Fast Food Business Plan
This fast food business plan sample is focused on the growing hospitality market in San Jose, California. We hope this sample provides you with a brief foundation for starting your own fast food company. Our fast food business plan writers crafted this sample for your review.
Executive Summary
This is a business plan for the acquisition of one Taco Bell Franchise in San Jose, California. Mr. Marc Henry is seeking to purchase this franchise, and is guided by a shared vision to provide a world-class customer experience to everyone, as embodied by the successful global brands that they franchise and represent. With extensive experience and skills in managing and operating businesses in the service and hospitality sector, the acquisition of Taco Bell San Jose will benefit all stakeholders, including the partners, and the local community.
The Fast Food Restaurants industry in America is forecast to exhibit accelerated growth over the five years to 2026, with industry revenue projected to increase at an annualized rate of 2.8% to $31.7 billion. For these stores, financial projections indicate that the business will be profitable within the first year of operations, with a net income of 13.83%. Despite the increasing competition in the industry, the owners believe that with Taco Bell global brand reputation combined with excellent customer service, the business will be able to meet its financial targets. With the growing American economy, the increase in overall demand for Fast Food Restaurant, and the added personal connection of the owners to the Taco Bell brand, the acquisition will form a strategic alliance for both sides.
The restaurant is located in high traffic areas such as malls, arenas, hospitals, and offices around San Jose, making it accessible for dine-in, carryout, drive-thru and delivery. The owners are hoping to acquire the three branches by February 2022, grow them for 3 to 5 years, and eventually open two more branches within the 30km radius of the main city. Their strategies for growth and business support are discussed in detail, as well as a clear management and staffing plan led by Eric Ross, an experienced Fast Food Restaurant General Manager and owner of several restaurant franchises across America. Also, the owners intend to engage with the community by generating meaningful local employment and integrating the Sustainable Development Goals (SDG) in their operations. Finally, financial projections are presented in this document, which shows an annual average net cash flow of +15% on the first two years of operation. Profits will be realized through effective business management, competitor and market assessment, marketing and promotion, and human resource management.
Background
About Taco Bell
Taco Bell was originally founded in Columbus, Ohio, U.S.A. by Glen Bell in 1962. He built his business on the premise, “Quality is our Recipe” which remains the guidepost of the Taco Bell system. It continues to be widely popular for its made-to-order tacos, burritos, quesadillas, and salads. Taco Bell and its franchisees employ hundreds of thousands of people across more than 6,800 restaurants worldwide with a vision of becoming the world’s most thriving and beloved restaurant brand. Taco Bell has been resilient despite the uncertainty brought about by the Covid-19 pandemic.
Taco Bell was first established in America in 1962, and has grown to over 400 branches across the country, spanning 10 provinces and nearly 200 cities, cementing its place as a leading quick-service restaurant all over America. There are 9 branches in San Jose – one in San Jose strategically situated in prime location: 158 Main Street, which XYZ Ltd.. is looking to acquire.
About XYZ Ltd.’s Acquisition
XYZ Ltd., led by Marc Henry and Eric Ross, first identified the business opportunity of acquiring the one existing Taco Bell location in July 2019. In March 2020, they formally approached the existing owners of the Taco Bell America Franchise, and a Letter of Intent (LOI) was signed in April 2021. Discussions on how to proceed with the sale continued, leading to the signing of the Sale of Purchase (SOP) Agreement in September 2021. This business plan provides an outline for the successful management and operations of these three franchise locations.
Business Overview
The company is looking to acquire one Taco Bell franchise based in San Jose, California, America. The location is:
Taco Bell 158 Main Street
- Store size: approx. 3,000 Sq ft
- Services: Dine-in, Carryout, Drive-thru, Delivery
- Map Coordinates: 45.311552629834665, -66.01660125996705
- Nearby establishments: Cineplex Cinemas San Jose, Dollarama, Irving Oil Field House, Exhibition Park Raceway
Vision, Mission, and Objectives
Our vision is to provide an exceptional customer experience to everyone. We intend to be the best leader in everything we do.
Our mission is to give our customers a place to enjoy life’s special moments by offering the best food, service, and ambiance in San Jose.
