Part 8.
Cheesecake factory market research
Overview
The purpose of this research is to find out the opportunities available for cheesecake restaurant to sell its products in the US and the international markets and the possibility for further expansion locally and globally. The report also evaluates the market of various foodstuffs especially cheesecakes products that are favoured by consumers and which faces stiff competition both in the local and the wider market. The general cheese market and production of cheese have been increasing over time and this is especially true because of the expansion of the market segmentation based on the changing consumer preferences. The sales of cheese has become a key component of the US and other major international economies due to the increase in consumer demand for cheese based products like the cheesecakes whose main content is cheese. The huge consumption of cheese products can also be traced to the increase in the preference for artisan cheese and products thereof. The potential for artisan varieties seems to be very promising especially due to domestic upward trend in the consumption of such specialty cheese. Cheesecakes’ popularity in the market can also be attributed to a growth in organic food supplies in the market and a key component of these supplies is organic cheese.
The market for dairy products is highly competitive and there are substantial number of products that compete directly and indirectly with cheese products like cheesecakes. The cheesecakes products are affected by various factors like the taste of the consumers, discretionally patterns of spending, the trends in the markets, the cost and availability of substitute products and the industry quality standards set by regulating authorities and the rival cheesecake factories. Emphasis on the nutritional value of dairy products has also had a big influence on the changes in the consumption of cheese cakes. Thus the selection of a good marketing plan will be very important in keeping up with the completion in the market and ensuring that the cheese factory performance in terms of sales and profit-making is maintained. The report also provides information on the general restaurant market in the US and globally and gives a lot of focus on the competitive nature of this market.
Research methodology
The research method used in studying the market is mainly the analysis of the available secondary data and the review of the historical trend in the food staff market more so the consumption those based on the dairy products like cheese.
Review of market in restaurant industry
The restaurant industry in the US and international market continue to grow gradually after recovering from the global economic recession that saw may restaurants record minimal to no growth or lossmaking altogether. Driven by strengthening local and global economies, the restaurant industry continues to rebound and thus more opportunities are opening up in this market in the midst of stiff competition (Mazzone& Associates Inc, 2015). The location of business associated with the restaurant industry are normally distributed in accordance to population. Hence, the distribution of the restaurant establishment is based on the income distribution of the population with the largest concentration within or near those areas with households having higher income (Bill and Laura 2011). The industry offers food services in the locations that are convenient for consumers and thus Cheesecakes Factory has to base its operations in the arears that are near the target customers. Restaurants add a lot of value to downtown areas since most workers or residents that represent their markets are normally located in such areas. These restaurant also attract visitors in those downtown areas thus serving the larger part of the community. Few such establishment are located in central business areas of major towns or cities and the few that are located there serve mostly the high end consumers or the lower income earners who visit once in a while (Bill and Laura 2011). The major restaurants in the market that can compete with Cheesecake restaurant offer fast foods, table services, restaurant for casual dining which serves foods that are moderately priced within a casual atmosphere. There are also family style establishments that offer traditional food services and the diner serve themselves or restaurants for fine dining. The residents of primary location area are the most important segment of the market that Cheesecake Factory can count on for the current operations or for any future expansion. This population provides a sizeable market whose preferences and consumption behaviour can easily and fairly be assessed accurately.
Similarly , employers in downtown come with a market that consist of daily streams of employees , and these can mostly be found during the day and thus spend substantial amount of money at food outlets or establishment. The international Council of Shopping Centers report indicate that expenditures on downtown lunch among the downtown office employees are more than the expenditures reported by office workers in the suburban areas (Bill and Laura 2011). This market consist of consumers who enjoy taking their lunch at restaurants and other outlets like grocery, carry-out and market businesses. They also stop over after work at these establishments for drinks or dinner. These business operators and the workers indicates that this is good market that Cheese Factory can target and setting up restaurant establishments in those areas will ensure that there will be a constant stream of customers(Bill and Laura 2011). The Cheese Factory can come up with varieties in the food servings so that to cater for the differing customer preferences in such a large market a strategy that will ensure that it realises economies of scales and thus increased chances of higher profit. To have a competitive advantage over other restaurants and outlets that offer food services the Cheesecake Factory has an opportunity to set-up many outlets in these areas since the population is huge and a single or few restaurants will not allow full exploitation of the market.
