EL FIESTON RESTAURANT BUSINESS PLAN

A Project Presented to the Faculty

of
California State University, Stanislaus

In Partial Fulfillment
of the Requirements for the Degree
of Master of Business Administration

By
Reyna E. Nieves
November 2017
 CERTIFICATION OF APPROVAL

EL FIESTON RESTAURANT

BUSINESS PLAN

By
Reyna E. Nieves

Signed Certification of Approval page

is on file with the University Library

Ms. Ann Edwards Date

Faculty Advisor

Dr. Sophie Zong Date

Project Coordinator, Professor of Finance

Ms. Katrina Kidd Date

Director of MBA Program

Dr. Tomas Gomez-Arias Date

Dean of College of Business Administration
 © 2017

Reyna E. Nieves
ALL RIGHTS RESERVED
 TABLE OF CONTENTS
PAGE

Abstract ................................................................................................................... iv

Introduction ............................................................................................................. 1

Executive Summary .................................................................................... 1

Business Objectives .................................................................................... 3
Mission Statement....................................................................................... 3
Guiding Principles ...................................................................................... 3
Keys to Success........................................................................................... 6

Company Description ............................................................................................. 10

Ownership ................................................................................................... 10
Legal Forms ................................................................................................ 11
Location and Facilities ................................................................................ 12

Services ................................................................................................................... 13

Daily Operations and Production ................................................................ 13

Suppliers ..................................................................................................... 14
Management Controls ................................................................................. 15
Administrative Systems .............................................................................. 16

Market Analysis ...................................................................................................... 18

Industry Analysis ........................................................................................ 18

Market Size ................................................................................................. 19
Industry Participants ................................................................................... 19
Main Competitors ....................................................................................... 19
Market Segments ........................................................................................ 20
Target Market Segment Strategy ................................................................ 21
Market Needs .............................................................................................. 21
Market Trends ............................................................................................. 22
Market Growth ............................................................................................ 22

Marketing Strategy, Promotion, and Implementation............................................. 24

Strengths ..................................................................................................... 25
iv
 Weaknesses ................................................................................................. 26
Opportunities............................................................................................... 26
Threats......................................................................................................... 27
Unique Selling Proposition ......................................................................... 27
Competitive Edge........................................................................................ 28
Pricing Strategy........................................................................................... 29
Promotion and Advertising Strategy ........................................................... 31
Marketing Programs.................................................................................... 31
Milestones ................................................................................................... 35
Exit Strategy................................................................................................ 35

Organization and Management ............................................................................... 37

Organizational Structure ............................................................................. 37

Financial Plan.......................................................................................................... 38

Important Assumptions ............................................................................... 38

Source and Use of Funds ............................................................................ 39
Break-Even Analysis .................................................................................. 39
Projected Cash Flow ................................................................................... 39
Business Ratios ........................................................................................... 40
Hourly Labor Schedule ............................................................................... 40

Conclusion .............................................................................................................. 42

References ............................................................................................................... 44

Appendices

A. Operations Figures and Tables.................................................................... 51

B. Market Analysis Figures ............................................................................. 54
C. Financial Tables and Figures ...................................................................... 57

v
 ABSTRACT

Considering ethnic cuisine’s popularity and the fast-casual restaurant concept gaining

ground in today’s culinary world, it is the perfect time to explore the feasibility of

opening up an authentic, fast-casual Mexican restaurant in Gilroy, California. The

restaurant industry is labor intensive and requires dedication. Many restaurants fail

for a variety of reasons including bad location, poor management, bad customer

service, and poor marketing. For this reason, it is extremely important that thorough

research be conducted prior to opening a restaurant in order to be successful. The

chosen location for the restaurant is on a retail strip near the US-101/Leavesley Rd.

exit in Gilroy, California. The location is ideal due to its proximity to the Gilroy

Premium Outlets and a lack of Mexican restaurants within a walking distance of the

145 outlet stores. The restaurant, El Fieston, which means “the big party,” will serve

authentic Mexican food in a friendly, festive, fast-casual setting. After thorough

operational, market, and financial analysis, El Fieston can achieve profits of over

$350,000 per year with great customer service, authentic quality food, a start-up cost

of $227,700, and $17,441 fixed operating costs per month.

iv
 INTRODUCTION

Executive Summary

Some of the hottest culinary trends, according to the National Restaurant

Association’s 2017 Culinary Forecast (2017), include street food-inspired dishes,

ethnic-inspired breakfast items, house-made condiments, authentic ethnic cuisine,

fast-casual concepts, and ethnic spices. This business plan outlines the introduction of

a fast-casual restaurant that will follow today’s culinary trends by serving authentic

Mexican dishes from the Guadalajara, Jalisco region in Mexico. The ambiance and

service will mimic that of typical celebratory events in the region, hence the name El

Fieston which translates to “the big party.” The restaurant will offer a variety of food

options that will be assembled to order, giving the customer a plethora of dish

options. El Fieston will service residents, employees, and commuters in the Gilroy,

California area.

El Fieston will start its operations in a 2,500 square-foot space on a retail strip

situated on 8620 San Ysidro Ave., Gilroy, California. The space is located off the

Leavesley/US-101 exit, which had an average daily traffic of 20,800 cars in 2015

(“2015 Traffic Volumes,” 2015). Situated next to El Fieston are the Gilroy Premium

Outlets, which consist of 145 stores. Furthermore, total daytime population in Gilroy,

California is 3,091,728 (Property Overview, 2017) making it a prime location and

leaving El Fieston in a strong position for viable growth.

El Fieston will position itself as the go-to, quality, reasonably priced,

authentic, fast-casual Mexican restaurant that will offer locally sourced ingredients

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used to replicate Guadalajara’s most loved recipes while being served by well trained,

welcoming staff in a vibrant environment with festive décor and cultural literature

that will educate the public of Mexican customs. Research and development efforts

will be ongoing in order to keep up with market trends and keep the customer

satisfied. The restaurant will reach out to customers via its custom website, social

media, review websites, and deep community involvement.

Unfortunately, with every new endeavor comes obstacles. Because El Fieston

is a new entrant with limited resources in Gilroy’s restaurant community, the

restaurant must work twice as hard as its competitors to gain customers. Main

competitors have been identified as Chipotle Mexican Grill and Super Taqueria,

which will undoubtedly be a threat to the restaurant. However, El Fieston’s strict

processes and procedures along with its food variety and authentic research and

development program will give the restaurant a competitive edge and will make it

difficult for competitors to duplicate El Fieston’s work.

The project will require $227,700 to start up. $170,250 of the required funds

will come from a business loan, and owner, Reyna Nieves, will contribute the

remaining $56,925. The money will be used to fund building rent and deposit,

renovations, equipment, furniture, fixtures, and all starting operating capital. The

owner has opted to lease a location, as opposed to buying, and will purchase used

equipment wherever feasible in order to minimize start-up costs. Planning and

execution of all operating functions will be performed in a lean manner to decrease all

operating costs. With all of this in mind, El Fieston is forecasting $178,490.77 in

 3

profits in the first year, with a start date of April 15, 2018, $374,480.20 in 2019, and

$394,719.78 in 2020.

