Taste of Han Dynasty Business Plan

Prepared by Ying Xue, Yang Wang

Executive Summary

Han Dynasty plays a prominent role in Chinese history and it still has a great impact

on Chinese society. Meanwhile, recent years, the mainland of China has seen a big

culture revival movement. So we consider this as an appropriate opportunity to

operate our business and also being a part of this movement.

Taste of Han Dynasty: a place to taste history is a theme restaurant that aims at

providing customers a special dining place which allows them feel and experience

Han Dynasty culture and atmosphere. We are going to operate our restaurant in

Nanjing, which is a popular tourism city of China. We decided to locate our business

in China mainly because of the background we mentioned previously and we believe

Chinese people will understand our idea much better and more familiar with the topic.

We segment our customers into three target markets, which are local people, people

who love history and culture, and tourists. In terms of products, we will provide

everything that one restaurant is supposed to have as well as our own specialized

products accordingly. Employees that that will be hired to help to run our restaurant

include two managers, a full time accountant, full time and part time chefs and waiters

(waitresses). We believe this organization structure will be effective for our 400

square meters (one floor) restaurant that concludes a maximum sitting capacity at 200.

All full time employees will be working 360 days a year from 11am to 11pm.

To realize our business plan, we require a $750,000 financing budget, which contains

a 55% of equity that comes from our parents and friends, and rest of 45% of debt that

we plan to borrow from bank. Unlike many other businesses, we see a positive net

income of $54,739 in the first year and it continues to grow up in the following next

four years.

With all of these saying and our marketing strategies that will be presented in detail,

we are very confident that Taste of Han Dynasty will fill up the vacant position in

2

current market and contribute to culture and entertainment development of China.

Table of Contents

Executive Summary.......................................................................................................................2

1.0 Introduction.........................................................................................................................................5

1.1 Mission Statement..................................................................................................................5

1.2 Corporate Goals.....................................................................................................................5

1.3 Industry Overview..................................................................................................................6

2.0 Operating Plan......................................................................................................................... 7

2.1 Location.................................................................................................................................7

2.2 Site Plan.................................................................................................................................8

2.3 Floor Plan...............................................................................................................................9

2.4 Quality Control Program......................................................................................................10

2.5 Suppliers...............................................................................................................................11

3.0 Human Resources....................................................................................................................12

3.1 Job Descrptions....................................................................................................................12

3.2 Human resource wages.......................................................................................................14

3.3 Hours of Operation.............................................................................................................14

3.4 Training Program................................................................................................................15

4.0 Marketing Plan.........................................................................................................................15

4.1 Competition..........................................................................................................................16

4.2 Positioning...........................................................................................................................17

4.3 Products................................................................................................................................17

4.4 Pricing................................................................................................................................................17

4.5 Promotion..........................................................................................................................................18

4.6 Segmentation and Targeting................................................................................................19

5.0 Financial Plan..........................................................................................................................21

5.1 Indirect Competition............................................................................................................21

5.2 Summary of Project Income................................................................................................21

5.3 Summary of Projected Balance Sheet..................................................................................23

3

5.4 Risk Analysis.......................................................................................................................23

5.5 Critial Variables...................................................................................................................23

5.6 Break-Even Analysis...........................................................................................................24

5.7 Contingency Plan.................................................................................................................25

5.8 Net Present Value and IRR..................................................................................................25

6.0 Conlusion.............................................................................................................................26

4

1.0 Introduction

Taste of Han Dynasty is the first restaurant which themed on Han Dynasty. People

could get special experience for dinning in Taste of Han Dynasty, since it is not only a

place that people could have dinner here, people could also have experiences on

culture of Han Dynasty.

On top of providing the dining experience to customers, Taste of Han Dynasty focuses

on the atmosphere which provides to customers. In Taste of Han Dynasty, there are

bridge, small pavilions and stone chairs around the main dinning building. Also, the

main dining building would be in Han Dynasty Style, people feel the cutural

atmospere while they have dinner here.

