Old Smithy is a restaurant and lounge concept which aims to provide a completely sophisticated, sensual, yet casual and affordable dining and/or lounge experience for locals and tourists who frequent George’s casual dining spots and entertainment venues. The restaurant aims to incorporate local talent and to create awareness of local heritage sites.
The name of the restaurant, Old Smithy, was decided on as this is a historical site located on the Montague Pass. The Old Smithy was used as the supply storage and repair house and a garrison for prisoners during the time when John Montagu built the pass over the Outeniqua Mountains. After the completion of the Pass, Old Smithy slowly dilapidated and today the walls are nearly broken down to the ground due to vandalism (George Museum, 2010).
Please note: when the author refers to Old Smithy as the ‘restaurant’, she is referring to both the lounge and restaurant sections. When referring only to the lounge, the author will name it thus.
2 BUSINESS MISSION AND OBJECTIVES
The business mission of Old Smithy is to provide superior service in the restaurant industry within George by providing local entertainment and cultural education coupled with superior quality products and services, while striving to be both a ‘green’ company and a good corporate citizen.
The business objective is to obtain a multi-faceted success in three main regions, namely, financial, educational, and entertainment. The company goals can be laid out as follows:
* to attain financial success and well-being for the company within the first three years
* to provide the restaurant’s customers with healthy and quality foods
* to provide cultural and historical information
* to provide and promote local entertainment by using local drama schools and the Arts Theatre
* to build trust, understanding, generosity and fairness between all levels of management and employees, as well as customers and vendors, and
* to be a good corporate citizen that advocates the well-being of the environment.
3 SITUATION (SWOT) ANALYSIS
The SWOT analysis is a situation analysis of a firm that identifies internal strengths (S), internal weaknesses (W), external opportunities (O), and external threats (T) (McDaniel, Hair, & Lamb, 2006). The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing Old Smithy.
3.1 Internal Strengths and Weaknesses
The venture is based on a societal-market philosophy. This view services the needs of the market, and ensures that the venture is a good and responsible corporate citizen.
The restaurant will start trading on December 1, 2011. The restaurant is to be situated next to the Arts Theatre in York Street, at the Butcher’s Block building. The lease agreement is set to five years fixed monthly rent with 10 % annual increase. During the months September to November, installation of machines and alteration of the building will be made at the owner’s cost which will be incorporated in the rent for the three months as stated in the lease contract.
The restaurant has received capital from three investors who each own equal shares. The start-up capital has been used to purchase machinery as well as decorations and furnishings, obtain human resources and pay all necessary licensing fees.
Old Smithy seeks to employ only experienced waitresses, kitchen staff, and chefs. The staff are to be trained on a continual basis. Adequate remuneration and fair treatment are to be given to all staff, as the business’s philosophy also believes that satisfied and happy employees generate better service, and therefore contribute to the overall atmosphere of the restaurant. Strict policies will be in place and ethical behaviour will always be central to the business. Operating hours for the restaurant are from 10h00 to 23h00, 7 days a week.
The group of investors have over 30 years experience within the restaurant industry and currently posses three successful restaurants in addition to Old Smithy. These restaurants are situated in Mosselbay and Knysna.
It is difficult to determine the financial projection of the restaurant as there is no history. It can only be estimated using figures from other restaurants within the vicinity of George. At present, an independent consultant is preparing financial forecasts.
Strict labour laws govern South Africa; therefore, the contracts that need to be drawn will have to be fair for both employer and employee. The contracts must also be written in such a way that it will decrease staff turnover. Training will also be essential, but since the employee turnover rate in the restaurants industry are high, care will need to be taken as to how much resources are allocated to training. Even though training will be given to all staff, training will focus more on permanent staff than casual staff. Old Smithy will hire only kitchen staff with at least five year’s experience at first. Thereafter, succession training will be given to new staff members.
3.2 External Opportunities and Threats
Various opportunities and threats exist in the external environment of the restaurant. Several factors will be discussed below that will have an impact on the operation of the venture.
The Eden district (Garden Route) of the Western Cape is a very well-known vacation and tourism destination. It boasts serene natural scenes, various arts and crafts chops, as well as high-quality entertainment in the arts and culture section. George is home to the Trinity School of Music and Arts, and the George Arts Theatre. The George Art Theatre hosts many performances throughout the year, of local, national and international talent. Old Smithy is already in the process of negotiating a strategic alliance with both these entities, to promote local talent and bring more patrons to the restaurant. Performances will be once a week on a designated evening.
Unfortunately, George’s economy is not as strong as would have been preferred, due to various external factors including the global recession and local taxation policies. Therefore, the restaurant seeks to have weekly specials on performance evenings, Sunday lunches, and ‘sundowners’ evenings. Unemployment is also a major threat.
George’s population has expended rapidly within the last several years and stands roughly at 200 000. George’s ethnicity includes Asian, Colourds, Blacks and Caucasians. Of these, it is mostly the Caucasian and Colourds middle-class section that dine out on a regular basis (Saayman, C, personal communication, 2010).
