The following paper analyzes the business plan presented by Romastrano Incorporated, in an attempt to attract investors and raise 500,000 dollars in order to open 36 more operating units in the next year and help expand the sandwich-selling franchise into the region. The chain produces famous Italian submarine sandwiches of excellent quality at an affordable price. The purpose of this paper is to evaluate the business plan using 12 evaluation criteria, determine the plan’s strengths and weaknesses, and propose recommendations for improvement.
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The company already has a product that has found success in the market. As it stands, Romastrano has 10 franchises that generate a 77.400$ royalty revenue and 29,100$ in net profits (Hill 407). The business plan suggests expanding an existing business rather than creating one from a start-up. Revenue flows as well as customer base provides more accurate predictions than projections for a startup. These factors would make the idea more marketable to the investors, who would prefer solid numbers to leaps of faith.
Successful business plans promise to deliver large amounts of profit in relatively small periods of time. Such an approach is less risky for the investors, as the risk of failure grows the longer it takes for an enterprise to pay for itself. Good payoff estimations have annual return rates of about 50%. This business plan seeks to attract 500,000 dollars worth of investments. Net profits for the entire franchise are expected to double within a month after the implementation of the proposed business program, growing from 29,100$ in net profits to 56,744$ in one month (Hill 407). By September 1996, roughly one year from now, net profits are expected to reach the mark of 300,000 dollars (Hill 407), thus exceeding the 50% annual return rate. It can be concluded that such a profit potential would be very attractive to the investors.
The business plan does not have a well-defined market segment. This is due to the fact that the fast-food industry encompasses virtually everyone passing by, meaning that every individual within a proximity of the shop is a potential customer. Projecting customer flows in such a situation is increasingly difficult. However, Romastrano is planning to place its shops in highly congested locations where other shops would not fit, hoping to generate revenue from a heavy flow of customers in that area (Hill 404). Such an approach suggests great amounts of exposure from the location choice alone. Although the business plan features an advertising and information campaign, it does not target any specific demographic or social group.
The company’s competitive edge, according to the business plan, lies in the quality and low costs of the product derived from the simplicity of production. Romastrano does not feature a large menu, limiting itself to only one type of sandwich as well as several small amenities in the form of teas, salads, and beverages (Hill 403). This makes the supplying and manufacturing process simple as well as helps save money on space, enabling conducting business in the narrow constraints of city centers and other difficult-to-access locations (Hill 404).
Although the quality and cheapness of the product is a strong point in favor of Romastrano’s business plan, these advantages are relative when compared to their competition. Subway, an American chain of submarine sandwiches, provides a variety of different products while matching Romastrano in price and space requirements.
Logistics and Quality of Service
The business plan shows a solid understanding of the logistics and processes behind the operation of a fast-food franchise. Although the company is not large enough to afford its own farms, they have an array of reliable subcontractors to deliver the food supplies to the shops (Hill 403). Due to a limited menu of sandwiches, the need for diversification of the products is relatively low, meaning that the logistics chain is simple and straightforward (McCormack and Johnson 103).
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In the event of a force majeure, it would be possible to replace the main supplier with another company without losing momentum or closing down facilities. At the same time, the simplicity and straightforwardness of the production process, due to a limited menu, would ensure higher standards of quality of the product (Khan 225). However, this side of operations has a potential weakness in that Romastrano is a franchise, which means that standards of quality will differ from one sales spot to another.
The company has a crew of trained staff skilled in operating and managing sandwich production and logistics. Due to the simplicity of the production process, training new front-line staff does not take much time and effort. However, the company has a lack of experience in running a larger franchise. In order to compensate for this weakness, the business plan mentions hiring a chief executive officer with great experience in running franchised fast-food chains, in order to help Romastrano adapt and expand accordingly (Hill 406). Overall, although the current roster of high-tier managers lacks expertise, there are measures to remedy that issue.
The complexity of the Business Idea
The business idea is relatively simple and straightforward. It includes several steps for expanding and developing businesses, such as constructing new shops, conducting an advertising campaign, hiring new high-tier managers and personnel, and establishing better relationships with subcontractors. The product is simple and marketable – delicious sandwiches will always have customers, provided that they are affordable, accessible, and high-quality. Romastrano’s product has all of these qualities. The business plan is easy for the investors to understand.
All members of the existing company’s management team have a personal interest in the company’s success. Henry Malone, the president of the company, has owned a significant share of the company’s stocks since 1958 (Hill 402). Beatrice Philmont, the general director, is a shareholder in the company. Arthur Philmont and Sandi Malone are also shareholders in the company. All of these people have personal stakes in Romastrano’s success, which includes financial and property possessions.
Long-Term Benefits to Customers
The product offered by Romastrano does not offer any tangible long-term benefits to the customers. Like all fast food, it is potentially unhealthy if eaten on a daily basis, as sandwiches cannot replace a balanced diet or a 3-5 course meal pattern (Khan 49). Nevertheless, the company could advertise itself as using only natural ingredients and following the traditional Italian recipes. Other fast-food chains like McDonald’s are presenting their burgers as healthy by citing how much of each element and vitamin can be found in a single product (Khan 50). Romastrano can do the same to provide an image of a long-term health benefit for the customers.
The presented business plan offers a reasonably detailed strategy for developing the business in the short term and in the long term. It features certain milestones for every month for the next year and a half, including the number of shops opened, an advertising strategy, materials analysis, logistics plan, and employee recruitment and development plan. At the same time, the provided material is succinct enough to be quickly glanced over and understood, which is important for investors that have more than a single business plan to look over.
Annual financial projections presented in this business plan are based on present sales and results, thus presenting a most likely scenario. Optimistic and pessimistic projections are absent, likely left out as to not frighten potential investors with overly pessimistic (or overly optimistic) results, thus avoiding any positive or negative expectations. While such an approach is reasonable, from a certain point of view, it would be prudent to include a worst-case scenario analysis as well as a potential contingency plan for such. The existing projections are realistic, but lack alternatives.
The plan was written in a clear, concise, and professional manner. It lacks any notable weak spots and is based on data from existing businesses. It was written by a professional and polished to look presentable in every possible way. It lacks grammar errors, colloquialisms, and amateur mistakes. The plan’s presentation should have no trouble proving to the investors that the project is worthwhile.
The business plan analyzed in the scope of this paper is highly professional and very efficient. It offers plenty of valuable information to the investors without wasting their time or cluttering their minds with unnecessary distractions. The business idea is simple, solid, and seems likely to be realized. The projected revenues are high, and the company clearly has experience in the industry to guarantee success upon expansion.
The company managers are aware of their existing strengths and weaknesses and have a clear vision on how to capitalize on their competitive advantages while eliminating possible liabilities. The only minor flaws in the proposed business plan are the underestimation of potential competition, who could easily copy Romastrano’s business model while providing greater variability, and a lack of backup plans for potential crisis scenarios.
Hill, Sonya D. Business Plans Handbook. 27th ed., vol. 3. GALE, 2013.
Khan, Mahmood A. Restaurant Franchising: Concepts, Regulations, and Practices. 3rd ed., Apple Academic Press, 2014.
McCormack, Kevin P., and William C. Johnson. Supply Chain Networks and Business Process Orientation. CRC Press, 2016.