1.1 Mission

Our mission is to spread the culture of Han Dynasty, attracting increasing people to

have interest on Han Dynasty. Also, providing great tasty foods and cultural

atmosphere for customers is another mission of Taste of Han Dynasty.

1.2 Goals and objectives

Our goal is to approach our mission statement and satisfy our customers so they return

and acts ambassadors for our business while generating above industry average profits

to position us for future growth and expansion into new market.

Short-term objectives (1 -2 years)

Reach our assumed customers per day which is 150 customers per day

Be protitable in first two years

Develop complete accounting, operating and Human resource systems

Long-term objectives (3-5 years)

“Taste of Han Dynasty” would be a well know brand among local people and

tourists

5

Shareholders should be satisfied by the dividend

2/3 portion of the bank loan would be paid

1.3 Industry overview

Nanjing is the capital city of Jiangsu province, and it is the second largest city in east

part of China. The population of Nanjing is approximately 8 million people.

Moreover, economy of Nanjing is also strong, since our restaurant is market on high-

end, Nanjing could a suitable location that many people could afford to have dinner in

our restaurant.

The restaurant industry is competitive. The barriers to enter this industry are few,

since it requires relative fewer funds to open a restaurant. At same time, one of the

key factors that people have dinners in a high-end restaurant is determined by the

disposal income customers have. Economy is unstable in recent years, and the

inflation rate in China is higher compared to decant years ago. Therefore, there is a

high chance that people decrease frequency to have dinner at restaurant because of the

decreased disposal income. Therefore, in this industry, the mortality is high.

Although the restaurant industry is competitive, Taste of Han Dynasty still has its

strengths. Themed restaurant is popular in current industry, and Han Dynasty Theme

restaurant is the first this kind of restaurant in China. In recent years lots of peopleare

very interest in the culture of Han Dynasty, therefore, this bring us an opportunity for

opening a restaurant themed on Han Dynasty.

6

2.0 Operating Plan

Our objective is to provide customers a special dinning place which allows them feel

and experience Han Dynasty cultural atmosphere. By saying this, we will operate a

Han dynasty theme restaurant in Nanjing. We will realize this by providing customer

delicious food as well as creating a simulated environment of Han Dynasty: both

internal and external.

2.1 Location

Our themed restaurant will be located in Nanjing of China (see figure 2.1 and 2.2).

The reasons why we set up our business in this city are meaningful. Firstly, Nanjing is

the capital city of Jiangsu province which is one of the richest areas and one that has

the biggest portion of population. These factors will guarantee us a considerable

potential number of customer and we believe they would be able to afford dinning at a

high-end restaurant. Also, since our restaurant theme is “Han Dynasty”, which makes

the culture perspect a typical factor to our restaurant. Nanjing, a beautiful city, has a

long and deep history and it was one of the ancient capital cities in China. We believe

the image of this city is quite close to our theme. Moreover, as we stated that Nanjing

has a long history, it is also one of the most popular tourism cities in China.

Meanwhile we will build our restaurant right beside the Xuanwu Lake, which is a

beautiful and popular destination, and it is very close to many other historical sites.

There could be lots of tourists come to Nanjing because of those sites. Locating in

Nanjing could be an essential opportunity for us, since one of our main target markets

is tourist,. Thus, locating in this city is an appropriate decision.

7

(Figure 2.1 and 2.2 Location)

2.2 Site plan

Since we are aiming at provide a unique “Han Style” themed restaurant, we would try

to create the most real and accurate both internal and external dinning atmosphere.

Our site plan, presents as Figure 2.3, is try to build a retro and elegant environment.

The entire site design looks like a big circle, the restaurant building lies in the very

middle and it is surrounded by a small artificial stream. There will be some wooden

bridges for the sake of customers’ convenience. All white area will be covered by

plants such as bamboo and pine tree. We select these plants because there are many

related historical stories about them in China. Bamboo stands for good luck and pine

tree are green all the year round. We often describe someone who has a noble and

unsullied character just like bamboos and someone who has a stronger character like

pine tree. These two types of plants could give customers more direct impression of

our restaurant. We want to make the white area as the gardening and outside activity

area, so we would build some pavilions and stone or wooden tables and chairs.