Business Objectives

The primary objectives of this business plan is to explore how El Fieston can

be Gilroy’s go-to fast-casual restaurant of choice and to achieve favorable profits.

These objectives will be achieved by developing and constantly improving strategic

processes and procedures; providing authentic, quality meals at reasonable prices

with excellent customer service; focusing on employee development and retention;

leveraging marketing initiatives; and bringing the festive Mexican culture to the

community.

Mission Statement

The mission of El Fieston is to offer authentic, quality, fast-casual Mexican

food in an environment that will introduce the customer to a celebratory Mexican

culture that focuses on great food, a welcoming environment, and festive décor. El

Fieston will achieve this goal by: 1) providing the best recipes brought from the

Guadalajara, Jalisco region in Mexico, 2) using fresh, local sourced ingredients for

the best quality, and 3) creating a welcoming culture that will mimic that of Mexican

family parties where the host’s main goal is to make the guests feel welcome.

Guiding Principles

Guiding principles will be the focus of the business. Because the owner will

not be at the location at all times, it will be extremely important that employees

continue to be self-sufficient and carry out El Fieston’s mission at all times. Each
 4

principle will serve as a guide for employees’ actions and attitudes towards customers

and coworkers and will create a company culture that allows for a positive

environment. The guiding principles of El Fieston will also help employees decide

what actions to take in any situation.

The first principle is to provide excellent customer service. All employees are

to treat all customers as they would their most beloved family member. In order to

achieve great success, a restaurant must always provide great customer service.

”Increasingly, restaurant customers say few things are as important to them as good

service, and as the industry grapples for that elusive share-of-stomach in a crowded

field of food choices, good customer service begets customer loyalty” (Waters, 1998,

p. 47). The great customer service experience will go hand-in-hand with the festive

Mexican tradition of making all guests feel comfortable and bringing our best skills to

the kitchen. We will also provide customers with free Wi-Fi and the ability to order

online and have their food ready for pickup.

Thorough employee training will be a huge driver in customer service efforts

as employees will be the last persons El Fieston’s patrons will remember, and they

could be a deciding factor that helps the patron determine whether to move on to

other places to eat, or return to El Fieston again (Ridilla, 2004). El Fieston aims to

create a welcoming environment that will foster repeat customers who will then serve

as brand advocates. According to Fuggetta (2012), advocacy—not ads—is what

drives purchase decisions and perceptions in nearly every product category. El

Fieston will build advocates by defining what great customer service is so the
 5

customer knows exactly what to expect and so the staff knows exactly what is

expected of them.

Customer service will be divided into three main drivers that include the

authentically delicious food that El Fieston serves the customer, the quality of the

staff’s interaction with the customer, and the action plan for situations when

customers, for any reason, are unhappy with the service provided. In order to keep

customer service at its prime at all times, management will be responsible for

continuously monitoring all three drivers of customer service. Food will be monitored

for consistency of flavors and quality; staff will be monitored on their response time,

attentiveness, greetings, and menu knowledge; and all staff will be monitored on their

response and ability to fix problems in an effective manner.

El Fieston will clearly state and implement a culture of respect that will focus

on the customer. According to Balthazard, Cooke, and Potter (2006), organization

culture has been characterized as the “glue that holds organization together and is not

just one aspect of the game- it is the game” (qtd. in Kumar, 2012). Each employee

will be vetted to ensure that each employee fits the company culture and is dedicated

to the mission. Staff will know every item on the menu and must try each item at

least once so that they can share their experience with the customer if asked to do so.

The staff will also attempt to learn repeat-customer names and orders to offer a

personalized experience as soon as repeat customers walk through the door. Each

staff member will be trained on how to greet customers, answer phones, place orders,

and quickly resolve common complaints. When complaints arise, staff will listen
 6

intently to the problem with no interruptions, own the mistake, stay calm, negotiate a

solution that is acceptable to the customer and restaurant, and apologize. All

employees will be taught the basics on risk mitigation, and complaints that are more

complex will be left for management to handle.

The second principle will be to provide the customer with only quality food.

Some of the hottest trends of 2017 include hyper-local sourcing and natural

ingredients (“What’s Hot 2017,” 2017). Keeping this in mind, El Fieston will only

use fresh ingredients with priority on sourcing ingredients within a 250-mile radius.

Each batch of food will be tested for taste consistency, and there will be strict

directions to dispose of batches of food that do not meet standards. El Fieston will

operate with the following in mind, “Only serve food that you would feel proud to

serve at your home to your closest family and friends.”

The third principle is to provide only authentic meals. Authentic ethnic spices

and foods are also trending concepts; for this reason, El Fieston will only serve fresh,

authentic dishes that are typical in the Guadalajara, Jalisco or Zacatecas region, with

the Guadalajara region being the menu’s main inspiration.

Keys to Success

The restaurant’s keys to success comprise of repeat business, hiring and

retaining the right personnel, attaining prime location, continuous improvements, and

research and development. Customers are naturally drawn to fresh food and

remarkable meal service will naturally supply the business with a growing customer

base (Ridilla, 2004). For this reason, El Fieston will make sure to put its best foot
 7

forward when cooking and serving every single customer. Every customer who

comes in once should want to return, and in order to bring in more business the

restaurant will encourage repeat customer to recommend us online.

Hiring and retaining respectful, customer-service-oriented personnel to serve

and chefs with great experience to take care of all the cooking will be imperative to

the success of the restaurant. In 1988, The Wall Street Journal reported that the

average cost for turning over an hourly position in our industry was $1,400. In 1990,

it increased to between $2,900 and $4,100 (Carbone, 1995). It is estimated that

between forty and fifty percent of all operating costs are related to human resources

(Carbone, 1995). Employees are a huge factor in the mission of El Fieston, and the

restaurant will put processes in place to hire only those who fit the company culture.

Personnel will be trained on safety, quality, and customer service, and management

will make sure that all personnel are treated well, because happy employees will in

turn provide the best service to guests (Rowe, 2011, p. 32).

El Fieston will pay employees honorable wages to keep them working in our

establishment. As the company expands and revenue allows, management will add

generous employee benefits including bonuses and paid health care benefits.

Employee retention and job satisfaction will aid in providing patrons with a pleasant

customer experience. McDonald’s CEO, Steve Easterbrook, told Forbes "The

improvements we made to our compensation and benefits package to employees in

U.S.-company operated restaurants have resulted in lower crew turnover and higher

customer satisfaction scores," (Craver, 2016).

 8

Location is yet another key to El Fieston’s success. The current goal is to open

El Fieston near the Gilroy Premium Outlets located 20 minutes south of Silicon

Valley and San Jose directly off Highway 101. The Gilroy Premium Outlet center has

145 factory outlet stores, and El Fieston hopes to attract shoppers, employees,

commuters as well as some of the 52,533 Gilroy residents.

Process efficiency increases customer satisfaction and is necessary in order for

the company to grow. For this reason, continuous improvement will be imperative to

success. Continuous improvements will help El Fieston fine-tune operations while at

the same time lowering operational costs and making the business more effective.

