Business Model Critical Evaluation - Business Plan Assessment Answer

November 16, 2018
Author : Celina

Solution Code: 1EIGA

Question: Business Model Critical Evaluation

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Business Plan Assessment Answer

Task

Write a business plan for your venture and critically reflect and evaluate each part of the model, specifically targeted to a potential financial investor who has an interest in your idea(s). You have been asked by the potential investor to provide a business plan regardless of what stage you are at, the success or failure you are experiencing, and regardless of the value of the investment required (if any). This investor wants a brief description and explanation of the business model, including revenue and cost details, but is primarily interested in your own personal, critical reflection and evaluation of each element of the business plan.

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Solution: Business Model Critical Evaluation Assessment Answer

INTRODUCTION

The aim of this report is to understand from the business model of Moo Moo The Wine Bar + Grill whether investing in the restaurant will be a profitable venture for investors. Various facets of the restaurant's business like the business background, market attractiveness, unique value proposition, revenue model, sustainable competitive advantage, avoidance of pitfalls and financials analysis will be determined and evaluated for the same.

BUSINESS MODEL

BUSINESS MODEL SUMMARY

The business model of Moo Moo The Wine Bar + Grill has elucidated how the restaurant carries out its business. The restaurant which was founded in 2005 is a formidable player in the Australian restaurant industry. (Gold Coast Bulletin, 2015) The restaurant targets the premium market and its target customers are well-educated youngsters of all genders. The marketing strategy of the restaurant involves maintenance of high standards of food and beverages, well-trained and polite staff and high-quality events. The restaurant's Unique Value Propositions are its drinks, food and events. The revenue model of the restaurant has been discussed and it majorly involves conducting events and selling food and beverages to people who show up for the event. The restaurant is provided with a sustainable competitive advantage by its location, events, quality, high net profits and unique branding. An obstacle in the restaurant's path could be government regulations which ban nigh events and the restaurant has ensured that it won't be affected by affected by such a ban by focusing on the quality of its food, beverages, and services. A financial analysis of the business shows that it is an extremely lucrative proposition for the investors.

BUSINESS BACKGROUND

COMPANY

Moo Moo The Wine Bar + Grill began operations on the Gold Coast from 9th June 2005. The restaurant was founded by Steven Adams and Autumn Adams who originally belong to the UK. Their vision was the creation of a "premium quality steak brand". (Moo Moo The Wine Bar + Grill, 2017) The restaurant is currently owned by Plaza QLD Holdings. The founders of the restaurant are still a part of it as ‘Brand Consultants’. The only branch of Moo Moo The Wine Bar + Grill is in Brisbane.

INDUSTRY

The restaurant industry in Australia sees annual revenue of over $ 20 billion and has been growing annually for the past five years at a rate of 3.5 percent. There are 24,440 restaurants in Australia and they employ 288,854 staff. (IBIS World, 2017) The industry is expected to witness steady growth due to the increasing penetration of foodie culture.

MARKET ATTRACTIVENESS

TARGET MARKET

The products and services offered by Moo Moo The Wine Bar + Grill are high-end. Various cooking-related TV shows have increased the demand for premium dining restaurants. (Bankwest, 2015) The major competitors in this segment in Gold Coast are Little Truffle, Allure, Seaduction, The Fish House and Social Eating House & Bar. (Gold Coast Bulletin, 2015) .

TARGET CUSTOMERS

The target customers are youngsters of all genders. They’ll be educated professionals who have the buying capacity to avail the products and services of the Moo Moo The Wine Bar + Grill. (Lobo, 2014) The target customers will have the aptitude to appreciate the culinary preparations of the restaurant. (Adamczyk, 2014) Since the customers are educated professionals, they are expected to behave decently towards each and towards the staff, especially during DJ events.

MARKETING STRATEGY

The strategy employed by the restaurant to keep its target customers happy has three aspects. Firstly, the food and beverages offered in the restaurant will be of the highest standards and will be in keeping with the latest culinary trends. (Adamczyk, 2014) Secondly, the restaurant staff will be well trained and polite. Thirdly, the events conducted in the restaurant will be of tasteful artistic quality.

UNIQUE VALUE PROPOSITION (UVP)

PRODUCTS & SERVICES

Drinks

The restaurant offers a large variety of drinks including cocktails, mocktails, beer, vodka, gin, tequila, rum, bourbon, whiskey, cognac, wine and champagne. All the liquor served in the restaurant are of premium brands. (Moo Moo The Wine Bar + Grill, 2017) Cocktails, mocktails etc. are prepared following unique recipes and using high-quality ingredients.   

Food

The restaurant is primarily a steakhouse, but also serves burgers, pasta, and seafood. A wide variety of dessert options are also provided to the customers. (Moo Moo The Wine Bar + Grill, 2017)  

Events

The restaurant organizes night events featuring highly reputed and talented artists.