Furthermore, we would promote our restaurant as environment-friendly, in terms of

parking service, we encourage people taking public transit to our restaurant, but we

will negotiate with near parking lots for parking service, so parking area will be about

8

one hundred meters from our building. By doing all of these, we want our customers

fully integrated into the atmosphere we create. They could take few steps to walk

along the 100 meters bamboo trail in order to feel a natural and peaceful environment

first, and then they will see the building in the depth of the dense woods.

(Figure 2.3 Site Plan)

2.3 Floor plan

In terms of floor plan, there will be two similar floors in the building, cashier and

information area is in the middle as well as the stairs to the second floor, we will leave

enough space for special performance and activities, all dining tables will be placed

near the wall and only few small tables will be placed in the center area. Washrooms

are right at the top left corner. The kitchen, storage, staff room and office are all at the

top right corner. We will have an internal use stairs in the kitchen just in order to sever

customers in the second floor better and to avoid use the stairsin the centre when busy.

9

(Figure 2.4 Floor Plan)

(Floor

1）

(Floor 2)

2.4 Quality control program

We will do random quality tests every month for our food and for any new products in

the future to ensure customers get the best quality products. Besides, we are willing to

10

under the supervision of regulate organization. We will public supervision results and

encourage feedbacks from customers.

2.5 Suppliers

Meat, vegetables, and cooking materials are main raw mateials we need. We will have

a long term contract with at least two local farmers for fresh organic vegetables. They

will responsible for supply and transport vegetables to our restaurant at 8:00am every

day, one supply on odd day and one supply on even day. We will purchase meat (ex.

pork, beef) and other materials (ex. salt, oil) from local wholesale, and seek long and

stable relationship with them.

11

3.0 Human Resource Plan

(Figure3.1 Organizational structure)

3.1 Job Descriptions

HR manager- Yang

Schedule the work shift for employees include front and kitchen staffs

Recruiting employees and interviews

Charge for the employees’training program

Employees promotion and benefit

12

Managers(operating and

HR)

Leader ALeader B

Full-time Part-time

Leader -kitchen

chevies& Assistant

Accountant

Dealing the confliction between employees

Operating manager- Ying

Daily materials purchase from supply chain

Deal with the complaint from customers

Inventory storage management

Supervising the work performance of employees

Charge for the advertising for restaurant

Accountant-professional

Responsible for the tax company need to pay

Pay the bills for the company

Create accounting system for company

Leader A and Leader B

Leader A responsible for supervising work performance in 1st floor

Leader B is responsible for supervising work performance in 2rd floor.

They will responsible for the open and close restaurant

They could be cashers if it is super busy

They will also serve customers while busy time

Leader in kitchen

Charging for report how much raw material and inventory needed to

Operating manager

Responsible for supervising the chives in kitchen

Full-time waiters and waitresses

Service customers

Casher

Part-time waiters and waitresses

Assistant full-time employees when busy time

Part-time host could greeting and arrange seats for customers

Chives(3)

Cooking foods for customers

Develop creative receip for foods

13

Chives assistants

Assisting chives for cook

Responsible for the cleaning in kitchen which include dish washing

3.2 Human resource wages

Wages for employees’ are based on month, the average salary for full-tim employees

is $900/per month, and $300 for part-time employees. Wages for managers are based

on year, which is $40,000 per year.

(Table 3.1 Salary and Wage costs)

Sal ary and Wage CostsManager 120, 000 122, 280 124, 603 126, 971 129, 383 Ful l t i me staff 64, 800 77, 036 89, 714 102, 846 116, 445 Part t i me staff 67, 824 90, 389 102, 668 110, 259 118, 775 Total Sal ar i es and Wages 252, 624 289, 706 316, 985 340, 076 364, 603

3.3 Hours of Operation

The hours of operation will be same for both summer and winter season. Operation

days could be approximately 360 days per year. The operating hours per day is 12

hours. There would be two busy periods, which are period from 12:00am-2:30pm and

5:00pm to 8:00pm, we need part-time employees on those two periods.Table 3.4

shows the operating hours of company.

