ENTREPRENEURSHIP

Module 3
Week 4

BSHM-III

Ms. April B. Patalen

Subject Instructor

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MODULE 3
Entrepreneurship in the Restaurant Business

Learning Objectives
After reading this chapter, you
should be able to:
✓ Define competitive strategies.
✓ Explain positioning and generic
business strategies and their role
in a firm’s value creation process.
✓ Describe the roles of resources,
capabilities, and competencies in
strategy formulation.
✓ Describe the industry life cycle,
and explain the competitive
strategies that firms follow during
each phase of the life cycle.
Learning Outcomes:
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At the end of this chapter, the
student will be able to:
• Learn about the different
generations as target market for the
restaurant business.
• Understanding the type of
restaurant concepts.
• Apply the SWOT analysis in
creating a restaurant concept.
Learning Outcomes:
At the end of this chapter, the student will be able to:
• Learn about the different generations as target market for the
restaurant business.
• Understanding the type of restaurant concepts.
• Apply the SWOT analysis in creating a restaurant concept.

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ARGET MARKETS
No single food-service operation
has universal
appeal. This is a fact that many
newer
entrepreneurs have trouble
accepting, but the

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reality is that you will never
capture 100 percent of
the market. When you try to please
everyone, you
end up pleasing no one. So, focus
on the 5 or 10
percent of the market that you can
get, and forget
about the rest.
TARGET MARKETS

No single food-service operation has universal appeal. This is a fact that many newer entrepreneurs
have trouble accepting, but the reality is that you will never capture 100 percent of the market. When
you try to please everyone, you end up pleasing no one. So, focus on the 5 or 10 percent of the market
that you can get, and forget about the rest.

With that said, who is eating at restaurants? Let’s look at the main market categories of food-service
business customers: Generation Y. This generation also tagged the “millennial generation,” th e “echo”
or the “boomlet” generation, includes those born between 1980 and 2000. Generation Y is the most
ethnically diverse generation yet and is more than three times the size of generation X. They are prime
target for a food-service business. Members of generation Y go for fast-food and quick-service items.
About 25 percent of their restaurant visits are to burger franchises followed by pizza restaurants at 12
percent. Generation X. Generation X is a label applied to those who were born between 1965 and 1980.
This group is known for strong family values. While earlier generations strived to do better financially
than their parents, Gen Xers are more likely to focus on their relationship with their children. They are
concerned with value, and they favor quick-service restaurants and midscale operations that offer all-
you-can-eat salad bars and buffets. To appeal to this market group, offer a comfortable atmosphere that
focuses on value and ambience.

Baby boomers. Born between 1946 and 1864, baby boomers make up the largest segment of the U.S
population. Prominent in this generation are affluent professionals who can afford to visit upscale

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restaurants and spend money freely. During the 1980’s, they were the main customer group for upscale,
trendy restaurants. In the 1990’s, many baby boomers were two-income households with children.
Today, those on the leading edge of the boomer generation are becoming grandparents, making them a
target of restaurants that offer a family-friendly atmosphere and those that provide an upscale, formal
dining experience.

Empty nesters. This group consists of people in the age range between the high end of the baby
boomers and seniors (people in their early 50s to about age 64). Empty nesters typically have grown
children who no longer live at home, and their ranks will continue to increase as the baby boomers grow
older and their children leave home. With the most discretionary income and the highest per-capital
income of all the generations, this group typically visits upscale restaurants. They are less concerned
with price and are more focused on excellent service and outstanding food. Appeal to this group with
elegant surroundings and a sophisticated ambience.

Seniors. The senior market covers the large age group of people age 65 and older. Generally, the
majority of seniors are on fixed incomes and may not often be able to afford upscale restaurants often,
so they tend to visit family-style restaurants that offer good service and reasonable prices. “Younger”
seniors are likely to be more active and have more disposable income that “older” seniors, whose health
may be declining. Seniors typically appreciate restaurants that offer early-bird specials and senior menus
with lower prices and smaller portions, since their appetites are less hearty than those of younger
people.

How to Start a Restaurant?

Restaurant Service Styles
Restaurants are classified into
three primary categories:
quick-service, midscale and
upscale. Quick-service
restaurants are also known as fast-
food restaurants.
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These establishments offer limited
menus of items that
are prepared quickly and sold for a
relatively low price.
In addition to very casual dining
areas, they typically
offer drive-thru windows and take-
out service.
How to Start a Restaurant?

Restaurant Service Styles

Restaurants are classified into three primary categories: quick-service, midscale and upscale. Quick-
service restaurants are also known as fast-food restaurants. These establishments offer limited menus of
items that are prepared quickly and sold for a relatively low price. In addition to very casual dining areas,
they typically offer drive-thru windows and take-out service.

