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ALASKA WILD

QSR Offering Fish Recipes

Project Feasibility Report

Composed by: Nomis Liu, BA, MSc 劉業安


Email: nomisliu@gmail.com
SEPTEMBER 2004
BEIJING / CHINA
Table of Content

Chapter 1–Project Background P.5

1.1 “Alaska Wild”


1.2 QSR Catering Project

Chapter 2–Catering Chains in China P.6

2.1 A Brief Market Review


2.2 Market Characteristics
2.3 Section Conclusion

Chapter 3–Market Trend P.12

3.1 Beloved Western Fastfood


3.2 Mostly Dine-in
3.3 Frequency of Consumption
3.4 Mid and Low-end Expenses
3.5 Main Courses
3.6 Section Conclusion

Chapter 4–Establishment P.18

4.1 Formulation of Project Proposal


4.2 Means of Investment
4.3 Business Administration and Operation

Chapter 5–QSR Outlet Planning P.21

5.1 Choice of Outlet


5.2 Beijing: a Brief Review
5.3 Strategy for Determining Outlet Location
5.4 Construction Items
5.5 Public and Ancillary Facilities
5.6 Environmental Protection

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Chapter 6–Market Positioning and Competition P.29

6.1 Fastfood or QSR


6.2 Market Positioning
6.3 Market Competitors

Chapter 7–Product and Pricing P.34

7.1 Product
7.2 Project QSR Menu
7.3 Pricing
7.4 Products and Pricing of Major Competitors
7.5 Pricing Comparison between Project QSR and Competitors

Chapter 8–Production and Cost Analysis P.49

8.1 Production
8.2 Production Cost

Chapter 9–Branding Strategy P.55

9.1 Brand Significance


9.2 Brand Management
9.3 Brand Promotion and Development
9.4 Brand Marketing
9.5 Section Conclusion

Chapter 10–Organizational Structure, Operation System, Human Resources P.62

10.1 Organizational Structure


10.2 Operation System
10.3 Human Resources: Management

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Chapter 11–QSR Management and Marketing Strategy P.67

11.1 Internal – Quality Control


11.2 External – Competitive Intelligence

Chapter 12–Financial Analysis P.71

12.1 Project Programming


12.2 Financial Analysis

Chapter 13–Check List on Project Establishment P.75

13.1 Check List for Project Initiation

Chapter 14–Extra Chapter for Project Development P.78

14.1 Prospects for Project Development


14.2 Terms and Conditions for Franchising by Competitors

Chapter 15–Conclusion P.81

15.1 Comprehensive Appraisal on the Project


15.2 Opportunity for Development
15.3 Conclusion

Attachment 1:《The Sample Contract for Beijing Rentals》 P.88

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Chapter 1–Project Background

1.1 “Alaska Wild”


“Alaska Wild” is a QSR catering project, planned to establish in the form of foreign joint
venture between Beijing XXX Group Limited and Royal Asian (Hong Kong) Limited (the
latter is now performing as “a project company”). To be registered in the Chaoyang District
of Beijing City in November, 2004, the project will call for an investment size of RMB
¥5,000,000Yuan (US$607,500*), and will operate under the scope of: Imports of Raw
Food Materials, Food Production, and QSR Catering Retail Outlet (Fastfood Catering).
Since the main recipes will provide the fish products from Alaska Ocean, therefore the
project temporarily bears the name of “Alaska Wild”.
*In this report RMB¥8.27 = US$1.

1.2 QSR Catering Project


“Alaska Wild” will invest and develop a QSR catering outlet base in Beijing. The plan
consists of a 2-stage schedule which aims at gradual development to a franchising chain
operation.
1.2.1 First Stage of Development
a) From Nov 2004 to Jan 2005, the project will invest RMB¥5,000,000 Yuan
(US$607,500). This includes the rental of a retail outlet of 450m2, its
outdoor and indoor decoration, as well as the kitchen facilities and
equipment, amounting at a sum of RMB¥3,945,000Yuan (US$477,000); the
balance funding will be the running capital of approximate RMB
¥1,055,000Yuan (US$127,600).
b) Estimated Turnover:
#1 Average daily operation 12 consecutive hours (08:30 – 20:30)
RMB¥30,000 Yuan (US$3,625)
#2 Average annual operation 365 consecutive calendar days
RMB¥10,950,000 Yuan (US$1,324,000)
c) Estimated Annual Net Profit After Tax:
RMB¥3,240,000Yuan (US$391,780)
1.2.2 Second Stage of Development
The schedule of which will be formulated after reviewing the turnover and
relevant issues brought up from the first stage of development; but initially 1 to 2
chain outlets are planned to be increased, by a fresh pour-in of investment capital
not less than RMB¥8,000,000Yuan (US$1,000,000), and may not be later than
April, 2005.
The Feasibility Report of which will be independently and individually composed.
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Chapter 2–Catering Chains in China

2.1 A Brief Market Review


During 2003 China possesses a registration of 236 catering chain enterprises (by minimum
required investment capital, abbreviated hereinafter “MIC”), with total retail outlets
amounting to 5,451, an increase of more than 700 outlets from 2002 and a growth of 15%.
Total retail outlet area amounts to 3.678 million m2, a growth of 14.4% from 2002. Total
jobholders amount to 302,000 heads, a reduction of 136,000 heads and a drop of 31%
from 2002. Total turnover reaches RMB¥252.9 h/million* Yuan, a growth of 26.2% from
2002 and retail income at RMB¥244.4 h/million Yuan, a growth of 26.4% from 2002.
*In this report “h/million” = 100,000,000 (108).

Table 2a: The Brief Outlook of Chain Catering in China


Catering Chains (MIC)
Parameters Units
2003 2002 +/– %
1 Retail Outlets shops 5,451 4,742 15.0
2 Outlet Area m2 3,677,906 3,214,481 14.4
3 Employees heads 302,451 438,385 31.0
4 Annual Turnover RMB¥h/million 252.9 200.4 26.2
5 Annual Retail Income RMB¥h/million 244.4 193.4 26.4

2.1.1 Obvious Increase in Retail Turnover

Table 2b: Ratio of Retail Turnover of Catering Chains (MIC) to Entire Catering Industry
Province 2003 2002 Province 2003 2002 Province 2003 2002
China 4.0 3.6 Fujian 2.7 2.5 Shandong 0.7 0.6
Inner Mongolia 35.9 25.3 Shanxi 2.4 2.5 Shaanxi 0.6 0.7
Beijing* 31.8 32.5 Anhui 1.8 1.9 Henan 0.1 0.1
Chongqing* 18.9 13.9 Jiangxi 1.7 1.5 Hainan 0.1 0.1
Tianjin* 14.7 14.0 Sichuan 1.4 1.4 Hebei 0.1 0.1
Shanghai* 9.8 9.6 Guizhou 1.4 1.4 Jilin 0.1 0.1
Zhejiang 4.9 4.3 Yunnan 1.4 2.0 Heilongjiang 0.1 0.1
Hubei 4.7 4.9 Gansu 1.4 1.4 Guangxi 0.0 0.0
Jiangsu 3.7 3.4 Hunan 0.9 0.8 Xicang 0.0 0.0
Liaoning 3.4 3.5 Qinghai 0.8 1.3 Ningxia 0.0 0.0
Guangdong 2.8 2.8 Xinjiang 0.7 0.8 *Autonomous Cities

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In 2003 the retail turnover of catering chains (MIC) accounts for 4% of the retail
turnover of the entire catering industry, a growth of 0.4% from 2002. In Inner
Mongolia, Beijing, Chongqing, Tianjin, Shanghai, the retail turnover of catering
chains (MIC) accounts for more than 10% of the retail turnover of local catering
industry, among which, Inner Mongolia and Beijing reach more than 30%. While
the growth rate of Inner Mongolia and Chongqing achieves more than 1 fold;
Heilongjiang grows as high as 45%; Shandong, Zhejiang, and Jiangsu increase
more than 30%; Hunan, Jiangxi increase more than 20%; Shanghai, Guizhou,
Sichuan, Fujian, Shaanxi, Tianjin and Anhui increase more than 10%. In short, the
retail turnover of catering chains (MIC), in more than 80% of the Nation’s
different regions, reports an overall growth at various rates.
2.1.2 The Market in 2 major categories – Hot Meals by À la carte and by Fastfood
In 2003, among the registered 236 catering chains (MIC), 143 chains serve hot
meals by À la carte, represents 60.1%; while 78 chains serve fastfood, represents
33.1%; and the balance serves snacks (such as Häagen-Dazs’ ice cream) and
specialties (such as Starbucks’ coffee).

