1) Describe the business: Type of business, name, address, location
The business we decided to analyze is Guadalupe. This is a fast food restaurant that produces fresh, handmade burritos to order. They are located at the SFU Burnaby campus in the Maggie Benson Centre (8888 University Dr W, Burnaby, BC V5A 1S6) where they operate five days a week. We chose this company because we all enjoy their food and felt with their extremely close proximity and large customer base, it would make for an interesting business to analyze. We initially approached the business on February 9th in person to ask for an interview. We were given an email address which allowed us to contact the owner whose name is Paul Smith. We then followed up with Paul on February 12, 2018 to ask for permission to analyze the business and send him our interview questions. On February 13 2018, Paul responded and answered all our questions. We did this all via email because it was more convenient for both parties with our busy schedules.
2) Describe each of the nine (9) key elements of the business (use the business model canvas)
A business model canvas is a means that allows for strategic management and entrepreneurship. With the business model canvas, the business can be subdivided into smaller comprehensive segments. The business canvas model makes it possible for a business to outline and describe its value, weaknesses, means of delivering value among other important pieces of the business. The nine elements of a business canvas model include customer segments, value propositions, customer relationships, key activities, channels, key partners, revenue streams, key resources and cost structure. These elements of business canvas model run based on who the partners are, the available resources, and their expected costs and the revenue.
The customer segments outline who the customers of the business are and the need intended to be met by the products. The customer segments of the company are SFU students, school staff, campus visitors, and the families living on Burnaby mountain. Most of these segments are characterized by short-term loyalty. Most of these individuals spend a limited time within the outlet. The business has to come up with strategies to attract new customers each period. The location of Guadalupe is near campus with its major target market being students and the school staff members who are looking for quality but fast food they can enjoy during their busy schedules. For example, Guadalupe’s menu is appealing to students who are looking for an affordable and delicious food.
Value propositions focus on the features and uniqueness of the products or services offered by the organization. It is through value proposition market coverage is established. One value proposition that Guadalupe has is that it delivers custom handmade meals with fresh ingredients, that are made in a timely manner. Their use of food preparation and speedy cooking style is able to satisfy their busy customers who often have complicated schedules. Burritos, bowls and tacos are made accordingly to customer’s choice and combination of ingredients. Another value proposition is its menu offers vegetarian options that help the company appeal to an even larger customer base. Guadalupe’s Facebook page gives regular updates on the existing offers and available meals and gives customers and opportunity to express their reactions. Social media such as Facebook, Twitter, Yelp, and Simon Fraser University dining services website are all Guadalupe’s partner channels that aid in its marketing.
Customer relationships are also a vital element because it defines how the business creates its demands (Joyce " Paquin, 2016). Businesses characterized by proper customer relationships are more likely to succeed as compared to those without. Guadalupe is categorized under personal assistance. This is where the relationship between the business and customers take place with the customers and employees interacting face to face. This provides the human touch by assisting the customer (Paschen, 2018). Guadalupe emphasizes its channels with a high quality customer service approach. They achieve this by being friendly and talkative with customers in order to create a good relationship with its customers.
Revenue streams helps to determine the sources of revenue, profit and their size of a business. Since the success of an organization is measured by its profit, it becomes easier to understand the importance of its revenue streams. The streams define various avenues through which the business generates revenue and profits. Once the streams are identified, the entities can choose which ones to prioritize.
Key resources entail identifying what is needed to perform the business activities, the commodities used by a business and any other vital elements of an organization. Physical resources would include the cooking ingredients, beverages, kitchen equipment, and restaurant space. Intellectual resources would be Guadalupe’s recipes and their reputation. Human resources would be the manager, suppliers, and employees. Employees would include the cooks, kitchen assistants, food servers, cashiers, and the cleaning staff. Financial resources in terms of equity financing includes personal savings and money from family or friends. In Guadalupe’s case Paul mentioned in the interview that “having a group of friends and family can be of immense value in keeping start-up costs low” (Smith, 2018). Lastly, technology resources would include all computers, credit card terminals, and information on Guadalupe’s social media accounts.