(Table 3.2 Operating Hours)

Operating Hours

Monday 11am-11pm

Tuesday 11am-11pm

Wednesday 11am-11pm

Thursday 11am-11pm

Friday 11am-11pm

14

Saturday 11am-11pm

Sunday 11am-11pm

3.4 Training program

The full-time employees should be skilled and have working experience in restaurant.

In the training program, it is HR manger’s responsibility to introduce the company

culture and job description for the new employees. Also, HR manager would also ask

a full-time employee to teach the new employee’s specific work they need to do.

4.0 Marketing Plan

Since we realized that the food offered at every restaurant are very much the same,

customers come to the restaurant for the same purpose: to have dinner, however our

“Han style” theme restaurant aims at providing a special dinning place, we want

customers feel a great differences while they also have delicious and high quality

food. Thus, except those normal products we provide, we will focus more on the

marketing strategies.

4.1 Competition

Our researches show that there is no direct competitors compete with us in the “Han

style” theme restaurant currently, but we have to pay close attention to some serious

indirect competitors, include The Republic of China Theme Restaurant, western-style

food restaurant, 80s Theme restaurant, and chain restaurant. The following table 4.1

is the analysis of these competitors.

15

(Table 4.1 Competors Analysis)

Restaurant Name Advantages Disadvantage

Nanjing Food Stall Special and historical

theme: Republic of China

Located in a shopping mall

Good reputation and

awareness

No segment targets

Feedback on food is

normal

Les 5 Jens Western-style food

restaurant

High position level

Exquisite products and

environment

Clear segment

High price

Not unique

Pizza Hut Clear segment: young

people

Well awareness

Good marketing strategy

Seen as fast food

Not widely accepted by

Chinese

YOS. MITE Franchise advantages

Good reputation and

awareness

Competitive price

Not specialized

No segment

4.2 Positioning

From previous table we can get clear overview of our competitors’ advantages and

disadvantages, and based on these information and our own strengths and weakness,

16

we can find our position in the competition as the figure 4.1 shows. We will position

our restaurant as a unique and premium place that customers had never been.

Positioning Statement

To those who seek a dream place that provide delicious food as well as cultural and

historical atmosphere with reasonable price, Taste of Han Dynasty is your best choice

forever!

(Figure 4.1 Positioning Map)

4.3 Products

Since first of all we are operating a restaurant, we will provide everything that one

restaurant is supposed to have. We will offer customer special chef soup every day,

delicious meals and noodles, and our specialized desert. In order to connect to our

theme, we will only serve Chinese traditional white wine. Besides, we will also

provide pure and fresh tea for customers who not only come for normal meals but

want to enjoy the atmosphere we provide.

4.4 Pricing

Since we positioning our restaurant as meddian and high level, and we will try to

approch to this positioning strategy by providing a fantaitic dining place (facilities,

17

food, and environment), so we believe ask for a premium price is reasonable. Our

average price for one person is $23 which is the mix price of meals, wine and tea.

4.5 Promotion

The most significant purpose for our promotion is to strengthen our uniqueness and to

distinguish from our competitors. We will put a lot of effort on both short term and

long term promotion.

For short term promotion, we mainly focus on increase reputation and awareness.

We will offer customers 20% off for the first two weeks when open. And we will do a

large amount of advertising through two main distribution channels. The first one is

the traditional method. We will put ads on selected TV channel, newspaper, magazine,

such as tourism channel, newspaper culture section, and fashion magazine. The

second way is through social media, such as Renren and Weibo (Chinese Facebook

and Twitter). Considering from long term development, we will create membership

system and all customers who have membership card can get 10% off. In addition, we

will create own promotion strategies to highlight our theme: “Han style”. For

examples (figure 4.2), customer can get a free beautiful handkerchief when they spend

certain amount and we will encourage customer bring it next time for the sake of

environment. Our menus are written in bamboo slips in order to match our theme. We

will have special traditional performance play, such as Guzheng, Flute, and “Han

style” cloth cosplay and shows. We will encourage customers to wear their own “Han

style” cloth to our restaurant and we will offer them 10% off if they doing so. Besides,

we will help some customers or organizations hold special activities, such as Chinese

traditional weddings.