3.2.4 Political, legal and financial
South Africa is a democratic nation, which embraces free trade and allows for privately owned businesses. However, communism has been on the rise, especially in the ANC Youth League. Talks of nationalisation of companies have been a growing concern for the private sector. Although not a threat at present, it poses a threat in the long-term for the restaurant.
Labour laws have also been increased and have become stricter. Labour unions are becoming more and more active. The restaurant would need to be careful as to the employment contracts and work ethics.
Financially, the global economy has been in a recession since 2008 and on Friday, 05 August 2011, America was officially downgraded from an AAA country to an AA+ country due to its debt. This has plunged the country back into the recession. Some economists believe that this will have a ripple effect across the globe. Since some European countries are in serious debt trouble, the fall on Friday, 05 August 2011, this has also had serious repercussions on Europe’s struggling economy. The South African Rand is based on the American Dollar, which means that the South African economy will also weaken due the fall in the value of the American Dollar. The European fall, alongside the American fall, has made the global economy more unstable than it has been since 2008 (news24.com, 2011). This will have an effect on the South African economy, which is already suffering due to the strikes by the various unions. This will affect the restaurant as people will have less purchase power due to the fall in the economy and Rand value.
Old Smithy’s direct competition includes the restaurant and theatre Kalahari, located at the Redefine centre at the bottom of York Street. Old Smithy seeks to strengthen its competitive stand by strategic alliances with the Arts Theatre and the Trinity School. Indirect competition includes all restaurants, including fast-food outlets, within George.
Old Smithy has invested in the latest technology to make its operations as environmentally friendly as possible. This includes utilizing alternative electricity sources like solar energy, recycling of waste material, purchasing from local fresh produce vendors (to minimise the carbon footprint) and by using biodegradable cleaning products.
4 COMPETITIVE ADVANTAGES
The competitive advantage offered by Old Smithy includes the combination of lounge and restaurant with live entertainment on a regular basis. In addition, it aims to gain advantage over the competition by
o product identity, quality, and novelty
o high employee motivation and good sales attitude
o innovative and aggressive service options
Furthermore, the restaurant aims to gain the competitive edge by utilizing the value chain and building long-term, mutually beneficial relations with the various members of the value chain.
5 MARKETING STRATEGY
The target market is a defined group of people who will most likely visit Old Smithy (McDaniel, 2006).
5.1 Target Market strategy
Old Smithy will appeal to middle-income workers, tourists and students within George who desire a casual dining, lounge entertainment experience. The market segment would largely be heterogeneous, consisting of singles, married couples without young children, students attending university, and tourists. The high opportunity segments include the married couples without young children and young singles.
The restaurant and the lounge area will each have their own unique marketing mix. The lounge will cater mostly for young professionals and students who seek a casual, relaxing experience in comfort furniture and decorations, while the restaurant will be more formal and will consists of “traditional” dining tables and chairs.
Through informal research, it has been established that there is a growing need for casual “kuier plekke”, where people can enjoy an evening of relaxation and entertainment that is not too expensive, and relatively private. The lounge area of Old Smithy was designed with this in mind, offering casual, comfort furnishings and decorations that are similar to a lounge room in a home. This differs from competitors in that no other restaurant or lounge offers this same setup coupled with entertainment and meals.
Old Smithy aims to generate loyalty with its customers and is considering loyalty cards to regular customers at a later stage. The focus would be on patron retention instead of new business.
Old Smithy wishes to position itself as a homey, something-different restaurant with good, friendly service. The brand name wishes to evoke a feeling of reliability and safeness and an association of the home, where patrons can relax, be themselves, and feel safe. It needs to be more than ‘just another restaurant’.
5.3 Marketing Mix
A short overview of the product, place, promotion and price would be given in the following sections.
Old Smithy will be offering a menu of food and beverages with a distinctive image. There will be three ways to purchase these products; table service at the restaurant, take-out from the restaurant, and lounge service.
The Old Smithy menu is moderate sized, and moderate-low priced offering a collection of local items with a common theme – healthy (low-fat, low cholesterol, natural ingredients, and if possible, organic), flavourful, and familiar. Furthermore, a specialised cocktail and shooter menu will be made available in the lounge area.
Food production and assembly will take place in the kitchen of the restaurant. Most of the dishes will be made from scratch using fresh vegetables, meat and dairy products. These will be obtained from local vendors. The chef and kitchen staff will exercise strict standards of sanitation, quality production, and presentation or packaging over the kitchen and products.
Old Smithy will offer two different services to the customer. The first and main service is where patrons may enter the restaurant and be seated or move into the lounge area where they will be serviced by a waitress. The second will be a special take-out section where patrons can pre-order either pre-packed traditional foods or prepared-to-order foods that can be collected at a time specified by the consumer.
The above mentioned pre-order service opportunity will be researched and developed on a trial basis. If successful, it could become a major new source of income without creating the need for additional staff or production space.