Table 2c: The Synthetic Data of Chain Catering (MIC) in China


Total Hot Meals (À la carte) Hot Meals (Fastfood)
Parameters PA Units
2003 2002 +/– % 2003 2002 +/– % 2003 2002 +/– %
1 Retail Outlets shops 5,451 4,742 15.0 2,798 2,508 11.6 1,966 1,659 18.5
2 Outlet Area m2 367.8 321.4 14.4 227.7 207.4 9.7 135 109.8 22.9
3 Employees heads 30.2 43.8 31.0 20. 6 35.4 41.9 9.3 8.1 14.2
4 Turnover ¥h/million 252.9 200.4 26.2 137.9 101.4 36.0 108.5 92.8 16.9
5 Retail Income ¥h/million 244.4 193.4 26.4 132.3 96.6 36.9 107.2 92.0 16.4

The 2 major categories of serving – hot meals by à la carte and by fastfood –


account for more than 90% share in the catering chains (MIC).
The catering chains (MIC) serving hot meals by à la carte possess 51.3% of total
retail outlets, while those by fastfood possess 36.1%. Despite the overwhelming
predominance by the chains serving hot meals by à la carte – increasing approx
300 retail outlets more during 2003, their ratio to the entire catering chains (MIC)
drops 1.6% when compared with 2002; on the other hand, the chains serving hot
meals by fastfood also increase approx 300 retail outlets more during 2003, but
their ratio to the entire catering chains (MIC) has increased 1.1%.
The turnover of the catering chains (MIC) serving hot meals by à la carte and by
fastfood records a growth rate of 36% and 16.9% respectively; the sum of their
turnover accounts for 97.4% of the turnover generated by the entire catering
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chains (MIC), an increase of 0.5% compared with 2002, of which, the ratio of the
chains serving hot meals by à la carte increases from 50.6% in 2002 to 54.5% in
2003, while the ratio of the chains serving hot meals by fastfood decreases from
46.3% in 2002 to 42.9% in 2003.
2.1.3 The Chains’ Business concentrated in Eastern and Middle China
In 2003, the regions, with more than 10 catering chains (MIC) currently operating,
are: Beijing, Guangdong, Hubei, Shanghai, Zhejiang, Jiangsu, Fujian, and Tianjin;
the number of catering chains (MIC) operating in these regions accounts for
63.6% in the whole Nation, among which, Beijing accounts for approx 20%.

Table 2d: The Distribution of Catering Chains (MIC) in China


Retail Outlets (shops) Annual Turnover (¥h/million)
District
2003 2002 +/– % 2003 2002 +/– %
Total 5,451 4,742 15.0 252.9 200.4 26.2
Eastern China 3,360 2,927 14.8 162.7 142.2 14.4
Middle China 994 920 8.0 59.4 38.7 53.6
Western China 1,097 895 22.6 30.8 19.5 57.5

The retail outlets of the catering chains (MIC) operating in Eastern China
occupies 61.6% of the Nation’s total percentage, those in Middle China 18.2%,
and those in Western China 20.1%; the sum of retail outlets operating in Beijing,
Tianjin, Shanghai, and Guangdong is 41.2%.
The turnover of the catering chains (MIC) operating in Eastern China occupies
64.3% of the Nation’s total percentage, those in Middle China 23.5%, and those
in Western China 12.2%; despite the overwhelming predominance of turnover
achieved by the catering chains (MIC) operating in Eastern China, its growth rate
is obviously below the rate achieved by the chains operating in Middle and
Western China. Taking Inner Mongolia and Chongqing in Western China as
example, the turnover of chains (MIC) in these 2 regions accounts for 14.1% and
8% respectively of the Nation’s total percentage, representing a growth of 5.7%
and 3.4% respectively when compared with 2002; while on the other hand, the
turnover of chains (MIC) operating in Beijing, Guangdong, Tianjin, and Shanghai,
though achieves a sub-total of 42.5% of the Nation’s total, indicating a decrease
of 2.9%, 1.9%, 0.7%, and 0.6% respectively when compared with 2002.
2.1.4 Slack Development by Domestic Enterprises but Increasing Market Shares by
Foreign Enterprises
In 2003, the domestic enterprises occupies 64.9% of retail outlets in the entire
catering chains (MIC), however, is a decrease of 2.6% compared with 2002.
Among all domestic enterprises, only the congregate companies records a growth
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rate of 0.1%, while joint stocks and partnership companies records the same level,
and state-owned, limited liability, and private companies all record a decrease
when compared with 2002. On the other hand, the retail outlets operated by HK,
Macao, and Taiwan enterprises increase 8.1% while those operated by foreign
enterprises increase 27%, a small growth of 1.5% and 1.1% respectively when
compared with 2002.
In 2003, domestic enterprises achieve 50.5% of the turnover generated from
entire catering chains (MIC), a growth of 3.6% from 2002, mostly due to the
growth by the companies of limited liability, and private investment, while, the
turnover of state-owned companies drops 1.1%. The turnover generated by HK,
Macao & Taiwan, and foreign enterprises, although drop 0.8% and 2.8%
respectively from 2002, occupies the balance 49.5% of the turnover generated
from the entire catering chains (MIC); the foreign enterprises alone, occupy
40.4%.

Table 2e: The Domestic and Foreign Invested Catering Chains (MIC) in China
Catering Chain Enterprises Retail Outlets (shops) Annual Turnover (¥100 million)
Type of Ownership 2003 2002 +/– % 2003 2002 +/– %
Total 236 5,451 4,742 15.0 252.9 200.4 26.2
Domestic 164 3,538 3,201 10.5 127.7 94.0 35.8
1 State-owned 11 654 606 7.9 9.0 9.5 5.0
2 Congregate 2 16 11 45.5 0.7 0.6 8.0
3 Joint Stocks 6 42 36 16.7 1.3 1.3 1.2
4 Limited Liability 41 1,169 1,101 6.2 56.1 36.4 54.1
5 Partnership 6 43 38 13.2 1.2 0.9 28.8
6 Private 97 1,610 1,404 14.7 59.2 45.2 31.0
7 Others 1 4 5 20.0 0.2 0.1 62.4
HK, Macau, Taiwan 27 443 314 41.1 23 19.8 16.3
Foreign 45 1,470 1,227 19.8 102.2 86.6 18.1

2.1.5 Prominent Leading Role by Sizeable Enterprises


In 2003, there are 90 catering chains (38.1% of total 236 chains) earning an annual
turnover of more than RMB¥50 million Yuan, these chains possess 4,499 retail
outlets, a growth of 16.3% from 2002; and their turnover achieves RMB¥228.9
h/million Yuan, 90.5% of the total turnover generated by the entire chains (MIC)
and a growth of 28.4% from 2002. Of these chains, 58 chains are operating in
Eastern China, 64.4% of total 90 chains; 19 chains in Middle China, 21.1% of
total; and 13 chains in Western China, 14.4% of total. 93 chains, 39.4% of total
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236 chains and being increased 11 chains from 2002, possess more than 10 retail
outlets. This category possesses a sub-total of 4,848 retail outlets, 88.9% of total
outlets and a growth of 17.1% from 2002, and has achieved RMB¥212.2
h/million Yuan, 83.9% of the total turnover generated by the entire chains (MIC)
and a growth of 30.1% from 2002.

Table 2f: The Annual Turnover of Chain Catering (MIC) in China


Annual Turnover Retail Outlets (shops) Total Annual Turnover (¥100 million)
Achieved 2003 2002 2003 2002
Total 5,451 4,742 252.9 200.4
¥3,000 million and over 660 607 35.4 16.8
¥1,000–3,000 million 112 90 10.5 8.5
¥500–1,000 million 1,141 863 71.0 55.5
¥100–500 million 2,024 1,846 89.5 78.8
¥50–100 million 562 463 22.5 18.7
Sub-total: 4,499 3,869 228.9 178.3

