The Appetite is a partnership that was established in 2010 with two founding members.
The restaurant is a private company, where each owner equally splits the profits and liabilities.
The Appetite is a breakfast restaurant that will serve a variety of breakfast meals all day.
At this time, the restaurant industry is continuing to grow. Not only this, but breakfast is
starting to become more popular, especially with new trends that explain the benefits of eating
breakfast. The competition, both direct and indirect, is manageable when employing The
Appetiteâ€™s marketing strategy. The success of this restaurant will also be based on the fact that
its strengths and opportunities greatly outweigh its weaknesses and threats. This is with the help
of a large target market, whose trends parallel The Appetiteâ€™s products and services.
As a restaurant targeting schools, The Appetiteâ€™s mission statement is â€œTo provide top
quality breakfast items at a low cost.â€
Based on past research and The Appetiteâ€™s marketing strategy, the following goals are
realistic, yet challenging. These goals will allow The Appetite to grow and become profitable in
the future and establish itself in the minds of its customers. The Appetiteâ€™s goals include:
â€¢ Break-even within three years
â€¢ Open a second restaurant near another university in Orange County within 5 years
â€¢ Grow 10% in profits every year after breaking-even
â€¢ Increase awareness with customers
The Appetiteâ€™s target market is students that currently attend California State University,
Fullerton (CSUF) and reside in Fullerton, California. With 35,000 students enrolled at the
school, there is a large demographic area that can be reached. Nearby high schools are also
locations for prospective consumers. The target market includes young adults between the ages
of 15 and 25. By reaching this age bracket, which is 15.5% of the population of Fullerton, The
Appetite is targeting the second largest group in the area.
The product is a breakfast-only restaurant centered around all-you-can-eat-pancakes and
French toast. In addition, common breakfast foods will be served as side items. The Appetite
will differentiate from its competitors by focusing on its pancakes and The Appetiteâ€™s original
homemade syrup. The Appetite will have a fast-paced environment in order to serve studentsâ€™
needs, as well as have an inviting ambience to attract customers to dine-in.
The Appetite will be located across the street from CSUF in the University Plaza. This
area allows for awareness and direct access to The Appetiteâ€™s main target market, students. It is
within walking distance of multiple schools and apartment complexes, which indicates that the
restaurant will not have any difficulty meeting its projected sales. The prices at The Appetite are
in line with its competitors, such as Dennyâ€™s and International House of Pancakes (IHOP). By
pricing its products at similar prices, The Appetite is giving its customers choices for breakfast,
since they will spend the same amount of money at either restaurant. The Appetite will be
promoted through flyers that are passed out on the CSUF campus. Coupons will also be sent out
through the OC Register to the target market within Fullerton. One unique promotion The
Appetite will employ is rewarding students with a free meal if their GPA is over 3.5. The
Appetiteâ€™s projected sales will allow it to break-even within three years with a low 385 average
daily customer inflow. With this, please find The Appetite as a viable and worthwhile
Table of Contents
Brief Description 04
Industry Analysis 05
Market Analysis 09
SWOT Analysis 11
Marketing Strategy 13
Business Goal 13
Target Market 14
Financial Analysis 25
Appendix A 28
Appendix B 31
Appendix C 32
Appendix D 33
Appendix E 34
Appendix F 35
Appendix G 36
The Appetite is a restaurant located in the Fullerton area. The restaurant serves a variety
of high quality breakfast food items that are sold at low prices. The Appetite is geared toward a
younger student- based target market looking for breakfast food and dining options. These
options include take-out food or sit-down dining and a five for $5 meal that allows customers to
choose five side items from a series of side items for only five dollars. All-you-can-eat-pancakes
and French toast will also be available to all customers. The Appetiteâ€™s environment will be
relaxing, allowing students to study. Finally, Wi-Fi will be available for customers who dine-in.
A more detailed description can be found under â€œProduct.â€
Full-Service/Fast Food Breakfast:
The restaurant industry is one of the most important industries in the United States. It is
one of the driving forces that keeps the country running. It is a $580 billion industry with over
945,000 restaurant locations that employ over 12.7 million people (National Restaurant
Association). In California, researchers predict that the total sales from restaurants in 2010 will
equal $58 billion, or 10% of total industry sales (National Restaurant Association). The
restaurant industry is a large and profitable industry, and the breakfast market is quickly
becoming a popular market to tap into. According to the article, â€œBreakfast Trends in the U.S.
Foodservice Market,â€ breakfast day-part restaurant sales totaled $37.2 billion in 2009, and have a
projected forecast of $37 billion in 2010, and $37.7 billion in 2011 (Packaged Facts). With this
information, it is clear that the restaurant industry is a reliable industry to be a part of.
However, the recent economic recession has impacted all industries in the United States,
and the restaurant industry is no different. Breakfast sales for restaurants have dropped 2.8%
from 2009, and full service restaurants have fallen by 6.7% (Mintel). Although there are slight
dips in the sales numbers, the breakfast restaurant industry is still a beneficial market to enter.