(Figure 4.2 Promotion Strategies)

18

4.6 Segmentation and targeting

After analyzed our competitors and our restaurant, we came up with three target

groups: local people, people who love culture and history, and tourists. We segment

our target customers based on several factors: age, lifestyle, social class and

geography. A detailed analysis of our target groups can be seen by table 4.2.

19

( Table 4.2 Target Markets Analysis)

Target group Age Lifestyle Social class Geography

1. Local

people

14-75 Love outside dining

Love fresh and

unique thing

Care about food as

well as dining

environment

Middle and

high

Nanjing

2. Young

people

14-30 Love fresh and

unique thing

Love culture and

history

Have affordable

income or

affordable for

our price

National wide

3. Tourists 14-65 Love fresh and

unique thing

Love travelling

Middle and

high

National wide

20

5.0 Financial Plan

Instead of purchasing building and land, we decide to lease the building and develop

the leasehold improvement. The total budget for leasehold improvement is $600,000.

This is the heavest portion of our capital budget, since we are target on the high-end

market, the atmosphere is essential to the restaurant. High level of atmosphere

requires high quality of leasehold improvement. Moreover, the budget on kitchen

equipment is $50,000, furniture and fixtures is $100,000. The total capital budget is

$750,000. Beside the initial capital budget, we also plan to purchase new equipment

and new furniture and develop leasehold improvement in every two years, in order to

maintain the high level atmosphere of our restaurant.

5.1 Capital Requirement

The total capital budget requires $750,000, we decide to loan 45% of total capital

budget from Bank, which is $340,000. Although our company just owns the

equipment and furniture, but we have personal asset, those could be a key factor that

Bank could loan us money. At same time, in order to decrease the risk level, we

decide to have $410,000 equity. That money might be from family, and they could be

the shareholders in our company. The total capital budget is show in the table 5.1

(Table 5.1 Capital Budget)

Schedule 6: Financing Budget 2013

Bank debt 45

%

340,000

Equity 410,000

Total 750,000

5.2 Summary of Project Income

Our project revenues are based on 150 customers per day, with an average of

purchasing of $23. We assume that the growth rates of customers per day for the

following four years are 25%, 10%, 5%, 5%. At same time, the gross margin remains

21

at 53%, and the net income is increasing every year. In terms of the dividend, we

would pay sharholders dividend only if cash on Balance Sheet exceed $100,000. We

can not pay dividend until the third year, but the dividends increase would from 2016

to 2017.

(Table 5.2 Projected Income)

For the year ended 2013 2014 2015 2016 2017

Sales

1,242,000

1,581,998

1,773,261

1,897,301

2,030,017

COGS

589,950

751,449

842,299

901,218

964,258

Gross Profit

652,050

830,549

930,962

996,083

1,065,759

Gross margin: 53% 53% 53% 53% 53%

Net Income 54,739 133,621

185,980

216,133

248,109

Dividends

(100,000)

- -

125,620

167,629

213,230

Retained Earning 54,739 188,360 248,721 297,225 332,104

5.3 Summary of Projected Balance Sheet

22

(Table 5.3 Balance sheet)

Bal ance SheetYear 2013 2014 2015 2016 2017Current AssetsCash 73, 699 225, 620 267, 629 313, 230 312, 447 I nventor i es 24, 581 31, 310 35, 096 37, 551 40, 177 Total Current Assets 98, 280 256, 930 302, 724 350, 781 352, 624

Non- Current AssetsLeasehol d I mprovements 600, 000 600, 000 610, 000 610, 000 620, 000 Equi pment 50, 000 50, 000 55, 000 55, 000 60, 000 Furni ture and Fi xtures 100, 000 100, 000 110, 000 110, 000 120, 000 Accumul ated CCA (27, 000) (77, 520) (123, 399) (165, 447) (204, 317) Total Non- Current Assets 723, 000 672, 480 651, 601 609, 553 595, 683

