ENTERPRISE │ PLANNING │IMPLEMENTATION

Feasibility Report:Food Canteen

Client: Mr. Toyin Olaitan

Prepared by: Westville Enterprise, Ibadan.

PRODUCTION SERVICES

Report on Canteen Operation.

FEASIBILITY STUDY REPORT

FOR THE OPERATIONS OF

A CANTEEN BUSINESS

IN THEFOOD INDUSTRY

IN THE CITY OF IBADAN, NIGERIA

OUTLINE OF CONTENTS

1. INTRODUCTION

2. TECHNICAL ANALYSIS 2.1 Equipment Needs and Cost2.2 Raw Foods Prices and Sourcing2.3 Other Materials Need and Prices2.4 Staff Requirement2.5 Payroll plan2.6 Processes

3. MARKET ANALYSIS 3.1 Raw Food Ranges3.2 Market Needs3.3 Target Market3.4 Demand Analysis3.5 Competition3.6 Location Analysis

4. FINANCIAL ANALYSIS 4.1 Start up Cost 4.2 Sales Forecast4.2 Cash Flow Projection4.3 Profit Projection

5. CONCLUSION 5.1 Risk 5.2 Key Success Factors5.3 Last Words

Terms of Reference

This report was prepared using information deemed to be accurate and complete based on the competency of the sources. These sources include public sources, staff of studied organizations and management of selected Ice Block Traders in Ibadan. The information contained herein is of a general nature to be used as a guide and is not intended to address the circumstances of any particular individual or entity.

The estimates and projections are based on upon professional analysis and the competent work of our firm using collated data. The projections are also based assumptions, which are subject to and variation. Therefore the projections are to be used as reliable guides not results and values that have to be matched.

1. INTRODUCTION

Food canteen is a business that takes care of the feeding need of majority of people that desires to eat local/ homemade food that are often not available in the sophisticated fast food restaurants we found around.

Apart from the fact that the business requires a relatively low start up cost, it enjoys net profit as high as 30% of its revenue.

Ibadan is estimated to have over 400 small food canteens with at least 1 in every major street and with a combine estimated annual revenue of about N1.5 billion.

The large population of the middle and the lower class people in the city is one major factor driving the success of the business.

However, there is still a major gap of good customer service, comfortable ambience and quality food needed to be met in the business in Ibadan and a new canteen that positions itself to bridge this gap will enjoy great patronage and profitability.

This report examines the viability, market trends and success factors of canteen business in the city of Ibadan.

2. TECHNICAL ANALYSIS

2.1 Equipment Needs and Cost

The table below shows the breakdown of all the equipment that will be needed for the operations of a small scale canteen in Ibadan with their cost.

The equipment can be purchased in Agbeni Ogunpa, Dugbe Alawo or Aleshinloye Market.

S/N EQUIPMENT AND MATERIALS

UNIT UNIT COST, N TOTAL COST, N

1 Cooking Gas (4 burner) 1 15,000 15,0002 Industrial Gas Cylinder 1 40,000 40,0003 Camp Gas Cooker 2 4,000 8,0004 Big Cooler 3 3,700 11,1005 Small Cooler 2 2,000 4,0006 Big Cooking Pots 2 10,000 20,0007 Small Cooking Pots 4 4,500 9,0008 Frying Pots 2 2,500 5,0009 Stainless Pot 3 6,000 18,000

10 Cooking Spoon 3 1,500 4,50011 Frying Spoon 3 1,500 4,50012 Turning Stick 4 500 2,00013 Iron Pot Cover 2 1,700 3,40014 Table Cover 10 500 5,00015 Serving Plates 5 Dozens 1,500 7,50016 Soup Bowl 3 Dozens 1,300 3,90017 Spoon 5 Dozens 1,500 7,50018 Fork 2 Dozens 1,500 3,00019 Jugs 1 Dozen 4,000 4,00020 Cups 3 Dozens 600 1,80021 Washing Hand Bowls 2 Dozens 550 1,10022 Serving Spoon 10 500 5,00023 Napkins 10 400 4,00024 Pounded Yam Mortar 1 8,000 8,00025 Grinding Machine 1 30,000 30,00026 Water Tank 1 30,000 30,00027 Plastic Trays 2 Dozens 3,500 7,00028 Electric Fan 2 7,500 15,00029 Tables For 4 5 4,000 20,00030 Chairs 20 2,000 20,00031 Shelve 1 15,000 15,00032 Freezer 1 65,000 65,000

TOTAL 397,300

2.2 Raw Foods Prices and Sourcing

At start up, the owner of the canteen will need to stock major raw materials that are non-perishable and budget some money for recurrent materials such as pepper, meat and fish for the first one month.