According to research, breakfast makes up 21% of fast food purchases and looks to continue this
rise, moving upward (NPD Group). Since studies have shown that breakfast is the most
important meal of the day, consumers are actually trying to be more consistent in eating
breakfast, and the breakfast service industry has been growing rapidly. Consumers are looking
for breakfast meals that are convenient and fast. In the â€œBreakfast Consumer Trend Report
2009,â€ 77% of consumers have said that they purchase some kind of breakfast sandwich more
than once throughout the week (Packaged Facts). A recent study has also shown that more than
55% of breakfast restaurant sales have come from fast-food chains. The Appetite can cater to
this market because it provides quick services, as well as quality food and a friendly
There are various trends in the restaurant industry that The Appetite can use to their
advantage, in order to break into the market and create its own niche with its target market.
These trends are as seen below:
â€¢ Approximately 1
â„3 of consumers say they would like to see quick-service restaurants offer
breakfast throughout the day, and 35 percent would be likely to order breakfast during
non-traditional breakfast hours.
â€¢ According to an OnePoll survey announced in the U.K. Telegraph, breakfast meetings are
more productive than afternoon meetings. In fact, 67% of the 3,000 respondents said
they are more likely to be more attentive during breakfast.
â€¢ There is large consumer emphasis on value menus.
â€¢ Restaurants can generate faithful customers by offering low-priced meals.
â€¢ There is a large, untapped market for breakfast restaurant goers.
â€¢ Consumers are becoming more health-oriented when choosing food.
â€¢ Fast, casual establishments are on the rise.
Looking at these trends, The Appetite will be able to appeal to consumersâ€™ wishes. The
restaurant will be open for 24 hours a day for certain times throughout the year, offer breakfast
meals all day, have a value menu, and will be located right across from the CSUF campus.
Since, The Appetite is a fusion between a fast food and traditional sit-down restaurant, it fits the
â€œfast, casualâ€ type of food service, which bodes well for the future of The Appetite because it
fulfills customersâ€™ needs and wants.
The Appetite has two types of competitors within its target market, indirect and direct
competition. There are nine different indirect competitors and one large indirect competitor.
Direct competition for The Appetite will be full service pancake breakfast houses. The
only pancake house that falls within The Appetiteâ€™s 2 mile target market radius is Dennyâ€™s. It is
a well-established, full service breakfast restaurant located right off of the 57 freeway and across
the street from the CSUF campus. Dennyâ€™s offers the same or similar breakfast products that
The Appetite will offer, as well as, similar promotions and discounts. Dennyâ€™s is a well-known
establishment and dominates a large share of the market. It offers breakfast all day and is open
24 hours a day. Its signature deal is the â€œBuild Your own Grand Slam,â€ where customers can
build their own breakfast meals. In addition, Dennyâ€™s has a value menu, which includes various
items on the menu for $2, $4, $6, or $8, respectively. Some advantages that The Appetite will
have are its location and atmosphere. Dennyâ€™s is within walking distance of the campus, but it is
a five minute walk. With students unwilling to walk too far away from campus, The Appetite
will attract these consumers because it is located right across the street, and is a one minute walk
from campus. Also, the atmosphere at Dennyâ€™s restaurant is perceived as low-quality food and
geared toward an older target market. Its service is also perceived as slow. The Appetite is
targeted specifically toward college students, and will cater to their quick and busy schedules, as
well as, offer a place to relax and eat at.
The indirect competition includes all fast food chains that serve breakfast items. Most of
these fast food businesses only offer breakfast for a limited time during the day, and usually
stops being served around 11 am. Within The Appetiteâ€™s target area, there are nine different
competitors, including Starbucks, Burger King, Subway, Del Taco, McDonalds, Jack in the Box,
Pepeâ€™s, and Carlâ€™s Jr. These businesses offer items, such as breakfast sandwiches, breakfast
burritos, hash browns, coffee, and orange juice. Only McDonalds serves a pancake platter, but it
is perceived as low-quality and is also more expensive than the items served at The Appetite.
The market for The Appetite is divided into two different segments: students and local
residents. The student segment is comprised of people between the ages of 18 and 25, who attend
California State University, Fullerton and Hope University. Students are constantly busy and
usually need to eat quickly in order to get back to class on-time. Most students want to find an
excuse to leave campus or find an alternative to on-campus food. The student segment is driven
mostly by a need to eat breakfast in the morning in order to properly prepare for their day. The
local resident segment is comprised of mainly people that live within the immediate area (within
a two mile radius). This segment will probably be the less dominant of the two segments
because it will be hard to compete with the students during times where class is in session. The
local segment will also be more likely to dine-in and take their time while eating at the
restaurant. This information is based on The Appetiteâ€™s unique knowledge of the student
segment market. A brief survey will be used to attain a more accurate analysis of The Appetiteâ€™s
current market niche (see Appendix A).
