Greek Cosmobob Essay

Cosmo Pa scratchta, a 74 year quondam(a) immigrant from Greece, living in Niagara move, Ontario, Canada with his wife and devil give-and-takes. After works odd jobs for disco biscuit years, Mr. Panetta used personal savings and a loan from a family member to purchase a manakin barge in. He always dreamed of starting a family business. Panetta eventually s aged(prenominal) the variety store and purchased, renoveatd, and renamed a drive-thru restaurant. A second mend was added shortly thereafter. Both sons skipped college to help Panetta run the restaurants. Sales were redeeming(prenominal) and customers returned for the good solid solid food and good outlay. Mr. Panettas brainchild food item, The Cosmobob, was praised by patrons of both localization of functions, so he began preparing for mass- trade cornerstone and development.Cosmo was faced with a number of decisions concerning producing The Cosmobob. in that respect was an opportunity to open a third restaurant in the Niagara Falls business dominion, purchase or rent a newfangled output signal ease for the Cosmobob, record the product on a provincial or national level, and whether to distribute by a food whole saler or supermarket chains. All of these questions would capture to be answered very thoroughly because Cosmo had wholly $25,000 available onward having to turn to a bank. His age, shortage of menu diversification, and lack of higher education in the family would also have to be taken into consideration. In this compendium, we will analyze each situation and recommend the best pickaxs for Mr. Panetta, his family and their business.Cosmobob harvest-feast & Family Business Cosmo Panetta started his family business in 1975, when he opened his first restaurant in Niagara Falls, Canada. Mr. Panetta, his wife and sure-enough(a) son immigrated to Canada from Greece. Mr. Panetta had a passion for starting his own family business. He knew that a variety store could be the way to fulfi ll this dream therefore, in 1968, he used his personal savings along with a weakened family loan to purchase his first store.By 1975, he was presented with the opportunity to sell his variety store to a convenience store chain. Using this money and a loan from the bank, he bought an existing sleep with restaurant at Niagara Falls, which he renovated and named Cosmos Drive-in. In 1979, he opened his second location on Lundy pathway. Mr. Panetta always believed that a good location, excellent product, and a fair price were the key ingredients for a prospered restaurant.Cosmos restaurants are famous for the Cosmobob. In 1998, the Cosmobob accounted for almost 35% of the Thorold location gross sales and 30% of the Lundy Lane location sales. With this tremendous success in one product, Panetta decided to produce and sell the Cosmobob to other restaurants in the area. An extra room in the back of the Thorold Stone location was used to prepare orders. The restaurant however, had rest rict freezer space for storage so a local icehouse was used for $400 per month. Three people were initially hired on a part-time basis at $9.00 per hour to operate the production initiative. The Cosmobob sales went from 100 cases in September to 600 cases by December. Looking at this growth, production staff was increase to six people. Current locations Sales & ProfitThe Lundys lane location was also known as the degraded food strip and the second restaurant was located on Thorold Stone Road, a main industrial street. Mr. Panetta managed the Thorold Stone restaurant while his older son Joe managed the Lundys lane restaurant. The average sale per customer for the restaurants was $6.88 and most of the customer traffic was recorded during lunch and dinner hours. Cosmos restaurant had bragging(a) to $480,000 in assets by 1998 with a gross profit of $136, 846 and almost $1,163,000 in sales. Decisions Affecting the Longevity of the fraternitySales were promising in both locations and Mr. Panetta knew this could be a great time to inquire intimately expanding his company and product. He had three options to consider opening a new store in the forthcoming area stroll, purchase or lease a readiness for mass production, or do both. He also had to decide if he would market his product to the food serve well market or through supermarket chains. With only $25,000 to invest, he would need to consider a loan. Another question Mr. Panetta was faced with was would the demand for the Cosmobob be high enough to see a profit within the first few years if he mass produced the product? Canadian Food MarketThe Canadian food market is a $37.8 jillion dollar a year industry which consists of the food emolument market and retail grocery stores. The food improvement market includes all meals eaten away from home in schools, hospocket breadls, prisons, nursing homes, hotels, and restaurants. Canadians on average ate 38% of their meals away from home in 1996. Hotels and res taurants serve 960 million meals a year however, this is a small portion, only 8% of the tote up food service market. On the other hand, fast food service accounted for 80% of the 960 million meals, totaling 768 million. Within the food market, there are four basic types of food service trunks used for delivering entres Conventional system, where all food is purchased raw and processed on premises.The Semi-conventional food system which provided frozen pre-cut meats. The ready food system provided pre-cooked frozen entres on premises and finally the the Tempter convenience system where 90-95% of all food items were purchased from outside commercial suppliers. 