International Business - Opening a Restaurant in New Zealand - Essay Example

 . International Business: Opening a Restaurant in New Zealand Abstract New Zealand, also known as Aotearoa or the Land of the Long White Cloud in the Maori language of the earliest Polynesian settlers of the country is an island nation located on the eastern side of Australia. The country has been a dominion of Britain and has a predominantly British and Polynesian culture. As a result of post Second World War immigration, people from many nations across the world are now a part of the Kiwi melting pot. New Zealand has a relatively small population of about four million people and the population of sheep exceeds that of humans. The country is naturally very beautiful and has a highly developed economy which is based mostly on agricultural products as well as high technology industries. New Zealand has enjoyed a period of robust economic growth in the recent past, with low inflation and a liberal economy. The country is stable, with a low crime rate and investor confidence has been good. Because the number of new settlers and tourists has seen a marked increase in the recent years, therefore, investing in the hospitality industry or specifically a restaurant offers a good opportunity provided that a good restaurant concept can be presented. The country already has restaurants serving food from many corners of the world, but because of the high standards of living and a culture of dining out, there is room for new restaurants. This brief essay examines some of the perspectives associated with investing in a restaurant project in New Zealand to create a broad general opinion about whether such an investment is likely to be worthwhile. After an initial assessment, a detailed business plan can then be prepared based on the desired location and the type of restaurant that is desired. Contents Section I: Objective statement 4 Section II: An Introduction to New Zealand 5 Section III: Forces 7 Section IV: Marketing aspects 9 Section V: Human resource management 10 Section VI: Financial management 11 Section VII: Data analysis and conclusion 12 Section VIII: Summary and recommendations 12 References / Bibliography 14 Section I: Objective statement This essay deals with the business considerations involved in opening a restaurant in New Zealand. Starting a new business venture in a foreign country needs a careful study of the country and its business environment as well as the legal aspects of the new venture. Because the business environment as well as the administrative norms are different to what the managers associated with such projects may have been accustomed to, therefore, a special effort is required by the managers to familiarize themselves with the new country situation so that they are able to handle the business risks in an informed manner. Some perspectives associated with a country which have to be considered in relation to business investments in the hospitality industry include the culture of the country which reflects on the tastes of the clients, economic and political forces at work that have an impact on the stability of the country, marketing as well as human resources aspects for the venture, organizational design and an analysis of the financial risks involved. This essay presents the results of the investigations conducted in relation to the feasibility of opening a restaurant in New Zealand. Section II: An Introduction to New Zealand New Zealand is an island nation which consists of two islands, the North Island and the South Island on the eastern side of Australia. The known original settlers of New Zealand were the Polynesian people who arrived in New Zealand in migratory waves about a thousand years ago. These Maoris are the present day descendants of the Polynesian people of New Zealand who are also considered to be the indigenous people of New Zealand. The country is also known as Aotearoa, or the Land of the Long White Cloud, in Maori language. Europeans discovered New Zealand when the Dutch navigator Able Tasman sailed on the coast of New Zealand in 1642, around the time he discovered Tasmania. However, Able Tasman was not able to land on New Zealand soil because of opposition by the Maoris and it was Captain James Cook and his crew who claimed New Zealand for the British in 1769. Warfare between the British and the Maoris ended up in the signing of the Treaty of Waitangi in 1840, which is considered to be founding document of modern New Zealand. New Zealand finally became an independent sovereign nation in 1947, after having been a British Colony and a Dominion. Immigration has been a part of the New Zealand government policy and since the end of the Second World War (Travel Café, 2005, Pp 1). People of many nations and cultures have adopted New Zealand as their home country, assimilating into the so called Kiwi melting pot. Because of