Chapter 1

Preliminary Planning

Chapter 1 Overview
Defines the scope of a project, which

determines the complexity of the planning

process & the professionals involved in design
& implementation.
Explains the process of concept development
for hotels, chains, restaurants, & institutions.
Discusses the decision-making process
regarding menu, market, management,
money, & method of execution.
Introduces the elements of a feasibility study.

Scope of a Project
Level I: equipment addition/replacement or

renovation of small area (example: new dish

machine).
Level II: renovation of a significant portion of
a facility (example: renovation of serving
area).
Level III: complete renovation or new
construction of a facility.
Level IV: development of a prototype
restaurant for a chain.

Professionals Involved in a
Project
SCOPE

II

III

IV

Owner

FoodserviceDesignConsultant

Architect

Engineers

InteriorDesigner

GeneralContractor

Subcontractors

Banker

Lawyer

Accountant

PROFESSIONAL

EquipmentDealer

ManufacturersRepresentative

Project Time Lines by Scope

Scope IV

Scope III

Planning
Equipment Selection
Design & Engineering
Prepare Documents
Equipment Delivery
Installation

Scope II

Scope I
0.00

10.00

20.00

30.00

40.00
Weeks

50.00

60.00

70.00

80.00

Concept Development
Concept: the overall plan for how the operation

will meet the needs & expectations of the target

market.
Concept is expressed in many ways, including
menu, theme, dcor, hours of operation, form of
service, pricing, & location.
Examples of broad concepts include fine dining,
theme, casual, fast-casual, quick-service, ethnic,
& family.
Concept development is critical for design
because it provides direction to planners it is
critical for operational success as well!

The Five Ms of Concept

Development

The Five Ms: Market

Questions
To whom is the food operation being marketed?
Is the market large enough to generate sales &

produce a profit?
How will the market be identified?
What level of competition exists?
What method will be used to communicate to
this market?
Will the potential customer want or need the
food product?
Will a quality assurance plan be developed that
will encourage the customer to return because
of superior service and/or product quality?
Will internal marketing successfully sell the
customer additional services or products after he
or she arrives at the food facility?

The Five Ms:

Menu has an impact on
Amount of space required.
Service area size & design.
Types & capacities of cooking equipment.
Size of the dishwashing operation.
Size of storage areas.
Number of employees.
Amount of investment.

The Five Ms: Money

Successful capitalization of a food facility

includes funds for:

Planning costs.
Building construction or renovation.
Equipment (fixed).
China, glassware, utensils.
Furniture & fixtures.
Dcor.
Start-up & operating costs.

A two-step process: estimating the necessary

investment & identifying sources; then, when

design is complete & actual costs are known,
securing commitments from investors.

The Five Ms: Management

Who will operate the facility, & what skills/

experience must he/she have?

Who will assist this person in covering the long
hours that are usually required to operate a
foodservice facility?
What level of pay will this person receive?
Will this person be rewarded in some way for
excellent sales & profit results?
How will the owners set operational policies &
communicate these to the management staff?

The Five Ms: Method of

Execution
Production approach: cooking from

scratch or using convenience (partially

prepared) items.
Control systems: production
management systems (menu, recipe,
inventory, costing); sales management
systems (cash control); & service systems
(reservations).
Personnel: labor staffing & scheduling,
time keeping, payroll, etc.

Feasibility: Two Related

Approaches
Market Feasibility
Will the sales revenues be great enough

to generate a reasonable profit?

Emphasis on the income statement &
revenue sources.
Financial Feasibility
Will the profits generated by the operation

be sufficient to satisfy investors

expectations for financial return?
Emphasis on the balance sheet & retained
earnings.

Market Feasibility

Calculating Projected Sales

Step 1: Estimate Customer Counts & Capacity.
# of seats X turnover for each meal period.

Step 2: Estimate Average Check.

Use menu mix & price projections.

Step 3: Multiply Customer Counts by Average

Check.
Step 4: Prepare a Sales Projection for the Year.

Financial Feasibility: Balance

Sheet
Estimating Assets:
Operating capital.
Accounts receivable.
Land, building, furniture & fixtures.
Inventory (food & supplies).

Estimating Liabilities:
Accounts payable.
Short-term debt.
Long-term debt.
Owners Equity.

Financial Feasibility: Income

Statement (Pro Forma Profit &
Loss)
Estimates of the following:
Cost of goods sold, involving menu pricing & recipe

costing.
Labor costs, involving projections of staffing levels,
wages & salaries, benefits.
Marketing costs.
Utilities.
Occupancy costs (example: rent).
Repairs & maintenance.
General & administrative.

These estimates result in a projected

profit/loss for the operation.

Feasibility Analysis
The net income the bottom line from

the income statement is transferred to

retained earnings on the balance sheet.
Investors receive return on their
investments through either dividends paid
from retained earnings or through growth
in the value of their equity.
Market & financial feasibility studies work
together to demonstrate that investment
in the foodservice facility will generate the
desired financial return.

The Go/No-Go Decision

If the project looks financially sound, the

market is identified, a need for the foodservice

exists, & the capital is obtainable, the decision
to go ahead can be made.
If one or more elements are uncertain, there
are three alternative courses to explore.
Correct the problem area that has been identified.
Abandon the project & look for another place to

invest the funds.

Delay the decision until the final go/no-go
decision point.

Site Selection & Planning

Includes the calculation of foot traffic,

automobile counts, & distance to travel as

a part of the feasibility study process.
Other considerations:
Visual recognition.
Convenience.
Code restrictions.
Environmental issues.

Agency Approvals
Typical approval agencies involved in

foodservice projects include:

Zoning board.
Health department.
Municipal engineers (water, sewer, gas, &

electrical).
City planner.
Fire marshal.
Liquor control board.
Telephone company.
State or federal agencies (on state or
federal projects).

The End