Taco Bell Objectives
- Superior quality – international standards both in terms of product quality and customer service
- Focus on customers and communities – strong customer engagement and sustainable partnerships
- Leadership – setting an example for effective leadership and talent management for all
- Innovation – willingness and ability to learn new ways to improve overall customer experience
- Partnership – excellent communication with shareholders and institutional partners through regular updates and accessible reports
Our Franchise Objectives
- Start leasehold improvements in 2023 for Main Street Location – the location is ideal and with the developments in the area, we aim that we will be able to meet the growing demand for Fast Food Restaurant services in the area
- Increase YOY sales at all locations – we hope to exponentially increase year-over-year sales at all three locations, immediately after the acquisition. With the continuous growth of the Fast Food Restaurants, we want to increase our sales and our market share.
- Maintain excellent employee morale and retention rate – we want our employees to be our partners in delivering quality service to our customers. With effective management and mentorship, we will be able to boost morale and our retention rate
- Improve our customer service at all locations – our customers are at the core of what we do, and we want to ensure that we continue innovating and improving our service delivery for them. Right now, Taco Bell has mobile ordering and payment, and Wi-Fi.
Organization/Leadership Hierarchy
Marc Henry, Director – Marc Henry is the Director of XYZ Ltd.. He is currently the Director of Operations at ALC Group of Hotels, leading his 500-employee team to annual sales of $20 Million in 2018. He has a proven track record as a Director of multiple hospitality businesses, responsible for overall operations and growth promotion of the entire enterprise. He handles the following hospitality businesses:
- America’s Best Value Inn, San Jose
- Days Inn by Wyndham, San Jose
- Best Western, California
- Clarion Inn, California
- Four Points by Sheraton, Los Angeles
His regular duties and functions include: implementation of annual budgets, development of marketing strategies and sales plans, supervision and mentorship of middle and executive management, and management and control over daily operations.
Thanks to his hard work and dedication, he was able to implement a rationalization plan, which included the redefinition and restructuring of tasks at all hierarchical levels, centralization of accounting duties, increase of net profit by 8.5%, negotiation of collective agreement with employees, successful physical renovations amounting to $6,000,000 and corporate positioning and increased market visibility of the hotels on the market.
Mr. Henry was also Co-Owner and Operator of Days Inn by Wyndham and America’s Best Value Inn, both in San Jose. His academic record includes Mechanical Engineering Technician and Tool Design at University of California, and a Bachelors in Mechanical Engineering in Europe. He is also active in organizations, notably as Vice President of the European-Americans Society of San Jose and a member of the San Jose Hotel Association and the San Jose Chamber of Commerce.
Eric Ross, Operational Director – Eric Ross is a competent and service-oriented business manager with over 4 years of experience in coaching, budgeting and leadership. He is adept at raising revenue, boosting efficiency and lowering company costs.
He was the Assistant Manager at In-N-Out from 2012-2018, and oversaw all restaurant operations, weekly inventory sales reports (WISR), employee management, and customer care and service.
Mr. Ross has a Post Graduate Degree in Business from Mendocino College of Applied Arts and Technology, Ukian, California. He is also skilled in computers, training, recruitment, business management, and marketing, and he has excellent leadership, collaboration, communication and interpersonal skills.
In addition to his academic background and managerial experience, Eric owns a variety of Fast Food Restaurants in San Jose including: 1 Carl’s Jr., and 2 Jack in the Box. With direct experience in successfully owning and operating a variety of Fast Food Restaurants, Eric brings a wealth of experience to this venture.
Company History/Timeline
Marc and Eric are neighbors who mutually agree that hard work, dedication, and continuous improvement will allow them to run successful businesses. Their skill sets also match for running Fast Food Restaurants such as Taco Bell. They first discussed acquiring one in the San Jose Taco Bell franchise in July 2019. In March 2020, they formally approached the existing owners, and a Letter of Intent (LOI) was signed in June 2020. Discussions on how to proceed with the sale continued, leading to the signing of the Sale of Purchase (SOP) Agreement in June 2020. Within the same month, XYZ Ltd.. was incorporated.
Footprint/Geography
Over the past decade, San Jose has been energized as a hub of economic activity. Fuelled by offshore petroleum and a wealth of other natural resources, this is a city that has made significant strides forward. Several strategic sectors offer considerable opportunity for future economic growth and diversification. With its distinct and original arts community, San Jose has become recognized as a vibrant cultural centre. The attractiveness and livability of the city are inherently tied to the arts but artists also make a significant economic contribution to the region.
San Jose has garnered an international reputation for its expertise in offshore energy and ocean technology. The city has a critical base of research facilities, companies and expertise related to offshore petroleum development and ocean engineering technologies. Local expertise in harsh environments has specific application to new opportunities emerging in other jurisdictions around the world.