Size of Market and Trends:
The student segment consists of students from both CSUF and Hope University. CSUF
has about 40,000 students. Combined with Hope University, across the street, the number
increases to about 50,000 students. The local segment is much smaller. There are 140,000
people reported to live in Fullerton, based on the 2006 census. Due to the location of the
restaurant, most of the population will not be within reasonable driving distance of the restaurant,
which will reduce the segment by half. Another issue to factor into the calculation of the size of
the segment is the probability that this segment will eat at the restaurant during peak student
hours. During the weekdays, the student segment will dominate sales; on the weekends, the local
population will be the primary targeted segment.
Buyersâ€™ Behavior and Motivations:
The behavior of the dominating target market, students, will be easy to predict, but will
not necessarily be steady. Students attend class at the same time, which will cause a majority of
customers to come in periodic groups. The first group will eat in the early morning before most
students begin class. The second major group of consumers will come to the restaurant between
the 12 pm-2 pm time period because most students schedule lunch breaks between their classes.
The final major group will begin arriving at about 4 pm and last until roughly 6 pm. After
viewing these three major waves of business from the student segment, The Appetite must focus
on the smaller groups of customers, who will come roughly every 1 Â½ hours (in accordance with
class times). The student segment will be motivated mostly by how popular the restaurant is and
how quickly they can satisfy their hunger and return to their studies.
The lesser of the two market segments or the local resident segment will be far easier to
predict. The local market will produce a steady flow of customers on or around the three main
eating times during the day â€“ breakfast, lunch, and dinner. The Appetite may see a decrease in
the amount of people from the local segment during the week because they will not want to
compete with the student market. However, during the weekends, the local market will dominate
sales. Without school during the weekend to bring students into the restaurant, the student
segment will be virtually nonexistent.
The SWOT analysis consists of the Strengths, Weaknesses, Opportunities, and Threats of
executing this marketing plan and starting the restaurant.
There are quite a few positive attributes to building a restaurant of this type in the area
directly across from the school. With a restaurant that has relatively inexpensive and tasty food,
students and local residents can all enjoy a quick meal. One of the main benefits to creating a
restaurant that serves fast breakfast food is that it can cater to the many students that leave home
and are late to class and do not have time to eat before their first class. These students will be
given the option to have a quick breakfast and still make it to class on-time. Another strength for
this restaurant is that there are no other breakfast-only businesses within walking distance from
the school. Students are forced to have fast food, which is unhealthy, or they have to eat at
Starbucks and wait until lunch to eat a meal. Since breakfast has been called â€œthe most important
meal of the day,â€ The Appetite is destined to thrive in this marketing environment.
There are only a few weaknesses to building this restaurant. One of the weaknesses of
this restaurant will be the fact that it only will serve breakfast. This will be a downfall because
there are inevitably going to be students who do not like breakfast food at all. Another weakness
to starting this business will be that the restaurant may be considered a â€œstudent hangout,â€ in
which case many of the locals, who do not wish to be around this type of crowd, will not eat
here. Finally, the restaurantâ€™s sales are likely to fall during school breaks and holidays because
of the absence of its core market segment.
The opportunities that exist in this business have quite a large range. The lowest of the
opportunities are that the restaurant will be successful; yet, only make a small amount of profit.
On the other end of the spectrum, the higher opportunities include creating an entire chain of this
style of restaurant. If a franchise is created, there lies a perfect opportunity to spread out to other
universities. One possible school to start with would be University of California, Irvine. This
school has a large population, much like that of CSUF, and it also has space available for the
restaurant to attract that local segment. Nevertheless, a second restaurant is one of the ultimate
goals of The Appetite.
Although there are not many, threats to the success of the restaurant do exist. One of the
major threats that may plague The Appetite is if the students, who are the targeted segment, lose
interest in the products and services. If for some reason students find that they are not enjoying
the restaurant for any reason, word will spread quickly throughout the school, and The Appetite
can go from good to bad in a matter of days. The best way to combat these threats is to ensure
the satisfaction of the customers. Through proper measurement, such as surveys and other
media, The Appetite can gain the knowledge it needs to be a continuously learning and growing
â€¢ The Appetite has the following business goals:
â€¢ break-even within three years
â€¢ increase profits by 10% every year after breaking-even
â€¢ open up another restaurant near University of California, Irvine within five years
â€¢ continuing increasing awareness with customers
In looking at the estimated start-up costs and yearly operating expenses and taking into
account the state of the economy, it is likely that The Appetite will break-even, in relation to
expenses versus revenues, within three years (see â€œFinancial Analysisâ€). Upon breaking-even,
The Appetite has also established a goal to continue being profitable and actually increase its
profits by 10% each subsequent year. This goal will be a suitable benchmark for The Appetite to
measure its profitability and recognize its position in the industry as a breakfast restaurant
competitor. Another practical goal is to open-up a second restaurant near the second largest
university in Orange County, University of California, Irvine (UCI) within five years. By using
the evidence of sales and profits from the previous store, it is more than likely that a bank will
provide The Appetite with another loan for a second restaurant. Within five years, the first store
will have broken-even, gone two years making profits, and will have five yearsâ€™ worth of
customer awareness and knowledge. This evidence will show that The Appetite is a lucrative
business and opening a second restaurant is sensible. By opening a second restaurant near UCI,
The Appetite will be able to cater to customers just outside of the Fullerton target market, but
who are still aware of the restaurant. Finally, The Appetite will continue to increase awareness
with new and existing customers in order to constantly expand The Appetiteâ€™s target market.