When people think of fast-food

restaurants, they often
think of hamburgers and French
fries, but
When people think of fast-food restaurants, they often think of hamburgers and French fries, but
establishments in this category also serve chicken, hot dogs, sandwiches, pizza seafood and ethnic
foods.

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Midscale restaurants, as the name implies, occupy the middle ground between quick-service and
upscale restaurants. They offer full meals but charge prices that customers perceive as providing good
value.

Midscale restaurants offer a range of limited and full-service options. In a full-service restaurant,
patrons place and receive their orders at their tables; in a limited-service operation, patrons order their
food at a counter and then receive their meals at their tables. Many limited-service restaurants offer
salad bars and buffets.

Upscale restaurants offer full table service and do not necessarily promote their meals as offering great
value; instead, they focus on the quality of their cuisine and the ambience of their facilities. Fine-dining
establishments are at the highest end of the upscale restaurant category and charge the highest prices.

Selecting a Food Concept

Restaurant patrons want to be delighted with their dining experience but they don’t necessarily want
to be surprised. If you’re anticipating a family-style steakhouse (based on the name or the décor of the
establishments), but you find yourself in a more formal environment with a bewildering and pricey
gourmet menu, the surprise may keep you from enjoying the restaurant. Concepts give restaurateurs a
way to let patrons know in advance what to expect and also to provide some structure for their
operation. Here are some of the more popular restaurant concepts:

Seafood. Quick-service seafood restaurants generally offer a limited range of choices, often restricted
to fried seafood. Midscale and upscale seafood restaurants offer a wider selection, prepared in ways
other than fried, such as baked, broiled and grilled. Seafood can be a risky area on which to focus, as
prices are always changing, and many kinds of seafood are seasonal. Also, quality can vary fresh and
meet your standards of quality. If you are not happy with what a distributor offers, you can be sure your
customers won’t be, either.

Steakhouses. Steakhouses are part of the midscale and upscale markets. Midscale steakhouses are
typically family-oriented and offer casual environment with meals perceived as good values. In terms of
décor, comfort is emphasized and western themes are popular. Upscale steakhouses offer a more
formal atmosphere and may serve larger cuts of meat that are of better quality than those served in
midscale restaurants. Upscale establishments also charge higher prices, and their décor may be similar
to that of other fine-dining establishments, offering guests more privacy and focusing more on adult
patrons than on families.

Family-style restaurants. As the name implies, these establishments are geared toward families. Since
they charge reasonable prices, they also appeal to seniors. They offer speedy service that falls
somewhere between that of quick-service places and full-service restaurants their menus offer a variety
of selections to appeal to the interests of a broad range of customers, from children to seniors. Family-
style restaurant prices may be higher than those at fast-food restaurants. But these establishments
provide table service to compensate. The décor of family-style restaurants is generally comfortable with
muted tones, unremarkable artwork, and plenty of booths and wide chairs. Booster seats and highchairs
for children are readily available.

Casual-dining restaurants. These establishments appeal to a wide audience, ranging from members of
Generation Y to Generation X to baby boomers with families to seniors, and they provide a variety of

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food items, from appetizers and salads to main dishes and desserts. Casual-dining restaurants offer
comfortable atmospheres with midrange prices. Many centers on a theme that’s incorporated into their
menus and décor.

Ethnic restaurants. Ethnic restaurants enjoy a significant share of the U.S restaurant market. They range
from quick-service places with limited selections to upscale eateries with a wide variety of menu items.
Their menus typically include Americanized versions of ethnic dishes, as well as more authentic food.
The three most popular kinds of ethnic restaurants are Italian, Chinese and Mexican. Other popular
ethnic restaurant types include Indian, Thai, Caribbean, English, French, German, Japanese, Korean,
Mediterranean and Vietnamese. An even wider variety of ethnic restaurants can thrive in areas with a
culturally diverse population, such as large metropolitan areas.

Pizzeria. You have two primary choices when starting a pizzeria. One is a to-go restaurant in a modest
facility with a specialized menu highlighted by pizza and beer, limited seating and a self-service
atmosphere. The other is a full-service pizza restaurant with a menu that features not only a variety of
pizzas, beer and wine, but also Italian entrees like spaghetti, ravioli and lasagna, side dishes such as
salads (or even a salad bar), and a few desserts. The foundation of a pizzeria ism of course, the pizza. If
you don’t know how to make a good pizza, hire a good pizza cook. Invest in top-quality ingredients and
preparation methods, and make every pizza as if you’re going to eat it yourself. Do that and your
customers will keep coming back for more.