San Jose has also emerged as a unique and compelling tourism destination, which offers visitors an intriguing blend of history, culture and natural experiences, all within an urban setting. Tourism makes an important contribution to the economy and compelling marketing campaigns are increasing awareness and opening opportunities for future growth.
Business Philosophy
Taco Bell Founder, Mr. Glen Bell
“When I started Taco Bell in 1969, ‘Quality is Our Recipe’ was our motto. Our focus on quality hasn’t changed, and it never will. Taco Bell offers customers the highest quality food and freshest ingredients, made-to-order tacos, and fast, courteous service. When you like a restaurant’s food and are treated well, you’ll go back again. We have to earn our customers’ loyalty every day, and exceed their expectations on every visit. That’s our mission and our focus and, in my opinion, that’s what generates loyal customers.”
Marc and Eric share the same business philosophy as Mr. Bell, which is to provide quality food and service at all times. There is no better strategy for success, and they aim to continue this culture of providing quality service once the Taco Bell branch is acquired. The Fast Food Restaurants are competitive these days with existing and new players providing their very best. To add to Mr. Bell, part of the philosophy is to be efficient in running the business. This includes proper inventory management to avoid food wastage, management of costs, and investment towards business development and expansion. There must be an adaptation to the changing times, especially with the uncertainties brought about by the COVID-19 pandemic.
Community Engagement
Marc has been active with the local community of San Jose for over 8 years now. He has been involved in the San Jose Chamber of Commerce and has volunteered in the European-American Society of San Jose. He was recently appointed to the Board of Directors at San Jose Airport. Meanwhile, Eric is the Treasurer of the European-American Society. Both provide meaningful employment and careers to many locals.
Their beliefs also align with Taco Bell Corporate Social Responsibility initiatives, particularly in the importance of the Sustainable Development Goals (SDGs). As a global brand, Marc and Eric recognize they must work towards larger societal goals aimed at unifying collective efforts to provide services more sustainably and drive towards a more equitable world. The company aligns its efforts with the UN Sustainable Development Goals, focusing on the following SDGs:
- SDG 2: Zero Hunger
- SDG 8: Decent Work and Economic Growth
- SDG 10: Reduced Inequalities
- SDG 12: Responsible Consumption and Production
- SDG 13: Climate Action
- SDG 15: Life on Land
- SDG 17: Partnership for the Goals
Founders, Marc and Eric are also inspired to drive positive change as they conduct business. In addition, they are aligned with “Taco Bell Food, People, Footprint” focus areas:
“Food: We are serious about providing fresh food that is of high quality, safe, traceable and from responsible sources. Fresh meat, bread, and vegetables are the reasons why Taco Bell has been widely successful worldwide, and we intend to keep it that way. We will utilize our experience managing and operating our global brands such as hotels to ensure that we maintain the global quality standards of Taco Bell in our branches.
People: Achieving our earlier objective of increased employee morale and retention, we must uphold the values of respect, equality and fair treatment for our team members, fellow franchisees, and other partners. Harmony in the workplace reflects the success of any business, and our Taco Bell will be a great place to work and build a career. We also want to give back to the community in any way we can. We intend to hire locally and support local suppliers and businesses.
Footprint: We aim to reduce our environmental impact, and we align with Taco Bell in committing to this. We value the importance of sustainable packaging, reducing our footprint in any way possible. We also support any initiative of Taco Bell towards a better climate and the use of clean energy. Finally, we also commit to make smart reductions in the amount of water we will be using, and to innovate better ways to use our resources.” – Marc Henry and Eric Ross, San Jose Taco Bell
Overview of Individual Franchise Candidates
Personal Bios
The Business will be managed by Marc Henry and Eric Ross. Day-to-day operations will be managed by Marc, and Eric will assist with the HR and Admin part of the business. Lakeisha will oversee the operation of the business and provide assistance as needed in the operations of Taco Bell. Lease for all the locations will be at least 5 years plus the option to renew for 5 years. Existing staff of the Taco Bell locations will be retained and managed by the same restaurant managers.
Marc Henry is one of the key people that will be operating Taco Bell based on his experience.
- Started as a Dishwasher at a Taco Bell California Franchise in 2008
- 4 months later, after being a dishwasher, he was later moved to the Front desk and Kitchen – Taco Bell
- After that, he worked as Supervisor for another 6 months and was promoted to Assistant Manager and worked for the same Taco Bell location from 2006 to 2015
- From 2015 to 2020, he worked as a Manager for Mucho Burrito in Los Angeles, Ca.
