Introduction
Building a small business enterprise is a complex task that encompasses the knowledge of entrepreneurship and operation management. This case study examines a model of expanding a local food venture to a permanent location and franchise. It allows us to take business management theories and apply them, learning from the challenges and uniqueness of the specific example. The case study will include growth strategy, financing, organizational structure, methods of promotion, and social responsibility as they apply to Otto’s Weiner World business model.
The structure of the case study is similar to the progressive approach that would be taken by a conscientious owner. In developing an expansion strategy for Otto’s Weiner World, it is important to focus on implementing the successful authenticity and values of the venture on a large scale through the customer-centered growth and financially efficient organizational structure.
Growth Strategy
Otto’s Weiner World is a food service enterprise. A critical function of the service industry is customer satisfaction. Foodservice has unique characteristics, such as customization and customer contact. Customization allows catering to the client, which is relevant to food choices and personal tastes. Meanwhile, customer contact is meaningful as people are expecting a courteous and fulfilling experience every time they choose a service (Exploring business, 2014).
In planning the operation of his restaurant, Otto should stay customer-focused because of the social popularity of his products and services. Therefore, he should evaluate which foods the customers expect from his restaurant. Also, the ability to provide his food should be considered, which includes efficient service and access (such as location and possible delivery). If Otto can develop the capacity to meet the needs of a growing customer base, his investment into expansion will be worthwhile. Otto seems focused on market expansion as his primary objective, so his growth strategy should entail maximizing the potential of his food business through rapid customer expansion.
Financing Assistance
In any expansion, particularly when opening a restaurant, it is important to have a coherent plan for financing the enterprise. There are numerous obvious and hidden costs associated with the transition. Sound financial decisions should be made to ensure the sustainability and profitability of the business. Before searching for funding, Otto should have a clear outline of his assets and savings compared against estimated fixed and variable costs. The difference would be the financing that Otto needs. A detailed business plan gives more leverage and risk assurance in seeking any potential funding.
There are several types of financing available to small business owners. A most common method is to seek out a loan from a lending institution with the best annual interest rate that is willing to take on the risk. Lenders participating in the U.S. Small Business Administration Program are more willing to fund amateur business owners as they are protected against default. It is possible to seek out a venture capitalist willing to provide full funding for the firm.
This can be successful if they share the same passion for products or values. Another method that has grown in popularity is crowdfunding. It uses platforms to collect funds from the public interested in the established objective and promises incentives (such as merchandise and free food or services) for their support. A financing opportunity that is crucial to a restaurant business is the possibility of leasing equipment that would otherwise be a high cost if bought all at once (Arkansas Small Business and Technology Development Center, 2015).
Otto has to consider covering short-term priorities, but also evaluate long term sustainability when considering financing options. Due to the popularity of his food business in the local area, crowdfunding may be an appropriate funding source. Innovative and beloved businesses can quickly meet and exceed their funding goal via crowdfunding through the use of social media and word of mouth. The offered incentives are not costly and can be spread out over time.
Furthermore, Otto can consider leasing the equipment in small monthly payments until he established profitability to buy his own. A venture capitalist or angel investment is not an option for Otto since it requires giving up a portion of the business that he wants to grow based on his vision. Meanwhile, loans are a significant financial loss over time due to interest rates. Although local leaders and organizations may offer incentives for small business owners through lower rates, Otto should take out loans only as a last resort. Although the LLC business form prevents him from being liable in case of bankruptcy, loans can accrue costs which will collapse the business.
Organizational Structure and Staffing Needs
The expansion to a restaurant location will require staffing changes in order to maintain the planned capacity and numerous new roles within the organization. It seems that Otto plans to implement a simple (or flat) organizational structure that consists of the owner managing all executive and supervisory roles. The owner maintains control of all business decisions. Meanwhile, the rest of the employees are fulfilling various low-level functions.
It is a simplistic model that is informal and flexible to adapt to changing situations. Otto values the relationship with his employees, and it will allow him to manage them personally while working beside them.
In order to fulfill his obligations to customer service, Otto has to maintain a staff capable of dealing with a variety of roles within the restaurant. This includes frontline associates dealing with customers entering to dine at the facility. If a drive-thru exists, the separate staff has to manage the efficient speed at that station. The backroom staff has to be responsible for food preparation and cooking.
Otto may wish to maintain access to his food in various parts of town, specifically his previous central location. Therefore, delivery or mobile food stands may need to be implemented. The staff is required to maintain sanitary conditions in the restaurant. As with most small businesses, he was maintaining part-time staff is most cost-efficient to avoid providing insurance and benefits.
