Managing Financial Resources (0832428)
Birmingham Business School
Coursework Assignment
Word Count: 2,000 words (including titles, references and footnotes, but excluding bibliography, calculations and cover page)
Due date: 14th May 2021 at 12 noon
Submit your assignment electronically via Canvas
Required:
Produce a four-parts report (part A, B, C & D) which address tasks 1 – 4.
Please note that the essay marking rubric is available on Canvas.
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Assignment
Managing Financial resources
YALLA MOMOS: EXPANSION DILEMMAS OF A SMALL BUSINESS
Refer to the case study : Yalla Momos expansion dilemmas of a small business (pdf, page 1-5 only)
and answer the below requirements.
THE DILEMMA
PART A : CVP ANALYSIS
Goel wanted to set up one more branch, despite the fact that sales at the Bur Dubai kiosk and the Dubai International city branch were not as strong as those at the Karama branch. Goel was worried about the net revenue and felt that he should take a more structured approach to expansion. He was wondering if he should concentrate on the current business or open an additional restaurant? What if things will not turn out as he is expecting?
His competitors were engaged in aggressive marketing and Goel knew he had to make a quick decision. The Dubai market was expanding, but the volatile nature of growth and the sheer number of competitors might eat into his profits. With these fears in mind, he knew that the present decision was going to be critical to the continued success of his business.
Task 1
Would expansion be beneficial to Goel? Respond to Goel’s dilemma by supporting your argument with Cost-volume profit analysis.
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YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED)
Particulars
Amount in AED
Net Revenue
504,000
Cost of Food sales
151,200 Gross Profit 352,800
Operating Expenses
Rent
68,000
Salaries
54,000
Administrative costs
23,000
Depreciation
30,200
Utilities
13,000
Miscellaneous expenses
15,800
Advertisement costs
0 Operating Profit 148,800
Interest
13,000 Net Profit 135,800
Note: AED = United Arab Emirates (Emirati) Dirham; US$1 = AED3.67 on April 30, 2016.
Source: Created by the authors based on company data.
YALLA MOMOS PROJECTIONS WITH AND WITHOUT EXPANSION (2016)
(IN AED)
Amounts shown in AED
Without Expansion
With Expansion
Sales price per unit
20.00
20.00
Sales volume per period (units)
27,720
36,360.00
Raw material cost
6.00
6.00
Rent
75,000.00
88,000.00
Salaries
61,400.00
75,000.00
Administrative costs
26,000.00
34,000.00
Depreciation
34,720.00
38,360.00
Utilities
14,000.00
19,000.00
Miscellaneous expenses
17,060.00
19,180.00
Advertisement cost
8,000.00
12,000.00
Interest
13,000
16,000
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Part B & C BUDGETING AND BEYOND BUDGETING
Goel has identified a niche in healthy vegan food and customers concerned about the impact of restaurants on the environment. He is contemplating whether to add vegan menu to the Yalla Momos restaurant brand or start a new restaurant brand called Dinefest to provide vegan and low-cost healthy-eating options. He thinks he has a good chance of becoming a market leader if he introduces low gourmet membership fees and a ‘no-frills’ service concept and highlights the environmentally friendly attributes of the Dinefest.
He estimates that Dinefest can generate AED 1.3 million in 2017 to AED 3.5 million in 2019 in sales revenue. He estimates that the number of restaurants he operates will also increase between 2 and 5 restaurants within the period. He will increase the number of restaurants through a mixture of organic growth and acquisition of existing restaurant groups.
Dinefest’s business model will offer a no-contract gourmet membership, i.e. there is no fixed membership period. Dinefest will use eco-friendly cookware and equipment based on ceramic technology to prevent food from sticking to them. This non-stick technology will provide a better alternative to Teflon, which has been traditionally used in some cookware but tends to break down in high cooking temperatures. Other eco-friendly cookware products will be sourced from recyclable materials and designed to heat food faster.
In order to offer low Gourmet membership fees, their model will be based on a no-frills concept, meaning that he will restrict the restaurant to cuisines prepared with organic ingredients sourced locally. There will be no buffets and no café or bars that you would expect to find in traditional restaurants.
The low-cost model that will be used by Dinefest will be dependent on advanced technology. Prospective Gourmet members can join using a simple online process that can be completed in minutes. Members can also manage their accounts, view cooking class timetables and book cooking lessons online.
The use of technology results in an efficient staffing model with, for example, no need for dedicated in-restaurant sales and marketing teams.
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GOURMET MEMBERSHIP
Dinetfest Gourmet membership will be on a no-contract basis, i.e. it will not involve a fixed membership period, and members are free to cancel their membership at any time without penalty. There will be two types of membership: basic gourmet membership, where the member can access two chosen restaurants and premium membership where the member can access restaurants nationwide. Both types of membership require payment of a monthly fee. It will be possible to access restaurants daily by booking online or by telephone. Membership fees vary depending mainly on the location of the restaurants. Occasional marketing campaigns will be run, offering discounted membership to all new members. Student members will also receive a discount, and kids below the age of five can eat for a fixed price yet to be determined. Each gourmet member will be provided with a club card which will be used to get the privileges meant for members. Premium members will have access to free cooking classes and healthy living dieting guides. They can also arrange for individual coaching from a master chef without an additional fee.
STAFFING
A typical restaurant will have five employees (three chefs and two waiters), a manager and an assistant manager, who manage the restaurant. Other staff will work at the head office in various functions including IT, HR, Finance and Marketing. Restaurant staff will be complemented by some ad hoc waiters that will be hired on a zero-hours contract where they are not guaranteed to be offered work in any one week. The ad hoc waiters will be paid the minimum hourly wage rate but will able to supplement their income with tips that they will receive from benevolent customers. All waiters will be trained to be courteous, polite and respectful to the customers. They will be trained to be diligent in their duty and to uphold the motto: “the customer is a king”, and they will be expected to attend additional training sessions related to health and safety. Goel will empower restaurant managers to run their sites independently, but he will determine the membership fees.
MARKETING
The marketing team’s main activities are market research; the promotion and advertising of new and existing restaurants; raising brand awareness and advising on pricing strategies. The Marketing team will work closely with the IT and Properties department. Marketing efforts will be directed at both existing members, to try to ensure member retention and the recruitment of new members. The marketing team
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will use the website to provide members with details of cooking classes being operated each week and any other news or member offers. The managers will also use the customer database to communicate electronically with members using email and text messages. Regular marketing campaigns will ensure that the awareness of the Dinefest brand is high.
FINANCE
The financial information system will be developed to produce monthly management accounts and half-yearly and annual statutory accounts. It also will generate daily and weekly sales revenue and membership number information for management to monitor actual results against budgets. The Finance team will also carry out ad-hoc projects, including investment appraisal and investigations, along with ongoing decision support. Some areas, including all internal audit work, will be delivered by external experts. Budgets will be produced annually using incremental budgeting for sales and cost items. All budgets will be broken down into monthly periods, with the exception of the sales budget, which is broken down into weekly periods.
Budget information 2019
Gourmet Membership Fee Budget 2017
City
Suburbs
Total
Number of Restaurants
3
2
5
Average number of members per restaurant
Premium
365
305
670
Basic
115
104
219
Total
480
409
889
Average membership fee per month (AED)
Premium
50.00
45.00
95.00
Basic
25.00
20.00
45.00
Total membership fees per year (AED 000)
Premium
18,250
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