- An abundance of experience in operating hospitality businesses and Quick Service Chains along with a strong personal net worth
Eric Ross
- Immigrated to America as a student in December of 2010
- February 2012 to June 2015, he started working part-time at a Subway in San Jose, Ca.
- July 2015 to June 2016, he was promoted to Assistant Manager of the Subway.
- August 2016 – December 2018 worked as Assistant Manager, managing one Subway location in San Jose
- December 2019 he acquired one location of Jack in the Box, owning 60% of shares, San Jose, Ca.
- March 2020 acquired one location of Little Caesars with 40% shares, San Jose, Ca.
- Eric has relevant experience in managing Fast Food Restaurant’s and is a successful business owner and operator, managing over 150 employees
Lakeisha Ross
- Owns multiple hotels in various locations and has a strong personal net worth.
- Shareholder of ALC Group Hotels
- Will oversee finances, as her husband is an accountant
Roles & Leadership Capability
The required skill set in running a Fast Food Restaurant franchise includes business skills, competitor assessment, marketing, human resources and forecasting. It is important for Fast Food Restaurant operators to be well-rounded in every task of running and managing a restaurant due to the tremendously quick pace of operations and decision making required. Marc and Eric have the skill set to run the Taco Bell franchise, developed through years of experience running service-oriented businesses, and Fast Food Restaurants across America.
Business Skills – accounting, operations, logistics, purchasing, health and sanitation, and overall management skills are keys to success. Marc has years of experience operating and owning hotels located in San Jose. He has successfully done so, and is looking forward to using this experience in this new venture.
Competitor Assessment – the Fast Food Restaurants are highly competitive due to the sheer amount of competitors offering almost identical products to the market. With this, businesses can learn from one another on what works and what does not. Marc practices this in his hotel business, studying current trends and new ways of delivering customer service.
Marketing – marketing and advertising will mostly come from Taco Bell headquarters. While mass media and branding come with the package, the Founders will use their connections within the local community and the organizations they belong to in marketing Taco Bell. They will also forge partnerships with local establishments and offices.
Human Resources – skillful scheduling, task rotation, equitable performance reviews, rewards and incentives are some of the strategies which can be adopted to improve employee morale and retention. The Fast Food Restaurants is known for having high-turnover amongst staff, but both Marc and Eric want their franchises to be a place for people to work, be treated equally, and have a healthy career.
Forecasting – this is done properly through a combination of analysis and intuition. The Fast Food Restaurants are so dynamic that the Founders will have to consider changes in legislation, consumer perception over “fast-food”, and competitor activity. We have experienced several changes, sometimes drastic, in our other businesses, and we are ready to adapt and thrive amidst the uncertainty. There is always an opportunity to win the market when something changes.
Achievements
We formally approached Taco Bell America in March 2020, and a Letter of Intent (LOI) was signed between the two companies in April. Discussions on how to proceed with the sale continued, leading to the signing of the Sale of Purchase (SOP) Agreement in June 2020. We also continue to coordinate with Taco Bell to ensure that our acquisition will go as planned, through interviews with various departments and training programs.
Personal Connection to Taco Bell
Aside from strategic reasons, Marc and Eric intend to acquire Taco Bell over its competitors because Marc has a personal connection to the brand. His first job in America was at Taco Bell, as a dishwasher. Thanks to hard work, dedication and learning, he improved himself and moved up to Assistant Manager. He took his learnings from this experience and opened businesses in the hospitality sector. He has also received multiple awards for his leadership and service within the community. “We as partners believe in the Taco Bell brand, which prioritizes quality over anything. This is the kind of business philosophy we want to be aligned with, and we are looking forward to working with all stakeholders in ensuring the success of this location.” – Eric Ross, Operational Director
Why Taco Bell
Motive for Entering into Brand
Both Founders have been looking at the Fast Food Restaurants, and they believe acquiring Taco Bell is their best opportunity. The Taco Bell brand has a proven business model, a strong customer base, and Taco Bell values align with the Founders. With their work ethic, skills, and experience, Marc and Eric can develop this strategic branch into an even more profitable and well-established location.
The franchise is also strategically located in San Jose: Taco Bell 159 Main Street Dr is near Cineplex Cinemas San Jose, Dollarama, Irving Oil Field House, and Exhibition Park Raceway. The company can capture these high traffic and high growth areas by investing in the business, launching new marketing campaigns, and forging long-term partnerships with offices, universities, hospitals, and other establishments. Finally, the Founders believe it makes business sense to acquire this branch of Taco Bell, as there is an opportunity to scale operations.