this multicultural assimilation of people, restaurants serving food from many parts of the world are now a part of New Zealand life, despite its predominantly British and Polynesian traditions. Restaurants serving cuisine from India, Malaysia, China, France, Italy, Greece, Britain and Thailand etc are available to cater to the culinary tastes of the New Zealanders and the tourists. Auckland, Hamilton and Wellington are the major cities on the North Island, while Christchurch and Dunedin are the major population centers on the South Island. The population of New Zealand was estimated to be 3,819,762 people of which 0-14 year olds constituted 23% of the population (male 440,824; female 419,740), 15-64 year old individuals constituted 66% of the population, (male 1,263,710; female 1,254,958) and 65 years and over were 11% (male 191,511; female 249,019). The population growth rate has been estimated to be 1.17%. Europeans constituted 74.5% of the population, Maori 9.7%, other European 4.6%, Pacific Islander 3.8%, Asian and others 7.4% (Abacci Atlas, 2005, Pp 1). Because of the ties with Britain and the proximity to Australia as well as countries of South East Asia, a major component of New Zealand’s external trade is conducted with the UK, Australia, Japan, Malaysia, Singapore and Thailand etc. Trading links also exist with other Pacific Islands, the Middle East and countries of Europe and North America. New Zealand is also a member of organizations such as the Commonwealth, the WTO or the World Trade Organization, OECD and the APEC or the Asia Pacific Economic Cooperation Forum. The membership of APEC by itself indicates New Zealand’s economic and trading links. New Zealand has a high standard of living, ranking 19th on the 2005 Human Development Index and successive governments have attempted to convert the economy into a liberal free – market economy. Despite a stock market crash in October, 1987, the New Zealand economy has shown a strong growth, with contained inflationary pressures. The important export industries for New Zealand are agriculture, horticulture, fishing, and forestry as well as information technology. Education, film making and the wine industry are also assuming a certain level of importance. The current government of New Zealand is a coalition between the centre – left Labor Party, the Progressive Party and the United Future Christian Conservative Party which is led by Prime Minister Helen Clark. The leader of the opposition is Don Brash and there are a total of eight parties in the New Zealand House of Representatives (Wikipedia, 2005, Pp 1). Although there is a diversity of faiths in New Zealand, 33% of New Zealanders are agnostics or do not claim allegiance to any particular faith. This is followed by those who claim to be various denominations of Christianity. Apart from the holidays associated with the Christian faith, such as Christmas and the first day of the New Year, ANZAC day, Waitangi day, Labor Day and Queen’s Birthday are also celebrated as holidays in New Zealand. Rugby and yachting are very popular in New Zealand as is cricket and events associated with these sports usually drawing up large crowds of fans. Sporting events can, therefore, be good for the hospitality business because New Zealand is naturally very beautiful, with the people enjoying a healthy outdoor lifestyle, these events as well as other individual occasions can draw customers to a restaurant (Wikipedia, 2005, Pp 1). Section III: Forces Politics in New Zealand is rather laid back and the country is not involved in any serious international conflicts because of its relative isolation. Whichever party or coalition comes into power, it is very unlikely that the free market and liberal policies of the government of New Zealand will change. GDP per capita for New Zealand is about $20, 000 which means that the population is accustomed to a good standard of living and the societal standards are high. The economy of New Zealand has continued to grow at a solid pace for the past several years. The average growth rate in GDP has been about 3.3 %. Growth in domestic demand has been growing at about 6.6% and although a strong New Zealand dollar has meant that imports have become cheaper, it has also become difficult to export products. The momentum associated with spending in New Zealand is expected to grow over the immediate short term horizon, driven by strong household demand and business spending. There has been a strong wages growth and continued increase in real estate property prices. Agricultural exports from New Zealand to its major trading partners are stable and inflation has been kept in check at about 1.5 %. Immigration has been significant in contributing to the economic growth of New Zealand, maintaining the prices of residential property and adding to domestic consumer demand (APEC, 2005, Pp 1 – 4). New Zealand maintains a current account