Another market that the Cheesecake factory will target is the Culinary Tourism market. The US market and other market abroad also consist of culinary travellers who visit communities to have an experience on their retail or restaurant establishments for food tours or such events that are related to foodstuffs. Studies by Travel Industry Association have shown that around 17 percent of leisure travellers in the US market engage in activities that are related to culinary or wine. These are mostly the younger, affluent and more educated travellers and their motivation for travelling is unique experiences (Bill and Laura 2011). Theses reinforces the opportunities that Cheesecake factory have for expanding their restaurant to serve the needs of this important market segment. This segment consist of the consumers who usually seek out food and wine experiences in while they are travelling. They are likely to visit destinations that offer local cuisine and thus Cheesecake Factory has to come up with such cuisines in the local restaurants branches to capture this market (Bill and Laura 2011).
In a challenging economic environment, the Cheesecake factory has to come up with innovative and advertising and marketing strategies to reach out to consumers. This is because the market is currently consisting of consumers who are active in media outlets especially the social media. Social media plays an important role in generating spending by the consumer, due to the influences that is associated with it. The National Restaurant Association reports that those consumers who are active social media users visits restaurant more than the average customers. Also, 80 percent of restaurant businesses owners’ points out that social media is and will be necessary for the consistent growth of their businesses in future (National Restaurant Association, 2015). This present a market that is continually leaning towards the use of social media for communication and for Cheesecakes factory to reach out to them, it will have to have its presence in the same platform.
Over the recent years market reports indicate that sales in restaurant industry are expected to grow. However, the 2015 performance report indicates that performance in the restaurant industry continued to fall to the end of that period. With the realised growth since 2011 after the global economic recession, the performance has continued to fall, thus making it necessary for Cheesecake Factory to come up with ways of ensuring that this negative growth is not realised. With the health of the industry analysis done with a level of 100, the 2015 performance fell by 1.6 percent as per the month of December which indicates an undesirable trend in growth of this industry. The restaurants operators also reported a decrease in sales of same-store. This represents a bleak future for restaurant industry if the trend is continue in this way (National Restaurant Association, 2015).
Report for restaurant operators: Higher sales and Lower sales reports in the same month
|
Year 2015 |
Percentage – Higher sales |
Percentage – lower sales |
|
April |
71 |
13 |
|
May |
76 |
19 |
|
June |
64 |
20 |
|
July |
73 |
16 |
|
August |
56 |
32 |
|
September |
51 |
27 |
|
October |
61 |
22 |
|
November |
44 |
33 |
|
December |
42 |
43 |
Between the month of December 2014 and December 2015, 42 percent of restaurant operators experienced a small gains in the sales while 43 percent experienced a decline in sales. In the month of November, 44 percent of the operators reported a slight increase in the sales, while 33 percent reported decrease in sales. Prior to the Month of November, majority of the restaurants had reported higher sales and then the sales started declining. Most of the restaurant operators said they had a net decrease in customer traffic in the month of December. Only 33 percent of the operators reported a rise in traffic of customers between the months of December 2014 to December 2015 (National Restaurant Association, 2015). The month of December had the lowest performance in terms of customer traffic since January. The decline in the performance of the market industry indicates that the market had not been growing as expected previously. The number of the restaurants that were reporting lower sales was generally increasing for the month of April up to the month of December a trend that is not very promising (National Restaurant Association, 2015). This means that for Cheesecake company to start off well and expand continually the marketing strategy must be very suitable for attracting customers in such a tough economic environment.