Assessment of Fast Food Restaurant Space
The Fast Food Restaurants industry in America is forecast to exhibit accelerated growth over the five years to 2026, with industry revenue projected to increase at an annualized rate of 2.8% to $31.7 billion. Fast Food Restaurants in America are expected to benefit as the economy continues to grow and consumers spend more on small luxuries, such as eating out. Per capita disposable income is forecast to grow at an annualized rate of 0.6% over the next five years, enabling a greater number of American consumers to eat out at industry establishments.
Additionally, demand for quick service Will likely increase in line with the expansion of healthful menu options, as concern over the health risks associated with traditional Fast Food Restaurants has constrained industry sales in recent years. At the same time, the industry’s growth will likely be limited by intense competition as operators vie for the consumer dollar in a saturated market.
New Ways to Expand
Price-based competition and an emphasis on the regular introduction of new products will likely intensify over the next five years. Most quick service chains will introduce new healthful food alternatives and expand current product lines. Major operators will seek to expand revenue and profit by offering alternatives to red meat products, such as chicken burgers, Mexican food, pasta and fresh salads. They will also continue to diversify into new areas, such as cafes and full-service restaurants.
As the industry approaches saturation in several key markets and internal price-based competition intensifies, industry profit is projected to grow minimally over the next five years. In turn, operators that experience lacklustre domestic profit will likely increase their focus on international expansion to grow company-wide profit. Companies will also try to emulate McDonald’s Corporation by expanding their beverage options to include more coffee-based drinks and smoothies. These low-cost and high-profit menu items offer a quick way for companies to grow their revenue.
Many domestic operators will also continue to expand internationally. This move will likely be the largest source of revenue and profit growth for major players over the next five years. Asia and the Middle East are regions where domestic quick service brands have not yet saturated the market and some operators are already thriving. These regions are also attractive due to their large populations and fast population growth. In addition, younger age groups, which are the greatest consumers of fast food, have a far greater share of the population. Emerging countries also have increasing incomes and growing middle-class segments, including an increasing taste and desire for Western foods, such as fast food.
Establishments and Employment
Though the industry is projected to continue expanding in coming years, operators will increasingly compete for their fair share of revenue. Consolidation among operators has been underway for some time and is expected to persist over the next five years. Over the five years to 2026, the number of industry enterprises is forecast to increase at an annualized rate of 2.0%, reaching 23,241 companies. This growth in enterprises will be driven by the favourable industry outlook, which will appeal to entrants. At the same time, total industry employment is expected to grow at an annualized rate of 2.5% to 456,022 workers. This number will be partly inflated by the increasing use of casual employees to meet peak customer service periods. Average industry wages are also projected to experience minimal growth in coming years. However, the rising automation of food preparations is also expected to continue over the next five years. Similar to the previous five-year period, several of these new hires are expected to be part-time and seasonal employees to help supplement services during periods of increased demand.
Assessment of Competitive Landscape
McDonald’s Corporation
Market Share: 16.0%
McDonald’s Corporation (McDonald’s), the world’s largest fast food operator, opened its first store in 1948 in San Bernardino, CA, and signed its first franchise agreement in April 1954. By 1957, McDonald’s had 14 stores and opened its first international store in America 10 years later. The company entered a high-growth phase during the 1970s, opening about 500 new stores each year. During the 1980s, however, growth slowed as competition from other quick service operators increased. Competition intensified to an even greater extent during the 1990s. At that time, McDonald’s diversified within the quick service industry by purchasing other operators and increasing its international investments. According to the company’s 2020 annual report (latest data available), McDonald’s employs about 200,000 workers and generated global system-wide sales of $114.1 billion in 2020.
McDonald’s serves about 2.5 million customers at its restaurants across America every day. Additionally, there are about 1,400 McDonald’s locations in America and McDonald’s employs more than 90,000 Americans. An estimated 75.0% of its American restaurants are locally owned and operated by franchisees. McDonald’s is also the largest buyer of ground beef in the American restaurant industry, purchasing more than 30.0 million kilograms (66.0 million pounds) annually.
The McDonald’s menu has traditionally consisted of a range of burgers, fries, desserts and beverages. Over the past decade, however, the company has introduced a range of healthier options, such as salads, to cater to changing consumer preferences. More recently, in response to lower sales, McDonald’s has moved to test new menu offerings in an attempt to phase out its Dollar Menu & More, which offers items ranging between $1.00 and $5.00. These value menu items are designed to be sold as loss leaders, enticing customers into the store with the hope that they will pay for more expensive products while there. The chain is also making a bigger push into the breakfast segment, where it is a market leader, by emphasizing the high quality of its McCafe coffee and offering all-day breakfast.