2.2 Market Characteristics


2.2.1 Mass Public Consumption is the Main Trend
In 2003, the catering industry has been approaching directly to household
consumption, while personal consumption maintains a higher growth rate and
constitutes the majority of turnover.
Among the 53 chains, each of which is earning an annual turnover of more than
RMB¥100 million Yuan, 52.8% are fastfood chains and generating over 50% of
total turnover of the industry.
The products, which can meet with household consumption such as food of
pre-cooked, semi-cooked, fast frozen, and convenience, become extremely
popular by excellent sales, thus, specialty food and fastfood are the main trend in
the catering industry.
2.2.2 Safe, Healthy, and Hygienic Outlets are the Choice of Preference
The respiratory illness SARS outbursted in China during 2003 has diverted the
catering habits in public from the traditional pursuit of delicacy and good taste
towards the preference of safety, hygiene, health, and nutrition.
Hence, healthy catering becomes the common goal set by the catering enterprises,
and consumers; also becomes the yardstick for the practitioners; thus enhanced an
overall improvement on the quality provided by the industry.
2.2.3 Increasing Foreign Investment
It is obvious that the trend of management mode of the industry has been moved
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to multiformity. Among all catering chains operating in the Nation, only 4.7% are
state-owned, companies of limited liability and private investment amounted to
17.4% and 41.1% respectively.
Furthermore, due to the Nation’s strengthened economy and the increasing
frequency of interNational contacts, it enhances the exchanges and mutual
recognition between the traditional and global catering industry. The
multi-National catering giants are all required to further revise and strengthen
their investment and expansion in China: in 2003, foreign companies account for
19.1% in the catering chains (MIC) and generating RMB¥102.2 h/million Yuan
turnover, a 40.4% in the sub-total.
It is expected the chain operation and management will gradually substitute (if not
eliminate) the non-standardized food processing, single-outlet business, empirical
style of management, and enhance the catering industry striding forward to
industrialization, chain-operation, congregation, and modernization.
2.2.4 Unit Franchise by À La Carte Chains and Master Franchise by Fastfood Chains
In 2003, among the catering chains (MIC) serving à la carte hot meals, 61.5% are
operated by unit franchise, a growth of 0.7% from 2002; generating a turnover of
43.2% among all à la carte chains, which represents a growth of 76.2%.
Among the catering chains (MIC) serving fastfood, 95.1% (already a drop of
1.9% from 2002) are operated by unique ownership under the master franchise;
earning a turnover of 98% among all fastfood chains, a growth of 16.4%.
However, despite such overwhelming majority in practice, unit franchise operation
is growing amazingly fast, and increases their income by 45.7%, this increase rate
is more than 1-fold of the rate achieved by master franchise chains.

2.3 Section Conclusion


The data adopted in this chapter is from the reports by the Economy and Trade Sector of
the National Statistics Bureau. Mr Li Min, the Sector Director, further advised that
although the catering industry in China is fast developing, deficiency is existing; most of
them are the characteristics of the traditional catering industry such as: food
contamination, non-hygienic production environment, lack of standardization and
industrialization, manual production, subjectively random working style, etc; in addition,
overall quality of service is still not up to standard, and in particular, the industry lacks
management professionals and technical trainings. These problems have restricted the
industry’s upgradation. Therefore he appeals for the enterprises to improve on the relevant
issues, and put more efforts to innovate the brand management and technical concerns.

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Chapter 3–Market Trend

Along with the accelerating beat of modern life, more fastfood serving is appearing in China
market. However, tracking history, it was only until April 1987 when KFC established its first
outlet in China then the concept of modern fastfood being introduced to the Nation. Since then,
fastfood business almost became a revolution, overthrowing the traditional “slowfood” business.
During the 16 years from 1987 to 2003, fastfood business in China has undergone an extremely
rapid development. The market experiences in a status of multiplicity: traditional versus modern;
oriental versus western; high-end versus low-end; and also in a status of mutual strife and
recognition. However, on the basis of quality and quantity, the market of Chinese fastfood is
obviously much lagging behind the market of Western fastfood. The latter, mostly operating
through chain outlets and supported by effective promotion, penetrates into numerous Chinese
cities and knocks out the competition of Chinese fastfood with an overwhelming success.
In order to comprehend the influence of Western fastfood to the Chinese market, Nomis Liu
conducted a market survey in Beijing during June, 2004. Below are the findings:

3.1 Beloved Western Fastfood


The survey indicates: among the interviewers, 23.2% indicated that Western fastfood is
very favourable and 29.3% favourable, these 2 groups constitute altogether 54.5%; while
only 15.5% found that Western fastfood is unfavourable and 9.5% very unfavourable.

Diagram 3a: Attitude Towards Western Fastfood by Different Age Groups

48.3% of interviewers revert that Western fastfood is fast and convenient; 31.5% find it
tasty; 22.5% favouring the dinning atmosphere; 16.9% are attracted by advertisements; and
4.5% appreciate the quality of overall service.
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That the beloved Western fastfood must bear certain reasons to account for its existence
and development. Firstly, Western fastfood differs significantly from traditional Chinese
food. Although the food culture in China is historically long, Chinese are not acquainted
with hamburgers and fried chicken; these Western recipes thus become a distinctive feature
attracting trials for taste. Secondly, the convenience of Western fastfood serving is another
advantage. While the rhythm of modern life, among the metropolis in particular, is running
so fast, the nimble Western fastfood servings, whether by dine-in or by takeaway, or in food
consumption itself, well matches with the speed of life rhythm. It is common among the
Western fastfood outlets, to serve from order in less than 20 seconds, a speed which the
Chinese fastfood can never comply with, and thus becomes the decisive weapon
conquering the market.

Diagram 3c: Consumption Style


Diagram 3b: Reasons of Favouring Western Fastfood

When understanding the structure of consumers, age is an important indicator: the


younger, the more favouring. Those, who are below 18 years of age, are major consumers
of Western fastfood. This age group has been growing up under the open-door
environment during China’s economic reform thus being substantially influenced by
Western culture – their accustoming to the mingled Chinese and Western living style and
habits enhance, relatively speaking, their acceptance of Western products.
This age group, although not having a direct source of income, consists of more
casual-minded consumers, and therefore easier to become the target market of Western
fastfood and break-through point of the caterers’ promotional and marketing strategies.
In addition to fast convenience and good taste, the large-scale chain operation of Western
fastfood is obviously distinguishable from the single-shop operation of traditional Chinese
food. Considered from the management practice and brand consciousness, the outlets of
Western fastfood while offering the uniqueness of clean, comfortable, and bright dinning
atmosphere, creates a feel of intimacy to the consumers. These outlets usually can keep the
consumers to stay a longer while even after their dinning. This is another factor added to
Western fastfood’s attraction.
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3.2 Mostly Dine-in
According to the survey, majority 80.9% interviewers prefer dine-in versus 19.1% prefer
takeaways.
From their point of view, dine-in itself is not just an experience of acquiring delicacy, the
dinning environment and atmosphere are equally important. The warm and graceful
consumption environment and good quality of service in Western fastfood outlets are, in
addition to the concern of value-for-money, being considered by most consumers as a
value-added element – this accounts for another factor of the popularity of dinning-in.
Comparing with traditional Chinese food outlets, restaurants providing Western food
always appear to be more tidy and comfortable, more vivid and relaxed, more elegant and
innovative settings, thus more meeting with the characteristics and style of the younger
generation. Some young consumers, aiming at a leisurely rest, haunt-about a social meeting
place, and entertainment, are more willing to stay longer under an atmosphere of total
satisfaction. That accounts for why the majority of consumers inclines to dine-in Western
fastfood outlets.
The takeaway package by Western fastfood outlets also offers the convenience by carrying
– a distinctive advantage which attracts certain consumers who are so busy that food
consumption is merely a stomach fill-in to them, and who spare no time to dine-in.

3.3 Frequency of Consumption

Diagram 3d: Frequency of Diagram 3e: Average Expenditures


Consuming Western Fastfood in Western Fastfood

The survey shows that, on the frequency of Western fastfood consumption, 25.4%
interviewers consume once per week while 24.3% interviewers consume once per month.
While these 2 groups rate very close, other frequency styles also occupy certain proportion.
Along with the increasingly fast living rhythm in modern metropolis, the demand on food
consumption has also shifted to simplicity and casual. Those young white-collars, owing to
their tighter life schedule and higher working pressure than other professions, are not
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willing to sacrifice their time for learning and working, thus prefer a mere “stomach fill-in”.
And for those people whose lives are under irregular disciplines, also prefer consuming
fastfood to substitute their missed regular meals.
Despite Western fastfood does not become people’s regular meals in China, it already
becomes part of people’s life routine, during its rapid development throughout the past
years. Among the young age group, the names of “KFC” and “McDonald” are so intimate
to them that not merely a function of catering are these Western fastfood chains providing,
but symboling also as a place of social gathering, entertainment, etc. This is often
noticeable when so many people over-crowding inside these outlets during Sundays and
holidays, and even during weekends and roaming on the streets, Western fastfood always
becomes the youngsters’ first preference.

3.4 Mid and Low-end Expenses


The survey explicates: in one-time consumption in Western fastfood outlets, a majority of
29.1% interviewers spending from RMB¥21–30 Yuan; the second largest group, 25.8% is
those who spend more than RMB¥50 Yuan; 18.1% spends RMB¥31–40 Yuan; 12.6%
spend RMB¥41–50 Yuan; spending RMB¥11–20 Yuan occupies a smaller ratio of 7.6%;
while the lowest is 6.8%, those who spend below RMB¥10 Yuan.
The spending in Western fastfood outlets is determined by the level closest to what the
consumers can afford and the demand of individual food items. Since the spending of
RMB¥21–30 Yuan occupies the highest ratio, it is therefore indicating the consumption
level in Western fastfood is far behind the expenses in high-end catering market, and very
close to other low-end catering markets. This finding shows the pricing in Western fastfood
is an important means to promote itself towards popularity on one hand, but
distinguishing itself from other low-end catering markets on the other.
It is also understood that the group spending more than RMB¥51 Yuan, belongs to
household consumption, thus accounts for the higher expense and the larger group size.