deficit of about 5 % of GDP and has sustained a gross external debt of about NZ$ 93 billion or USD$ 65 billion. Private investment peaked in New Zealand during the year 2003, with government investment declining to its lowest levels. New Zealand presents a stable business environment for investments and is located in a stable region of the world. Although relations with Australia have been strained as a result of the Australian perception of low defense spending by New Zealand and the New Zealand view that Australia has been spending far too much by toeing an American agenda for defense, New Zealand as well as New Zealanders are well accepted in other developed nations as well as regional or international groups (Wikipedia, 2005, Pp 1). It can, therefore, be concluded that investing in New Zealand is relatively safe and provided a reasonably decent restaurant concept is presented, there is no reason why a reasonable return on investment cannot be generated. Experience gained from managing the restaurant can then be of use in further expansion in New Zealand or the neighboring countries. International food brands like Pizza Hut and Kentucky Fried Chicken, or KFC are already present in New Zealand and the outlets are operated by Restaurant Brands New Zealand Limited. Pizza Hut and Starbucks Coffee are more popular then KFC. It appears that New Zealanders like dining out on something which is different from their everyday fare at home (Restaurant Brands, 2005, Pp 1). Government legislation has recently made it illegal to smoke in bars and restaurants. Skilled and unskilled hospitality employees have been in short supply as a result of a strong economy and a growing number of international visitors. New hospitality ventures are, therefore, in demand in New Zealand. The minimum age requirement for the purchase of alcoholic beverages is 18 and attempts have been made to increase this to twenty. Licensing is required for the sale of alcoholic beverages in restaurants (HANZ, 2005, Pp 1) and (NZS.com, 2005, Pp 1). As a result of highly developed support services for business, suitable commercial properties are easy to find in the country and decent commercial property for a restaurant can be acquired at about NZ$ 150,000 (L. J. Hooker, 2005, “Commercial Property”). Section IV: Marketing aspects It has been estimated that as a rule of thumb about 6 – 8% of sales should be spent on restaurant advertising and marketing (Time 2 Dine, 2005, Pp 1). However, making customers come to a new restaurant can be difficult with money being spent on press advertisements. In New Zealand, it is customary for a restaurant to have a website which can portray what a customer can expect to find when visiting the restaurant for the first time. Small restaurants cannot spend the huge sums of money that are required to market a restaurant on television and a better technique which has been fund to be successful is one of mass mailing those who live near the restaurant location. Once the first customers have been persuaded to experience the restaurant, good public relations can be had based on what the restaurant has to offer. The atmosphere, items on the menu, any special attractions and the service can all impress. Good public relations can also be had by inviting members of the press who are associated with some suitable journals, magazines or publications and perhaps an article as well as some advice on the restaurant can be had in exchange for the meal and an advertisement. When marketing a restaurant, it is also important to keep an eye on what everyone else is doing. Branding and positioning the restaurant is associated with determining the type of customers that a restaurant will like to attract and how to go about getting these customers. Although nothing can replace what a restaurant has to offer from within its four walls, some good marketing tactics which are acceptable in New Zealand include email marketing, bounce-backs, affinity marketing programs, publicity through event marketing, partnerships with other local retailers and, of course, internal merchandizing such as bathroom signage and menu merchandizing. Neighborhood marketing is important even if other techniques are being used and it is important that the marketing tactics should reflect attempts to get the right customers. Marketing has to be effective and have an impact on the sales or profits being generated. Many established restaurants will not even have an impact on their operations if they were to totally cease marketing and advertising. It is also worthwhile to consider giving the marketing of the new restaurant to a specialist marketing firm which is established in New Zealand for a fixed annual fee (Time 2 Dine, 2005, Pp 1). International marketing of the restaurant is only justifiable if the restaurant has attained a certain level of domestic success. Section V: Human resource management