Financial performance
Over the five years to 2021, America-specific revenue for McDonald’s is expected to increase at an annualized rate of 4.1% to $4.4 billion. The company’s industry-relevant operating income, measured as earnings before interest and taxes, is expected to grow at an annualized rate of 8.8% to $1.7 billion during the same period. However, as McDonald’s does not receive revenue from its franchised stores, the company’s performance in the industry is best measured by system-wide sales, which includes revenue earned by company-owned stores and franchised stores.
As a result of persistent competition and lukewarm gains in demand, McDonald’s has focused on balancing core menu classics with new products and promotional food events, such as Chicken McBites, in addition to healthful options, such as the Egg White Delight McMuffin. The introduction of these new, high-profit products was largely responsible for sales growth over the past five years. However, lower guest counts and increasing competition have reduced the company’s overall standing in the industry. The company has also begun to experiment with a delivery service, which could enable the company to capitalize on a $100.0 billion market. If this experiment is successful, the company is expected to apply it to more stores, including its America locations. The company also successfully increased sales through aggressively cutting prices on soft drinks and introducing new items to the menu, such as a reintroduction of its Big Mac line.
| Year | Revenue
$m |
Growth
% change |
Operating Profit
$m |
Growth
% change |
| 2016 | 3,613.2 | N/C | 1,129.6 | N/C |
| 2017 | 3,950.3 | 9.3 | 1,643.6 | 45.5 |
| 2018 | 4,276.0 | 8.2 | 1,774.7 | 8.0 |
| 2019 | 4,534.4 | 6.0 | 1,925.0 | 8.5 |
| 2020 | 4,284.8 | -5.5 | 1,633.8 | -15.1 |
| 2021 | 4,412.3 | 3.0 | 1,720.4 | 5.3 |
Subway
Market Share: 5.6%
Subway is a privately owned fast food chain that primarily sells sub sandwiches. The chain is owned by holding company Doctor’s Associates Inc. All stores are franchised and the company employs a small head office staff. Nonetheless, the company has more than 250,000 people working in its franchised stores globally. Subway establishments sell custom sub sandwiches, salads and other food items. The company markets its products as healthful alternatives to typical fast food. Founded in 1965 and headquartered in Milford, CT, Subway began franchising Subway shops in 1974 after opening up 16 individual shops on its own. Subway currently has more than 42,000 restaurants operating in more than 100 different countries, including more than 3,000 restaurants in America alone.
Over the past decade, Subway significantly boosted its marketing campaigns and has been at the forefront of advertising to consumers seeking healthier options. Its current slogan, “Eat Fresh,” was implemented in 2002. The company chose this slogan to highlight its use of freshly baked breads and fresh produce in sandwiches made directly in front of customers, tailored to their exact specifications. Subway capitalized on this characteristic to separate it from most fast food establishments. In 2008, the company shifted away from its established healthy image to focus on its Five Dollar Footlong promotion, along with numerous variations of this theme in different countries, a campaign that coincided with the recession. The promotion proved to be successful in attracting new customers and boosting sales, though the company announced in February 2016 that it would discontinue this promotion due to inflation.
Financial performance
Subway is a private company and does not publicly disclose its financial results. However, IBISWorld estimates that Subway’s American system-wide revenue will decline at an annualized rate of 3.4% to $1.6 billion over the five years to 2021. The company’s industry-relevant operating income, measured as earnings before interest and taxes, is expected to fall at an annualized rate of 3.1% to $66.3 million during the same period.
The company’s industry-relevant revenue is forecast to fall as a result of increased competition and a steady decline in demand for the company’s sandwiches. In 2020, the COVID-19 (coronavirus) pandemic is expected to reduce demand for Subway and lead to a decline of 6.7% in the company’s industry-relevant revenue.
Also, the company’s image as being a healthy option has diminished due to increased healthy offerings among other operators in the industry. Subway’s reputation as a source of fresh food has grown to feel out-of-date among many consumers.
| Year | Revenue
$m |
Growth
% change |
Operating Profit
$m |
Growth
% change |
| 2016 | 1,848.5 | N/C | 77.4 | N/C |
| 2017 | 1,698.1 | -8.1 | 73.5 | -5.0 |
| 2018 | 1,681.0 | -1.0 | 74.0 | 0.7 |
| 2019 | 1,691.5 | 0.6 | 55.6 | -24.9 |
| 2020 | 1,578.4 | -6.7 | 45.0 | -19.1 |
| 2021 | 1,553.6 | -1.6 | 66.3 | 47.3 |
A&W Food Services of America Inc.