3.5 Main Courses


The survey restates that in one-time Western fastfood consumption, the choice of drinks
occupies 88.5% and that of hamburgers is 86.3%, these two are the highest ratio and very
close. Then followed by chips, 63.4% and chicken meat products (such as McDonald’s
Nuggets), 62.8%. The choice of fish products, relatively, is low.
Among various food items, the consumption of main courses is obviously higher than
other side courses, and this is determined by the product structure of Western fastfood.
When considering to have a proper dinner, the consumers would choose a main course;
but when considering just to have a leisure bite, the side courses are preferred. The drinks
and hamburgers, being the 2 main cast in a dinner meal, thus always become a “pair”
chosen by the consumers; and may not be excluded in “filling-up” one’s stomach. The
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nature of chips and chicken meat products (such as the Nuggets), however, seems to be
more like a leisure bite, thus less popular than drinks and burgers. The choice on desserts
and other side courses, since obviously these items are more casual, thus the consumption
of which is dependent solely on individual preference.
However, here needs to illustrate the reason why less preference was in fish and seafood
recipes. Most of the present Western fastfood brands did not offer equal choice, taking
KFC’s main product is fried chicken, and McDonald’s beef hamburger as example. In fact
a large portion of interviewers restated in the survey that if they can have equal chance to
pick up their choice, they would certainly prefer fish and seafood products which are
relatively not so “greasy”.

Diagram 3f: Consumption Structure of Western Fastfood

3.6 Section Conclusion


When studying the survey findings in depth and through the investigation on nowadays’
Western fastfood market, the following implications are concluded:
#1 A Relaxed Consumption Environment
A good atmosphere in Western fastfood outlets is very important since many
consumers consider the place is more for social gathering and activities than mere
food consumption. Hence, consumers are more enjoying the atmosphere created
in the outlets rather than the food provided. The overall environment should
create a delight and relaxed atmosphere, offering a feel of “home-oriented” and
therefore greater attention should be put to a more affectionate setting.
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#2 Product Diversification and Price Stratification
At present, the product items offered by Western fastfood outlets are too simple
thus not at all satisfying the mass consumer demand. Adjustments should be
considered on one hand, to develop some cheaper products to match the low-end
market; and on the other, to exploit the high-end market for better profit margin.
It is believed that only by product diversification and price stratification can
enhance Western fastfood to win the continuous support from the mass public.
#3 Reinforcement on Recipes Serving as Dinner Meals
Dinner meals are the main source of income in fastfood catering and those who
consume in Western fastfood outlets prefer choosing burgers as their dinner.
Therefore reinforcing the dinner meals recipes is in other words, reinforcing the
business development. The fastfood industry should innovate, for example,
different types of burgers that suit more to the Chinese taste, and various kinds of
drinks should be introduced to provide multiple choices to consumers.
#4 Development of Chain Outlets
The success of chain operation and management practiced by the several super
Western fastfood brands shall be a good reference. In order to develop more
chain outlets, especially in downtown area or neighbouring to entertainment
facilities, a thorough planning is required and is extremely important. While
customer flow in downtown high streets is more dense and concentrated, and
operation nearby entertainment facilities can tie-up the relevant food supply, thus
the choice of outlet location will be a decisive factor.
#5 Promotion of Brand Awareness
In amidst of nowadays increasingly intensive competition, advertisement is the
most effective means for business promotion. In view of KFC’s ads with the
“familized” theme and McDonald’s slogan of “more joy, more choice” already
strengthened in consumers’ mind, hence, it is vital to promote brand awareness by
launching more effective advertising programmes.
During the first few years in the new millennium, the fastfood industry in China already
achieved an annual turnover of RMB¥2,000 h/million Yuan (average RMB¥166 Yuan
per head based on the Nation’s 12 h/million population). The profit sector of which is the
largest and most attractive factor among all consumer goods and service market in China,
thus intensive competition is expected, as well as more new comers with more innovative
products will be joining the industry. In short, fastfood catering, though arriving late in the
Chinese market, is the speediest developing industry and a rising sun attracting everybody’s
(both investors and consumers) attention.

17
Chapter 4–Establishment

4.1 Formulation of Project Proposal


The project proposal will be formulated, on basis of Chapter 1 of this feasibility report,
and to be sent to relevant governmental departments for approval.

4.2 Means of Investment


The proprietors shall consider which means of investment to be used:
4.2.1 Private Investment by local Chinese citizen
Will be in compliance with the existing Chinese Regulations.
4.2.2 Foreign Direct Investment
Stipulated according to existing Chinese regulations, the establishment of
foreign-funded enterprises should comply with the approval and registration
procedures. The formulation of either wholly-owned, or Sino-foreign joint
venture (the portion of foreign shares and funding shall not be less than 25%), or
Sino-foreign joint cooperation is undergone the following procedures:
a) To submit the entity establishment in a project proposal, and only after the
approval of which can all investors proceed to other steps planned in the
project feasibility report;
b) To submit the project feasibility report, and only after the approval of which
can all investors proceed the draft and finalization of the legal documents
such as contracts and the Articles of Association for the new entity;
c) To submit the contracts and the Articles of Association on the formulation
of new entity to the relevant foreign economic and trade department for
approval and issuance of the Certificate of Approved Foreign-funded
Enterprise;
d) The investors can now present the Certificate to the Commercial and
Administration Bureau to register the new entity.
4.2.3 CEPA
According to the signed “Annex 4–No.6 Specific Commitments on Liberalization
of Trade in Services” of “Mainland and Hong Kong Closer Economic
Partnership Arrangement” (abbreviated CEPA)on Sep 29TH, 2003:
The two sides will, through consultations, formulate and implement
further liberalization of Hong Kong’s service sectors for the Mainland.
The relevant specific commitments will be listed in No.9/Table 2.
“Tourism and travel related services”:

Sectors or Hotels (including apartment buildings) and


sub-sectors restaurants (CPC641–643)
18
Specific To allow Hong Kong service suppliers to
commitments construct, renovate and operate, on a wholly-
owned basis, hotels, apartment buildings and
restaurant establishments in the Mainland.

By the means of investment through CEPA arrangement, the tax holidays may
not be as attractive as those granted to foreign-funded enterprises, but certainly
investors will enjoy more convenience during real practice.

4.3 Business Administration and Operation


4.3.1 Business Administration
a) To draft the name of the enterprise (for example: Alaska Wild Catering
Investment Company Limited), and the name of the retail outlet (at present
temporarily named: “Alaska Wild”).
b) To determine and rent the site of retail outlet.
c) To register a legal entity in the State Administration for Industry &
Commerce, according to the following procedures as a foreign-invested
enterprise:
#1 Name/Entity Registration
After the approval of project proposal and before the finalization of
contracts and the Articles of Association, apply to the Beijing
Administration for Industry & Commerce for the registration of the
enterprise name, in order to protect her exclusivity.
#2 Registration for Operation
Within 30 days after the approval of project proposal, apply to the
Beijing Administration for Industry & Commerce for the business
license in the People’s Republic of China, with the signed contract
(Sino-foreign joint venture), the Articles of Association, feasibility
report, the names and identity proof of all members of Board of
Directors, enterprise name, the rental contract of the enterprise and
retail outlet operation site (the rental period should not be shorter
than 1 year).
#3 Paid-up Investment Capital and Verification
After receiving the business license, investors should, according to
the contract or the Articles of Association of the joint venture, pay
up the investment capital, and assign a public accountant in China to
issue a report of capital verification.
4.3.2 Business Operation
a) To patent the trade mark, logo, etc;
19
b) To register in the State Administration of Taxation;
c) To establish a bank account in Renminbi;
d) To register in the State Administration of Foreign Exchange and upon
approval, establish a bank account in foreign currency;
e) To apply to the Beijing Public Health Bureau for the “Permit of Food
Production and Management”;
f) Owing to the necessary imports of production facilities and raw food
materials, the newly established enterprise should apply for the right of
import; or else to import through a third party food import and export
company.

20
Chapter 5–QSR Outlet Planning

5.1 Choice of Outlet


The project company will rent a high street outlet of 450m2 in Beijing downtown (either in
Chaoyang or in Dongcheng district) and establish a QSR for operation.