With a tight New Zealand labor market, it is important to hire a core staff which is competent and to compensate them adequately. Training opportunities and long term career with the restaurant will very likely attract some promising young people who can then be trained. The restaurant manager is the most important member of the team, followed by the chefs, because it is these employees who assume the responsibility for the customer experience. Overtime is required to be paid in New Zealand and an entry level manager will have to be compensated at about $22,000 to $26,000 p.a. while a seasoned manager may require as much as $30,000 to $40,000 p.a. Depending on the nature of the restaurant which is required to be operated, a selection will have to be made of the required level of managerial experience. An experienced restaurant manager is expected to open and close the restaurant, purchase food and beverage supplies, manage the cash register, track inventory, hiring, training and firing staff; and creating work schedules and monitoring their performance, develop marketing strategies, supervise personnel and schedule your staff, resolving customers' complaints and ensuring health and safety regulations are followed, keeping employee records for hours and wages, preparing payroll and filling out paperwork for taxes, wages, employment insurance etc (Allfoodbusiness.com, 2005, “Hiring a Manager”). Because the chef is such an important member of the team, it is important to sign an employment contract with the chef and when hiring junior chefs, it is important to ensure that they can take over the responsibility of preparing meals for the restaurant if required. Other members of the restaurant staff include the Maitre d, host/hostess, kitchen staff, kitchen workers, cashier, waiter / waitress, dishwashers, bartenders, fast food workers and counter attendants etc. If key restaurant staff with highly specialized cooking skills is required for operating the restaurant, then the government of New Zealand can assist in permitting the immigration of such staff, provided they meet the general immigration requirements. Depending on the level of investment that is desired, it may be most appropriate to hire a restaurant manager and let the locally hired restaurant manager manage the affairs of the new venture with the investor overseeing the financial affairs of the restaurant venture. Keeping in mind the cultural mix of New Zealand, it is appropriate to hire staff with a mixed background. Section VI: Financial management Whereas the financial investment that will be required to be made will depend on the number of seats which a restaurant is expected to provide, some expenditures that will have to be incurred will include management and staff payroll, cost of goods sold, taxes and VAT, marketing and advertising expenses as well as depreciation and credit card charges etc (Businessplan Pro, 2005, Pp 20 – 30). New Zealand is an economy which is well connected to other developed economies and hence there are minimal risks associated with exchange rate restrictions or fluctuations. However, it is important to have a restaurant concept which can effectively compete with the large number of restaurants in New Zealand. Dining out is popular in New Zealand and hence a reasonably good restaurant concept has a good chance of success. It is appropriate to purchase rather then lease the premises because once a restaurant becomes accepted and starts to become popular it becomes a landmark, making it inappropriate to shift premises. Suitable commercial property in most localities of New Zealand will cost about NZ$ 150,000 and furnishing this property for a restaurant can cost about NZ$ 40,000 to NZ$ 60,000. Staff salaries for the first year of operation can amount to NZ$ 150,000 and operating costs for the first few months when the restaurant will not be generating a return will amount to at least NZ$ 50,000. This means that the estimated capital outlay that will be required will be in the region of NZ$ 300,000. However, it will be possible to get a bank loan to operate the business by using the restaurant premises as collateral. This means that it will still be necessary to invest about NZ$ 200,000 in the new restaurant venture. Although the success of the restaurant will depend on the restaurant concept, it is very likely that the restaurant will start generating positive retained earnings after two years of operations (Business plan Pro, 2005, Pp 27 -28). Section VII: Data analysis and conclusion New Zealand is a naturally very beautiful country which offers a healthy lifestyle, a safe and crime free society with an absence of venomous animal species such as snakes, spiders and scorpions. The lifestyle is relatively relaxed and should appeal to someone who wants to escape from it all and enjoy a modest return on their investment. It is possible to generate higher