Total Assets 821, 280 929, 410 954, 325 960, 333 948, 308

Li abi l i t i esAccounts Payabl e 52, 379 66, 310 74, 228 79, 432 84, 997 Long Term Debt 304, 162 264, 740 221, 377 173, 676 121, 206 Total Li abi l i t i es 356, 541 331, 050 295, 605 253, 108 206, 204

Common Shares 410, 000 410, 000 410, 000 410, 000 410, 000 Retai ned Earni ngs 54, 739 188, 360 248, 721 297, 225 332, 104 Total Equi ty 464, 739 598, 360 658, 721 707, 225 742, 104

Total Li ab & Equi ty 821, 280 929, 410 954, 325 960, 333 948, 308

5.4 Risk Analysis

Risk analysis is a key factor to determine if the business plan of Taste of Han Dynasty

is feasible or not. The Risk analysis should include critical variables, Break-even

analysis, and the contingency plan.

5.5 Critical variables

In terms of the Taste of Han Dynasty, two major critical variables are customers per

day and amount they willing to pay. The decrease of those two variables could

decrease the margin a lot. Though table 5.4.1, it is clear that $ 3 decreased in price

would result $ 51,273 decrease in net income. Also, Table 5.4.2 indicates how the net

income changed as the changing in customers per day. If the customers per day

decrease 50 people, the net income could shrink $ 46,983.Therefore, we can conclude

that customers per day and amount they willing to pay could be very sensitive to our

profit.

23

(Table 5.4 Sensitive analysis for price)

2013(NI) 2014(NI) 2015(NI) 2016(NI) 2017(NI)

$20 3,466 $ 68,557 $ 113,328 $ 138,703 $ 165,594 $

$23 54,739 $ 133,621 $ 185,980 $ 216,133 $ 248,109 $

$26 106,012 $ 198,686 $ 258,633 $ 293,563 $ 330,624 $

(Table 5.5 Sensitive analysis of customers per day)

2013 2014 2015 2016 2017

100ppl $ -101,722 $ -43,540 $ 314 $ 18,255 $ 37,237

150 ppl $ 54,739 $ 133,621 $ 185,980 $ 216,133 $ 248,109

200ppl $ 185,769 $ 299,898 $ 371,647 $ 414,010 $ 458,981

5.6 Break-Even Analysis

The Break-Even Analysis is also an element in risk analysis, through the figure 5.1,

we can see that the based customer per day is 150, and the break-even point is below

this point. This might indicate that there is high chance that Taste of Han Dynasty

could have a positive net income from 1st year. Therefore, the risk level is low in

terms of this aspect.

(Figure 5.1- break-even analysis on customer per day)

5.7 Contingency Plan24

Another element in risk analysis is contingency plan for the Taste of Han Dynasty. By

increasing awareness this should also increase our customer base and store traffic.

Also, through the income statement, we could see our net income increases every

year. We would use part of profit to improve our leasehold improvement every two

years for maintaining our competitive advantage which is the atmosphere of our

restaurant. Beside the leasehold improvement, the promotion for employees could be

another area we would focus, and increasing the salary could be a type of promotion

we would to use.

5.8 Net Present Value and IRR

The net present value of the investment of this project is $212,887. The internal rate

of return for this project is 35.2%,this is a relative great rate for return. Therefore, this

project could be feasible to access.

25

6.0 Conclusion

With a breakeven customers at 130 while our maximum siting capacity is around 200

one turn, which means we are able to afford an increasing number of customers,

furthemore, we think our customers will steadyly increase over years when we earn a

better reputation and greater awareness. If this critical varibale increae and with other

factors remain stable quality, our sales will see an increase too.

From short term point of view, we will foucs on increase reputation and awareness by

placing appealing advertismens on selected channels. In terms of long run, we will

maintain high reputaion, and dealing good relationship with customers and certain

orgnazations (ex. Nanjing Culture Department).

Taste of Han Dynasty has a unique stand in current Chinese marketing and as long as

we implement appealing and accurate marketing strategies we will be confident to say

it is a great opportunity to achieve a considerable market share and a great investment

to earn a good profit.

26