The Appetiteâ€™s main target market is students at California State University, Fullerton in
the city of Fullerton, California. CSUF alone has around 35,000 students that attend the school,
which can create a large flow of customers into The Appetite (College Stats). As a whole, The
Appetite will be targeting young adults between the ages of 15 and 25. Based on the age range
of the target market, high school students and other college students are included, which will
increase The Appetiteâ€™s customer base. This creates a market of four high schools and five
colleges/universities â€“ Troy High School, Fullerton Union High School, Sunny Hills High
School, La Sierra High School, La Vista High School, and Western State University College of
Law, Southern California College of Optometry, California State University, Fullerton, Hope
International University, and Fullerton College.
By targeting these two age groups (as seen in yellow in Appendix B), The Appetite will
be reaching out to a total of 15.5% of the population in Fullerton, California. Together, this
market segment is the second largest in Fullerton. Plus, The Appetite will also target a portion of
the 25-34 year old age group (as seen in blue in Appendix B). This age group is the largest in
Fullerton, and will therefore, increase The Appetiteâ€™s target market enough to make it the largest
market segment in Fullerton.
The Appetite is targeting this market because research shows that people in this age
group are the most likely to eat breakfast. Of people age 20-34, 41.6% eat breakfast â€œeverydayâ€
and 22.7% eat breakfast â€œsometimesâ€ (US Department of Health and Human Services). With
part of The Appetiteâ€™s target market within this age group, it is clear that pursuing this market
segment is logical and should prove profitable. In addition, the percent of consumers with 12 or
more years of education that eat breakfast â€œeverydayâ€ is between 54% and 60% (US Department
of Health and Human Services). Since The Appetite is located within an area containing five
colleges/universities, an area with consumers with at least 12 years of education, it will be
specifically targeting the consumers within this 54-60% target market range. Although The
Appetite does not segment the market based on income, all income levels report that over 50% of
consumers in these groups eat breakfast (US Department of Health and Human Services).
Finally, aside from age, The Appetiteâ€™s target market is not specific to gender, race, marital
status, or occupation. By targeting this market segment, The Appetite has a greater opportunity
to grow the expected 10% each year, as seen in the goals, and be profitable throughout its
Restaurant Type and Design
The Appetite is a breakfast food restaurant. It is a mix between fast food restaurants,
such as Subway and Quiznos, and sit-down restaurants, such as International House of Pancakes
and Dennyâ€™s. However, The Appetite is more similar to IHOP and Dennyâ€™s in the products it
serves. With this understanding, The Appetite will be designed with the following major items
inside the building:
â€¢ walk in fridge
â€¢ four round tables with four chairs each for customers eating-in (similar to Figure 1)
â€¢ one high table with four tall stools for customers eating-in or waiting for take-out (similar
to Figure 2)
â€¢ four additional chairs against the left wall for customers waiting for take-out
â€¢ a long counter against the right wall for customers to pick up take-out food
â€¢ a smaller counter with a cash register, where the employee taking orders will stand
behind, customers can order and pay here
â€¢ Haier 125 Can Beverage Center (Figure 3)
â€¢ various artwork on the walls to convey a relaxing environment
â€¢ large menu written on a blackboard behind the cash register
Figure 1 Figure 2 Figure 3
The Appetite is mainly an all-you-can-eat pancake (Figure 4) and French toast breakfast
only restaurant. In addition, it will serve a variety of side orders that can be purchased as a
customized meal. This will allow customers to create their own breakfast orders. The Appetite
will serve eggs, bacon, sausage, hash browns, toast, bagels, English muffins, buttermilk biscuits,
mixed fruit, and the cereal bar (Figure 5) as sides. A single serving of pancakes and French toast
will also be served as sides if customers do not wish to purchase the all-you-can-eat breakfast.
The Appetite will also serve three kinds of syrup â€“ maple, boysenberry, and homemade syrup.
The Appetite will sell all of its drinks including, milk, coffee, orange juice, and water, inside a
large Haier 125 Can Beverage Center located next to the cash register. Finally, The Appetite
will provide cookies as dessert, which can be purchased in a set of three or individually. All of
these foods can also be ordered for take-out.