S/N ITEM UNIT UNIT, COST

TOTAL COST

1 Curry 1 Pack 7002 Maggi 1 Pack 7803 Thyme 1 Pack 7004 Take-a Way Packs 5,0005 Took Pick 2,0006 Onion 2,5007 Sachet Tomatoes 50 2,0008 Ginger 1,5009 Galik 1,500

10 Groundnut Oil 25 Liters 6,00011 Red Oil 25 Liters 4,50012 Rice 1 Bag 7,30013 Beans 10 Congos 2,00014 Gari 10 Congos 1,50015 Yam Flour 2,00016 Melon 4,800

TOTAL 32,600

Recurrent MaterialsApart from the above listed materials, there will be need to budget for recurrent major materials that will be needed on a daily bases. The quantity to be purchased will depend on the daily demand at the canteen at that period. Such raw material include meat, fish and pepper.

These materials can be purchased in Bodija and other small markets around the town depending on the quantity of the materials to be bought. However, for a large stock purchase it is cheaper to buy from the major market; Bodija and Agbeni.

The need for freezer is justify in the fact that some of the raw materials use such as fish, pepper, etc. need to be preserved and prevented from spoiling.

2.3 FacilitiesThe major facility needed for a canteen is building space. Other facility such as well could come with rent of the building space.

2.4 Staff RequirementThe operation of a small scale food canteen in Ibadan will require the following staff1) Supervisor2) Head Cook3) Cooks4) Servers5) Cleaners

Job Description

1) Supervisor: He/she is responsible for overseeing the operations in the canteen. He/she also performs stock and book keeping operations.

2) Head Cook: He/she supervises all cooking operations and ensures quality control for all the food cooked. He/she must be an experienced caterer that places value on quality, promptness and hygiene. He/she must also posses leadership quality needed to get the best out of the cooks working under him/her.

3) Cooks: They carry out the actual cooking operation as directed by the head cooks. They ensure conformity to the quality standard set by the management and the head cook.

4) Servers: They attend to the customer and take the orders of the customers promptly. They are expected to have sound and courteous human relation as this is a critical factor to customer retention.

5) Disher: They are responsible for taking the customers’ order from the server and dish the food in accordance with the order of the customers.

5) Cleaners: They wash the plates and also clean regularly the tables and the entire environment of the canteen to keep the canteen friendly to the customer.

In some canteens investigated in the course of this research, a staff could perform more than one role. For example, the disher could also serve as the server. In this case, the customer directly takes his /her order from the disher before going to seat down and eat.

2.5 Payroll planThere are different methods of salary payment use by canteen operators. While some have an agreement of daily payment, some canteen operator pays their staff weekly or monthly.

The table below shows the breakdown of salary for the different staff of the canteen.

S/N Staff Requirements

Staff No Total Monthly Salary, N

Annual Monthly Salary, N

1 Supervisor 1 20,000 240,0002 Caterer 1 20,000 240,0003 Cook 3 45,000 540,0004 Servers 3 36,000 432,0005 Cleaners 2 16,000 192,0006 Disher 2 30,000 360,000

TOTAL 12 167,000 2,004,000

2.6 Processes

Staff Resumption

To ensure the food is ready for the breakfast, the staff resumes 7.am to begging operation for the days. The supervisor ensures all materials needed for operation that day is made ready and direct the activities of the other staff to keep the canteen ready before customer starts coming in.

OperationsRaw material Stocking: The supervisor, who ensures monitoring of the stock in the canteen store, makes a list of stock as at when needed and submit to the management or the owner who approves and disburses cash to purchase the needed raw materials.

Food Preparation: The Caterer, who directly supervises the cooking operations, instructs the cooks on the sequence of the cooking and some of the foods are prepare concurrently to speed up the process.

Customer Services: This where the customer works in and seat down to be attended to by the server who takes the order and serve the customer.

Payment: The customer is required to pay the server as soon as he is served the food and the server immediately remits the money to the supervisor who takes the record.

Cash Remission: The supervisor remits the cash on a daily bases to the bank and gives a copy of the teller to the owner for proper recording.