Otto should focus on streamlining the payroll by combining roles within the restaurant. In addition, he should hire passionately committed employees that can maintain the high work ethic and responsibility needed for a starting business. Investing in human resources, such as training and staff support, will help reduce turnover and decreased productivity. Although difficult to estimate at first, Otto should manage the schedule to handle the customer capacity, specifically in peak hours (such as lunch sales that grew Otto’s business originally). Maintaining inventory is critical in the food industry, for both health and financial reasons.
It is important to have just enough inventory between restocking periods to serve the customer capacity, specifically using fresh local produce, which is thematic to Otto’s business. Lack of products causes lost sales, while outdated food has to be discarded. It is possible to maintain an efficient scheduling and inventory system using information system technology. Specifically developed enterprise resource planning (ERP) software will turn sales data into information about customer capacity and popular products. In addition, it will help Otto maintain his finances, payroll, and business performance (Exploring business, 2014).
Customers and Promotion
The business that Otto runs has been customer-focused from its origins. The close relationship that Otto maintains with his customers contributed to enterprise growth and popularity. It is important that Otto maintain a similar approach as he expands to a permanent space and larger markets. However, Otto now faces a larger challenge to maintain his business. His new location is now too far away from his core urban customer base. Therefore, Otto must find a way to continue serving urban customers while expanding into the new suburban market. This can be done through a carefully crafted customer approach and marketing strategy.
Otto’s current consumers already know and value his product for its authenticity and freshness. Otto should utilize that to communicate with the customers about his potential move. He can indicate that the permanent location will allow for better quality food, more menu choices, and customization. Further, he should advertise how urban customers can continue to have access to the food through potential delivery, mobile service stations, and visiting the location during evenings or weekends. All of these will lead to greater profits since sit-in dining and delivery brings in more profit than a quick lunch meal. Using word of mouth and social media, Otto can gather support for his move and bring people to the new location.
Since Otto’s Weiner World is a small business, it targets populations based on their niche and local area (which until this point have been urban employees and shoppers). Now, Otto must use the market expansion growth model to bring in new segments of the population to the restaurant. In order to do that, he has to evaluate his fit within the targeted community as well as possible competitive businesses.
Healthy food choices using local produce has become a social trend, especially among family-oriented households. However, that means that many restaurants and grocery stores have introduced similar options. Otto should focus on a promotional “pull” strategy that will cause consumer demand to rise. Aggressive marketing can be used to focus on the values that Otto has maintained in his food service for years by forming an association of his food to the concept of clean, fresh, and high-quality produce.
In addition, Otto can implement some promotions related to the opening of his new location, such as bulk discounts and kids eat free days to gain the interest of many suburban families. Overall the marketing strategy should consist of a balanced combination of non-personal (advertising) and personal (customer service) elements. This is a necessary step to become successful in a highly competitive economic setting where consumer value matters (Cuellar-Healey & Gomez, 2013).
Ethical Issues and Social Responsibility
It is critical to the growth and success of any business that ethical guidelines are followed. Since Otto, at this point, is the sole proprietor in charge of all management and executive roles, it is his responsibility to maintain ethical behavior. As an employer, he has the responsibility to his employees to pay fair wages promptly. He must exercise unprejudiced, courteous behavior towards staff and customers. Finally, Otto should adhere to principles of accountability and openness in any financial practices to avoid manipulating the system to his gain.
As a small business owner, Otto should maintain a social responsibility to the local population and environment. This is a principle similar to corporate social responsibility that companies practice in their treatment of minorities, community programs, and environmental practices. Conscientious behavior is necessary to become a model citizen and receives public support (Exploring business, 2014). Otto can implement such practices through his restaurant business.
He already uses fresh food, thus supporting the local agricultural industry, reducing the environmental impact of long-range transportation, and improving public health. In addition, the restaurant can benefit the community by offering food to the less fortunate and conducting events that benefit local charity organizations. Finally, the restaurant operation can be streamlined to reduce the environmental impact through power conservation and recycling. All these methods help Otto and his enterprise to develop social responsibility.
Otto’s venture becoming a restaurant is a complex process. However, Otto’s Weiner World can achieve success by maintaining a customer-centered growth and financially efficient organization structure in its expansion strategy. By taking advantage of his social popularity, Otto can maximize his financing and grow the business with the help of loyal customers and staff. Eventually, maintaining his values for fresh local produce and high-quality food will result in a growing customer base and soaring profits. Otto should implement a competent organizational strategy and use information systems technology to supplement his operational management.
References
Arkansas Small Business and Technology Development Center. (2015). Funding your small business. Web.
Cuellar-Healey, S., & Gomez, M. (2013). Marketing module 1: Marketing. Web.
Exploring business. (2014). Washington, D.C.: The Saylor Foundation.