This restaurant will have a relaxing ambiance, where customers can come and sit down
and read a book or study at one of the round tables in the back of the restaurant, farther away
from the noise. At the same time, The Appetite will have an environment that conveys speed, so
that if students need food in between their classes, they can come in and order take-out. The
Appetite will have Wi-Fi so that customers can use the internet, while waiting for take-out food
or while enjoying their food as dine-in customers. The colors of The Appetite will be red,
yellow, and green because these colors are naturally comforting, but also stimulating for oneâ€™s
appetite. These features will be what set The Appetite apart from other restaurants with the
same target market. The Appetite has many of the characteristics that students want â€“ relaxing,
yet understands the time crunch, delivers quality products with speed and efficiency, and open
during studentsâ€™ peak hours.
The Appetite will ensure â€œAâ€ grade quality food with the Orange County Health Care
Agency. It will do so by stressing quality as a part of The Appetiteâ€™s culture. It will focus on
having clean floors and counter tops. In addition, the kitchen will be cleaned of spills and
crumbs every evening. The employees will greet the customers with a smile and be willing to
help in any way. The food will be of excellent quality, in order to turn first time customers into
repeat customers. The homemade syrup will be original, making it the element that causes
customers to choose The Appetite over Dennyâ€™s for pancakes and other breakfast foods. This
syrup will also be the key to positioning The Appetite as the first choice for breakfast food in the
minds of its customers.
The restaurant hours will mimic those of the Titan Student Union (TSU) at CSUF in
order to maximize the number in The Appetiteâ€™s target market, since the TSU has high foottraffic, and if students want different food choices, The Appetite will be available. The Appetite
will be open from 6 am â€“ 11 pm every day. During CSUFâ€™s finals week, The Appetite will be
open 24 hours a day. Therefore, The Appetiteâ€™s employee make-up will look similar to:
â€¢ three managers
â€¢ four front staff, two working per day
â€¢ eight kitchen staff, four working per day
â€¢ one part-time cook to fill absences
In order to prepare for finals week, The Appetite will hire two temporary kitchen staff
and an additional front staff employee, in order to stay open 24 hours.
â€¢ three managers
â€¢ five front staff, three working per day
â€¢ nine kitchen staff, five working per day
â€¢ one part-time cooks to fill absences
The cooks will be paid $12.50 an hour and the employees will be paid $9 an hour plus
tips. The manger will be paid $20 an hour.
The location of The Appetite will be in the University Plaza in Fullerton, California.
Since The Appetiteâ€™s target market is students, it is only reasonable to set-up the restaurant near
a large, public, four-year university in Orange County. Chapman University is not included
because it is an independent college, which suggests that its student enrollment will never be as
high as a public university. Hope University is not included because it is a religious college with
an enrollment of less than 2,000 students. Two-year junior colleges are also not included as
possible places to set-up a restaurant near because the average enrollment is 18,766 students,
whereas four-year universities can reach closer to 30,000 students (OC Almanac). This leaves
California State University, Fullerton and University of California, Irvine. Of the two, CSUF,
and therefore, the city of Fullerton have been chosen for The Appetiteâ€™s location. CSUF has had
student enrollment of over 35,000 students for at least the last four fall semesters, while UCI has
only averaged 26,991 students in the last four fall semesters, which can be seen in Appendix C.
This allows for the possibility of almost 10,000 more customers if The Appetite were opened
near CSUF instead of UCI. However, UCI will be used as The Appetiteâ€™s second restaurant
location, once The Appetite management has decided to open another restaurant.
In addition, University Plaza has been chosen as The Appetiteâ€™s location because it
charges a reasonable rent rate and elicits high foot-traffic for the restaurant, which makes the rent
even more acceptable. The plaza is across the street from CSUF and Hope University and down
the street from Troy High School, which is only 1.3 miles away. In each case, The Appetiteâ€™s
location is easily accessible for its target market. In fact, the plaza is within walking distance of
the three schools, as well as three apartment complexes â€“ Nutwood East, University Crossing,
and Pointe at College Place. Each of these apartment complexes is largely considered as student
housing, containing mainly consumers within The Appetiteâ€™s target market. The specific site
location within the plaza is also visible from the street and from CSUF. With such high
visibility, awareness of the restaurant is guaranteed. The Appetite is also located off the 57
freeway to create accessibility for commuters and individuals traveling on vacations. There are
no other restaurants that serve similar food nearby, other than Dennyâ€™s. Even then, The Appetite
differentiates with them by creating more of a fast food environment with a focus on serving
pancakes and French toast. Thus, the University Plaza is the premier location for The Appetite
because it is readily available to the public and situated in an area that will provide high foottraffic into the restaurant.
