……

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Financial analysis Conclusion

…………………………………………………………...

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Recommendations

…………………………………………………………...

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Limitations

…………………………………………………………...

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Reflections

…………………………………………………………...

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Bibliography

…………………………………………………………...

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Appendices

…………………………………………………………...

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Executive summary 8

The entire restaurant industry in Montreal has been drastically impacted by pandemic. This Montreal eatery is no exception as it has experienced a decline in sales since 2019. This being said, numerous market-oriented restaurants have been surviving due to their adaptions to their customers ‘needs and wants’. Frais and Fresh’s management believes that they too must adapt in order to maintain their place in the market. This was when I decided to investigate the question “How can Frais and Fresh maintain their market share in Montreal 2021?”

Primary research was conducted by gathering a balance sheet, presenting a visual representation of the firm’s current financial strength, which was then used to produce a ratio analysis. Interviews were conducted with the business development director and the founder of F&F. Secondary research included recent articles written about the restaurant with comparison to other restaurants, giving a vague understanding of the market position and brand strength of F&F and was a basis for whether the company needed to strengthen their position in the market.

A steeple analysis was undergone in order to identify external factors affect ing the business. It was recognised that F&F only spent 2% of sales on promotion. In order to maintain their place in the market F&F needed to at least double their marketing budget. Word count: 215

Introduction

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Frais and Fresh is a contemporary style Montréal eatery that was founded in 2016. It has been inspired by the exquisite spirit of the city through the melange of different ethnicities, colours, energy and the ‘freshness’ of life in Montréal. With the founder being the father of the business development director, the restaurant ’s management style is very democratic as other members of the family are also important stakeholders.

Until just recently in 2019, the business decided to become a global franchise and signed their first franchise agreement in Saudi Arabia. F&F is family centred to the extent that the Saudi Arabian franchisees are also cousins. This proposes that the management of this business are usually on good terms with one another, and the business culture of this restaurant is ideally warming and family friendly. F&F claims to serve “wholesome, healthy, colourful and affordable food that you can enjoy on the go” (Frais & Fresh, 2017)

Globalization has facilitated F&F to expand, however with the increasing competition of healthy style restaurants in Canada and the COVID-19 pandemic, F&F’s place in the market is being threatened. Henceforth, the research question: “How can Frais and Fresh maintain their market share in Montreal 2021?”

Methodology

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The exploration consisted of both primary and secondary sources in order to gain adequate information to formulate a robust business-oriented investigation with clear potential solutions. Primary sources included two interviews and financial documents from F&F. The interviews were conducted in person regarding the threats that F&F’s management are facing according to the business development director (Appendix 1). The interview with the founder was more about the nature of the restaurant giving a clear understanding of their brand identity (Appendix 2). A Balance sheet was obtained directly from the DBD clearly showing the restaurant in Montreal’s capital structure.

Information obtained from the interviews was used to produce a SWOTT analysis, Secondary sources including articles about the restaurant (Appendix 3) and online reviews from customers (Appendix 4) also aided in the production of the analysis.

Main results and Findings

Main findings from interviews with Business development director and founder:

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•

Employees are generally satisfied and they get along resulting in intrinsic motivation

•

Diverse food and strong unique selling point, comparing them from competitors

•

Faces problems with increasing competition (restaurants of similar concepts)

•

Desire to expand through and reach more customer through globalisation and local food delivery apps

•

Changing location has positively impacted sales

•

Current location is strong as there is footfall and many potential customers

•

The only healthy restaurant on the block, however others nearby

•

Expanded as a franchise to Saudi Arabia

•

Business culture is family oriented so communication is easy, however important

•

Believes that they have filled many gaps in the market

•

Wish to further develop their menu items

•

The restaurant industry includes some of the businesses that are mostly impacted by COVID-19

•

COVID-19 has limited full customer experience

•

Spends 2% of sales on marketing

•

Focused on keeping meeting customer needs and wants by keeping up with trends, always introduce new items to their customers

•

High staff turnover

•

Employees are easy to train

•

Do not believe that they should bring in house delivery

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Main findings from Articles advertisements and online reviews •

Very few articles written about the restaurant in the past few years

•

Last article was published in 2019- None were published later

•

Google, Trip Advisor and Menu-Pix customer reviews are all above 4.5 stars

•

Was voted by Eater-Montreal as 13th best salad place in Montreal in 2019

Results of the Income Statement

Income statement for F&F (promotion 2% sales) Sales revenue Cost of goods Gross profit Operating costs Net profit before interest and tax Gross profit margin Net profit margin

687,260 91,200 596,060 233,941 362,199 87% 52.69%

*All figures are in Canadian dollars

Estimated Income statement for F&F (promotion 8% sales) Sales revenue Cost of goods

687,260 91,200

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Gross profit

596,060

Operating costs

263,753

Net profit before interest and tax

332,307

Gross profit margin

87%

Net profit margin

48.35%

*All figures are in Canadian dollars

Results of the balance sheet

Asse ts Assets Current Assets Fixed (Long-Term) Assets Other Assets

$

30,900

$ $

73,646 8,939

Total Assets

$

113,485

Liabilities and Owner's Equity Current Liabilities

$

24,416

Long-Term Liabilities

$

20,388

Owner's Equity

$

67,758

Total Liabilities and Owner's Equity *All figures are in Canadian dollars

$

112,562

Analysis and Discussion

SWOT analysis:

Frais and fresh current market position

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STRENGTHS • • • • •

Strong USP- healthy yet wholesome and flavourful food Only healthy restaurant on the block Employees are happy and enjoy the job Good source of finance from franchisee royalties High customer reviews on the internet

WEAKNESSES • • • •

OPPORTUNITIES • • •

Growing market- potential franchise opportunities Consumers desire vegan products Training new staff does not take too much time

Poor brand recognition in Montréal Team isn’t permanent- high staff turnovers No recent articles/ advertisement Social media platforms need more awareness and recognition

THREATS • • •

Increasing competition- similar concept restaurants Restaurants are closed due to the pandemic F&F only serve non-alcoholic products

Frais and fresh currently stand at a good market position, their clients are generally satisfied as F&F have already filled many gaps in the market however now with the pandemic and other complications frais and fresh’s place in the market is in jeopardy. According to the DBD the restaurant has a strong unique selling point as they are one of the only few restaurants in Montreal to serve a large variety of vegan, vegetarian and healthy products.

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Frais and Fresh currently outsource their delivery services. Since delivery companies only deliver to the downtown areas of Montréal, Frais and fresh can bring their delivery services in house in order to market their products to a wider geographic reach and possibly deliver to the suburbs of Montréal. However, F&Fs buyer persona are healthconscious students whom are mainly found in the downtown area of Montréal . Currently since Frais and Fresh only operate one restaurant, it is both financially and rationally best for them to continue outsourcing.

According to financial documents and statements made by both the founder and the business development director, frais and fresh were doing much better in their earlier years and now due to increasing competition they are losing many customers. The DBD claims that “you don’t need to educate people to eat healthy anymore” (Yamak, 2021). An option for F&F is to introduce new products to their customers which could potentially boost sales; however, the majority of F&F’s products were created by a Michelin star chef. According to online reviews, customers claim F&F’s food to be “delicious fresh and tasty” (Pacifique, 2020) as well as “fulfilling and satisfying” (Rizwan, 2021). The average rating for customer reviews exceeds 4.5 stars, clearly showing that customers enjoy the food, service and ambience of frais and fresh. If frais and fresh were to introduce new products, not only would this be time consuming and expensive (due to the hire of the Michelin star chef and stages of tasting, refining and reviewing) however business to customer relations may be at stake due to new products not meeting the standards of current loyal customers.

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Secondary research was conducted in order to find recent articles about frais and fresh however it was found that the restaurant does receive high brand recognition throughout social media. It is possible that this is the result of poor marketing campaigns due to the very low budget that frais and fresh allocate towards promotion. Articles and advertisements can potentially boost F&F’s sales, gain higher market recognition and as a result maintain F&F’s place in the market. Since Frais & Fresh is a socially conscious business, advertisements in the media may potentially inform and educate consumers about F&F’s healthy products, recyclable packaging and fair-trade suppliers. Frais and fresh lacks in internet advertising and the new market for online advertisements is a lowcost option for F&F. Promoted posts on Instagram and Facebook, target specific consumer markets ensuring that those who view F&F’s advertisements are most likely potential clients.

Liquidity ratios 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =

30900 24416 = 1.27

𝐴𝑐𝑖𝑑 𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 =

30900 − 1200 24416

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= 1.22

Financial analysis Frais and fresh had a Gross profit margin of 87% when the business allocated a budget 2% of sales for promotion. Using the same figures however with a budget of 8% of sales for promotion, the gross profit margin went down by less than one percent. Meaning that if frais and fresh were to increase their budget to 8% of sales they would have almost increased their budget by C$30,000 without decreasing the gross profit margin. The estimated income statement did not take into account the sales that frais and fresh would gain as a result of increasing their promotion as there was no simple way of measuring this. However, if frais and fresh decided to increase their marketing budget by 6% the possibility of them gaining sales is very high and the risk of F&F making a loss or even less profit than the previous year is extremely minor. Frais and Fresh’s stands at a good liquidity position with their current and acid test ratio both being significantly greater than 1. F&F are able to pay all of their loans and do not seem to have an issue with finance showing that they are able to spend their finance on promotion.

Conclusion Frais and Fresh Canada must increase their promotion budget in order to maintain their current market share due to; •

Increasing competition- competitors are all advertising

•

Expansion of offerings and adaptations to the menu items has a high chance of poor market recognition and unhappy customers

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•

Current promotion is very poor

•

Increasing budget has minor negative impact on sales

Especially now with new sources of finance from F&F franchisees, increasing F&Fs marketing budget will have a minor impact on their financial position.

Recommendations It is recommended that F&F increase their marketing budget to 8% of sales. Therefore, the most efficient way to maintain and possibly increase F&Fs market share is to concentrate on marketing and promotion techniques like advertisements and articles. As a result, they must first increase their marketing budget to at least 8% of sales.

Limitations •

Articles may be risky as the company has minimal control over what the producers want to write about them

•

Advertisements could lead to lead to a misrepresentation of facts

•

Deferred revenue expenditure, F&F may not immediately recognize results of advertising

•

Difficulty in measuring how effective each advertisement/ promotion technique was

Reflections All profit and loss estimates are made under the ideal case, there is a chance that the company will make less revenue than anticipated. The profit and loss account where 8% 19

of the budget was allocated did not take into account the anticipated number of sales after advertisements and promotions. In the financial research, it is agreed that Frais and Fresh stand at a go...