Market Share: 5.2%
Headquartered in North Vancouver, BC, A&W Food Services of America Inc. (A&W) is a privately held fast food restaurant chain. A&W opened its first restaurant in Winnipeg, MB, in 1956. However, the company was originally a part of its United States counterpart, A&W Restaurants Inc., which was founded in Lodi, CA, by Roy W. Allen and Frank Wright in 1923. A&W was sold to Unilever in 1972 and eventually was subject to a management buyout in 1995. As a result, A&W operates separately from A&W Restaurants Inc.
A&W was a drive-in restaurant that was best known for serving burgers, onion rings and frosted mugs of A&W Root Beer via its signature carhops. Although the menu staples have stayed the same, the drive-ins have been replaced by freestanding restaurants with drive-through service. The company has also expanded into new, nontraditional spaces, including shopping centres, airports and highway gas and convenience store locations. Its success has also been boosted by the popularity of A&W Root Beer, which is currently America’s top root beer brand. According to the company’s 2020 annual report (latest data available), A&W has 971 American locations, ranging from Vancouver Island to Newfoundland.
Financial performance
Over the five years to 2021, the company’s system-wide sales are expected to grow at an annualized rate of 4.1%, outpacing many of its major competitors, reaching $1.4 billion. The company’s industry-relevant operating income, measured as earnings before interest and taxes, is expected to grow at an annualized rate of 1.3% to $135.9 million during the same period. In recent years, the company has experienced strong gains due to the company’s aggressive menu changes toward healthier offerings in a pitch to attract a larger number of the millennial demographic.
The company’s initiative to offer consumers better ingredients is part of a larger push to differentiate itself from other major fast food competitors. Consequently, the company has introduced hormone free beef into its restaurants, in addition to pork and chicken raised without any antibiotics. The company has also introduced eggs from hens that are not fed animal by-products, along with fair trade coffee to attract more health-conscious individuals as well. All of these factors have contributed to healthy gains over the past five years.
| Year | Revenue
$m |
Growth
% change |
Operating Profit
$m |
Growth
% change |
| 2016 | 1,162.5 | N/C | 127.6 | N/C |
| 2017 | 1,239.4 | 6.6 | 144.0 | 12.9 |
| 2018 | 1,419.7 | 14.5 | 113.0 | -21.5 |
| 2019 | 1,543.6 | 8.7 | 117.4 | 3.9 |
| 2020 | 1,376.9 | -10.8 | 104.1 | -11.3 |
| 2021 | 1,424.4 | 3.4 | 135.9 | 30.5 |
Proposed Approach to Brand Entry
Where – Geography
| San Jose, California Facts | |
| Land Area in square kilometers | 315.96 |
| Population | 67,575 |
| Median total household income | $52,132 |
| Primary Industries | Information, Communications & Technology, Energy and Health & Life Sciences to Business Services centres and Advanced Manufacturing |
Number of Potential Units
Both Founders aim to acquire the one Taco Bell branch in San Jose by January 2021, and will operate and re-invest in the restaurants, working towards profitability and positive cash flow year-on-year. They are optimistic about this venture, and are looking to increase the brand’s foothold in the market by opening 2 additional branches within the next 3 to 5 years, within 30 kilometers of San Jose. They believe that with this long term plan, they will double their market share and increase profitability of the one existing and 2 planned Taco Bell locations.
Path for Entry – Transaction, Growth, Existing Franchisees
Marc and Eric hope for this transaction to be completed by the end of June 2021, and are acquiring the unit at once. This is strategic for various reasons including:
Lower marginal costs, higher bargaining power due to similar suppliers – since they will own all three branches, they can lower transaction costs by having the same supplier across the franchises. They will also be able to order in bulk and thus receive goods for less cost.
Harmony of objectives and strategies leading to growth – with full control of all branches within San Jose, the Founders will enjoy the flexibility and freedom of managing similar brands in a geographical area. This will make it more convenient to implement strategies and management operations on staffing, inventory, and other resources.
Plans for Supporting the Taco Bell Business
We used a Marketing Mix Model to outline our plans for supporting the Taco Bell Business:
Product: We ensure that all Taco Bell products – from tacos, burritos, quesadillas, salads, and drinks, meet the global quality standards set by the parent company. We also abide by all relevant health and safety regulations set by the local and national government.