A company's key activities are its crucial and inevitable tasks that the business performs in order to ensure its success and well-being. The most successful items that Guadalupe offers is its customized burritos and tacos. The key partners of a business are those crucial enterprises that play very significant roles in realizing the progress and success of the organization. A buyer-supplier relationship is very important for example as they have to trust one another to be able to settle of debts, and be able to provide services in a timely and reliable manner.
The cost structure is also a significant element of a business model canvas because it helps establish the variable and fixed costs associated with the running of a business. Guadalupe’s variable costs would be food ingredients or raw materials that go into their products. Food and beverage costs are the greatest variable expenses that Guadalupe faces due to the nature of the restaurant business. On the other hand, fixed costs include the restaurant equipment such as its grills and freezers that depreciates with use, and its utilities costs including electricity, gas, and oil. Employee’s wages are both fixed and variable, due to the fact that they are paid an hourly wage but the number of hours vary based on the number of employees working and how busy the restaurant is. The variable payments are key in motivating employees to work towards maintaining the customer base and expanding it since they get extra payment for each burrito made.
The success of a business depends on how well all the nine key elements of the business model canvas are applied. Identifying the customer segments and the value of products or services is crucial since it is the foundation on which a business stands. The customer relationships will determine the number of key partners and thus the revenue streams of a business. As a result, each element is equally important since they all drive the business towards achieving its objectives.
3) Describe the costs you observe: fixed/variable costs, capital/operating costs, and startup costs
Operating cost is the expense an organization uses in running its day-to-day activities, and this includes fixed and variable costs. Capital cost are used in purchasing new fixed assets such as building, and machinery as well as upgrading an existing facility. The start-up cost is the amount of money that has been invested into setting up a business.
According to Paul (Smith, 2018), the type of capital that one should choose while starting a business would be equity from friends and family rather than debt as it would be difficult to borrow money since most banks believe that small businesses would not repay back the loans. Capital from friends and family is also of great value since it keeps start-up costs low unlike debt, which is normally paid back with interest. Besides that, a sole proprietorship business is at a disadvantage in the sense that only one person is depended upon for resources and the person may have financial limitations (Ebert, Griffin, Starke " Dracopoulos, 2017).
Due to the relatively inaccessible location of Guadalupe, there was a substantial negative effect on labor availability as stated by Paul (Smith, 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 example, a free bus pass is of great value to a full-time employee and is not an overwhelming financial cost to the business.
As indicated by Paul (Smith, 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 error. The business is independent and this gives Paul freedom to innovate and come up with more suitable qualities and process codes to resonate with the needs of the local market.
4) Company: Describe the strengths and weaknesses you observe. What are the business’s 2-3 success factors, what determines if the business is successful or not?
Based on the answers provided by Paul (Smith, 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 important 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 school. 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 (Ebert et al., 2017).
According to Paul, starting up a fast food company such as Guadalupe in Simon Fraser University was advantageous due to the customer accessibility (Smith, 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 relatively isolated and inaccessible location, the enterprise experiences a low revenue cap.
Starting with Guadalupe’s strengths, we noticed that the process of making each product has been thoroughly thought out making it an efficient and easy process for the employee’s, cutting back production time. An aspect of Guadalupe that can be considered both a strength and a weakness, is their location. Located in the heart of the SFU Burnaby campus in the Maggie Benson Centre, it makes it a quick and easy stop for many students to eat.
Although this is a great strength it can also be seen as a weakness. The population of the campus is not consistent throughout the year. This can result in a low revenue cap due to Guadalupe’s isolated location. When faced with this problem, Paul has turned this to an advantage. His ability to forecast when the down times of the business will be has caused him to cut material cost and hired labour in a seasonal style matching that of the campus’s semesters.
Other weaknesses that were suggested by Paul are the lack of availability of labour which could also be a result of the isolation and possibly the labour experience needed to work at Guadalupe. Paul also mentioned that he believes that his material costs are a minor weakness for the business since Guadalupe takes pride in only using high quality and healthy foods in their finished products.
5) Customers: Describe the target market and the needs the business is serving.