Continuous improvement efforts will be done in every process, but will focus on

customer service and operations efforts. El Fieston will work to standardize all

aspects of the business and will implement a continuous improvement process at least

once per quarter. El Fieston will require employees to remain engaged in the process

by having them address inefficiencies as well as offer improvement suggestions. This

will cultivate a sense of individual initiative and creative thinking in employees. Once

a process improvement opportunity has been analyzed and approved management

will move forward with the “plan, do, check, act” process which contains the

following steps: 1) plan a process change, 2) make the change, 3) check the impact

the change has made on the business and its quality, and 4) decide whether to keep

the process or scrap it. This process will be ongoing until the team feels that there is

nothing left to do.

 9

Finally, El Fieston will engage in research and development initiatives. In an

effort to stay on top of market trends and ahead of competition, the restaurant will

create a research and development program with a focus on creating new dishes based

on market trends to serve customers. The program will consist of collaborating with

well-known and established chefs in the Guadalajara, Jalisco region and putting out at

least two pilot dishes per year.

Ms. Nieves will conduct yearly market trend analysis and will provide the

chefs with trend parameters. The chefs will then work on recipes that will align with

current trends. Once a recipe is developed, it will be tested and rated in Guadalajara.

If ratings are favorable, the recipe will be costed and added to El Fieston’s menu as a

promotional item. After one month of being on the menu, Ms. Nieves will analyze

sales and profits and decide whether the item stays on the menu, becomes a seasonal

item, or is removed from the menu completely. The developing chef will then receive

a bonus for providing a permanent or a seasonal menu item.

 COMPANY DESCRIPTION

The authentic fast-casual Mexican restaurant, El Fieston, will be located on

8620 San Ysidro Ave., Gilroy, California. El Fieston will serve some of the most

popular Mexican dishes including tacos, burritos, enchiladas, mole, sopes, tortas,

among others. The food options will be assembled to order, giving the customer a

plethora of dish options. See Appendix A, Table 1: El Fieston’s Hours of Operation

for an operating schedule.

Ownership

El Fieston will be fully owned by Reyna E. Nieves. Ms. Nieves is a California

native with deep roots in Jalisco, Mexico. She grew up with a deep love for the

Mexican celebratory culture and her mother’s famous dishes. Ms. Nieves realized that

very few restaurants were able to compete with her mother’s cooking. Those that

could compete were full-service restaurants, something that is becoming less popular.

It was her love for the festive culture and her mother’s cooking, along with foreseen

opportunity to gain significant clientele that inspired her to pursue ownership of a

fast-casual Mexican restaurant that will put her two loves in one location.

Her mother, Manuela Lopez, whom people know as an amazing chef, was

born in the little town of Zaragoza, Zacatecas and moved to San Agustin, Jalisco at

the age of 18. Mrs. Lopez worked both as a cook in restaurants in Guadalajara and as

a personal chef for the wealthy families in the region for many years, and it was then

that she developed some of the best recipes that will be used at El Fieston. Friends,

family, and others in her expended community would constantly seek Mrs. Lopez’

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cooking expertise for weddings, birthdays, quinceañeras, fundraisers, and other

events. It did not take long to realize that there is a great business opportunity in

operationalizing Mrs. Lopez’ signature dishes into a restaurant idea.

Ms. Nieves earned her B.A. in Psychology and Social Welfare from the

University of California, Berkeley in 2009. She worked at a culinary sauce and salsa

manufacturing company for many years, and it was there that she received her

purchasing, planning, and operational experience. In addition, Ms. Nieves earned her

Master of Business Administration from California State University, Stanislaus in

November 2017. She will pair her business savviness with her mother’s kitchen

expertise to run the most culturally accurate restaurant in Gilroy, California.

Legal Form

El Fieston will be organized as a sole proprietorship wholly owned and

operated by Ms. Nieves and will be registered in the state of California. Sole

proprietorship is the simplest and most common type of business operating in the

United States today and has plenty of advantages. However, because sole

proprietorships have a limited life, the owner will switch to a limited liability

company (LLC) after two years, once she has the resources necessary to switch.

Switching to an LLC will provide the owner with protection from being personally

responsible for the debt liabilities of the company (Hillstrom, 2002, p. 687).

Some of the benefits the owner will gain with sole proprietorship in the first

two years include a great deal of independence and autonomy; ease of filing taxes,

accounting, and business operational functions; modest start-up costs due to not
 12

needing attorney services to prepare documents required by state or federal agencies;

the advantage of business losses being used to offset other income on personal tax

returns; and owner ability to secure and build a work force (Hillstrom, 2002, p. 1070-

1071). Because a sole proprietorship involves the business and the owner being

considered one and the same, which means that the owner has unlimited personal

responsibility for the business’s liabilities, Ms. Nieves will make sure to purchase

liability insurance for protection from lawsuits or other threats.

Location and Facilities

El Fieston restaurant will be located in a 2,500-square foot facility on a retail

strip right next to the Gilroy Premium Outlets near the US-101/Leavesley Rd. exit.

The reason for this location is its high traffic on US-101 as well as the fact that Gilroy

Premium Outlets is a popular shopping destination for visitors and residents.

Caltrans’s 2015 Traffic Volumes on California State Highways stated that there was

an average daily traffic of 20,800 cars on Leavesley Rd./US-101 exit (“2015 Traffic

Volumes,” 2015). In addition, it is estimated that the total daytime population is

3,091,728 (Property Overview, 2017), making the area a prime location for a fast-

casual restaurant.
 SERVICES

Daily Operations

Ms. Nieves will take care of the financial management, purchasing, public

relations, scheduling of staff, and inventory control of the business. Ms. Nieves will

also oversee daily operations and receiving functions. El Fieston will be located in a

prime location in Gilroy, CA and will serve typical Mexican dinner options

throughout the day. El Fieston will target Gilroy residents, Gilroy Premium Outlet

shoppers and employees as well as commuters. For this reason, El Fieston will

operate during peak service times, one hour before and one hour after the Gilroy

Premium Outlets operates in order to give employees and shoppers the ability to grab

a bite to eat before heading home.

All staff are expected to exceed all customer service expectations in all

transactions. They will have to follow the philosophy of servicing each client as if

they would their most respected and loved family member. All employees will be

trained to greet each customer with a can-do attitude. The facility and its surroundings

are expected to be clean at all times, and there will be a log that includes a checklist

of all areas that will be cleaned daily and weekly. In addition, all staff will be

responsible for ensuring that each customer receives the highest standard of service

and high-quality food free of contamination.

At least one individual from each shift will be hazard analysis and critical

control point (HACCP) certified, and all employees will have monthly training that

covers good manufacturing practices and safety. Good personal hygiene will be

13
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required from every employee regardless of their position, and shift managers will

have an Atkins Thermometer Kit in order to facilitate and properly document and

check food temperatures. All ingredients and finished products will be properly

labeled, and there will be a manual available to all staff that includes shelf life and

standard procedures for all operations in the restaurant. These practices will be

mandatory as to be compliant with regulations.

Suppliers

There will be a vendor approval program that will consist of checking

vendors’ service compliance, checking ingredient flavor profile, checking product

integrity, and testing products before use. Once ingredients and supplies are

approved, the product and its product code will be added to an approved product and

vendor list, and only products on that list are to enter the establishment.

