Feasibility Analysis - Case Study Example

Feasibility Analysis Student’s Name Institutional Affiliation Contents Contents 2 Topic Overview 3 Description of the Industry of Operation 3 Current and Future Trends In the Tourism Industry. 4 The Key Driving Forces and Key Success Factors for the Industry 5 Product Description 6 Operations Objectives-Competitive Advantage to Pursue 7 Proposed Location 7 Acquisition of the Premises 7 Construction Process 9 Illustration of the Layout 11 Inventory Management System 12 Strategies for Managing any Seasonal Variations in Demand 13 Legal Formalities for Setting up a Restaurant 13 Number of Employees Required and Job Description 14 Conclusion 16 References 17 Topic Overview A feasibility analysis is an objective study aimed at rationally revealing the weaknesses as well as the strengths of a business entity whether existing or proposed. The study entails a thorough scrutiny of the threats and opportunities in the field of concern, required resources and the projection of the success of the business enterprise. Feasibility of a business is judged on the total costs incurred or to be incurred and the expected revenue from the business undertaking. An appropriate feasibility analysis should also include an estimate of the costs of operations and possible ways of reducing these costs. The success of technical development as well as implementation of the project is largely dependent on the nature of the feasibility analysis conducted. Therefore, this analysis should be objective and detailed enough not to miss out on any relevant information (Baron, & Shane, 2008). Description of the Industry of Operation The business venture to be undertaken is in the tourism industry in the United States. I intend to provide accommodation facilities to tourists. Among the major tourism attraction resources includes historic landmarks, natural wonders, entertainment joints and vacation sites. Tourism is one of the oldest industries in the United States dating back to the 1850s when the industry became well established. Urban tourism was the origin of the present day tourism in the US with its roots in Washington D.C, Chicago, Philadelphia, San Francisco, New York and Boston since 1980. Travel democratization took place throughout the twentieth century along with automobile evolution and advancement. Air travel transformed travel and consequently tourism between 1945 and 1969. The U.S is the second most preferable tourism destination in the world only after France. The tourism industry was the second largest source of employment in about 29 states with an estimate of 7.3 employees according to a research done in 2004. Income generated from purchases of tourism –related products by foreign tourists in the U.S amounted to $10.9 billion in the month of February 2013. Despite the significant growth in tourism over the past years, this sector has had its challenges such as the September 11th 2011 terrorist attack which had 3,000 casualties. Commercial airlines were destroyed and many tourists cancelled their bookings as a result. Current and Future Trends In the Tourism Industry. Travel and tourism in the United States has continued to improve for the past four years. Rate of growth of the industry in has maintained an encouraging trajectory in most categories of tourism. However, US travelers continue to anticipate reduction of prices of tourism related products as well as discounts on most of tour destinations. The travel sector has in the recent past experience a lot of mergers and acquisitions in most categories. 2012 saw the merger between Continental Airlines and United Airlines. As competition intensified, American Airlines merged with US Airways early last year to form the world’s largest carrier. Mergers of car rental have also been in the rise as witnessed by the acquisition of Dollar Thrifty Automotive Group by Hertz Corp in 2012.Consequently, Zipcar was acquired by Avis Budget early last year The federal government of United State has been implementing the national tourism policy commissioned by president Obama in 2012. In the process, the federal government in partnership with private tourism firms has been engaging in a robust campaigns aimed at marketing the United States as the best tourism destination in the world. Brand USA initiative has been operational for the past two years and has prompted a debate in the legislator in attempt to relax international travel barriers. There are ongoing consultations as to whether to expand the waiver program on US Visa. With the on going reforms and programmes, the tourism sector is projected to experience a consistent growth rate in the near future. However, this would only be possible if the political gridlock in regards to Visa Waiver and elimination of travel barriers is resolved. Tour operators should also be encouraged to invest more in the industry to meet the ever changing leisure market demands. The Key Driving Forces and Key Success Factors for the Industry The success of the tourism industry into is dependent on a several number of factors; Transport infrastructural development is one of the determinants of grows of travel and tourism. The United States have well established means and modes of transport ranging from air travel, sea transport, railway and road transport. Movement of tourists from around the world and within the United State is thus facilitated at an affordable price. All tourism destinations are easily accessible; thus encouraging people to visit them. The spirit of adventure is another contributing factor for growth in the tourism sector. People are incited by their desire to explore the world, hence traveling from all corners of the world and others from one state to the other within the U.S in a bid to satisfy their curiosity. Demand of tourism related goods and services increase with the increase in people’s curiosity to explore. The advancement in the information and communication technology has reduced the world into a small village, through sharing of information. Business people in this sector advertise their products through the social media and other platforms which have wider coverage. Tourists thus receive all the relevant information regarding the products available, their prices as well as accessibility. Increase in the number of wealthy retirees who have the time to travel has a positive impact on tourism. Such wealthy individuals are free from job commitments and may thus devote their leisure time to tourism activities. Political stability ensures peace and security thus creating an enabling