Diagram 5a: Location of Beijing Diagram 5b: Downtown Area in Beijing

5.2 Beijing: a Brief Review


5.2.1 Natural Environment
Beijing is situated at 39° 56’ North latitude and 116° 20’ East longitude, in the
midst of North China Plain, with her East neighbours to Tangshan and Tianjin
City, the other sides to Hebei province. Surrounding by the mountains in the
West, North, and Northeast, the topography of Beijing slants from the higher
Northwest to the lower Southeast, the plain of which inclines eastwards to Bohai
(Bo Sea). The main rivers penetrating through Beijing are: Yongding, Chaobai,
North Canal, and Juma, mostly originated from the peaks on the Northwest, then
passing through the sublime mountain ridges and wriggling towards the flat lands
in the Southeast, until finally converging into Bohai.
The climatic feature of Beijing is warm-temperate, semi-humid, with four clearly
distinguishable seasons, though the Springs and Autumns running shorter
duration than the Summers and Winters. The mean annual temperature is 14.9℃,
January being the coldest, average at –5.4℃; and July being the hottest, average at
30.3℃; mean annual rainfall is 338 mm, and the frost-free period during the
whole year used to be approximately 180 days.
5.2.2 Social Background
Beijing has been the ancient capital of China, possessing a gorgeous cultural
heritage. The verified written text and centuries-old relics have corroborated the
city construction of a 3000-year history, and have been the imperial capital of 5
21
Dynasties: Liao, Jin, Yuan, Ming, and Qing. Upon the establishment of the
People’s Republic of China on October 1, 1949, Beijing became the capital, and
henceforth the new Nation’s political and cultural centre, as well as the focus of
international and diplomatic encounters.
5.2.3 Outlook of Economy
a) Economic Development

Table 5a: The Economy of China and Beijing in 2003


China Beijing
2003
¥h/million $h/million ¥h/million $h/million
Total GDP 117,252.00 14,178.00 3,611.90 436.70
GDP/per capita (¥9,027)* ($1,091) (¥31,613) ($3,823)
National Income 116,603.00 14,099.50 5,251.00 635.00
National Income/per capita (¥8,977) ($1,085) (¥42,270) ($5,111)
Government Revenue 21,715.00 2,625.75 592.50 71.65
Government Expense 24,650.00 2,980.65 737.20 89.14
Money Circulation (M0) 1,974.60 238.80 88.90 10.70
Money Circulation (M1) 8,411.90 1,017.20 462.70 55.90
Money Circulation (M2) 22,122.30 2,675.00 1,216.70 147.10
Household Expenditure 8,472.00 1,024.40 381.20 46.10
Unemployment Rate (4.3%) ---- (2.5%) ----
Total Exports 3,625.30 438.40 163.10 19.70
Total Imports 3,414.20 412.80 153.60 18.60
Total Foreign Trade 7,039.40 851.20 316.80 38.30
Total Retails 4,584.20 554.30 271.30 32.80
Investment on Fixed Assets 55,567.00 6,719.00 2,480.00 299.88
Savings/per capita (¥8,400) ($1,015) (¥70,000) ($8,464)
Foreign Investment (by contract) 951.60 115.10 42.80 5.20
Foreign Investment (by paid-up) 440.90 53.30 19.80 2.40
*The figures in brackets are just Yuan or Dollar (not h/million).

Beijing is a comprehensive industrial city, full of vitality and energy. Since


the new millennium, with an incessant growth of overall economy, Beijing
has been ranking amongst the Nation’s front positions. In 2003, Beijing
achieves a GDP of RMB¥3,611.9 h/million Yuan, an increase of 10.5%
from 2002 in terms of tangible computation. The economic growth
maintains a rate of over 10% in the past 3 consecutive years. The GDP per
22
capita achieves RMB¥31,613 Yuan, a growth of 9.2% from 2002. Annual
income of the municipal government is RMB¥592.5 h/million Yuan,
increased 18.2% from 2002, and annual government expenditure reached
RMB¥737.2 h/million Yuan, increased 17.3% from 2002.
b) Consumer Market
Motivated by the highly fortified domestic demand from the Nation’s active
economy and strengthened monetary policy, Beijing has been experiencing a
fast economic growth. Local consumer market maintains a healthy and
steady development by: implementing the Nation’s guideline on augmenting
the consumer demand; accelerating the market development in minor towns
and counties; improving the quality of service and management; stimulating
holiday consumption; all of which have promoted the city’s sales volume of
retail goods. Commodities in the consumer market are abundant and
purchases are leaping a big step forward. The consuming environment has
been improved, the consumption demand and level have been upgraded,
and total commerce resulted in prosperity. The income of Beijing citizens,
especially those from remote counties, is increasing yearly, thus reinforcing
their consuming power and reassuring the confidence of business
transactions and consumption, and hence becoming the motive in
progressing to the next stage of market growth.
In 2003, the GDP of Beijing keeps to grow. Enterprises have fortified its
economic efficiency, the workers earn a better salary, the citizens’ income
improves thus upgrading their consumption level: the overall standard of
living has been totally promoted. It is noticeable that after joining WTO, the
market supply is affluent with a stable price level. The citizens’ increased
income enhances more savings thus bringing forth the confidence of
consumption. In 2003, the city’s wholesales and retail turnover, which
includes the catering business, record an added value of RMB¥271.3
h/million Yuan, increased 7.8% from 2002. Total commodity sales achieve
RMB¥4,587.3 h/million Yuan, increased 31.6%; total commodity
purchases achieve RMB¥4,344.9 h/million Yuan, increased 35.8%. The
sizeable enterprises, having improved their economy efficiency, record an
income by sales of RMB¥3,808.4 h/million Yuan, profit after tax at RMB
¥79 h/million Yuan, and responsible for a tax revenue of RMB¥124.5
h/million Yuan, a growth rate of 23.3%, 24.4%, and 16.4% respectively. The
number of modern enterprises, running in form of the vivid chain
operation and management, increases sharply. By the end of 2003, there are
146 chain business running in Beijing, with annual retail turnover of RMB
¥463 h/million Yuan, a ratio of 24.2% and approximately one fourth to
23
the city’s total retail turnover, being increased 23.7% from 2002, and 9.2%
higher than the average growth rate achieved by the city’s total enterprises.
Amongst these chain enterprises are the 300 plus retail outlets of
convenience stores, achieving annual retail turnover of RMB ¥ 12.5
h/million Yuan, increased 1.1 times in volume. To conclude, the consumer
market is hot and prominent, annual retail turnover of total goods amounts
at RMB¥1,916.7 h/million Yuan, increased 14.5% from 2002, and if
deducting certain parameters of the price factor, a substantial increase of
16.6%. The upgrade on the consumption structure is the main impetus to
the increase of market demand, as it is noticeable that the hot consumption
is focused on housing, transportation, and tele-communications.
c) Economic Forecast
According to the economists’ initial calculation, since Beijing will be hosting
the 2008 Olympics, expected a special investment of US$90 h/million
(RMB¥745 h/million Yuan) will be brought forth and together with its
uncountable multiple effect. The new investment will be the propeller of
high-speed growth to the Capital’s economy. Since it is mostly the products
and service in Beijing being the target of consumption, there will be
substantial motivation on promoting the Capital’s construction,
transportation, post and tele-communications, information exchange,
tourism, and catering industries. It is predicted by 2008, the subway of
Beijing will be prolonged from 53.7km to 94.7km, 150,000 new vehicles
increased in the public transportation, and since Beijing will become the
Nation’s largest information city, her network of tele-communications,
broad band technology, internet service, and smart card in use will be
undertaken the biggest development. By that time, Beijing will have 10
million mobile phone users with a covering rate of 69%; the number of
starred hotels will be increased from today’s 500 to 800, with improved
quality of service reaching the latest interNational standard. Therefore, while
Beijing already possessed a distinctive cultural attraction, the 2008 Olympics
will further promote the city to be the world’s tourism hot spot.