All-You-Can-Eat Pancakes and French Toast
The Appetiteâ€™s main dish is the all-you-can-eat pancakes or French toast. This meal will
only be sold by itself for the price of $5, including unlimited syrup. This price will be used
because The Appetiteâ€™s competitors, who also serve all-you-can-eat pancakes â€“ IHOP and
Dennyâ€™s â€“ serve its pancakes at similar prices. IHOP, a breakfast restaurant specifically catered
toward serving pancakes, serves its pancakes for $4.99. Dennyâ€™s, a family-style restaurant
known for serving breakfast, lunch, and dinner all day, has just begun serving all-you-can-eat
pancakes for $3.99. Although this price is lower than The Appetite, Dennyâ€™s is not well-known
for its pancakes, but rather for being open 24 hours a day, 7 days a week. In this way, The
Appetite believes that it can price its pancakes and French toast at a slightly higher price,
competing more directly with IHOP, since The Appetiteâ€™s main dish is pancakes or French toast.
The next item on the menu is a 5 for $5 meal. A customer can buy any five side items for
five dollars, drinks not included. The Appetite feels this price is reasonable based on
competitorsâ€™ prices. Dennyâ€™s serves a build-your-own-breakfast of up to only four items for
$5.99, whereas IHOP sells only one breakfast combo containing six items for $8.69, one meal
with five items for $7.99, and others up to four items for $8.49 (Dennyâ€™s, IHOP). In looking at
The Appetiteâ€™s competitorsâ€™ prices, The Appetite is within the price range of similar breakfast
items. Any individual items will be priced at $1.50, which is comparable to other fast food
restaurants, whose average price of side items is $1.29. The cookies will be three for one dollar
or 50 cents each. Drinks will also be $1.50 for a 16 oz. cup, which is also comparably priced
with other fast food restaurants â€“ Subway (drink = $1.39, cookie = $0.48) and Quiznos (drink =
$1.39, cookie = $1.09). These prices are low to encourage students and low income individuals
to eat at the restaurant and become repeat customers. All of these items can be found in the
supplemental menu in Appendix D.
Tax Liability Waiver
The Appetite will also waive CSUF studentsâ€™ tax liability when they show their school
ID. This will work as an incentive to draw in The Appetiteâ€™s main target market. Plus, this type
of discount is being used by various competing restaurants on the university campus and will
continue making The Appetite competitive with places, such as the on-campus Starbucks and LH
Express. This discount will be in effect all year-long, in order to continue attracting student
customers during CSUFâ€™s winter intersession and summer school.
The Appetite will accept cash and credit card as payment, including debit cards. All
major credit cards â€“ Discover Card, American Express, Visa, and Mastercard â€“ will be accepted.
By accepting both cash and credit card, The Appetite is creating more opportunities for
customers to buy its product, since some consumers do not carry cash on them and some do not
carry credit cards. The Appetiteâ€™s credit terms with the participating credit card companies will
be based upon the credit card companiesâ€™ terms and conditions, but will be similar to those of
similar restaurant types.
The Appetite will promote its products using small, post-card size flyers that can be
passed out to students on the CSUF campus, as seen in Appendix E. This small flyer can also be
placed on parked cars within walking distance of The Appetite. Passing out these flyers will be a
direct way to put awareness of The Appetite into the minds of its customers, especially during
The Appetiteâ€™s grand opening, since it will be August 29, 2011, a week after the CSUF school
year has started. This flyer will be passed out for the first three weeks of every school year,
which will be from the end of August to the beginning of September, based on the CSUF
academic school year. The flyer will include a coupon for a free drink and cookie with the
purchase of either the all-you-can-eat pancakes or French toast or a 5 for $5 meal. This coupon
will expire on September 30th of every year. The Appetite will use its employees to pass out
these flyers on the Titan Walk at CSUF. Employees will be paid $10 an hour and will pass out
the flyers Monday through Thursday between the hours of 11 am and 1 pm. This time frame will
parallel the times with the most student traffic on the CSUF campus.
As for The Appetiteâ€™s grand opening, The Appetite will have a one-day sales promotion.
The Appetite will hang a large banner (468 x 60 Interactive Marketing Units (IMU)) with
â€œGrand Openingâ€ written on it in front of the restaurant. This will help to attract customers that
are passing by. If customers eat at The Appetite on its grand opening, they will receive a free
serving of pancakes with the purchase of a drink. This promotion will be advertised using the
same small flyer that will be used on a yearly basis for its recurring coupon, but with a different
coupon, as seen in Appendix F. Therefore, for The Appetiteâ€™s grand opening, since it will be at
the same time as employees will be passing out the yearly coupon flyers, the grand opening flyer
will only be passed out during the first week of the school year because the grand opening is one
week after the school year starts. This promotion will only be good for the day of the grand
opening. For the remaining two weeks, the recurring coupon flyer will be passed out on the
Titan Walk. In this way, the students at CSUF will be able to hear about the grand opening, but
still have an opportunity to use a coupon if they miss the grand opening.
This promotion will also be advertised in the OC Saver a week before The Appetiteâ€™s
grand opening. By advertising in the OC Saver, The Appetite will have 88% penetration into
Orange County homes (Orange County Register). Plus, The Appetite can pick a specific zip
code, which will help The Appetite narrow down the advertisement to its target city, Fullerton.