Old Smithy delivers services and products directly to patrons from its location. The building Butcher’s Block, where Old Smithy has signed its lease contract, is located the top of York Street near the circle connecting York Street with Courtney Road. Both of these streets are main routes though George, and therefore have a high traffic flow.
Distribution chains with local fresh produce vendors will focus on forming mutual beneficial relationships. Logistics, depending on the vendor, will be on contractual basis. Should the vendor already have a reliable logistical system in place, its use would be negotiated. Preferably, the restaurant would make use of direct distribution from farms on a daily or second-day basis, pending cost analysis.
5.3.3 Marketing Communication
Marketing communication includes advertising, promotions and publicity.
A budget of R30 000 has been allocated to an independent advertising company within George to assemble an advertising campaign to be launched in George one month before opening and during the December holiday season. The company would be responsible for print and radio ads, distribution of promotional materials to the most applicable areas, special printing and promotional materials and public relations. Depending on the results of the advertising campaign, the advertising company may be used on a contractual basis for the 2012 financial year. It should be noted that they are not responsible for the Old Smithy website maintenance, as this would be done in-house.
An advertising budget of R100 000 has been allocated for advertising within George with an additional R50 000 allocated to special events for the 2012 financial year.
Advertising media include the local George Herald, the restaurant’s website, advertising at The Arts Theatre and their members through direct mailing, radio and special publications stated above, the possibility exists that the advertising may be outsourced to an independent advertising company. It would then be left to their discretion to obtain the most favourable promotional mix. Branding will be the main focus of the advertisements.
The website domain is currently being registered as www.oldsmithy.co.za. The upkeep of the website would be jointly financed by the Arts Theatre and Old Smithy. The maintenance would be done in-house by an appointed technician. A newsletter application would be made available, and special promotions will be sent out to members who register to the newsletter. The website would be used to advertise the entertainment events at Old Smithy and The Arts Theatre, book tickets for performances at the Arts Theatre in advance, make venue bookings for special events, and place orders for the take-away service at the restaurant.
A variety of promotions will be used weekly to introduce new offerings and to gain customer relationships. Thursdays are proposed buffet evenings from 19h00 to 23h00, with a set price of R90pp, excluding drinks. Entertainment would be offered on Thursdays in the restaurant section.
Fliers would be mailed out to members of the Arts Theatre and the e-newsletter showing different promotions and events. Because of the strategic alliance between Old Smithy and The Arts Theatre, members of The Arts Theatre will be able to receive 10% discount on all products on the menu, except Sunday lunches. Pensioners would also receive discount on meals.
Publicity would be gained through various interactions with the George community. These include sponsorships, entertainment events, and active participation in events in the George Community. An in-house public relations liaison would be responsible for communicating articles to the independent advertising company should they be contracted. The advertising company would then be responsible for communicating with local newspapers, as well as handling any negative PR that might arise.
Prices will conform to industry standards. Preliminary research is being conducted to determine the average prices of various meals at different restaurants that fall within the same category as Old Smithy. Based on these results, a competitive mark-up will be added to cost-prices of the meals. All discounts will be taken into account and worked back into the mark-up.
Customers within George are relatively price sensitive due to George’s economy. However, patrons will be willing to pay extra if they perceive the benefits to out-weigh the costs. Therefore good service, entertainment and quality products are of vital importance to Old Smithy.
Credit cards, debit cards and cash will be accepted as methods of payment. Traveller’s checks are still being debated at present. Pre-ordered meals can be paid over the internet using Paypal, or other means of direct internet payment. The management is still in discussion as to various payment methods through the internet that will guarantee the patron’s online payment safety.
6 IMPLEMENTATION, EVALUATION AND CONTROL
The implementation of the market strategy will commence on September 1, 2011. Operations will commence from December 1, 2011, and it is expected that the restaurant will begin making a profit at the end of January 2012. Audits will be done by Mazaars Accounting firm located in George once every 6 months, starting January 1, 2012.
Due to the fact that the company is still in its infancy stage, evaluation on financial performances cannot yet be asserted, however, within the space of one calendar year, the company wishes to show a positive growth trend of five percent (5 %). Should this rate and profit earnings increase by the end of three calendar years, the possibility of opening another branch within Mosselbay would be considered.
McDaniel, C., Lamb, C.W. & Hair, J.F., 2006. Introduction to Marketing. 8th ed. Ohio: Thomson South-Western.
Saayman, Chalmain, personal research and observation of restaurant demographics within George, [conversation] (personal communication, 19 April, 2010)
News24, Market Meltdown to Hit Global Economy http://www.fin24.com/Economy/World/Market-meltdown-to-hit-global-economy-20110809 [Online] Accessed 9 August 2011)
News24, Horror as US Markets Plummet http://www.fin24.com/Markets/International-Markets/Horror-as-US-markets-free-fall-20110808 [online] Accessed 8 August 2011)
George Museum, 2010. Montagu Pass. [Photocopied Pages] George: George Museum