returns in USA and Canada, but the entry costs can be higher for these economies. Because of a relatively low human population, which is outnumbered by sheep, the market size is limited and thus the maximum possible returns which can be generated are also limited. However, all the amenities of life are available with a predominantly British cultural traditions and all this should appeal to an investor who is willing to take a risk and try to establish a new business for themselves. Section VIII: Summary and recommendations Investing in a restaurant is certainly worth it if an investor has the funds available to invest and has some previous experience in the hospitality business along with a good idea for a restaurant. If the investor is already in New Zealand, then they will have a good idea about the country and it is a good time to invest in an expanding economy. However, for those who are not New Zealand citizens or residents, it is a good idea to apply to immigrate to New Zealand on the basis of their business plan. For seasoned business people, New Zealand offers good opportunities and investments can also be made in partnership with a New Zealand business. However, for someone without any intention of residing in New Zealand, the possible returns on a New Zealand restaurant should be carefully considered against other business opportunities and other future plans which a business or an individual may have. Although there are many restaurants which were established by New Zealand entrepreneurs, a large number of the restaurants in New Zealand are either owned by individuals who had the money to invest and were willing to migrate to New Zealand or international franchises that made investments in collaboration with New Zealand businesses. The time to invest has never been better, but investors should consider all the business possibilities which are open to them. References / Bibliography 1. Abacci Atlas. (2005). Demographics of New Zealand. Abacci Atlas. Retrieved: September 21, 2005. From: http://www.abacci.com/atlas/demography.asp?countryID=280 2. Allfoodbusiness.com. (2005). Restaurant Management Tips, Articles, Allfoodbusiness.com. Retrieved: September 22, 2005. From: http://www.allfoodbusiness.com/restaurant_management.php 3. Asia - Pacific Economic Cooperation, APEC. (2005). New Zealand – Economic Report. APEC. Retrieved: September 21, 2005. From: http://www.apec.org/apec/member_economies/economy_reports.MedialibDownload.v1.html?url=/etc/medialib/apec_media_library/downloads/sec/pubs/2004.Par.0020.File.v1.1 4. Businessplan Pro. (2005). Sagebrush Sam’s Steak Buffet – Sample Plan. Businessplan Pro. Retrieved: September 22, 2005. From: http://www.paloalto.com/sampleplans/BPP7/enu/Live/SagebrushSams_Live.pdf 5. Fullen, Sharon. L. (2005). Opening a Restaurant or Other Food Business Starter Kit: How to Prepare a Restaurant Business Plan & Feasibility Study. Atlantic Publishing. Retrieved: September 20, 2005. From: http://www.fishpond.co.nz/Books/Business/New_Business_Enterprises/search_used.php?products_id=1305974 6. L. J. Hooker. (2005). Commercial Property in New Zealand. L. J. Hooker. Retrieved: September 20, 2005. From: http://www.ljhooker.co.nz/content/content.php?cat_id=5 7. New Zealand Trade and Enterprise. (2005). The New Zealand Advantage. New Zealand Trade and Enterprise. Retrieved: September 20, 2005. From: http://www.investnewzealand.govt.nz/section/14339.aspx 8. NZS.com. (2005). New Zealand Restaurants and Bars. NZS.com. Retrieved: September 20, 2005. From: http://www.nzs.com/entertainment/restaurants-and-bars/more9.html 9. Restaurant Association of New Zealand. (2005). Trends & Research… Restaurant Association of New Zealand. Retrieved: September 20, 2005. From: http://www.restaurantnz.co.nz/trends.asp 10. Restaurant Brands. (2005). News and What’s Happening? Restaurant Brands. Retrieved: September 20, 2005. From: http://www.restaurantbrands.co.nz/ 11. The University of Otago. (2005). Statistical Sources: New Zealand. The University of Otago. Retrieved: September 20, 2005. From: http://www.library.auckland.ac.nz/subjects/stats/nz_pacific/NZsources.htm 12. Time 2 Dine. Co. nz. (2005).Restaurant marketing in New Zealand. Retrieved: September 20, 2005. From: http://forum.time2dine.co.nz/new-zealand-wide-restaurants-information/restaurant-marketing-in-new-zealand-216.html 13. Travel Cafe. (2005). New Zealand. Travel Café. Retrieved: September 20, 2005. From: http://www.travelcafe.tv/newzealand.html 14. Wellington Institute of Technology. (2005). Hospitality Industry Library Guide. Wellington Institute of Technology. Retrieved: September 20, 2005. From: http://library.weltec.ac.nz/Library%20Web%20Page/Subject%20Guides/Hospitality%20Management.htm 15. Wikipedia, the Free Encyclopedia. (2005). New Zealand. Wikipedia, the Free Encyclopedia. Retrieved: September 21, 2005. From: http://en.wikipedia.org/wiki/New_Zealand Read More