Owner, Ms. Nieves, will pair with a customer service representative from

California Restaurant Supply to find the best equipment and supplies for El Fieston.

California Restaurant Supply has a location in Fresno, California, which is in close

proximity of Ms. Nieves’ home in Los Banos, California.

As a part of the local sourcing effort, Ms. Nieves will partner with Fresh Point

Central California for all produce needs and Los Banos Abottoir for all meat

purchases. Fresh Point purchases the fresh, local produce from the Central Valley and

surrounding farmers and services different areas in California seven days a week. The

Los Banos Abattoir has been a part of Ms. Nieves’ community for over 90 years and
 15

is known for providing the finest and freshest meat to Los Banos and the surrounding

areas.

For all other ingredients, including spices, El Fieston will use Sysco and Boyd

Brokerage. Boyd Brokerage is a foodservice distributor in Northern California that

delivers premium ingredients from California suppliers. Ms. Nieves has worked with

Boyd Brokerage for over five years and knows that they are reliable and will do

whatever it takes to get the product delivered in a timely manner. Sysco is the leader

in distributing food products to restaurants and has locations in close proximity to the

restaurant.

Management Controls

Management controls are central to strategy formation as they shape the

emergence of strategy and help support the implementation of deliberate strategies;

on the other hand, restaurants also face the risk of employees engaging in undesirable

activity where interdependent activities become uncoordinated and

conflictual (Thomas & Ambrosini, 2015, p. S106). Good management controls help

keep costs low, customer service high, and quality high. For this reason, the following

controls will be strictly implemented.

There will be policies and standard operating procedures in place to keep

everyone informed of best practices. Policies and procedures will be given to each

employee and they will be required to read it, ask any questions, and acknowledge

receipt with their signature before starting work. There will also be a yearly review of
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all policies and procedures in order to keep employee compliance and education

updated.

All procedures will be tested and approved by the owner prior to

implementation. There will be a list of approved suppliers and approved ingredients

along with the policies and procedures booklet in order to keep quality standardized.

There will also be visual controls that include checklists, budgets, and visual

reminders of safety and quality that will be used daily. In addition, there will be a

sales report and cleaning report due daily, and there will be an inventory report due

weekly, all of which the owner will have to receive and sign off on. Sales and

inventory reports will be used to develop a forecast that will aid in efficiently

purchasing ingredients and materials and keeping inventory control accurate.

Administrative Systems

Because the restaurant will only hire a limited staff, it is extremely important

that El Fieston finds an efficient way to keep all cash and sales information accurate

and up to date. For this reason, the restaurant will purchase the service of Toast point

of sales (POS) system. Toast is an all-in-one POS and restaurant management system

that will help management with food costing, inventory management, kitchen

management, payroll, point of sale, online ordering, sales tracking, and many more

important features.

Toast will be an extremely important tool in daily cash control. Toast has the

ability to track certain items by day, by time, and even by server. This will help
 17

monitor seasonal menu items and research and development pilot tests by providing

data to help figure out what items are performing well.

The POS system will also give El Fieston the ability to compare and

consolidate cash and credit card deposits with actual sales. Consolidation will be

conducted daily at the end of each shift in order to be able to address any

discrepancies in an effective manner. Any discrepancy over $5.00 will prompt the

lead or manager of the shift to conduct an audit to find from where the discrepancy

came. To help with this, there will be a checklist of points to look into when looking

for discrepancies.

In addition to end of shift consolidation, Ms. Nieves will conduct a monthly

audit of all sales and cash flows to make sure that cash, credit, and debit receipts

match what the POS system shows as actual sales. She will also conduct weekly

prime cost reports that will show profit margins by deducting all variable and fixed

costs from sales revenue.

 MARKET ANALYSIS

The Restaurant Industry Profile states that in 2019, the United States

restaurant industry was forecasted to have a value of $842.1 billion, an increase of

23.2% since 2014 (2015). Currently, The National Restaurant Association states that

2017 restaurant industry sales will be at $799 billion (“2017 National Restaurant,”

2017). The industry includes full-service restaurants; quick-service restaurants,

including the fast-casual concept; cafeterias; buffets; snack bars; and nonalcoholic

beverage bars. El Fieston, will be a fast-casual restaurant, which has 7.5% of the

market share, but this concept is quickly increasing as millennials are moving away

from full-service and into quick-service restaurants (McGrath, 2014).

Industry Analysis

Fast-casual restaurants typically have customers order at the counter and do

not offer the full table service that full-service restaurants do, but they do offer higher

quality food than fast food restaurants. El Fieston will be a fast-casual restaurant,

which is the latest concept in the quick service industry. It differs, however, from a

typical quick-service restaurant like McDonald’s and KFC in that the average meal

price is higher, the menu options are of better quality, and décor is more pleasant.

According to The Fast Food Industry Analysis 2017-Cost & Trends report (2017), the

quick service restaurant industry had an annual revenue of $200 billion in 2015 and is

expected to have an annual growth of 2.5% for the next few years. The report also

states that the fast-casual average check size is $12 and the consumer is generally

described as married, working, and between the ages of 35-45. The fast-casual

18
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consumer is looking for healthier options and locally sourced food, and there is an

ever-growing demand of ethnic cuisine.

Market Size

The National Restaurant Association’s 2017 State of the Industry report states

that there are over one million restaurants located in the United States and 14.7

million restaurant industry employees (2017). As can be seen in Appendix B, Figure

2: Restaurant Industry Sales, the restaurant industry is quickly growing.

Industry Participants

Leading companies in the restaurant industry include Doctor’s Association

Inc., trading as SUBWAY; McDonald’s; The Wendy’s Company; Yum! Brands,

which consists of KFC, Pizza Hut, and Taco Bell; and Darden Restaurants, which

control Olive Garden and Red Lobster. Fast-casual chains include Boston Market,

Panda Express, El Pollo Loco, Chipotle Mexican Grill, Panera Bread, Pizza Ranch,

Five Guys, and others.

Main Competitors

Since El Fieston will be a Mexican, fast-casual restaurant, the only food

chains that are direct competitors are El Pollo Loco and Chipotle Mexican Grill. In

addition, there are a plethora of restaurants located in Gilroy, California that will be

competition, but few offer similar food and concepts.

Located 0.7 miles from 8620 San Ysidro Ave., Gilroy, California is Chevy’s

Fresh Mex restaurant. Chevy’s is an American chain of Mexican-style casual dining

that was founded in 1986. Chevy’s offers full-service dining, and the experience is
 20

reflected in the price per plate, which is at a much higher price than fast-casual

restaurants. Cielito Lindo Restaurant and El Michoacano Restaurant are two authentic

Mexican restaurants located 2 and 2.5 miles from El Fieston. Both restaurants also

offer full-service dining with a variety of menu items, and the average ticket price per

person is around $20. Although these and other Mexican restaurants in the area serve

Mexican food, they do not fall in the same category as El Fieston, which will be a

fast-casual restaurant that will focus on serving quickly at a lower price.