Guadalupe has a broad base of return customers. Some of the ways Paul (Smith, 2018) outlines on achieving their good customer relationship are through its excellent customer service, product consistency, product quality, and product value.
Guadalupe target customer base include SFU students, visitors to SFU Burnaby campus, SFU staff, and people living in University. The target market of this company is mainly composed of individuals who have busy schedules. In this business environment, customers not only want high-quality goods and services for a fair price but also want immediate delivery (Ebert et al., 2017). Guadalupe has achieved this by providing its customers with fresh products delivered within the shortest time possible. This makes it convenient for this target population to get their food during the limited free time they may have.
6) Competition: Describe who are the key competitor(s) are for the business and how they compete against the competition?
Guadalupe can be characterized as competing in a monopolistic competitive market, which is defined as “a market or industry with a large number of firms supplying products that are similar but distinctive enough to give firms some ability to influence price” (Ebert et al., 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, product differentiation gives this business some degree of price-setting power however Guadalupe’s price-setting power is limited because of a large availability of substitutes present on Burnaby Mountain. When looking at Michael Porter’s five forces model, “threat of substitutes” (Ebert et al., 2017) there is more competition present in the industry and Guadalupe's market in no exception.
Guadalupe faces very stiff rivalry from competitors such Gawon Korean Restaurant and Bubble World Cafe. The fast food industry has few entry obstacles; as a result, new and emerging fast food businesses will substantially increase competition. Lastly, Guadalupe has faced the threat of new substitutes to its products being introduced in the market by its rivals such as Quesada, another burrito and taco restaurant located on Burnaby Mountain. Quesada has the potential to act as near perfect substitutes quality wise and this would cause the two rivals to compete directly on price.
As stated by Paul (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. It is a means to bring a vision to reality.
Guadalupe takes part in corporate social responsibility for its benefit on humanity and as an effort to get a competitive advantage over other entities. The business overcomes competitors by using beef and poultry raised locally. The products do not contain hormones and antibiotics. The company encourages use of grazing management, reduction in use of chemicals, protection of soil resources and natural habitats and water resources. The company encourages its partners to consider these factors in their production process. It also cuts links with entities that are not keen with environmental conservation.
7) Context: What are the key opportunities and threats the business is facing?
Opportunities
There is an increase in health awareness, providing fast food companies an opportunity to provide healthier options and capitalize on this new market trend. Burittos have high quantities of starch and many young people on diet are likely to avoid them for options that they deem healthier such as fruits and vegetables.
We feel that Guadalupe has a unique opportunity based on the fact that they have a constant influx of new students every semester that they can add to their customer base. This means they have a constant opportunity to add new people to their loyal fan base and keep their business exciting and talked about.
Threats
The relatively inaccessible location of Guadalupe makes it hard for it to access high quality labour that is readily available. As Paul mentioned in the interview, they experienced a hampering trend on the revenue and process efficiency with the numerous population swings on campus that take place during the school year. Recession has led to increase in prices. Young people have no regular sources of income and are thus more likely to spend their money on the most basic needs while cutting other expenditures such as the money that they spend on Guadalupe products.
There are threats in the market, especially with the increase in infrastructure on the Burnaby mountain campus. This increase in construction has come with an abundance of new restaurants opening, such as Uncle Fatih’s pizza and The Chopped Leaf. Other threats include competition from other restaurants scattered throughout the campus who share the same strength of being in a central and easy location for students and staff, such as CaliBurger, Quesada Burritos " Tacos and Club Ilia. Although most of these restaurants do not sell the same product as Guadalupe the variety of new restaurants can definitely cut down on the demand for Guadalupe’s products.
8) Apply concepts from the course (textbook and class notes)
From the interview Paul said that “we believe so wholeheartedly in our core principles and mission statement and believe that success is a by-product or measure of how much faith you have in what you have built,” this statement shows an aspiration characteristic (Smith, 2018). And near the end Paul said “success is not so much the goal as it is a means of support for you to bring a vision to reality,” this is where Ebert et al. described as having a grand vision for the future of the company (Smith, 2018). Therefore, the owner possessed all characteristics of an entrepreneur as he had a vision, aspiration, and strategy.