By using the OC Saver, The Appetiteâ€™s advertisement will reach the homes of the customers
within the target market in Fullerton that do not attend or have children or friends who attend the
schools in the area. In addition, it will reach the surrounding homes that house CSUF students as
another way that ensures that the students at CSUF hear about The Appetiteâ€™s grand opening.
The advertisement will be mailed within a half mile radius of 92831, which will include a
circulation of about 11,000 people. The total cost of this advertisement will be $368.96. For an
8 x 6 inch, single-sided advertisement being circulated to over than 10,000 people, this cost is
reasonable and worth the cost. This same ad and coupon will be also be sent out during holidays
and school breaks. In this way, The Appetite will continue attracting customers when foot-traffic
is not as high, due to school-wide scheduled breaks.
The Appetite will employ another promotion occurring at the end of each CSUF
semester. Students can bring in their unofficial transcripts and receive a free serving of pancakes
with the purchase of a drink if their GPA is above a 3.5. In this way, The Appetite is able to
focus on its main target market, students, in a way that is unique to them. In addition, The
Appetite can help students pursue excellence in the classroom.
Owning and operating a restaurant involves many different costs. Using research based
on similar restaurants, personal interviews, and phone calls, The Appetiteâ€™s start-up and annual
operating expenses are concluded (Appendix G). The sales of the business have been assessed in
a pessimistic, average, and optimistic scenario. The start-up costs and annual operating expenses
are based on the average of a small and medium sized business of the same type.
The Appetite has estimated the mean revenue per customer based on the menu prices.
With the most frequently purchased menu item (all-you-can-eat pancakes/French toast) selling
for $5, The Appetite has projected its mean revenue per customer to be $6.25 after tax and
including a drink. Some research suggests that breakfast-only restaurants similar to The Appetite
have a cost of goods sold (COGS) percentage of about 20% of sales. Therefore, if the revenue
per customer is $6.25, the profit per customer will be $5.00. Given that the total start-up
expenses and annual operating expenses for The Appetite are estimated at $453,612.50 and
$498,938 respectively, the break-even goal of three years is reachable with the projected monthly
sales of $54,178.51. The Appetite is able to calculate the average amount of customers by
conducting interviews with the business managers/owners near the ideal location, where The
Appetite will be opening its business. With the projected monthly sales of $54,187.51, The
Appetite will need an average of 385 customers per day, spending an average of $6.25 in order to
accomplish the break-even goal of three years.
With a pessimistic analysis, keeping the same COGS percentage and mean revenue per
customer for the average break-even analysis, break-even is achievable in just over 4 years, even
after decreasing the number of customers per day by roughly 10%. By doing so, this causes the
break-even monthly sales to increase to $48,769.20. In contrast, while continuing to keep the
same COGS percentage and mean revenue per customer, the optimistic break-analysis, also
known as the best-case scenario, yields a two year break-even period with monthly sales of
$60,270.35. This occurs after increasing the amount of customers per day by 10%, the average
number of customers per day from the average break-even analysis.
The Appetite will have a total of 15 employees, three managers, four front staff, and eight
kitchen staff. Employee labor is calculated using a variable hourly rate of $9.00 for the front
staff, $12.50 or the kitchen staff, and $20 an hour for management, which comes out to a
$42,560 average salary. Estimating that four members of the kitchen staff, two front staff, and
two managers are needed a day, an annual total cost of labor is estimated to be $296,688.
Based on the above information, The Appetite is a viable investment. The business is a
part of the restaurant food industry, which is a lucrative $580 billion industry. The Appetite
combines a fast food environment, which makes up 21% of breakfast meals, and breakfast at any
time, which 35% of consumers say they will enjoy. With many individual business strengths and
opportunities in the industry, The Appetite is sure to overcome its weaknesses and threats within
the industry and be successful. In fact, with a large target market, which includes students and
local residents in the Fullerton area, The Appetite will find it easy to break-even within three
years. With its projected start-up and annual expenses, the restaurant will only need to bring in
roughly 385 customers a day. This will not be a problem, since the restaurant is being set-up
directly across the street from California State University, Fullerton, which has a student
population of over 35,000 students every semester. Plus, with the various promotions and lowpriced items, The Appetite will be able to successfully target its market, attract customers, and
accomplish its goals.
Appendix A â€“ Survey:
3) Favorite Meal of the Day
4) Favorite Breakfast Drink
5) Favorite Breakfast Food
â€¢ French Toast
6) Favorite Breakfast Side Dish
â€¢ Hash Browns
7) Favorite Breakfast Condiment
â€¢ Hot sauce
â€¢ Barbecue Sauce
8) What price would you expect to pay for All-You-Can-Eat pancakes or French toast?
9) What price would you expect to pay for 1 item as a side dish?