Chipotle Mexican Grill is located 2.3 miles from where El Fieston will be

opening. Chipotle is an American chain of fast casual restaurants with a menu that

consists of only four items: burritos, bowls, tacos, and salads. Super Taqueria is

another restaurant within a five-mile radius of where El Fieston will be located that

falls in the fast-casual dining category. Super Taqueria has 11 locations throughout

the South Bay, is very popular, and, like El Fieston, is located right off of US-101.

Super Taqueria serves tacos, burritos, quesadillas, nachos, tostadas, and flautas. This

restaurant will be El Fieston’s largest competitor as they offer the same concept with

similar food. However, their menu options are limited, and they do not offer the

dinner plates and the excellent customer service that El Fieston will offer.

Market Segments

As El Fieston will be a fast-casual restaurant, it will appeal to a population

looking for higher quality food than fast food services like McDonald’s and KFC

offer and more convenience than the full-service restaurants. El Fieston will appeal to

those looking for customization of an ethnic cuisine in an inviting atmosphere.

 21

Service will be quick, and price per meal will range from $8 to $15, thereby

targeting individuals who have higher disposable income and are looking for quality,

locally sourced food. Once customers experience El Fieston’s top of the line customer

service, they are likely to become repeat customers. The location selected for El

Fieston was chosen in order to appeal to Gilroy residents, Gilroy Premium Outlet

shoppers, local employees, and commuters driving on US-101. According to Data

USA (2017), in 2015 Gilroy had a population of over 51,000, a median household

income of $83,027 and a median age of 33.4. The Gilroy Premium Outlets center has

more than 145 stores, which means there is a good pool of employees and shoppers in

the area.

Target Market Segment Strategy

A study showed that over one-third of shoppers are considered long duration

shoppers, those who typically spend more than two hours on a shopping trip and are

most likely to patronize a restaurant in the area (Taylor, 2010). The location of El

Fieston will be within walking distance of shoppers looking for a quick bite while

shopping and for employees looking for a conveniently located restaurant where they

can quickly grab a bite during their break or lunch or before and after their shift starts.

The location will also be convenient for commuters who are stuck in traffic because it

will offer them a pit stop to grab a bite and let the traffic calm down.

Market Needs

Americans go out for lunch on average twice a week and spend $10 each time

(Touryalai, 2013). The area located off Leavesley Rd. and US-101 is in need of a fast-
 22

casual Mexican restaurant. This area has mainly fast food restaurants with the

exception of a few Asian restaurants located in the same shopping strip as El Fieston.

The current restaurant climate puts El Fieston at an advantage against competitors

because shoppers and employees prefer restaurants within walking distance and a

distance of 0.25 miles is often used as an acceptable walking distance in U.S. research

studies (Yang & Diez-Roux, 2012).

Market Trends

The National Restaurant Association surveyed nearly 1,300 professional chefs

— members of the American Culinary Federation — on which food, cuisines,

beverages and culinary themes will be hot trends on restaurant menus in the year

ahead and developed the 2017 What’s Hot Culinary Forecast. El Fieston’s concept

and menu falls within many of the top trends listed in the 2017 Culinary Forecast

(2017). According to the survey, street food-inspired dishes was number two on the

top 20 food trends; number six on this list was ethnic-inspired breakfast items;

number eight was authentic ethnic cuisine; and number eleven was ethnic spices.

Number two on the forecast for top 10 concept trends was chef-driven fast-casual

concepts, and number five was locally sourced produce (“What’s Hot 2017,” 2017).

(See Appendix B, Figure 3: Industry Trends).

Market Growth

According to the 2015 Restaurants Industry Profile on the United States, the

United States restaurants industry grew by 3.5% in 2014 to reach a value of $683.4

billion, and in 2019, the United States restaurants industry is forecasted to have a
 23

value of $842.1 billion, an increase of 23.2% since 2014 (Restaurant Industry Profile,

2015, p. 2). The compound annual growth rate (CAGR) of the restaurant industry

between the years 2010 and 2014 was 4.1%. In 2015, the CAGR of the industry

between the years 2014 and 2019 was predicted to be 4.3% and the 2017 forecast for

the United States restaurant industry value was $777.2 billion, but, as previously

mentioned, according to the National Restaurant Association forecast conducted this

year, 2017 is well on its way to reaching $798.7 billion, which exceeds previous

forecasts by 2.77% (“Restaurant Industry Profile,” 2017). (See Appendix B, Figure 4:

U.S. Restaurant Industry Value and Figure 5: U.S. Restaurant Industry Value

Forecast).
 MARKETING STRATEGY, POSITIONING, AND IMPLEMENTATION

El Fieston will position itself as the go-to, high quality, reasonably priced,

authentic Mexican fast-casual restaurant that will offer locally sourced ingredients

used to replicate Guadalajara’s most loved recipes served by a well trained,

welcoming staff in a vibrant environment with festive décor and cultural literature

that will educate the public of Mexican customs. This goal will be accomplish by

focusing 100% on customer experience and authenticity. Each detail will be

immaculately planned and executed in order to provide the customer with the best

experience possible with the goal of making each customer a repeat customer.

As stated, each employee will go through thorough training that will cover

food and personal safety, company goals and expectations, customer service,

customer complaint mitigation, and menu items. Employees will be paid above

minimum wage and treated with much respect and given as much flexibility as is

possible in the restaurant industry. There will be regular performance reviews for

each employee and El Fieston will have an employee of the month program where the

winner will receive a bonus. Furthermore, management will always look for ways to

develop and motivate employees.

El Fieston will also make sure to be on top of all marketing trends. The

restaurant will have a website where customers can order and pay online along with

an e-mail list where El Fieston will send out new menu item alerts and coupons. The

restaurant will also have active social media accounts in order to stay connected with

our customers.

24
 25

Strengths

El Fieston’s focused strength will be its unwavering commitment to providing

customers with an excellent experience. The food will be consistent and authentic and

there will be nothing outside of delicious and fresh served to customers. El Fieston

will also work daily on improving customer relationships and employee morale. El

Fieston will be located in a convenient location that will cater to commuters using

US-101, Gilroy residents, and Gilroy Premium Outlets shoppers and employees. The

operations and layout will be implemented in such a way that will make customer’s

orders quick and efficient. There will also be an online ordering feature and delivery

options for orders over $100 in a 10 mile radius.

Whereas our competitors have a limited menu, El Fieston will offer a variety

of items that will be assembled to order so as to allow for customers to enjoy mass

customization. For example, El Fieston will offer different types of sauces like sweet

mole, savory mole, chile rojo, chile verde, and others that will be separate and paired

with the customer’s meat of choice. There will also be seasonal menu options, like

different types of soups during the winter, menudo and posole on the weekends, and

tamales and champurrado during Christmas.

Due to the restaurant’s small size and the fact that El Fieston is new in the

industry, there is a high level of drive and determination to offer excellence.

Managment will have the ability to thoroughly research and source ingredients

through sustainable and ethical suppliers, thereby appealing to sustainable businesses

 26

in the area, something that larger competitors lose sight of once they’ve become too

large.

Weaknesses

Although being a small size can be a positive thing in some aspects, it also

presents El Fieston with some challenges. Because El Fieston and its owners will be

new to the industry, there will be a learning curve and limited resources. The POS

system will be instrumental in learning what works and what does not, but it may take

months to gather reliable data. It will also take years to gain the experience and

resources of local competitors.