business environment. Visitors would feel secure to travel around and about while investor’s confidence would be boosted by the favorable business environment. More people would set up tourism related ventures which would attract clients thus contributing to the expansion of the industry. All these factors have facilitated establishment and development of the tourism sector in the United States. Product Description The project entails construction of a restaurant targeting the frequent visitors of St Mary of the Fields Shrine in Henry County, Illinois. The restaurant would consist of accommodation facilities constructed using the ancient housing methods which were common in the pre-colonial era. The restaurant would serve various types of delicacies from across the globe especially traditional meals specific to certain communities. Accommodation rooms would be decorated with artifacts from across the world. The restaurant would also feature a fully equipped gym and a two hundred meters long swimming pool. In addition there would be a souvenir shop dealing in a wide rage of artifacts both religious and non-religious. (Fullen, 2004). The unique feature of this project is the style of construction of the accommodation suits, interior decorations and the food stuff served. The charges to access these facilities would also be affordable. Clients would be able to sample various buffet from across the world at affordable prices. The restaurant would be differentiated from the rest by the design of the accommodation suites, interior decorations, methods of cooking, prices and the landscaping. All these features are aimed at attracting more clients. Operations Objectives-Competitive Advantage to Pursue The objective of this project is to satisfy the needs of the tourists that visits the Shrine of Saint Mary of the Fields. The closeness of the restaurant to the shrine is one of the competitive advantages as it provides easier access by the pilgrims. Fees charged for the use of services at the restaurant are also relatively low and this is also expected to attract more clients. More over, the design of some of the structures at the compound would attract more individuals so as to view them. Proposed Location The restaurant is to be constructed in a 17 acre piece of land adjacent to St. Mary of the Fields shrine, Hoopoe, Illinois. The targeted clients are the frequent visitors to the shrine and hence the proximity of the restaurant to the shrine. However, this being a religious based attraction site, particularly associated with Catholics, people from other religious divides may shy away from it, owing to the difference in religious affiliation. Acquisition of the Premises Currently there are some buildings elected on the piece of land in which the restaurant is to be built. Architects and engineers would be contracted to inspect them and evaluate whether they are habitable and if not they would be demolished. Other structures and facilities would be set up and furnished at an estimated cost of U.S $ 46million. The construction company would be required to fund 37% of the construction costs which would be repayable in full, a year after opening of the restaurant. Construction Process Stage one; purchasing of the land Land surveyor is to be consulted to ascertain the size of the land. An attorney would also be involved to ensure authenticity of the title deed to the land and to foresee all the regulations regarding sale of land. Stage two; architectural designs and drawings Architects would be hired to provide designs for all the structures and buildings to be put up as well as estimating the construction costs. Stage three; invitation to tender and awards Construction companies would be invited to bid for the tender. Suppliers of furniture and fitting materials would also bid for their contracts. Tenders would be awarded based on merit. Stage four; construction and furnishing of the premise Construction work is estimated to take one year after which the restaurant would also be equipped and ready for use. Stage five; opening of the restaurant Advertisements would be made in both traditional and non traditional channels so as to reach as many potential customers as possible. Charges to access some of the facilities would be reduced for the first month as a way of attracting customers. Illustration of the Layout The main entrance would be facing the US$11million worth restaurants for easy access and an ample secure parking space provided. The souvenir shop would be built and stocked at a cost of US$ 6million adjacent to the reception for exposure to the clients. The gym would be equipped at a cost of US$3million. US$ 1million would be used to set build the swimming pool and equip it. An apartment containing 150 self contained rooms would be constructed at a cost of US$ 9million. 100 traditional huts would be constructed at a cost of US$ 7million. Five V.I.P lounges would be set up at a cost of US$ 11million. The cost of materials and supplies is included in the above stated figures. Seven acres of land would be reserved for future expansion as demand for the services increases. Construction of new structures in the reserved area would depend on the services whose demand would have increased. Maintenance work would be reserved to the construction companies that would have won the specific tenders. Such companies would be required to conduct an annual check on their installations under the supervision of the finance and security managers. However, the original contractors would only be awarded the maintenance contract for the first eighteen months after opening of the restaurant. Thereafter, the tendering process would be repeated afresh in which the original contractors and sub contractors would not be exempted. Transportation costs for maintenance materials and supplies would be catered for by the restaurant using the enterprises vehicles. Inventory Management System Silos would be constructed and fitted with preservative systems to ensure food stuff do not go bad quickly. New orders for foodstuff and refreshments would be made once in every week and safety level of stock maintained at 56% of the holding capacity of the food stuff silos. Minimum stock levels would be set at 34% of the go down where as the maximum stock level would be fixed at 93% of the holding capacity of the warehouse. (Fullen, 2004). As for the artifacts and other non perishable stuff, orders would be made monthly with the safety stock level set at 62 % of the warehouse’s storage space. Minimum stock levels for these stuffs would be set at 28% and