UVP IMPACT

The products and services mentioned above have helped the restaurant maintain an identity in the market and achieve the vision of its founders to be a “premium quality steak brand”. (Gold Coast Bulletin, 2015)

REVENUE MODEL

The target customers of the restaurant are wooed to the restaurant by organizing night events.

To calculate the costs incurred and the revenue generated by such events, the last such event conducted by the restaurant shall be considered.

COSTS

REVENUE

PARTICULAR

COST INCURRED

PARTICULAR

REVENUE OBTAINED

Advertising

Nil

Entry tickets ($5 per ticket)

67 x 5 = $335

DJ Remuneration

$ 100

Drinks sale

$1330

Other expenses (wages etc.)

$ 500

Food sale

$440

Total Costs

$600

Total Revenue

$2105

From the table above, it has can be deduced that the profit earned by the restaurant from the last event is $ 2105 - $ 600 = $ 1505.

The customers who come to the restaurant for the events end up spending money on food and drinks.  

Advertising such events don't cost a penny to the restaurant as patrons are informed about such events using a blackboard kept outside the restaurant.

The revenue generated from an event far outweighs the expenses incurred by the restaurant to conduct the event.

SUSTAINABLE COMPETITIVE ADVANTAGE

The competitive advantages of the restaurant are based on the following parameters:

Location: Proximity to various beaches like the Surfers Paradise Beach, Gold Coast Beach and the Burleigh Beach ensure that the restaurant sees a steady inflow of customers.

Events: The restaurant organizes unique events which lead to customers preferring the restaurant over its alternatives.

Quality: The quality of the food and drinks served and the quality of service is never compromised by the restaurant and this helps the restaurant gain an advantage over its competitors.

High Net Profits: The costs incurred by the restaurant are very low while the revenue generated is extremely high.

Unique Branding: The restaurant is a “premium quality steak brand”. Such a steak based branding is unique to the restaurant in the premium restaurant segment. (Gold Coast Bulletin, 2015)

AVOIDANCE OF PITFALLS

As seen above, the revenue model of the business is event based. A situation could arise in the future when the restaurant is unable to conduct such events. For instance, the government could bar such events from being conducted during night time. Also, the government could restrict the sound levels of events conducted during night time, leading to the inability of organizing DJ parties in the restaurant.

The restaurant has ensured that closure of events won’t affect the business of the restaurant by focusing on the quality of its food and beverages and the quality of its service. In case, the restaurant can’t conduct events in the future, the quality of the food and beverages and the quality of service will ensure that the restaurant will still be able to generate profits.   

FINANCIAL ANALYSIS

BALANCE SHEET

PARTICULARS

VALUE

ASSETS

$5 Million

LIABILITIES

$200,000

EARNINGS RETAINED FOR OPERATIONAL EXPENSES

$100,000

It can be seen from the balance sheet above that the value of the assets owned by the restaurant far outweighs the liabilities and the restaurant also has enough fund to meet its day to day requirements.

INCOME STATEMENT

PARTICULARS

REVENUE

EXPENSES

FOOD

$79,200

$45,000

DRINKS

$239,400

$45000

EVENTS

$60,300

$18,000

TOTAL REVENUE AND EXPENSES

$378,900

$108,000

NET REVENUE

$270,900

The income statement given above is for a period of 6 months. The income statement given above reveals that the expenses incurred are extremely low while the revenue earned is very high and hence the net revenue of the business is very high.

BREAK EVEN ANALYSIS

PARTICULARS

EXPENSE

FOOD

$45,000

DRINKS

$45,000

EVENTS

$18,000

TOTAL

$108,000

 

The table above gives the expenses incurred over a 6 month period by the restaurant. Therefore, the revenue needed for the business to break even in a six month period is $108,000.

Therefore, from the balance sheet, the income statement and the break-even analysis it can be seen that the restaurant is doing extremely well financially as the restaurant has low expenses and high returns.

CRITICAL EVALUATION OF THE BUSINESS MODEL

ANALYSIS OF BUSINESS BACKGROUND

The fact that the restaurant has been in existence for more than a decade signifies the success of the vision of its founders. Only 4 percent of the businesses are to survive over a decade. (Carmody, 2015) It takes a strong business idea to just survive over a decade and Moo Moo The Wine Bar + Grill has managed to not just survive but also become one of the best. (Gold Coast Bulletin, 2015)

Apart from the success of the restaurant, the restaurant industry as a whole is seen to be growing. (IBIS World, 2017) The $20 billion industry is growing annually at 3.5 percent and the prevalence of various cooking based reality shows on the television is a significant contributor to this growth.