Opportunities

The two main opportunities that El Fieston will focus on include adding

catering services and starting a fleet of Food Trucks. Catering is a simple addition

that we can add in order to increase revenue. El Fieston will immediately offer the

ability to order party platters, but management will develop a catering menu for large

events once the workload is more comfortable. Ms. Nieves’ mother has experience

catering large events and El Fieston will use a new menu, Mrs. Lopez’ experience

along with Ms. Nieves’ planning experience to provide customers with large event

catering for parties, weddings, company events, and other occasions.

Food trucks are another easy way to gain revenues. The food truck industry

has gained popularity and with the mobility and low overhead that food trucks require

would create a great opportunity for El Fieston to expand. Food trucks and their

cuisine are important to millennials, a demographic that likes to experiment with new
 27

tastes (Morrison, 2012). In the Technomic 2011 Food Trucks Innovation report, 42%

of consumers surveyed ages 18 to 30 said they visit food trucks at least once a week;

38% of consumers ages 31 to 40 answered the same way (Morrison, 2012). However,

because of the space constraint, the food trucks will focus on a limited menu, selling

typical Mexican street food like tacos, bacon wrapped hot dogs, burritos, tortas, and

tostadas.

Threats

El Fieston’s biggest threats include government mandates and local

competitors. There is a vast number of government mandates that must be followed in

order to operate. Mandates include, but are not limited to, food safety, employee

safety, federal health and sanitation standards, and fire safety. El Fieston must make

sure to do their due diligence, research each mandate, and implement changes as

needed.

Lastly, established competitors pose a great threat to El Fieston. Restaurants

like Super Taqueria and Chipotle are established restaurants that have regular

customers, sound operations, and offer customers Mexican food quickly and at a

reasonable price. El Fieston will have to differentiate itself from these competitors

through its product variety and customer service.

Unique Selling Proposition

Our customers can expect to receive friendly service, a variety of authentic

dishes, and reasonable prices for quality meals. Vegetarian customers will have

delicious vegetarian options to choose from. In addition, El Fieston will provide

 28

seasonal dishes that will be added to the menu during Mexico’s festive seasons. For

example, we will offer roscas made from tacos on January 6th to celebrate El Dia de

los Magos Reyes, seafood items during lent, and tamales and champurrado during

Christmas season. We will also add literature to teach the public about the Mexican

customs and why there is a change in the menu for each occasion.

Competitive Edge

Our competitive advantages will be our authentic research and development

plan based in Guadalajara, Mexico; continuous improvement efforts; and

unparralleled customer service. Process and food innovation is extremely important in

today’s market and will be a key driver in the success and survival of El Fieston. It is

no surprise that there is a constant change in consumer demands, and through

research and development, El Fieston will stay on top of new trends in order to keep

customers engaged. Ms. Nieves will also become a member of the National

Restaurant Association and invest in yearly market research reports in order to stay

informed and ahead of the curve.

The research and development component of the business will allow El

Fieston to give customers products that competitors cannot easily replicate. New

products will also give El Fieston the capability to increase market share in the area

by giving customers something they have never had before. Additionally, mew

products will keep El Fieston relevant in the eyes of the consumer.

Our continuous improvement projects, which will be executed at least once

per quarter will help our restaurant drive down costs and will allow us to pass on
 29

those savings to customers in the form of discounts. Because our continuous

improvement efforts will require all team members to participate, it will create a more

unified culture and make team members feel empowered, thus creating happier

employees that better serve our customers. Continuous improvements will also allow

the business to expand. Once the restaurant has reached a point where the team feels

that there are no more improvements to be made, El Fieston will open up a new

location and an opportunity to implement the same processes.

Lastly, our ability to provide the customer with an unparalleled customer

experience will give El Fieston a huge advantage over competitors. Having a culture

that focuses on respect and the customer will be the emphasis on everything the

restaurant does. When an organization’s culture offers a good environment consistent

with each employee’s personal value and careers goals, employees can easily adapt to

the organizational culture and perform better (Kumar, 2012). El Fieston will have a

customized application and follow up process in place in order to hire employees who

fit El Fieston’s culture and mission.

Pricing Strategy

According to Forbes magazine, restaurants have a small profit margin, which

makes pricing each item on the menu extremely important. Restaurants are often at

the mercy of external forces when it comes to food pricing; droughts and other natural

disasters can cause poor crop yields that drive food prices higher. For this reason,

profit margins are constantly fluctuating. In order to keep profits increasing,

management will implement a cost-plus pricing strategy.

 30

Cost plus pricing is a pricing method that takes the direct material cost, labor

costs, and overhead, and adds to it a markup percentage to create a profit margin.

Once pricing lists are gathered from each vendor, El Fieston will develop formulas

that take the cost of ingredients for each recipe and divide it by the number of

servings each recipe will yield and add the monthly expenses. El Fieston will then

divide that by the average number of customers are received per day; add the per

customer expense to each menu item; and add a 13% margin. The 13% margin comes

from rounding up the Restaurant Benchmarks Key Performance Indicators report that

states what earnings should be before interest, taxes, depreciation, amortization, and

rent (EBITDAR). EBITDAR for quick-service restaurants in 2016 was 12.8%

(Restaurant Benchmark, 2016). Afterwards, El Fieston will compare prices to those of

competitors to make sure that they are within reasonable parameters. Management

will then analyze pricing sheets and update them on a quarterly basis.

Owner, Ms. Nieves, has a background in procurement and operations, so she

will use her experience to negotiate the best pricing with vendors. Ms. Nieves will

strategically source and place purchase orders with suppliers and evaluate freight

options for cost-effective, lean, just-in-time delivery to ensure proper inventory on

hand for timely production with demand with the shelf life of ingredients in mind.

Lean operations will help the business by decreasing waste and costs, and

maximizing profits. Purchasing ingredients from local vendors will also help control

costs by decreasing freight costs. There will be contracts put in place for high volume
 31

ingredients and Ms. Nieves will keep a close eye on market trends in order to contract

ingredients at the best time in order to receive the best rates.

Promotion and Advertising Strategy

In today’s technological world, delivering great food and service is often not

good enough. If a restaurant is not up-to-date on marketing trends, they will not reach

their full potential and can run the risk of dying off. El Fieston will market using a

combination of social media, community involvement, physical and online postings,

event marketing, and word of mouth to get business to as many eyes and ears as

possible.

Repeat customers supply most operators with the cash-flow foundation

necessary to survive (Ridilla, 2004). For this reason, El Fieston will target local

residents and employees as its regular customer base by getting involved in the

community. El Fieston will collaborate with Gilroy’s Chamber of Commerce and use

their networking services to stay informed of local events. El Fieston will also

participate in local fairs and festivals and sponsor local sports teams so that local

residents become familiar with the restaurant’s name and services. Additionally, local

employees will be provided with discounts in order to make them regular customers.