PROCESSES

3. MARKET ANALYSIS

3.1 Food Ranges

Stocking

Preparation

ServingPayment

Remission

Below is the range of the food, soup, fish and meat found in small scale canteens Ibadan.Food1) Plain Rice2) Jollof Rice3) Fried rice4) Beans5) Plantain6) Eba7) Fufu8) Semo9) Pounded Yam10) Amala11) Yam Porage

Soup1) Red Stew2) Vegetable soup3) Okro 4) Ewedu5) Ogbono6) Melon 7) Beans Soup (Gbegiri)

Meat and Fish1) Red meat2) Bush meat3) Regular fish4) Stock fish5) Fresh fish

The type of food regularly demand for depends on the purchasing power and exposure of the people in the area where the canteen is located. Therefore, the owner must study the customer buying pattern and listen to their request to determine the type and quantity of food being prepared.

3.2 Market NeedsFood being a primary need of human is one item that has patronage size as much as people living on the surface of the earth. People have this important need of their life met by either cooking at home or visit a restaurant.

However, our study shows that majority of people due to their work demanding often have little or no time to prepare their food and therefore often have to patronize canteen to eat during their work days.

While almost every street in Ibadan has one or two canteen, only very few canteens are satisfying the need of the customer for a canteen with warm customer service, quality food, clean environment and reliable service.

3.3 Target MarketSmall scale canteen targets majorly at serving people in the lower and the middle clas:, the classes of people with the majority of the population. These classes of people main include:

I. Cab and bus driversII. Bus drivers assistant and bike riders

III. TradersIV. Small business ownersV. Professionals e.g. Bankers, Lawyers etc.

VI. Public ServantsThese classes of people have earnings ranging between N15, 000 and N150, 000 monthly.

3.4 Demand AnalysisDemand in the regular food canteen Ibadan was estimated to reach about N1.2 billion annually with each canteen making an average of N30, 000 revenue per day.

3.5 PricingThe price of the food is a function of the purchasing power of the people the canteen is serving. The table shows the prices of food items in most of the canteen in Ibadan.

S/N Food Item Unit/Measure Price, N1 Plain Rice 1 Serving Spoon 502 Jollof Rice 1 Serving Spoon 503 Fried rice 1 Serving Spoon 504 Beans 1 Serving Spoon 505 Plantain 1 Piece 10 to 206 Eba 1 Rap 20 to 507 Fufu 1 Rap 20 to 508 Semo 1 Rap 20 to 509 Pounded Yam 1 Rap 50

10 Amala 1 Rap 20 to 5011 Yam Porage 1 Serving Spoon 5012 Meat 1 Piece 30 to 5013 Fish 1 Piece 30 to 50

3.6 Location AnalysisThe location of the canteen is an important factor that determines the patronage the canteen enjoys. A new canteen should be located in a high traffic area close to both residential and office area. Proximity to a market alongside residential and office area is also a very important factor that drives patronage for a canteen. Other important factor could include proximity to a (Secondary school or Tertiary institution).

4. FINANCIAL ANALYSIS

4.1 Start up Cost

The table below shows the breakdown of the startup cost.

S/N ITEM COST, N

1 Rent (1 Year) 120,0002 Equipment and Materials 397,0003 1 Month Initial Stock 70,0004 1 Month Recurrent Budget 100,0005 1st 3 Month Salary 501,0006 Registration 50,0007 1st 3 Month Utility Cost 15,0008 Start Up Contingencies 120,000

TOTAL 1,373,000

4.2 Sales Forecast

The table below shows a realistic projection for a new canteen starting in Ibadan. The projection takes into consideration fluctuation in sales that may be experienced at the inception of the business. However, as more people patronizes the business and refers others the patronage rises. The average amount spent by each person eating at the canteen is put at N150.

MONTH DAILY PATRONAGE

MONTH PATRONAGE

MONTHLY REVENUE (N)

MNTH1 10 260 39,000MNTH2 20 520 78,000MNTH3 35 910 136,500MNTH4 50 1,300 195,000MNTH5 75 1,950 292,500MNTH6 100 2,600 390,000MNTH7 110 2,860 429,000MNTH8 120 3,120 468,000MNTH9 150 3,900 585,000MNTH10

160 4,160 624,000

MNTH11

180 4,860 729,000

MNTH12

200 5,200 780,000

TOTAL 31,640 N 4,746,000

MNTH1

MNTH2

MNTH3

MNTH4

MNTH5

MNTH6

MNTH7

MNTH8

MNTH9

MNTH10

MNTH11

MNTH12

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

4.2 Cash Flow Projection

Our research shows that an average of 40% of the revenue is the cost of the raw materials use in preparing the food. Below is a table that shows a projection of the raw material and the gross profit for the first one year.