10) What price would you expect to pay for a 5-item breakfast meal? (Example: Eggs, bacon,
hash-browns, toast, fruit)
11) Do you ever eat breakfast food for lunch or dinner?
â€¢ Once in a while
12) How often do you eat at restaurants?
â€¢ 5+ times a week
â€¢ 3-4 times a week
â€¢ 1-2 times a week
â€¢ 1-2 times a month
Appendix B (City of Fullerton) â€“ Demographics:
Appendix C (University of California, Irvine, California State University,
Fullerton) â€“ Student Enrollment:
Semester) CSUF UCI
*Bold = highest enrollment
Appendix D â€“ Menu:
Appendix E â€“ Yearly Recurring Coupon Flyer:
Free Drink and Cookie
with purchase of a meal
Across from CSUF. Next to Which Wich
Expires September 30th
Appendix F â€“ Grand Opening Flyer:
with purchase of a drink
Across from the CSUF. Next to Which Wich
One day only â€“ August 29, 2011
Appendix G â€“ Financial Analysis:
Start-up Expenses The Appetite
Leasehold Improvements $145,000.00
Beginning Inventory $6,000.00
Furniture, Fixtures, and Equipment $167,500.00
Office Equipment & Supplies $2,750.00
Computer equipment (hardware, software, POS system) $10,000.00
Grand Opening Advertising $15,000.00
Legal services & Accounting $1,500.00
Miscellaneous Expenses (add roughly 10% to total) $41,237.50
Total Start-up cost $453,612.50
Yearly Operating Expenses The Appetite
Rent (Security Deposit and first month included) $65,000.00
Marketing (Flyers) $4,000.00
Total Yearly Operating Expenses $498,938.00
4 Front Staff $9/hr. $51,408.00
8 Cooks $12.5/hr. $117,600.00
3 Managers ($20/hr.) $127,680.00
Total Labor $296,688
Average Revenue per Customer $6.25
Cost of Goods Sold (as % of Revenue) 20%
Gross Margin per Customer $5.00
Pessimistic Break-Even The Appetite
Total Start-Up Expenses $459,112.50
Total Annual Operating Expenses $493,688.00
4 Year Operating Expenses $1,974,752.00
4 Year Total Expenses $2,433,864.50
BE Sales per Month $48,769.20
BE Sales per Year $811,288.17
BE # of customers per month 9,753.84
BE # of customers per Week 2,438.46
BE avg # of customers per day 349
Time to Break Even (years) 4.16
Average Break-Even The Appetite
Total Start-Up Expenses $459,112.50
Total Annual Operating Expenses $493,688.00
3 Year Operating Expenses $1,481,064.00
3 Year Total Expenses $1,940,176.50
BE Sales per Month $53,893.79
BE Sales per Year $646,725.50
BE # of customers per month 10,778.76
BE # of customers per Week 2,694.69
BE avg # of customers per day 385
Time to Break Even (years) 2.98
Optimistic Break-Even The Appetite
Total Start-Up Expenses $459,112.50
Total Annual Operating Expenses $493,688.00
2 Year Operating Expenses $987,376.00
2 Year Total Expenses $1,446,488.50
BE Sales per Month $60,270.35
BE Sales per Year $723,244.25
BE # of customers per month 12,054.07
BE # of customers per Week 3,013.52
BE avg # of customers per day 431
Time to Break Even (years) 2.02
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Dec. 2010. <www.restaurant.org/pdfs/research/state/california.pdf>.
“California State University-fullerton Data, Tuition, Campus, Location | College Stats.org.”
College Stats.org: University & College Data, Statistics, Facts, Maps. College Stats,
2010. Web. 23 Nov. 2010. <http://collegestats.org/college/california-state-
“City of Fullerton – Fullerton Glance.” City of Fullerton – Community Development. City of
Fullerton, 2010. Web. 23 Nov. 2010.
“Colleges & Universities in Orange County.” OC Almanac – Demographics, History and
Statistics about Orange County, California. OC Almanac, 2006. Web. 23 Nov. 2010.
“Create Your Ad Campaign Today.” Adportal. The Orange County Register, 2008. Web. 23
Daypart. “Breakfast Trends in the U.S. Foodservice Market: Packaged Facts.” Consumer Goods
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“Denny’s Restaurant Manager (General Info).” Phone call. 12 Nov. 2010.
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Nov. 2010. <http://www.dennys.com/en/page.aspx?id=1&title=Menu & Specials>.
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“Health Practices Among Adults: United States, 1977a.” Advanced Data. US Department of
Health and Human Services. Web. 22 Nov. 2010.
IHOP – Menu. Web. 23 Nov. 2010.
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Magleby’s Fresh Estimated Initial Investment. Provo, UT, 17 Oct. 2010.
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News.” Today’s Top C-store Industry News – Convenience Store News. N.p., n.d. Web. 1
Dec. 2010. <http://www.csnews.com/top-story-
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