Marketing Programs

About 60% of new restaurants fail within the first years of opening; thirty

percent fail in the first year and another thirty percent close in the next two years

(Kavanagh, 2016). Competition in the restaurant industry is fierce, and El Fieston

needs to make sure it differentiates itself and gets attention from as many people as
 32

possible. In order to do this, management will implement an aggressive marketing

program. The marketing program will consist of reaching out to the local community,

geo-targeted ads, social media pages, setting up review accounts, website

development, and creating a loyalty program. In each marketing effort, the culture

and customer service of El Fieston will shine through.

El Fieston will kick off its marketing campaign by reaching out to local

businesses and residents. El Fieston will provide free samples to businesses in the

area, put out flyers, sponsor local community efforts and teams, and attend local

events to show a presence in the community. It is important that community members

know that El Fieston is present and cares. According to Edelman's Good Purpose

study, 72% of consumers would recommend a brand that supports a good cause over

one that does not, a 39% increase since 2008 (2012).

Social media will also be a huge driver in marketing efforts. Social media has

changed the game when it comes to delivering information to current and future

customers. Social media is a great tool because it offers free visibility, viability, and

sustainability in the marketing portion of the business. A survey conducted in 2012

reported that social media helps organizations to grow and promote their businesses,

especially to generate more awareness in terms of business exposure (85% of

marketers), to increase traffic (69%) and provide organization insight (65%)

(“Edelman’s Good Purpose,” 2012). Social media can also help the small business

organizations in terms of networking, relationships, and online branding opportunities

(Taneja, 2014). El Fieston will have active Facebook, Instagram, Twitter, and
 33

Snapchat accounts. Each site will be updated at least once per week, and all

promotional campaigns will be posted on these sites. El Fieston will also encourage

posts sharing and online reviews. According to one market research firm, each time a

consumer posts something on the social web, it reaches a minimum of 150 people

(Fuggetta, 2012). This will serve as our word-of-mouth marketing. Social media will

help El Fieston penetrate the market more effectively and efficiently because today’s

generation is extremely driven by social media.

El Fieston will be sure that “foodie” pictures are put up on our social media

pages at as often as possible in order to provide customers with high quality,

appetizing photos that will encourage them to come in and eat at the restaurant. Buzz

will be created by having promotions that give a free taco to anyone who puts a

picture on their social media page, writes about their experience at our restaurant, and

tags El Fieston. Geo-targeted ads will be put on Facebook and Instagram to get

people to add El Fieston and try the restaurant out. Additionally, the restaurant will

put up promotions, specials, and news on its company website. Marketing will also

reach out to Facebook and Instagram “foodies” to get them to review our restaurant

and post pictures of El Fieston on their pages.

Furthermore, El Fieston will be proactive by creating Yelp and Google+

profiles. It is no secret that Yelp and Google reviews have power in the restaurant

industry. A Harvard Business School study found that even a one-star rating increase

on Yelp translates to a sales increase of 5% to 9% (Jarvis, 2014). People are always

writing reviews and El Fieston wants to make sure that it has a head start in making
 34

its business look as appealing as possible by putting up information and appealing

photos on each site instead of leaving it at the hands of others.

El Fieston will also hire an experienced website developer to create an

appealing and engaging website that will have the capabilities to grow with the

restaurant. Hiring an experienced web developer is a smart move because they will be

able to create a functional website that will meet all internet legalities. Our website

will showcase El Festion’s menu, map, hours of operation, history, mission, news,

coupons, and online ordering capabilities. The website will be listed with at least 15

search engines, and keywords and Meta tags will be properly formatted in order to

generate more traffic to the website. The web developer will only be active during

start up. Once the website is done, owner Ms. Nieves will properly maintain and

update it with all pertinent information.

A rewards program will be yet another marketing initiative. Getting new

guests is more costly than bringing in repeat customers. According to

a survey conducted by the National Restaurant Association, adding and expanding

rewards programs was the most successful strategy used by casual restaurants to

maintain their customer’s loyalty (“Restaurant Industry Forecast,” 2014). Loyalty

programs encourage customers to continue going to the same locations because they

find it more beneficial. For this reason, a loyalty program will be implemented with

the help of a POS systems provider.

 35

Milestones

Keeping in mind that El Fieston is scheduled to open on April 15, 2018, El

Fieston milestones are listed on Table 2: Milestones in Appendix A.

Exit Strategy

El Fieston is going to be given life in the hopes of succeeding and carrying on

for many generations. Continuous improvement efforts will be done efficiently so as

to adapt to change and create success. At this point, failure is not an option, so El

Fieston will focus on how to prevent closure.

In the case that the restaurant is not bringing in the margins expected,

management will evaluate the causes of the failure through deep analysis of

expenditures, sales, and customer reviews. Once management has evaluated all the

data, they will put a process improvement effort in place and execute it in the most

effective, time sensitive way possible. Management will also put the following plan in

place in order to drive up sales and remain flexible: offer promotions, increase

business hours to include early breakfast, host local events, and purchase from non-

local companies if the action could increase savings. If in need of more help, El

Fieston will bring in consultants to help revive the business.

Promotions will include one-dollar taco Tuesdays, providing coupons to our

social media followers and handing them out to local employees, and having meal

specials every day of the week. Increasing business hours to include breakfast will

open up to a new set of customers that may not attend otherwise. Management will

then schedule a meeting with the Gilroy Chamber of Commerce to see if there are any
 36

events that the restaurant can host at its location in order to bring in sales. Evaluating

vendor price schedules and requesting quotes from outside vendors will also be an

important step. The goal is to source locally, but good managers must be sure to

always remain flexible and look at alternatives in order to stay in business. If after

careful evaluation, management cannot figure out a plan to get the business back on

track, they will solicit the service of restaurant consultants in order to help develop

and execute a plan to make El Fieston profitable.

 ORGANIZATION AND MANAGEMENT

Organizational Structure

The organizational structure that will be in place at El Fieston will be

designed to implement a system of accountability and responsibility. Because the

restaurant will be a small establishment, each employee will take on more than one

role. There will be a total of fourteen (14) employees, including the owner, under the

El Fieston umbrella. Owner, Ms. Nieves, will be the general manager that will be

responsible for the day-to-day operations, hiring, training, research, ordering, and will

assist with serving the customer. There will be nine employees that will serve the

front of the house and will alternate shifts. They will be responsible for taking care of

service execution and cleaning the front of the house. Finally, there will be three

cooks that will alternate shifts. Ms. Nieves’ mother will be the executive chef that

will train and oversee two other chefs who will be responsible for putting out quality

in spec meals, kitchen maintenance and cleaning. See Appendix A, Figure 1:

Organizational Structure.

37
 FINANCIAL PLAN

Important Assumptions

Assumptions are a critical component of this business plan because El Fieston

will be a new entrant and does not have historical figures to develop the financial

information needed to evaluate potential performance. To start off, El Fieston will use

an average check price of twelve dollars based on the Fast Food Industry Analysis

2017-Cost & Trends report (2017).

Percentages will come from the 2016 Restaurant Benchmark report (2016).

This report states that food cost is 28.5% of total sales; labor is another 28.5% of total

sales, giving us a total prime cost of 57% (Restaurant Benchmark, 2016). Prime cost

will be used as an overall variable cost because prime cost combines the food cost

and store labor percentages, the two most significant costs that a restaurant incurs.