A review of cheesecakes market
Cheesecakes are the main product that are offered by this restaurant and serve as a selling point for other food services. The International Dairy Foods Association regards cheese products as being highly nutritious and a food that has almost all the important vitamins, minerals, proteins and many other nutrients that can be obtained from milk (Lactimed, 2015). Also there are a variety of cheese products that can be used in making cheesecakes. This can explain why the market for cheesecakes is very wide and has differing preferences for cheesecakes by different consumers both locally and internationally. The various categories of cheesecakes available in the market is based on the kind of the milk from which it was made. The most obvious types of milk are the cow, goat, sheep, moose, camel and reindeer milk (Lactimed, 2015). The consumption of dairy products based foodstuffs is seeing surging in the general food market. Studies done by various local and global organisation have shown that growth of dairy products consumption will continue to grow locally and globally which provide a huge market potential for the cheese factory to make hit the ground learning and the expand the market globally. Regions in the America and Europe might have markets which are in the mature stage but the markets in the Asian-Pacific areas present the highest current growth but high potential in future (Lactimed, 2015). This would explain why the cheesecakes market is very high is in such regions and it provides a good opportunity for start-up companies to start –up companies or for small companies which are trying to have a significant market share.
To have a good understanding on the potential market it is important to understand the rate consumption of dairy products like cheesecakes both locally and globally. This is in consideration that consumption growth projection for dairy products shows a significant possible increase in the developing and the least developed countries thus presenting a very good opportunity for marketing of cheesecakes. This opportunity makes it possible for Cheesecake Company to set-up branches in such unexploited areas which would guarantee long term growth and profitability. According to the estimates by OECD and FAO, the consumption of dairy products in the developed countries appears to indicate a considerable rebound even though these markets are quite saturated. This recovery can be attributed to the new packaging technology that makes it possible to have a high observation of hygiene in storage of the products for longer period and the available option for consumers to replace meat products with dairy products in their meals’ ingredients (Lactimed, 2015). This appears to be one of the major drivers of the growth in worldwide consumption potential.
In the US market the sales of cheese based products is a major component of the dairy products market. The overall cheese products consumption also takes a big portion of the other animal based products in the food market a fact that can be confirmed by the increase in the allocation of more milk in the making of various varieties of cheese products. For instance, of the pounds of milk amounting to about 188.9, 127 billion pounds were used in dairy products’ manufacturing. The production of cheese used around 65 percent of the entire amount used for dairy products which represent 82 billion pounds of the milk (Lactimed, 2015). This means that the consumer need for cheese based products is big and thus a big potential for the Cheese factory to penetrate into the market with an assurance of attaining a considerable market share. The consumption of the cheesecakes or the sales will be determine by various factors: whether the factory can make various varieties of cheesecakes; the expansion of cheesecakes sales by the pizza and fast-food restaurants; more use of cheesecakes as a diet ingredient at home or in institutions, both large and small; inclusion of cheesecakes in the consumption of ethnic food such as Mexican and Italian dishes. The market for the cheesecakes is always influenced by the emphasis on the consumption of dairy based products due to their nutritional benefits. Calcium content in the milk is retained in cheese, and makes up one of the three healthy and nutritious dairy nutritious products that are highly recommended (PM food & dairy consulting, 2012).
The cheese market in the US is quite dynamic mainly due to changing preferences in the consumer tastes, a fact that the cheese factory should really look into. Over the last decades the makers of cheese products especially the artisan cheese base products have realised this market dynamism and have resulted to particular strategies that aim at fulfilling these needs. Currently, these producers market their products by identifying them with names that represent their area of origin, ethnicity or tradition. Being the largest producer of cheese products globally, the US producers have come-up with such and many other ways that help them penetrate the market and remain afloat (PM food & dairy consulting, 2012). This is has become necessary due to the stiff competition between the various dairy products and the substitute products that always provide options for the customer. This in addition to a very high quality standards in the market calls for much keenness by the cheesecake factory , in order to penetrate the market, attain a significant market share, beat stiff competition from substitutes products and the other cheesecakes producing factories. The factory will be required to have above standard products by ensuring that it create products with good brand image, which can be achieved if its cheesecakes can build a consistent reputation of quality through efficiency in the production process, and a food safety measure or record that is unparalleled. Such an innovative way of marketing will ensure that the restaurant attracts the consumers who are more conscious of quality in a market that is full of varieties of similar products or substitutes.