5.3 Strategy for Determining Outlet Location


The outlet location is the primary factor to the project’s key success. The right choice of
outlet location, is not just propositional, but will be the foundation of project’s future
development towards standardization, simplification, and professional chain management.
5.3.1 Classification and Choice of Business Area
a) Classification of Business Area
It is required to gather necessary data for the classification of business area
24
within Beijing, the target city.
#1 To adopt a marking method: for example, by counting the size of
shopping malls on the Chaoyangmenwai Avenue, 1 mark for those
with annual turnover of RMB¥10 million Yuan, 5 marks for those
of RMB¥50 million Yuan and vice versa; those with a public bus
stop nearby can add certain marks, those close to a subway station
can add certain marks, etc. The standard of these marking values is
an accurate empirical evaluation to identify a business area.
#2 After acquiring the marks, then classify the areas into different
categories, for example, KPMG/Beijing (Peat Marick) using their
marking system defines Chaoyang District as: Outer Chaoyangmen -
city grade commercial, Inner Chaoyangmen – district grade
commercial; and there are also the sub-categories such as: target
market model, social business model, social-commercial model,
tourist point, etc.
b) Choice of Business Area
This is the determiNation of the exact location to establish the outlet which
meets with the target market. The choice of business area, therefore should
be based on the project QSR’s market positioning, and the stability and
maturity of the business area; and the outcome of choice will be totally
different if the market positioning or the target market is altered.
The consideration on the stability and maturity of the business area is
important. This will depend on whether or not can know in advance the
future planning in the selected business area, for example, which sector in
Chaoyang district will be further developed, or the Urban Planning Bureau
has approved which construction project in the district, etc – these events
might give either a positive or negative effect on the project.
5.3.2 Survey and Choose of Frequent Haunt-Abouts (FHA)
a) To Determine the FHA within a Business Area
Chaoyang District is a mature business area, but not all locations in the
district are FHA’s. Thus the prerequisite for the project’s choice of outlet is:
the QSR must be established at the point of FHA, or at least close to it.
One important reference of FHA is the direction of people flow, for
example, what direction most people are going at when leaving the subway,
etc; this type of data must be properly recorded for statistics and analyses
before choosing the outlet location.
Another indicator is the counting of people flow nearby the outlet. This can
be done by using the counters to record the number of people flow within a
time span at the initially selected location of outlet. In addition, the
25
people flow in the middle and opposite of the road should also be counted.
For those in the middle of road, only count the cyclists and passengers, but
not those in the vehicles. Before counting the people flow on the opposite
side, it is required to judge whether its road size is big enough to be a
separated zone; if it is, seldom will the customers come across the street to
consume, thus the people flow over there will not be significant.
b) FHA Determines the Choice of Outlet Location
The FHA is a direct indicator for the choice of outlet. It represents also the
maturity of a business area, thus knowing where the FHA’s are and then the
selection of outlet location can be determined.
In 2003 alone, KFC, according to their own survey and classification of the
business areas and FHA’s in Beijing, successfully established 56 new outlets,
all of which are recording an appealing sale volume.
5.3.3 The ideal location is always the roads’ inter-section, thus the outlet can face 2 high
streets; and achieve, both from outside and inside, a wider and better vision effect.
In Beijing, the search of available high street outlets as well as the negotiation of
rental terms, should be practically worked through the real estate agency.
Attachment 1:《The Sample Contract for Beijing Rentals》

5.4 Construction Items


5.4.1 a) Exterior and Interior
The project QSR, both the façade and interior decoration, will be elaborately
designed by Ms Doris Tsui, a designer from Hong Kong who is reputable in
worldwide hotels and catering restaurants design.
#1 Main Theme of Design
Major age group of the target market is: 18–40 years, the theme of
the QSR design will be youthful and lively: energetic, soft, young,
free (unrestrained).
#2 Use of colour: shining orange, light green, bright yellow, pale white
#3 Tables and chairs: light (not weighty), sharp lines, more innovative
and epochal design, cute and comfortable.
#4 Other furnishings and displays: matching with the main theme
#5 There will be plants and flowers both indoor and outdoor to
ornament the QSR outlet and to provide a green environment.
5.4.2 b) Kitchen and Production Facilities
The main kitchen and production facilities will be imported from USA, the
installation of which will be by local technical personnel and under the
supervision and management of the exporter’s engineering staff.

26
The following table illustrates the imported items:

Table 5b: Imported Production Facilities and Installation


RMB¥ Unit Unit Price Sub-total
Anets GoldenFRY 14" Standard Gas Fryer 4 50,000.00 200,000.00
Star 14x28 Cast Iron, 2 Sided Grill with Grooved Top 2 50,000.00 100,000.00
Rubbermaid Cold Storage and Prep Table Pan Full Size 100 260.00 26,000.00
Rubbermaid Cold Prep Table Pan Ninth Size – 4" Deep 100 79.00 7,900.00
Can Storage Rack CSR-9 4 7,600.00 30,400.00
True Sandwich and Salad Prep Unit 1 50,000.00 50,000.00
Doughpro Tortillapro Tortilla Press 2 50,000.00 100,000.00
Arctic Air Commercial Chest Freezers 2 12,000.00 24,000.00
McCall Reach in Cooler/Freezer 4 78,000.00 312,000.00
SS Sink 3 Compartment with 2 Drainboards 1 13,600.00 13,600.00
Wall Mount Pre-Rinse with Wall Bracket 2 4,000.00 8,000.00
SS Bar Sink kROW-18-63C by Krowne 1 13,600.00 13,600.00
Zurn Mop Basin Sink 1 4,000.00 4,000.00
Hoshizaki Crescent Ice Cuber with Storage Bin KM250 2 38,000.00 76,000.00
Imperial Convection Oven ICV-2 1 92,000.00 92,000.00
Amana Commercial Microwave Oven RCS10MP 4 7,800.00 31,200.00
Astra Mega II Commercial Automatic Espresso Machine 1 70,000.00 70,000.00
Nemco 6000A2 2 Bulb Heat Lamp 10 2,600.00 26,000.00
Walking Freezer (5,000 KG) 1 200,000.00 200,000.00
Misc equipment/setting up and delivery 1 240,000.00 240,000.00
Kitchen set-up management 1 160,000.00 160,000.00
Total: 1,784,700.00

5.5 Public and Ancillary Facilities


5.5.1 Water Supply
Will be supplied through the sewage network of Beijing Waterworks Group
Company Limited, estimated fresh water consumption: 2m3/day, 730m3/year.
5.5.2 Used Water Disposal
a) There will be no wastewater disposal in production;
b) Water used in living will be treated in septic tank before disposing into the
urban sanitary sewage;

27
c) Water used after catering consumption will be treated in grease trap before
disposing into the urban network of wastewater drainage.
5.5.3 Electricity Supply
Will be supplied by the urban network of electricity supply in (Chaoyang or
Dongcheng District of) Beijing.
5.5.4 Heat Supply
The project QSR does not need heat for industrial use, thus not requires the
installation of boiler. In Winter, heat for living use will be supplied by Beijing
District Heating Group, in Summer the cooling system is by centralized electric
air-conditioning.
5.5.5 Tele-communications
Utilizing the landline network of China Telecommunications in (Chaoyang or
Dongcheng District of) Beijing.

5.6 Environmental Protection


5.6.1 Restriction on Smoking
The project QSR will advocate a green dinning environment, thus there will be no
smoking areas. All customers are prohibited from cigarette smoking, nor cigars
and pipes inside the QSR; all staff will not be permitted on cigarette smoking
during their working time within entire outlet area.
5.6.2 Packaging
a) The project QSR will prohibit to use food packaging of foaming materials;
b) The project QSR will adopt environmental packaging materials, all of which
will be non-foaming plastics and paper pulp mouldings;
c) The project QSR will execute the food package standard as per “the
Technical Requirement for Environmental Packaging「Disposable Container
for Food and Drinks」” (HBC1–2001) promulgated on June 4th, 2001 by the
State Environmental Protection Administration of China.

28
Chapter 6–Market Positioning and Competition

6.1 Fastfood or QSR


6.1.1 Definition of Fastfood
The term “fastfood” originally means the “selling of food for fast consumption”,
that is to supply the cooked food items, not necessary for preordering or
time-consuming preparation. Therefore fastfood is mostly fit with “takeaways”
instead of “dine-in” catering.
The term did not appear in any dictionaries before 1954 and is believed only after
the successful management of McDonald by Ray Kroc since 1955 then the new
coinage becoming aware and popular.
But during the recent 10 more years, many consumers regard fastfood products as
unhealthy food (in which a low nutritional value but can easily cause fatness, thus
eliciting cardiovascular disease, diabetics, gastritis, enteron ulceration, etc), and
even equate the term to “Junk Food”. Therefore the term “fastfood” nowadays
already adopted a derogatory sense.
6.1.2 QSR
“QSR” is the acronym of “Quick Service Restaurant”, and being coined much
later than “fastfood”. While its textual meaning brings up an accurate definition
of: “a restaurant offering quick service”, its deep-structure implications are
explicated as follows:
a) Industrialization of Catering Business
If considering the traditional catering is a simple restaurant operation of
merely a workshop style, primarily by craftsmanship and manual processing,
and dependent on empirical management; then QSR is endowed with a
modern and civilized system of industrialization, economy of scale,
standardization, and scientific management, to offer a fast and quick service
of catering.
Giving the following example: 13 minutes and 30 seconds – KFC’s unique
cooking time of fried chicken by computer control; or 1 layer of Cheese, 1
layer of assorted vegetable, 1/2 cupful of minced meat, + 7 minutes’ baking
– the standardized pizza production in Pizza Hut. Whether it is in KFC,
McDonald, or Pizza Hut, there is a standard manual on every manipulation
for every individual staff. The result from the industrialization is: there is no
art of food, but only food of reliability.
The standardized products are certainly not the best, but their quality is
stable, the hygienic concern is guaranteed, the taste will be all the same but is
acceptable. Unlike consuming in traditional restaurants, every experience
29
of which might spell out a risk.
b) Integration of Products
Comparing with traditional restaurants, the product definition by QSR is
greatly widened. Consumers must be highly impressed by the overall outlet
environment, quality of service provided by modern QSR’s (more exquisite
by those QSR serving Western recipes). The bright and clean dinning
environment becomes one of the important product constituents; even the
cleanliness of restrooms is also counted. Consumers may also, not know
that modern catering practitioners in fact are very concerned in constant
product researches, on just as a minute issue as the serving temperature of a
drink: for example, the best temperature to serve coca cola during the course
of consumption; why necessarily requires to be controlled exactly at a
certain temperature – because it will then give the best feel of taste, together
with the serving of other food items. Such brand new concept of product
integration doubtlessly is revolutionary among the traditional restaurants.