25% of all hotels and restaurants used the total convenience system by 1990. The use of convenience foods helped contribute to the efficiency service during the peak periods of the day, resulting in faster customer service and increased sales volume. Marketing StrategyMr. Panetta is undecided between two marketing strategie s to promote and sell the Cosmobob. Either he piece of tail enter into the food service market or distribute through supermarket chains. Distributing through a food wholesaler would require permanently adding pita bread and Cosmo sauce to his offering. Grocery store chains were a larger market than food service however, the cost would also be substantially higher. Cosmo knew there were no existing ready to serve souvlakia available to the home user. Serca FoodsSerca Foods, a national food wholesaler, was interested in carrying the Cosmobob. They would require a 20% margin on the products purchased. Meaning for every Cosmobob case sold at $60, Serca Foods would receive $12. With Serca being a national wholesaler a federal inspection would be necessary for products to be sold in multiple providences. Therefore, Panetta would have to invest an extra $30-40,000 in his production facility to pass the federal authorities inspection.The complimentary items to the Cosmobob the pita bread and Cosmobob sauce, were not available in all Ontario markets, resulting in plusal working capital needed to cover four weeks of inventory. If the Cosmobob was exclusive to Serca, their salesperson would have the upper hand with its buyers. Cosmo would not have to personally worry about the selling and promoting of his product to the food service market. Small restaurants and hotels want the convenience of ordering from only one wholesaler, and if only Serca offered the Cosmobob that gave them the opportunity to gain new accounts. Supermarket Chains national inspection would be necessary if the Cosmobob was introduced nationally in a supermarket chain. Distributing to the home user would be respectable to those with large families that could not afford to eat away from home often, and also appeal to people who want to have comfort food at home. Supermarket chains would expect a 25% margin on the retail selling price, good promotional support, and guaranteed delivery. The deliv ery to national supermarkets would be an additional cost for Mr. Panetta to consider. Mr. Panetta and his son were the only two conducting sales and demonstration of the product. With the promotional expectations of the supermarket chain, he would need to hire another salesperson in order to meet the demands.There is a $20,000 placement fee per product, per supermarket chain in addition to samples, free food allowances, advertising, and trade promotion. Consumer promotion for a new product would cost more than $800,000 a year. Table 1 shows the estimated cost and profit if he used Serca Foods and produced and sold 2,400 cases a month. New prospect in Victoria MallMr. Panetta had an opportunity to open a new store in the upcoming Victoria Avenue Mall area. Compared to his current locations, this restaurant would be closer to the Niagara Falls business district and tourist area, which could possibly generate a lot of exposure to new customers. The estimated inflow to the mall was ju dge to be 500 cars per day. His target market would include local customers and tourist who visited Niagara Falls. The list of tenants in the mall includes a convenience milk store, hair styling salon, flower shop and a dry cleaner.With this expansion, he projects the new store could generate at least 60% of the Thorold Stone location initially and potentially match it in two years. This would require an investment of about $60,000 towards leasehold improvements and equipment. Table 2 and 3 outlines his initial estimated sales of $322,503 and net income of $10,930. Production Facility OptionsThe facility space being utilized for production has affected its capacity. If Mr. Panetta considers expanding his product on a larger scale and mass produce, he must occupy a facility that can meet the needs of production and service. There are two options available the mushroom factory and the old dairy farm farm. The mushroom factory is located outside of Niagara Falls in Grimsby, Ontario. To lease this facility for 3 years it would cost $83,340. In addition, Mr. Panetta would have to provide an upfront cost of $160,000 to cover improvements and mandatory government activity inspection. Alternatively, the building can be purchased for $460,000 which includes rent, facility improvements and inspection.After conducting a differential analysis, the differential cost from the preference to buy the mushroom factory compared to leasing would be $216,660. Table 4 outlines the details of this analysis. His second option is the old dairy plant factory. This facility would require a 3 year lease agreement for a total of $103,200 in rent. It would also take an additional $30,000 in leasehold improvements, in order to get the facility ready for operation and $40,000 for government inspection. Mr. Panetta has the option to purchase this location for $470,000. In Table 5, the differential analysis shows a $296,800 net difference in the cost to rent or buy the old dairy plant.Reco mmendationsAfter conducting a full analysis of Mr. Panettas product and the market, we recommend that he pursue a new business opportunity and open a new location in the Victoria Mall. Although the unavoidableness to lease the site is for a minimum of 20 years, with rent exceeding $384,000, there is potential to reach many customers on a daily basis. Sales projected on 60% average of the Thorold location is expected to produce a $10,000 net income within the first year and has the potential to reach Thorold location sales in two years.Opening this new site would require a larger facility in order to mass produce the Cosmobob. The old dairy plant location in Niagara Falls would be the best option. Not only would it allow him to use the same employees, but the capital require to have the plant operational is less expensive. $70,000 would be required upfront compared to $160,000 in improvements and inspections for the alternative location.There is a $296,800 difference in cost to lea se the old dairy plant compared to purchase. The lease option is less and it provides the option to discontinue the lease agreement after 3 years if he determines that his net profit is not meeting the companys expectations. To market the Cosmobob through Serca Foods would be beneficial. While hotels and restaurants only make up 8% of the food service market, they served 960 million meals a year, and 768 are at fast food restaurants. The Cosmobob is a versatile entre and can be sold at eateries of all price points. The sales force and promotion is guaranteed, and the requested margin on sales is lower than that of supermarkets.