maximum at 96% of the available storage facilities. However, these stock levels are subject to review depending on the rate at which they would be consumed at. Strategies for Managing any Seasonal Variations in Demand Seasonal variations are to be countered by reduced charges and making special offers to the few clients that would be visiting. The operation costs are also expected to reduce during this period because supplies of food stuff, laundry services and entertainment bills would reduce significantly. During this period, demand for staff would have reduced and so, the cost of hiring casual staff would not be incurred (Fullen, 2004). Legal Formalities for Setting up a Restaurant Food service entities such as restaurants are required by the Illinois Department of Public Health to have a licensed food service supervisor always. Restaurants are to adhere to solid waste management regulations. Any business entity is required to pay taxes to the federal and county governments. The premises are to be accessible for physically challenged people. Fire fighting equipments must be installed in the premises and be easily accessible all the time. All businesses must be registered with the county government. The attorney hired would guide the management through to acquiring zoning and health permits, environmental approvals and operating licenses. The attorney would also frank the management on any pending legislation and the impacts it may have on the business once enacted. All the laid down legal procedures for operating a restaurant would thus be implemented with the help of the lawyer. Number of Employees Required and Job Description Job adverts to fill in various positions would be advertised in the internet, dailies and with the state department of labor. Staff would be hired based of their credentials, experience and their potential. Each staff would sign a performance contract, against which he/she would be evaluated periodically. Members of the staff would be allocated shifts by their respective departmental heads and would be working a minimum of five days a week eight hours per shift; totaling to forty working hours. There would be five departments each headed by a manager who would be answerable to the Managing director. The managing director would be the chief executive officer in charge of all the operations of the entity and to whom all the departmental heads would report. The C.E.O would also be the official representative of the restaurant. The Finance manager would be in charge of the finance department responsible for sales, procurement, effecting salary payments, supervising maintenance works and awarding of tenders after consulting with the C.E.O in the presence of all the departmental heads. All accountants and cashiers would also report to the finance manager. There would be a chief of staff who would be the human resource manager in charge of hiring, disciplining and firing of all the subordinate staff after consultation with the departmental head and the managing director. He/she would also be in charge of all the waiters/waitress. A security manager would be in charge of all security personnel and the liaison with the local and federal law enforcement agents. He/she would be maintaining security and safety of all the staff and the visitors within the restaurant. The senior chef would ensure all meals and drinks are prepared in time and meet the required standards. The care taker would be in charge of all janitors, gym instructors and receptionists to ensure that all rooms are clean and habitable at all time. He/she would also assist the finance manager in supervising maintenance works. In total, there would be five managers, eighteen waiters, five cashiers, eleven accountants, twelve security personnel, twenty cooks, four receptionists and sixteen janitors. All the above members of staff would be employed on full time bases. Nevertheless, an attorney, an IT expert and an auditor would be hired periodically on a contract bases (Loucks, 1990). Hourly wage rates for night shifts, overtime, weekends and holidays would be 1.5% more than the normal wage rate. Further training would be done after recruitment, during which period all the staff would be familiarized with the policies and systems of the restaurant and everyone assigned their duties. On service training would also be done to improve worker’s productivity to meet the dynamic demand of services (Baron, & Shane, 2008). The managing director would be entitled to a monthly gross salary of US$ 1062.5, US$ 1012.5 for the finance manager, US$ 991.25 for the chief of staff, security manager would get a gross salary of US$ 990, and care taker would earn US$990 while the senior chef receives US$ 991. Accountants would earn US$502.5, cashiers US$ 500, receptionists US$ 499, cooks US$ 501, waiters US$ 497, security personnel US$498, gym instructors US $ 496and US$436 for the janitors. The above salaries are for the first three months only. According to the federal labor laws, all employees must be at least eighteen years and above. The maximum working hours in a week should be forty and any extra hour worked would be counted as overtime. Safety of the employees from work related hazards would be guaranteed as prescribed in the occupational safety and health Act. Any injury suffered by any employee on service within the premise would be compensated. All employees would be free to join their respective labor unions. Conclusion Any business is a risky venture and more often than not, the most risky venture turn out to be the most profitable. In the short run, this venture is bound to have more costs with no revenues at all, a situation that is expected to last for about three years. However after the pay back period, streams of returns are projected to surpass costs. In the business world, not risking translates to not earning. Technically, the business is feasible as the prospected returns would be enough to off set the running costs whereas making normal profits (Loucks, 1990). References Baron, R. A., & Shane, S. A. (2008). Entrepreneurship: A process perspective. Mason (OH: Thomson/South-Western. Fullen, S. L. (2004). Opening a restaurant or other food business starter kit: How to prepare a restaurant business plan & feasibility study: with companion CD-ROM. Ocala, Fla: Atlantic Pub. Group. Burgess, C., & Heale, M. (2008). The late medieval English college and its context. Woodbridge, UK: York Medieval Press. Loucks, K. (1990). Training entrepreneurs for small business creation: Lessons from experience. Geneva: Int. Labor Office. Read More