Sandwich Shop/Delicatessen. One reason sandwich shops are so successful is that they enjoy high profit
margins. Sandwich shops and delicatessens can also change their menus quickly and easily to adapt to
current tastes. For example, with the growing interest in health and nutrition in the United States,
sandwich shops and delicatessens have started offering more low-fat, healthy ingredients in their
sandwiches, salads and other menu items. In addition, many sandwich shops and delis have been able to
keep up with workers who eat at their workplaces by adding delivery and catering to their sit-down and
take-out operations. Sandwich shops and delicatessens can differentiated by the foods they serve. Most
sandwich shops serve only sandwiches, possibly with some side dishes or desserts. A delicatessen
usually offers a more extensive menu, including sandwiches, prepared meats, smoked fish, cheeses,
salads, relishes and various hot entrees.

Coffeehouse. With more than 400 billion cups consumed every year, coffee is the world’s most popular
beverage. But beyond the beverage itself, people frequent coffeehouses and espresso bars for variety of
reasons: to meet with friends, for a quick lunch and drink to perk up the afternoon, or simply to start off
each morning with a great cup of coffee. Most successful coffeehouses have heavy foot traffic and high-
volume sales. The majority will serve up to 500 customers per day and manage up to five customer
turnovers during the lunch hour, despite having limited floor space and modest seating capacity. Profit
margins for coffee and espresso drinks are extremely high, you’re dealing with a product that’s more
than 95 percent water. At the same time, your average ticket amount is around $3, so you need volume
to reach and maintain profitability. Besides specialty roasted coffee by the cup, most coffeehouses also
have espresso-based drinks (cappuccinos, lattes, etc.), assorted teas, bottled water and fruit juices,
along with an inviting assortment of baked goods, a selection of desserts, and coffee beans by the
pound.

Bakery. With the emergence of strip malls and competition from supermarkets that have in-store
bakeries, “bread-only” retail bakeries have almost disappeared from United States. Bakeries today offer

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cakes, scones, bagels and coffee drinks, and sometimes even a full dining menu, including sandwiches,
hot entrees, beer and wine. Consumers love fresh bakery goods, but the market is extremely
competitive. As you develop your particular bakery concept, you’ll need to find a way to differentiate
yourself from other bakeries in town .

Working in a Restaurant Dealing graciously with customers and playing the role of an elegant host are
only part of a restaurateur’s many duties. Food-service business operators spend most of their time
developing menus; ordering inventory and supplies; managing personnel; creating and implementing
marketing campaigns; making sure their operation is in compliance with a myriad of local, state and
federal regulations; completing a wide range of paperwork; and performing other administrative chores.
Certainly, the financial opportunities are there-as well as the fun aspects of the business- but starting,
running and growing a food-service business is also hard work.

Regardless of the type of food-service business you intend to start, the best way to learn the ropes is to
work for a similar operation for a while before striking out on your own. Doing so will give you significant
insight into the realities and logistics of the business.

Successful restaurateurs agree that the best preparation for owning a restaurant is to work in someone
else’s first. Think of it as getting paid to be educated. Certainly, you should also plan to work in a
restaurant for at least a few years doing as many different jobs as possible. And if you’re not actually
doing it when your own restaurant is unexpectedly shorthanded.

Ideally, you should work in a restaurant similar to the type you want to open. You may find out that you
don’t like the business. Or you may find you’re more suited to a different type of operation than you
originally thought. Hopefully, you’ll discover you’re in exactly in the right place.

“As soon as I started working in a restaurant, I realized this way my passion,” says Scott Redler, “when
you have a busy restaurant, and you’re watching everything happen as it should, it’s just wonderful
feeling of satisfaction.” Redler has worked in various restaurants for 11 years, he opened Chinese fast-
food place at the age of 26. That venture failed within eight months, then Redler went to work for a
large restaurant company, where he eventually advanced to the position of senior vice president,
overseeing 15 operations. But he still yearned for his own place, so he developed the concept that
became Timberline Steakhouse & Grill in Kansas (which he sold in 2011). He recognized that the fast,
casual segment was gaining momentum, so he created Freddy’s Frozen Custard, which offers hot dogs,
hamburgers, and (as you might expect) frozen custard. Freddy’s Frozen Custard franchise operation with
60 stores. As long as there are people that have money, there are lots of people who are willing to
satisfy their needs. Entrepreneurs are individuals who seeks opportunities for business. They are
creative, resourceful and they are willing to take risk in business.

In discovering business opportunities, the following factors or resources have to be evaluated.