Part 15
Financial analysis
The market for Cheesecake Factory restaurant products is quite big. The success of these products in this tough market will depend on the amount of effort and time that the marketing team spends on looking for clients especially for cheesecakes which is the major selling point of this restaurant. Since there no members of the marketing team who can work fulltime, lack of commitment and effort by the members will stifle any expected early growth. Where there are good indicators of penetrating the market in at the earliest time possible, the marketing team will be highly motivated by the prospect of an early break- even. This financial projection analysis will depend on some logic assumptions. To begin with, the first year will be spent in the preparation and learning of the best way to approach the clients and in building of solid relationships with the potential customers which may include individuals or institution. The other assumption is that all the senior managers will be maintained in their positions in other branch restaurants. Also, the marketing team will put emphasis on the opportunities available for the main restaurant until sufficient revenue is accumulated for opening other branches whether locally or in foreign markets. In addition, all the revenue will be realized after the restaurant has fully maximized on any available opportunity. If this model brings in good results in terms of revenue collection, it will be implicated in other branches of the restaurant.
The break-even point is expected to be reached at $10,316, assuming that the percentage in average variable cost is maintained at 13%, and the monthly estimated fixed cost is $8,975.
The financial contingency and risk
The financial risks to the Cheese factory faces in its present plan are few. The most expenses relates to the basics as a website, business cards and communication mechanisms that are very basic. There are few expenses that do not link directly with generation of revenue and thus they are profitable intrinsically. In case the Cheesecake factory restaurant is financed by a venture capital organisation by taking care of some expenses like salaries, the organization risk incurring loss if the restaurant is unable to raise enough revenue to cater for the debt.
Part 16
Scenarios
Since the restaurant want to attract more customers into the establishment, the market team will employ a strategy where the consumers will be directly involved. The first instance will involve picking the most tantalizing products more so the cheesecakes. In order to estimate the number of the customers who are likely to remain attached to the restaurants especially in the downtown market, any passer –by to use the product without paying for it. The potential client will then be requested to rate the foodstuff, and this will show those consumers who will develop an interest in the product. Those who show interest will provide a qualified lead which can be followed by the marketing team, and such consumers are likely to become solid customers of the restaurant. The future behaviour of such customers will be used to estimate the viability of the marketing strategy and the future response can present the number of consumers that will express interest in the restaurant’s food services.
Part 17
Controls
The Cheesecake Factory will seek to work with various marketing firms in the local market in order to advertise and market their presence in the local market and also in case of expansion in the foreign market. In the Asian market, the restaurant will employ the help of established companies to market its cheesecakes and other products such as Alshaya Group, which is based in United Arab Emirates and have its firm presence in the area. In put control measures are those actions that are aimed at implementation of the marketing strategy. They are the steps that are needed for ensuring that the marketing strategies adopted yield results. Such actions include recruitment of employees, selection and training them. These actions also include allocation of human resource, financial resources, capital outlays and the expenditures on research and development. To ensure the marketing plan strategies work out as plan, Cheesecake factory will embark on recruiting, selecting and an extensive training of the marketing team members. This step will serve as an important step that will ensure that the set marketing targets are achieved and that there will be no deviation from the set goal.
