In this paper, we decided to carry out an analysis on Guadalupe which is a fast food restaurant that prepares fresh handmade burritos in the presence of the customer. Burrito is a cuisine dish that is made up of wheat tortilla and various ingredients that are used as fillings such as fried beans and meat. They usually operate five days a week and are located on the SFU Burnaby Campus in Maggie Benson Centre. The reason we decided to analyze this particular restaurant was that; most students enjoy the burritos they produce, and we were also familiar with their frequent relatable customers who are our fellow students. Analyzing Guadalupe did not impose many challenges due to its proximity. Therefore, we interviewed Jordan Chan to collect more information about Guadalupe.
Cost
In any business enterprise, there are various types of cost associated, which include fixed cost, variable cost, start-up cost, and operating cost among others. Operating cost is the expense an organization uses in running its day-to-day activities, and they are categorized into three, that is, the fixed costs, variable costs, and semi-variable cost. Capital cost refers to the expenses used in purchasing of new fixed assets such as building, and machinery as well as upgrading of the already existing facilities. The start-up cost is the amount of money that has been invested in starting and setting up of a business. According to Chan (2018), the type of capital one should opt for while starting an enterprise would be equity from friends and family rather than debt as it would be difficult to borrow money since most banks believe that one would not repay back the loans. Capital from friends and family is also of immense value since it keeps start-up costs low unlike debt, which is normally paid back with interest. Besides that, a sole proprietorship business is disadvantageous in the sense that only one person is depended upon for resources and the person may have financial limitations (Ebert et al., 2017). Due to the relatively inaccessible location of Guadalupe, there was a substantial negative effect on labor availability as stated by Chan (2018). When cash is a constraint, offering incentives that are cost efficient with perceived value for the employees is a mechanism that can be used to attract labor. For instance, a free bus pass is of great value to a full-time employee and is not an overwhelming financial cost to the business. However, this may be considered a conflict of interest as it is a situation that benefits the employee while costing the employer (Ebert et al., 2017).
Fixed costs
are the expenses that a business enterprise has to pay and are not dependent on the goods and services produced. In Guadalupe, the fixed costs observed by Jordan Chan were monthly rent, monthly payroll, electricity bills, security bills, and water bills. Variable costs, on the other hand, are the expenses within an organization that vary depending on the organizations business activity and production. Examples of variable costs in Guadalupe are sales commission, cost of raw materials, and utility cost amongst others.
As indicated by Chan (2018), to manage cost-effectively and efficiently without compromising the quality of the product emphasis was placed on optimizing process efficiency and codifying these processes into a larger predictable and easy-to-follow system to achieve product consistency and maintenance of quality through minimization of deviation/error.
Strength and Weaknesses of the Business
Based on the answers provided by Chan (2018), the foundational strengths of Guadalupe lie in their core principles and mission statement that offer believability and viability of a business proposition. These usually get influenced by the ingenuity, intuition, and passion of the core founders and employees of that organization. Also, it is eminent for the employees in the organization to have practical strengths and skills such as process efficiency, good analysis, and excellent forecasting. A higher percentage of these practical skills are usually acquired and learned in a school setting. Forecasting involves prediction of the company’s future based on the analysis of trends of past or present information. Therefore, it requires knowledge of the current market as well as the firm’s existing strength and weaknesses.
Major weaknesses of Guadalupe included unavailability of labor, the high level of labor intensity needed, the high cost of materials needed, and lastly the precision requirements of the processed used in Guadalupe. Labor intensive refers to any business process which requires a relatively high proportion of labor input in comparison to capital input used. Thus, Guadalupe is considered labor intensive as it requires a significant workforce in the production of quality goods and this affects the variable costs in the organization.
Based on Chan’s opinion, starting up a fast food company such as Guadalupe in Simon Fraser University was advantageous due to the customer accessibility (Chan, 2018). He thought that for an established successful enterprise, the large population swings throughout the year would hamper process efficiency and revenue. However, as a result of the isolated, inaccessible location, the enterprise would experience a low revenue cap.
Target Market and Customer Relationships
The target market is the category of consumers within the available market to which a company directs its marketing efforts towards. Guadalupe has a broad base of return customers. Some of the ways Chan (2018) outlines on achieving good customer relationship include excellent customer service, product consistency, product quality, and product value. However, if these fail or not properly planned, other methods such as coupons, gift cards, or promotions may be used to retain the customer base.
In this business environment, customers want high-quality goods and services for a lower price as well as immediate delivery (Ebert, 2017). Guadalupe has achieved this by providing its customers with fresh ingredients and quick delivery plus good customer service.
Competition
As stated by Chan (2018), Guadalupe has not concerned itself with competition as they believe it is a measure of one’s ability to adapt to any changing condition. Based on their core principles and mission statement, success is considered a by-product or a measure of how much faith one has in what they built. According to Guadalupe, success is a consequence of a bigger vision and provides security to facilitate the execution of that vision. Therefore, it is not a goal, but a means to bring a vision to reality.
Guadalupe can be characterized as competing in a monopolistic competitive market, which competition refers to imperfect competition brought about by product differentiation in firms offering similar products or services; hence, cannot entirely substitute each other (Ebert, 2017). One of the distinguishing factors is that goods and services offered by the firms are differentiated (Rittenberg & Tregarten, 2013). This differentiation in Guadalupe’s case occurs in the food quality and service they offer. Consequently, businesses have some degree of price setting power due to product differentiation. The industry is more competitive when there are many substituted products available as indicated in Michael Porter’s five forces model, “threat of substitutes” (Ebert 2017). In conclusion, one may affirm that Chan (2018) possessed characteristics of an entrepreneur as he had a vision, aspiration, and strategy.
Key Opportunities and Threats in this Business
People are becoming conscious about their health, and there is an increase in health awareness; as a result, people are opting for less processed foods, which results in a small customer base. Also, people are becoming more aware of health hazard associated with consuming fast food. This awareness has provided the fast food company an opportunity to incorporate healthy meals such as healthy salads unlike before. The economic recession is also a major threat to fast food businesses. It impedes the growth of the industry despite facilitating investment in local economies by providing employment and generating revenue.
References
Chan, J. (2018, February, 2). Email interview.
Ebert, J. R., Griffin, W. R., Starke, A. F., & Dracopoulos, G. (2017). Business essentials. (8th Canadian ed.). Toronto: Pearson.
Rittenberg, L., & Tregarthen, T. (2013). Principles of microeconomics. Retrieved from https://2012books.lardbucket.org/books/microeconomics-principles-v1.0/index.html.