Thus, the restaurant industry is one of the safest bets for an investor in Australia and Moo Moo The Wine Bar + Grill is one of the best businesses in the industry.

ANALYSIS OF MARKET ATTRACTIVENESS

The target market for the restaurant is high-end or premium dining. This is a wise choice as premium dining is on a rise like never before due to the prevalence of cooking shows on TV. (Bankwest, 2015)

The target customers of the restaurant are young, educated professionals of all genders. These customers have the best buying capacity and decent behaviour too can be expected out of them. (Lobo, 2014) They’ll be more interested in night events than other customer segments.  

The strategy used by the restaurant to keep its target customers happy is three-pronged. The restaurant offers high-quality food and beverages. It also ensures that its staffs are well-mannered and polite. Further, the restaurant also conducts high-quality events.

The restaurant has identified the best-growing segment within the restaurant industry and also targets the customers with the best purchasing power. (Bankwest, 2015) (Lobo, 2014) Also, the measures taken by the restaurant to keep the customers happy are apt as a survey has revealed that Millennials place most importance on quality when it comes to food. (Adamczyk, 2014)

Potential investors can feel secure about return on investment as the target market, target customers and marketing strategy chosen by the restaurant are the most suitable for the business.

ANALYSIS OF UNIQUE VALUE PROPOSITION (UVP)

The restaurant is unique from its competitors because of the range and quality of drinks offered, its steak-focused food menu, and the various night events it conducts. (Moo Moo The Wine Bar + Grill, 2017)

The founders of the restaurant had set out to achieve the establishment of a “premium quality steak brand”. As there are no other premium restaurants focusing on stakes, this gives the restaurant a unique identity. The quality offered by the restaurant and the night events conducted by the restaurant also help the restaurant stand out among its competitors.

Therefore, a potential investor can be assured that the restaurant has a unique value among its competition.

ANALYSIS OF REVENUE MODEL

The revenue model discussed in the business model is an extremely attractive and efficient revenue model as the net profit is extremely high. The total revenue is much higher than the total costs incurred. For a potential investor, this means, high dividends on investment. Potential investors always prefer high returns on low investment. (Garyali, 2012)

ANALYSIS OF SUSTAINABLE COMPETITIVE ADVANTAGE

The competitive advantages of the restaurant according to the business model are location, events, quality, high net profits and unique branding.

Unique branding and organization of events show entrepreneurial creativity. (Kotelnikov, 2017) Unique branding also offers differentiation and differentiation is a competitive advantage. (JBDON, 2017)

Superior access to customers is a competitive advantage. (Ab.Kadir, et al., 2017) The restaurant's location near beaches provides it with a competitive advantage.

The high net profits of the business provide cost advantage (JBDON, 2017) and the quality maintained by the business has ensured that the customers associate the restaurant with an enduring value. (Kokemuller, 2017)  

The fact that the sustainable competitive advantages of the restaurant as mentioned in the business model have theoretical basis enables the investors to make an informed decision.

ANALYSIS OF AVOIDANCE OF PITFALLS

In the business model, the threat of government regulation over night-time events has been acknowledged by the restaurant. The strategy to survive in the industry in case of such an obstacle is to focus on the quality of food, drinks and services. This is a good strategy as Millennials who are the target customers of the restaurant place a high importance on quality. (Adamczyk, 2014)

Investors need not worry whether the restaurant will shut down if night events are banned by the government because the restaurant has already decided to focus on quality so that it will be able to survive in case nigh events are banned.    

ANALYSIS OF THE FINANCIAL ANALYSIS

The financial analysis of the business has been done in the business model using a balance sheet, income statement and break-even analysis. From them, it can be seen that the business has high revenue and low expenses. Hence, an investor who invests in the business will get high returns on his/her investment. Investors are looking at maximum returns on minimum amounts of investment. (Garyali, 2012) So, a potential investor must not let go of the opportunity of investing in Moo Moo The Wine Bar + Grill

CONCLUSION

A business model for Moo Moo The Wine Bar + Grill has been prepared and critically evaluated. It has been seen that the business is in a growing sector and within the sector, the business is in the segment which sees the most growth. The restaurant targets young educated customers of all genders and the marketing strategy to keep them happy will focus on quality, polite staff and unique events. The unique value proposition (UVP) of the restaurant is composed of its drink menu, food menu and events roster. The revenue model of the restaurant focuses on attracting customers with events. Location, events, quality, high net profits and unique branding are the factors which provide the restaurant with a competitive advantage. The restaurant is aware of the effect a ban on night events will have on its business and is prepared to face such a scenario by focusing on quality. The critical evaluation of the business model has shown us that the business model followed by Moo Moo The Wine Bar + Grill is an extremely lucrative proposition for investors.

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