The restaurant will also include process controls actions that will be aimed at ensuring employees remain on course in the marketing efforts. These controls will involve the reviewing of compensation systems, evaluation of employee performance, empowerment, and programs for internal communication, establishment of authority lines in the marketing teams and encouraging employee commitment to the set target. In the process controls the evaluation of the employees will be done on measures that are stated specifically in the marketing strategy, like customer service or commissions on the number of customers that one can manage to gain. For instance, if the strategy identifies a certain goal upon which to improve, or the achievement of a specific goal relating to customer service or sales volume, the marketing team members will be evaluated and compensated according to how much their performances align to the expected result. These are important controls for ensuring that the employees remain focused to customer attraction and retention.
Appendix:
Financial Estimates
The projected income statement for the Year 2015
Amount Amount Amount
Sales 18,500.00 250,500 450,500
Direct Cost of Sales 2,405.00 47,595 77,306
Other Production Expenses - - -
Total Cost of Sales 2,405.00 47,595 77,306
Gross Margin 16,095.00 202,905 373,194
Gross Margin 87.00% 81.00% 82.84%
Expenses
Salaries 90,200.00 120,200 260,200
Sales, Marketing and Other Expenses 2,199.00 26,100 46,800
Utilities 900.00 2,100 2,100
Insurance 100.00 2,500 2,400
Rent - 11,000 12,000
Payroll Taxes 13,400.00 18,000 38,500
Total Operating Expenses 106,699.00 179,900 362,000
Profit before Interest and Taxes - 90,604.00 23,005 11,194
EBITDA 90,604.87 23,005 11,194
Interest Expense 0 0
Taxes Incurred 6,810 3,174
Net Profit 90,604.00 16,195 8,020
The projected Cash flow statement for the Year 2016
Amount Amount Amount
Cash Sales 4,600 63,500 113,500
Cash from Receivables 11,300 158,980 312,900
Total Cash from Operations 16,700 221,500 425,450
Sales Tax, VAT Received 0 0 0
Current Borrowing (new) 0 0 0
Other Liabilities (interest-free) 0 0 0
Long-term Liabilities (new) 0 0 0
Sales of Current Assets (others) 0 0 0
Sales of Long-term Assets 0 0 0
Investment Received (new) 0 9,500 9,800
Subtotal Cash Received 16,700 231,000 435,250
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending 90,000 120,100 260,100
Bill Payments 18,860 106,450 176,970
Total Spent on Operations 108,860 226,450 436,970
Additional Cash Spent
Sales Tax and VAT, HST/GST Paid Out 0 0 0
Repayment for Current Borrowing 0 0 0
Other Liabilities Repayment 0 0 0
Long-term Liabilities Repayment 0 0 0
Purchase Other Current Assets 0 0 0
Purchase Long-term Assets 0 0 0
Dividends 0 0 0
Total Cash Spent 108,860 226,450 436,970
Net Cash Flow -93,060 -3,930 2,550
Cash Balance 15,800 10,582 8,300
References
National Restaurant Association, (2015). Restaurant Performance Index. Retrieved from: https://www.restaurant.org/Downloads/PDFs/News-Research/index/RPI-Dec2015.pdf
MAZZONE& ASSOCIATES INC, (2015).2014 Restaurant Industry Report. Retrieved from: http://www.globalmna.com/assets/2014restaurantindustryreport.pdf
Volha B. (2012).Analysis of the Upscale/Fine Dining Sector in the Restaurant Industry: Johnson & Wales University. Retrieved from: http://scholarsarchive.jwu.edu/cgi/viewcontent.cgi?article=1008&context=mba_student
Bill R., Laura B. (2011). Evaluating Restaurant and Culinary Opportunities. Retrieved from: https://fyi.uwex.edu/downtown-market-analysis/
PM FOOD & DAIRY CONSULTING, (2012) .The Global Cheese Market Report 2000-2015. 2-12
Lactimed, (2015).The dairy products market Documentary study. 19-43. Retrieved from: http://www.animaweb.org/sites/default/files/document_etude_debouches_lactimed_en_web_final.pdf