MONTH DAILY PATRNG

MONTH PATRNG

MONTHLY REVENUE, N

COST OF RAW MATERIAL

GROSS PROFIT

MNTH1 10 260 39,000 15,600 23,400MNTH2 20 520 78,000 31,200 46,800MNTH3 35 910 136,500 54,600 81,900MNTH4 50 1,300 195,000 78,000 117,000MNTH5 75 1,950 292,500 117,000 175,500MNTH6 100 2,600 390,000 156,000 234,000MNTH7 110 2,860 429,000 171,600 257,400MNTH8 120 3,120 468,000 187,200 280,800MNTH9 150 3,900 585,000 234,000 351,000MNTH10

160 4,160 624,000 249,600 374,400

MNTH11

180 4,860 729,000 291,600 437,400

MNTH12

200 5,200 780,000 312,000 468,000

TOTAL 31,640 4,746,000 1,898,400 2,847,600

1ST YEAR SALES PROJECTION

4.3 Profit Projection

Year 1 Year 2 Year 3REVENUE 4,746,00

08,424,00

010,920,00

0 FIXED COSTS Salaries 1,644,00

01,972,80

02,301,600

Rent 120,000 120,000 120,000Utility 60,000 60,000 60,000 TOTAL FIXED COST 1,824,00

02,152,80

02,481,600

VARIABLE COSTS Raw Materials 1,898,40

03,369,60

04,368,000

TOTAL VARIABLE COSTS 1,898,40

03,369,60

04,368,000

TOTAL FIXED COST 1,824,00

02,152,80

02,481,600

TOTAL VARIABLE COSTS 1,898,400

3,369,600

4,368,000

OTHER CONTINGENCIES 237,300 421,200 546,000 TOTAL COST 3,959,70

05,943,60

07,395,600

NET PROFIT 786,300 2,682,54

03,524,400

5. CONCLUSION

5.1 Risk FactorsDespite the huge potential and profitability inherent in a canteen operation business, there are certain risks peculiar to the business that must be taking care of with proper mitigation plan from the start up. Such risks are outlined below:

1. Theft. Research shows that operators of small canteen often have challenges with staff who steals money and materials from the canteen. To mitigate this, the operator must place emphasis on honesty while recruiting staff and have strict policy against pilfering.

2. Poor Cash Handling. Because many of the canteens often have to pay suppliers and make certain purchases on a regular basis, the need for proper reconciliation, while keeping the expense low to maximize profit is of great importance. When this is not giving attention to, operator of canteen can be losing money and not be aware of it until it has a major impact on the operating capital of the business.

3. Fire. Another risk peculiar to canteen is fire outrage. This can be mitigated by giving proper orientation to the staff on how to avoid fire outrage and quickly put out fire whenever it occurs. Also, positioning of fire extinguisher in a place easily accessible in the canteen is important in preparation against fire occurrence.

5.2 Key Success Factors1. Customer Focus. Courtesy, care, empathy and keen attention to customer needs and complaint is a

major factor that contributes to speedy increase in patronage.2. Quality food. When a high quality food standard is maintained in a canteen, the canteen will enjoy

good referrer and repeat purchase from the customer, therefore the restaurant should make quality their priority to enjoy good success

3. Good Management. Proper supervision, good treatment of staff, sound financial management and right leadership approach are an inevitable success factors for canteen business.

RiskTheft

RiskPoor Cash Handling

RiskFire

5.4 Last Words

This report reveals the following facts, observations and conclusions for a new canteen business located in Ibadan:1. The management of the new canteen will invest N1, 373,000 to commence operations. 2. The canteen will experience monthly sales performance of N 39,000 to N195, 000 in the first four months of its operation. This performance will increase to N624, 000 from the 10th month and up to N780, 000 from the 12th month.3. The total revenue in the first three fiscal years is: N4, 746, 000, N8, 424, 000 and N10, 920, 000 respectively.4. The canteen will enjoy a net profit of 16.6%, 31.8% and 32.3% of its revenue in the 1st, 2nd and 3rd year respectively.

Key Success Factor

Good Management

Quality FoodCustomer Focus