6.2 Market Positioning


6.2.1 Definition in Broad Sense
The market positioning of “Alaska Wild” is employing the broad definition of
modern QSR: to guarantee a clean and comfortable dinning environment; to
provide efficient and quick catering service; to produce food products of a steady
standard and above average; and to utilize the qualitative and quantitative concepts
in modern management culture – while at the same time defending the existing
business, aggressively exploiting the room for development.
6.2.2 Definition in Narrow Sense
“Alaska Wild”, though is newborn in the QSR market in Beijing, China, believes it
has well comprehended the urging market demand from detailed studies, thus
positioned itself in the market as: providing hot meals of fish recipes, of which
the fish products are sourced from the natural Alaska Ocean, bearing healthy and
high nutrimental values, prepared in western style, not greasy but delicious.
The integrated service will be fast and convenient. Aiming at the mass target of
the middle class in pursuit of the modern trend of health, therefore it is expected
the consumption level will be above the market’s average.
6.2.3 Target Consumer Market
Middle class, with a monthly salary of RMB¥3,000 Yuan circa and monthly
disposable income of RMB¥1,000 Yuan; major age group: 18–40 years.

6.3 Market Competitors


6.3.1 Amongst the maturing and intensively competing environment in Beijing’s
30
Western fastfood and QSR market, “Alaska Wild” will be facing the following
competitors:
a) Pizza Hut
#1 Has set up more than 100 chain outlets in China, all of them are
self-owned; in Beijing total 31 outlets: 11 in Chaoyang District, 1 in
Dongcheng district.
#2 All along has been positioning at: “leisure catering”, but since 2003,
altered to: “leisure and happy catering”.
#3 Target market: middle class and youngsters.
#4 Now aggressively promoting the door-to-door delivery service of
“Pizza Home Express”.
Pizza Hut will be the no.1 competitor to “Alaska Wild”, since the positioning
and product items of both are very much alike; the slight difference may be
by the name itself, Pizza Hut will be restricted from providing Italy pizza as
their only main meals, thus hindering themselves from future development
on main meals and product innovation.
b) McDonald
#1 Has set up almost 500 chain outlets in China, in Beijing
approximately 70.
#2 Advertised as a Worldwide trusted and reputed QSR, offering “high
quality, tasty and nutritiously balanced food”; positioning at: engaged
with “ideal, joy, and delicacies”; emphasizing that every customer
can enjoy the “outstanding quality and service, cleanliness, and
value-for-money” in worldwide McDonald’s, as well as hearty smiles.
#3 Target market: all round consumers in the society.
#4 Coordinated with a comprehensive, consummate, and strong
back-up system, which includes: advanced technical and
well-managed food manufacturing, a merchandizing network of
package suppliers and wholesalers, a complete system of human
resources management and training, a world-class managerial level,
logistic support, structuring and development, market promotion,
accurate and speedy fiscal statistics and analysis, etc, therefore
boasting to meet the goal of: “100% consumer satisfaction”.
#5 Total investment (including the investment on the supplying network
system) has reached more than RMB¥60 h/million Yuan since
commencing business in China; accumulated tax payment more than
RMB¥9 h/million Yuan, in 2000 alone has been over RMB¥2
h/million Yuan.
McDonald is an extremely successful Western fastfood brand name in
China. In amidst of the mass market’s cognition: the term “hamburger” has
31
already merged with the name McDonald and cannot be separated. Their
high protein (beef) product items, in compare with the high protein (fish)
product items of “Alaska Wild”, though with a different origin, are within
the same category. Therefore McDonald will be treated as the project QSR’s
no.2 competitor in future.
c) KFC (Kentucky Fried Chicken)
#1 Has set up more than 1,000 chain outlets in China, part of them are
self-owned, the others by franchise; in Beijing total 118 outlets: 26 in
Chaoyang District, 10 in Dongcheng district.
#2 Awarded the “China’s 10 Best Franchise Brands” in 2003 by China
Chain Store and Franchise Association (CCFA).
#3 Positioning at: “Where KFC is, there will be favour in life”, thus
hooking with lives of the mass public; in another words, the target
market is also the all round consumers in the society.
#4 Annual turnover of 2002 already reached RMB¥71 h/million Yuan.
#5 The enterprise maintains the aim to “redound upon the society” and
sponsored mostly in China’s education activities; for years, its direct
and indirect doNation have accumulated to RMB ¥ 65,000,000
Yuan.
KFC is probably the most successful Western fastfood brand in China. No
people seems not being aware of the brand and its products. However, just
because the brand is so popular and its products are of meat and prepared
by deep-frying, there certainly provides the project sufficient space to
promote its healthy fish products.
6.3.2 It is expected in the near future, the following brands will join the competition:
a) Dicos
#1 Established only since 1999 but already set up 400 chain outlets in
China; minority of which are self-owned, majority by franchise; in
Beijing there is only 1 outlet operating in Zhongguancun district.
#2 Promoting as “a brand new and featured system of fastfood chain”
and that “the most tasty fried chicken can only be found in Dicos”;
positioning at: a management of “honest, practical, and innovative”;
the target market is the teens and youngsters.
#3 In 2001, just 2 years after its commencement of business, the brand
was ranked the 5TH largest among all catering chains in China.
The brand is presenting a style of affectionate, modern, young and energetic
on purpose, to acquire the satisfaction and approval from the market; and
giving the consumers a fresh catering experience of “tasty, substantial, and
quick”, devoted by the management’s sincerity to consumers and passion
32
with delicacies.
The enterprise, though entering into the market comparatively late, develops
extremely rapidly, owing to the remarkable financial strength of its parent
company – the flagship business under which, is the world’s largest instant
noodles manufacturer of the “Master Kang” brand.
b) Happy Tom
#1 Have set up circa 200 outlets in China, but none is in Beijing.
#2 Positioning at: “Originated from USA, the only American fastfood
possessing the exclusively indigenous characteristics and distinctive
American fastfood culture”; aiming at low-end consumer market.
This brand is imitating both McDonald and KFC, therefore providing
primarily meat products (beef Hamburgers as well as fried chicken); and is
treated only as an indirect competitor to the project.

33
Chapter 7–Product and Pricing

7.1 Product
To meet the surging market demand, the project will provide hot meals of fish recipe, of
which the fishes are sourced from natural, healthy with high nutrimental value (high protein
but low calories), prepared in western style, not greasy but delicious.
7.1.1 Distinctiveness
a) The wild fishes are originated from the natural Alaska Ocean, and not being
polluted and contaminated.
The coastline of Alaska amounts to 11,270 km long, and 547,200 km in total
by adding up the island lines within the region. The Ocean possesses
abundant seafood products, in particular, is the world’s only source for the
numerous deep-sea fish species as well as wild (not cultivated) salmons.
Alaska exports every year more than 56% of total USA seafood products, if
counting Alaska as a single country, her export volume will be ranked within
the world’s front six positions.
b) To distinguish from the meat products provided by other fastfood chains.
c) To be supplied exclusively by the reputable, years-old established, and
well-experienced Alaska Wild Seafoods Inc of USA, which guarantees all
fish products are, from their raw and fresh state, directly transported to the
order of the consumer, “From the Source to the Plate”.