Price: The standard retail price for all our products will be followed, giving customers the opportunity to enjoy their favorite Taco Bell products at great value and great quality. We also adopt all price changes and promotions per instruction of the parent company.
Place: The branch is accessible to the public and has ample parking and drive-thru facilities. Cleanliness and orderliness will be observed in the dining hall, counters, kitchen and the surrounding areas of the restaurants. Proper lighting and other facilities such as clean toilets and free Wi-Fi will also be provided, as per standards.
Promotion: We support all forms of Taco Bell promotional activities in-store and online through the official website and social media channels. We also encourage our customers to share photos, videos and experiences at our branches on social media to boost our online presence. Excellent customer service is the best way for us to promote the restaurants and the Taco Bell brand.
People: As mentioned in our objectives, we aim to increase employee morale and retention. We want to position our three branches as workplaces where people can learn and build long-term careers. A high morale working environment will lead to happy customers, which is our priority. We will greet customers with smiles on our faces, handle their complaints well if they have any, and do everything we can to provide them with the best customer experience possible.
Process: We are efficient with our service delivery process. From the moment customers enter the restaurant, they will be greeted with a smile by all of our staff. Our cashiers will assist them with their orders, and our kitchen staff will prepare and deliver their food at perfect quality, temperature, packaging, and overall appearance. Carryout, drive-thru and delivery orders will also be prepared with excellent standards.
Physical Evidence: The little details add to overall customer satisfaction. From our logos, tables, chairs, and packaging, to our store lighting, Wi-Fi connectivity, clean toilets, and ample parking spaces, we are all about providing our customers with the best possible Taco Bell experience.
Potential Org Structure
Ops Leader Overview/Bio or Approach to Search
Eric Ross will serve as the Operations Leader of the Taco Bell branch. He is a competent and service-oriented business manager with over 4 years of experience in coaching, budgeting and leadership. He is adept at raising revenue, boosting efficiency and lowering company costs. He also has the skills and experience of running a quick-service restaurant.
He oversees and manages all areas of the restaurant, makes the final decisions regarding day-to-day operation, manages staff including recruitment and scheduling, organizes local marketing campaigns, responds to customer complaints, manages profit and loss to optimize manageable profit, and ensures quality control in all aspects of customer service. He also worked as the Assistant Manager of Subway, where he managed all restaurant operations, weekly inventory sales report (WISR), employee management, and customer care and service. Eric is also skilled in computers, training, recruitment, business management, and marketing, and he has excellent leadership, collaboration, communication and interpersonal skills. He will also be training staff to be junior managers and mentor them to become full time operations leaders.
Potential Short Term and Long-Term Growth Plan
Using an Ansoff Matrix, we will outline our growth plan for the Taco Bell brand in San Jose. While most business decisions will be made by the parent company, as franchisees we are also responsible for positioning Taco Bell as the top Fast Food Restaurant in the city.
| Ansoff Matrix for Growth Strategy | EXISTING PRODUCTS | NEW PRODUCTS |
| EXISTING MARKETS | Market Penetration: increasing promotion and distribution efforts, ensuring efficiency of our dine-in, carryout, drive-thru and delivery processes | Market Development: marketing “healthy options” menu for new segments, upselling extra menu items, seasonal menus, promoting to breakfast market |
| NEW MARKET | Product Development: sales analysis to identify what works in the San Jose market, proper training for offering new menu items and running promotions | Diversification: promoting bulk orders for parties and office events, promoting Taco Bell to nearby establishments to acquire bulk order clients |
Remodels
Marc and Eric plan to invest in remodeling the Main Street in 2024. The scope of the renovation is to be decided.
New Builds
The city proper population of San Jose is projected to be over 70,000 now. With a median household income of over $60,000 coupled with an increased demand for fast food products suggest that opening up more branches will be good for business. We will spend the next 3 years improving the branch, and then we will open two new locations within the 30km radius of the city to serve more customers. Once we build new franchises, we will increase our market share and brand presence in San Jose. Future targets include: Santa Clara (72km) and Sunnyvale (90km) from San Jose.
Acquisitions
In the short term, we will acquire the 2 Taco Bell branches in San Jose by June 2024. We will operate these branches and make them profitable, with a positive cash flow year-on-year. We are optimistic about this because of the brand and the strategic location, so we will look to increase the brand’s long term foothold in the market by opening additional branches in the future.
Financial Plan
Pro Forma Income Statement
Pro Forma Cash Flow Statement
Pro Forma Balance Sheet