1. MARKETS - The number of prospective buyers, the presence of competitors, and the prices
and quality of goods and services have to be analyzed. Are the needs of the consumers fully
satisfied> if not, then business opportunities exist in areas where consumer satisfaction is weak
or incomplete.

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2. INDIVIDUAL INTEREST - Business interest of individuals vary. There are those who are
interested in agriculture. Others are inclined to industries. Not a few like to be employees.
Interest should match business opportunities. For example, owning a house close to a
university would be a good place to sell food for lunch or run a boarding house.
3. CAPITAL - Money is very important in putting up a business enterprise. The availability of
funds should fit the type of business to be organized. One who has a limited capital start with a
microbusiness. Many in schooled individuals started with such business, and many of them are
very much successful in their endeavors.
4. SKILLS - The entrepreneur should have the proper skills in the business he is going to
undertake. Example, if the person wants to open a restaurant, it would be beneficial to him if
he has some cooking skills or related restaurant skills. It is not advisable to depend on
somebody to run the business for you, a hands on entrepreneur is most likely to succeed
compared to an absentee entrepreneur.
5. SUPPLIERS OF INPUTS - It is not enough that there are sufficient buyers of goods and
services. It is equally important that there are steady suppliers of raw materials and other
inputs of the business. Obviously, if there are no materials to be used in production, a business
man has nothing to produce and sell. If production is delayed due to lack of materials, then it is
not good for the businessman. His business is likely to lose customers.
6. MANPOWER - The success of any business enterprise primarily depends on the efficiency of
its employees. In putting up a business, make sure that experts or trained personnel are
available. This is an essential requirement to make the business feasible.
7. TECHNOLOGY - Tastes and preferences are not permanent. They are heavily influenced by
innovations and innovations are the product of technology. New products and new services
represents improvement which are intended to improve consumer satisfaction. Entrepreneurs
should be aware of the presence of technology to improve their products or services.

SWOT Analysis
SWOT is an acronym for
Strengths,

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Weaknesses, Opportunities,
Threats.
It is a planning tool used to
understand the
strengths, weaknesses,
opportunities, and
threats involved in a project or
in a business. It
involves specifying the objective
of the business
or project and identifying the
internal and
external factors that are
supportive or
unfavorable to achieving that
objective. SWOT is

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often used as part of a strategic
planning
process.
The term “SWOT ANALYSIS”
is in itself an
interesting term. Many believe
the SWOT is not
an analysis, but a summary of a
set of previous
analysis-even if those were not
more than 15
minutes of mini-brainstorming
with yourself in
front of your computer. The
analysis or more correctly

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interpretation comes after the S
WOT
summary has been produced.
SWOT Analysis
SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. It is a planning tool
used to understand the strengths, weaknesses, opportunities, and threats involved in a project
or in a business. It involves specifying the objective of the business or project and identifying
the internal and external factors that are supportive or unfavorable to achieving that objective.
SWOT is often used as part of a strategic planning process. The term “SWOT ANALYSIS” is in
itself an interesting term. Many believe the SWOT is not an analysis, but a summary of a set of
previous analysis-even if those were not more than 15 minutes of mini-brainstorming with
yourself in front of your computer. The analysis or more correctly interpretation comes after
the S W O T summary has been produced.

Definition A process generates information that is helpful in matching an organization or

group’s goals, programs, and capacities to the social environment in which it operates. Note
that in itself is only a data capture - the analysis follows.
Strengths
• Positive tangible and intangible attributes, internal to an organization.
• They are within the organization’s control.

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 Weakness
• Factors that are within an organization’s control that detract from its ability to attain the
desired goal.
• Which areas might the organization improve?
Opportunities
• External attractive factors that represent the reason for an organization to exist and develop.
• What opportunities exist in the environment, which will propel the organization? Identify
them by their “time frames”.
Threats
• External Factors, beyond an organization’s control, which could place the organization
mission or operation at risk
. • The organization may benefit by having contingency plans to address them if they should
occur.

Discussion Questions
Activity 1
1. What is SWOT Analysis? When do you need one?

2. How do you conduct SWOT Analysis for you business and utilize it?

Activity 2
Make an Interview
Direction: Interview a business owner in your community. Please be guided with the following
interview questions below:

1. Explain what is SWOT

analysis?
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2. Why is technology an important
resource in business?
3. Give examples of strengths of a
company?
1. Explain what is SWOT
analysis?
2. Why is technology an important
resource in business?
3. Give examples of strengths of a
company?
1. When did you start your business?
2. Why did you decide to become a business owner?
3. What was your mission at the start of your business?
4. What services or products do you offer?
5. What are the Strengths, Weaknesses, Opportunities and Threats of your business?

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