In order to evaluate potential sales volume, management will use Chipotle

Mexican Grill figures. Chipotle Mexican Grill has a similar set up, size (as far as

square footage per store), and falls within the same restaurant concept as El Fieston.

In 2010, Chipotle’s CEO Steve Ells stated that Chipotle Feeds 750,000 customers a

day (Lean, 2010). At this time, Chipotle had 1,000 restaurants, which equates to an

average of 750 customers per day per store. Since Chipotle invests millions of dollars

in advertisement and other operational projects, which is outside of El Fieston’s

budget, the restaurant will start at a forecast at 450 customers per day, 60% of

Chipotle’s average, in an attempt to be conservative.

38
 39

Finally, an annual 3% increase will be added for inflation and an annual

increase of 5% in revenues is forecasted.

Source and Use of Funds

Total start-up costs will be $227,700. The owner will seek $170,250 (75%)

bank loan and she will personally come up with $56,925 (25%). Ms. Nieves will get a

five-year business loan through a bank and will pay it at 6% interest. In order to keep

costs as low as possible, the owner will purchase used restaurant equipment as is

feasible and will work with her long-time contractor friend to find the best rate for

renovations. See Appendix C, Table 4: Source & Use of Funds and Table 5: Fixed

Operating Expenses.

Break-Even Analysis

Total annual fixed cost associated with the restaurant is $215,571. Based on

the assumption that the variable cost is 57% of the ticket price and the average ticket

price is $12, the variable cost per unit is $6.84. Therefore, the break-even revenue is

$501,327.91, which is equivalent to 41,777 meals. See Table 6: Break-Even Table

and Figure 6: Break-Even Analysis in Appendix C.

Projected Cash Flow

Tables 7 through 9 in Appendix C show El Fieston’s incoming and outgoing

cash that will be associated with the restaurant from April 2018 to the end of 2020.

The projected cash flow statements break down expenses and revenues of the

restaurant and display an ending cash balance of $218,758 (including $25,000 start-

up working capital) in 2018, $528,416 in 2019, and $866,342 in 2020. These are
 40

conservative numbers considering that the average unit sales in 2014 for quick-

service restaurants was $861,000.

Business Ratios

Table 10: Business Ratios in Appendix C shows the liquidity, safety,

profitability, and efficiency ratios for the restaurant. As stated in the assumptions,

cost of goods sold (COGS) to sales is 57% and covers labor and food costs. Net profit

margin will be 18% by the end of 2020. Liquidity ratios increase with every passing

year, which indicate that El Fieston will be able to pay back debt with no problem as

long as they maintain quality of food and service. Gross profit margin is at 0.43,

which is right in line with the 2017 Restaurant Industry Profitability Ratios that

shows a .4364 ratio (Restaurant Industry Profitability, 2017).

Hourly Labor Schedule

El Fieston plans to operate from April 15, 2018 onward. All employees,

including the owner, will be paid $12 per hour in 2018. Full time employees will

work 37.5 hours per week and part-time employees will work 30 hours per week. Pay

will increase to $13 per hour in 2019 and $14 per hour in 2020. This is well over

minimum wage requirements for employers with 25 employees or less in California

(“New Minimum Wage,” 2016). See Appendix A, Table 3: California Minimum

Wage Schedule. Maintenance and other services will be outsourced and solicited on

an as needed basis.

El Fieston is forecasting average sales of 450 meals per day, which equates to

3,150 meals per week. Vast research has been conducted to summarize productivity
 41

levels in different types of food service operations. Results show meals per labor hour

in the quick-service restaurant is 9.5 (Gregoire, 2010). This plan uses quick-service

standards because the fast-casual concept is the latest concept in the quick-service

restaurant industry. As in typical quick-service operations, El Fieston’s fast-casual

operation is a made-to-order environment with more complex flavors and more

upscale décor.

To calculate the number of hours needed to employ the restaurant, 3,150

meals per week is divided by 9.5 meals per labor hour, which gives a standard of

331.57 labor hours per week. Figure 7: Start-Up Labor Schedule in Appendix C gives

details on a proposed employee schedule that gives 427.5 labor hours per week. This

will be the starting schedule and gives 29% additional capacity in case the restaurant

receives more business than expected. As data is gathered through the POS system,

the schedule will be modified to fit actual sales and hours will be cut from part-time

employees to keep full-time employees at a constant rate.

 CONCLUSION

After thorough market, financial, and operational analysis, opening up a fast-

casual Mexican restaurant in Gilroy, California is a profitable endeavor. This

endeavor will require an unwavering standard of great customer service; authentic,

quality food; a start-up cost of $227,700; and $17,441 fixed operating costs per

month. By carrying out the strategy stated in this business plan, El Fieston will be

able to achieve profits of $228,035.77 by the end of 2018, $374,480.20 in 2019, and

$394,719.78 in 2020. This information can be seen in Appendix C, Tables 11, 12 and

13 that show 2018 to 2020 projected income statements.

42
REFERENCES
 44

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APPENDICES
 50

APPENDIX A

OPERATIONS FIGURES AND TABLES

Table 1

El Fieston’s Hours of Operation

Monday 10:00 am – 10:00 pm

Tuesday 10:00 am – 10:00 pm

Wednesday 10:00 am – 10:00 pm

Thursday 10:00 am – 10:00 pm

Friday 10:00 am – 10:00 pm

Saturday 10:00 am – 10:00 pm

Sunday 10:00 am– 8:00 pm

 51

Table 2

Milestones

Table 3

California Minimum Wage Schedule (New Minimum Wage Phase, 2017)

 52

Owner/General
Manager
Reyna Nieves

Part-Time Front Front of the

Executive Chef
of the House House
2 Employees 7 Employees Manuela Lopez

Part-Time Chef Assistant Chef

1 Employee 1 Employee

Figure 1. El Fieston’s Organizational structure that indicates hierarchy and functions.

 53

APPENDIX B

MARKET ANALYSIS FIGURES

Figure 2. National Restaurant Association’s 2017 Restaurant Industry Sales indicated

in billions of current dollars (“2017 National Restaurant,” 2017).
 54

Figure 3. 2017 What’s Hot Report showing current industry trends (“What’s Hot
2017,” 2017).

Figure 4. United States Restaurant Industry Value stated in billions of dollars.

(Restaurant Industry Profile, 2015)
 55

Figure 5. United States restaurant industry value from 2014 to 2019. (Restaurant
Industry Profile, 2015)
 56

APPENDIX C

FINANCIAL TABLES & FIGURES

Table 4

Source & Use of Funds

 57

Table 5

Fixed Operating Expenses

 58

Table 6

Break-Even Table

Figure 6. Break-even analysis graph showing an intersection of total cost and sales at
41,777 meals, which is the equivalent of $501,327.91.
 59

Table 7

2018 Projected Cash Flow Statement

 60

Table 8

2019 Projected Cash Flow Statement

 61

Table 9

2020 Projected Cash Flow Statement

 62

Table 10

Business Ratios

Figure 7. El Fieston’s employee schedule at start-up.

 63

Table 11

2018 Projected Income Statement

 64

Table 12

2019 Projected Income Statement

 65

Table 13

2020 Projected Income Statement