7.1.2 High Nutrimental Value


According to the literature and researches deliberated by nutritists: animal meat
contains 60% of fat, while fish meat contains only 6% of fat but 90% of protein,
the fat content possessed by fishes is always lower.
Nowadays, while most of the fish supplies are produced by cultivation, Alaska
produces only wild and natural fishes. The nutrimental values found in Alaska
“wild” salmons and her other deep-sea fish products, are much superior to the
“cultivated seafood”.
The meat texture of Alaska wild salmon, comparing with other fish species, is
more firm and solid. This owes to its entire life is cruising along the natural
deep-sea, and fed by different kinds of small fishes, algae, and crustaceans in the
34
North Pacific. The result from the clean water and healthy food is the outstanding
nutrimental values, among which, the most worthy to be mentioned is Omega-3.
The wild salmons possess the fat content rich in multiple unsaturated fatty acid
and Omega-3, which is different from the fat of animal meat, and from that of
cultivated salmons.
Omega-3 is known by the public as the “fish oil”, and is seldom found in
cultivated fishes, but only rich in wild fishes that live in the natural sea. And even
among these wild fishes, only those which are always cruising in long distance and
regularly consuming algae, can possess more Omega-3.
Omega-3 can eliminate the maleficent cholesterol (LDL low-density lipoprotein
cholesterol) and triglyceride from the human blood vessels; simultaneously can
retain the level of good cholesterol (HDL high-density lipoprotein cholesterol).
Omega-3 can reduce blood viscosity, so that the blood, would not become too
dense and thick; thus can circulate regularly, avoiding the pathological changes
relevant to the heart and blood vessels; and giving excellent prevention from
arteriosclerosis, palsy, and heart disease.
A research conducted by a Harvard scholar explicates that: Omega-3 fish oil can
activate the functions of leucocyte in the blood; and not only can ease the
adhesion of leucocyte and thrombocyte to the coronal blood vessel wall, but can
also prevent from coronary arteriosclerosis by its anti-inflammation function.
Therefore, Omega-3 can soften the articulation; alleviate its relevant disease such
as arthritis. There have been many other featured articles worldwide, illustrating
the wonderful effect of Omega-3, and diplomates are advocating patients of heart
diseases and cerebrovascular diseases, and even the healthy public, should
consume more and regularly the Alaska wild salmons.
Besides Omega-3, Alaska salmon is also the source of high quality protein and
nutrition: it includes all essential amino-acids, Vitamin A, D, B6, B12 and nicotinic
acid, riboflavin (B2), calcium, ferrum, zinc, phosphorus, iodine, sulfur, and natural
fluoride. Taking Sockeye salmon as example: 4 ounces* of smoked sockeye
contain 9g of fat, of which 3.6g is Omega-3, 20g protein and 160 calories.
*1 ounce = 28.35 gram.
7.1.3 Excellent Fish Species
a) Family of Alaska Salmon
#1 Alaska King Salmon
In respect of size, taste, meat, and colour, Alaska King Salmon is
second to none, owing to its appealing colour, high fish oil content,
good taste feel, and fleshly texture, winning a noble honour and the
most expensive selling price.
35
#2 Alaska Sockeye Salmon
Being the second largest in the family, Alaska Sockeye Salmon wins a
widespread reputation by its distinctive crimson colour, tender flesh,
and fresh taste, due to the high content of unsaturated fat.

#3 Alaska Coho Salmon


Possessing a taste, colour, and flesh similar to King Salmon, but
when comparing with other salmons, Alaska Coho Salmon is
endowed with firmer texture, even sizes, higher fat content, and a
brighter meat colour of orange red.

#4 Alaska Chum Salmon


The flesh of Alaska Chum Salmon is superior, with a bright colour
and good taste; only its oil content is relatively fewer.

#5 Alaska Pink Salmon


The flesh of Alaska Pink Salmon is rose pink in colour, tender and
36
vividly tasty; as well as the highest Omega-3 content among all
salmon species, owing algae is its major food.

b) Family of Alaska Flat Fish


#1 Alaska Halibut
Contains high protein and minerals; low fat, low calories, and low
sodium; white flesh, fine texture with rare fishbones; and good taste.

#2 Alaska Flounder
The flesh colour and texture of Alaska Flounder are similar to
Alaska Halibut, but with a softer and smoother taste feel.

c) Family of Alaska Gadus macrocephalus


#1 Alaska Cod
The white flesh of Alaska Cod is tender and fresh, not greasy at all;
37
each 100g cod fish meat contains 12.5g protein and 0.4g fat; being
extraordinarily large, the cod liver possesses very high content of
Vitamin A, D, and fish oil which is extracted for commercial sales.

#2 Alaska Pollock ( “ ” extraordinary popular in South Korea)


The flesh of Alaska Pollock is white and tender, with fine texture
and no small fishbones, and tastes the best in Winters. The fish body
is chubby and gives an excellent chewy feel.

7.2 Project QSR Menu


7.2.1 Flagship Products
The 1ST factor to enhance success is to launch some leading products, so-called
the flagship items, to identify the project QSR, and will be served throughout all
business hours and to be the focus of promotion.
a) Fishburger
#1 Alaska Wild Burger

38
#2 Alaska Cod Burger

#3 Alaska Salmon Burger

#4 Alaska Halibut Burger

#5 Alaska Flounder Burger


b) Recommended Drinks
#1 Low Sugar Lemon Tea
Lemon favour is refreshing and comfortable, either to consume
separately or with fish products will be the best choice.
#2 Chinese Green Tea
The speciality of green tea is that it retains large extent of natural
substance from the fresh leaves, of which polyphenol and Caffeine
at above 85%, chlorophyll at 50%, and vitamins lose just very little,
thus green tea soup provides a very appealing taste with a strong
astringency. Latest result by scientific research indicates that the
retained natural substance in green tea can prevent consenescence
and cancer, antiseptic, and can diminish inflammation; these are the
special effects which other types of tea do not possess.
#3 Charcoal-Roasted Coffee
Prepared by the Japanese charcoal-roasting method, the coffee
favour comes out insipidly, slightly bitter but not sour, thus most
suiting the Asian taste.
39
7.2.2 Other Products
a) Breakfast Series (07:00–11:00 hrs)
The breakfast is the most important among the daily 3 meals. Simple reason:
in the night time, the human body is actually not “resting” but still
consuming the reserved energy, thus the first thing in the morning requires a
breakfast with rich carbohydrate to recharge the energy source.
The breakfast serving in the project QSR will provide a refreshing and
relaxed feel to give the customers a brand new start in the day beginning.
#1 Alaska Assorted Fish Omelette

#2 Alaska Salmon Chops Roll

b) Lunch/Supper Series (11:01–20:30 hrs)


The lunch/supper series will be served after breakfast and throughout the
rest of operation hours, not distinguishing specifically lunch or supper
hours. The project especially encourages customers to have early suppers
since the medical experts advise that the calcium consumed in suppers needs
time to be discharged from human body, thus early supper would reduce the
incidence of urolithiasis.
The main courses in the QSR’s lunch/supper menu, not only possessing the
characteristics of light, convenient, and quick in order to match with the
rhythm of working (office-attending) in the daytime; but also provide choice
40
of delicate dishes for those customers, who have been released from a day’s
painstaking, to enjoy something tasty and substantial in a stress-free and
comfortable manner.
#1 Alaska King Salmon Sashimi

#2 Alaska Assorted Fish Sashimi

#3 Braised Alaska Assorted Fish in Port Wine

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#4 Alaska Coho Steak fried/grilled/baked

#5 Alaska Cod Steak fried/grilled/baked

#6 Alaska Pollock Steak fried/grilled/baked

#7 Alaska Halibut Fillet shallow/deep fried

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#8 Alaska Flounder Fillet shallow/deep fried

7.2.3 More Delicacies


#1 Alaska King Salmon Hand Roll

#2 Alaska Wild King Salmon Salad

#3 Country Salad

43
#4 Alaska Chips

#5 Crispy Onion Rings

#6 Alaska Borsch

#7 Alaska Wild Chowder

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7.3 Pricing

Table 7a: Pricing of QSR Menu


Breakfast Single Order Lunch/Supper Single Order Set#1 Set#2

Assorted Fish Omelette 8.0 King Salmon Sashimi 30.0 35.0 36.0
Salmon Chops Roll 5.0 Assorted Fish Sashimi 32.0 37.0 38.0
Sauce Braised Assorted Fish in Port Wine 32.0 37.0 38.0
Mint & Cream Coho Steak fried/grilled/baked 22.0 26.0 28.0
Lime & Clove Cod Steak fried/grilled/baked 26.0 30.0 32.0
Mixed Herbs  Pollock Steak fried/grilled/baked 17.5 21.5 23.5
Black Pepper & Garlic Halibut Fillet shallow/deep fried 58.0 62.0 64.0
Light Curry Flounder Fillet shallow/deep fried 28.0 32.0 34.0

Flagship delicacy RMB¥ Set#1 Leisure Bites RMB¥ Recommended Drinks RMB¥

Alaska Wild Burger 8.5 13.5 King Salmon Hand Roll 7.5 Alaska Mineral Water 2.5
Cod Burger 8.0 13.0 King Salmon Salad 6.0 Honey Plum Juice 5.0
Salmon Burger 8.5 13.5 Country Salad 4.0 Low Sugar Lemon Tea 5.0
Halibut Burger 20.0 25.0 Alaska Chips 4.0 Chinese Green Tea 5.0
Flounder Burger 10.0 15.0 Crispy Onion Rings 4.0 Charcoal-Roasted Coffee 6.0

Minor Course RMB¥ Dessert RMB¥ Beverages RMB¥

Garlic Bread (pc) 3.0 Ice Cream 4.0 Soft Drinks 3.5
Stewed Assorted Fish with Rice 12.0 Ice Cream Bun 5.0 Fresh Orange Juice 5.0
Alaska Borsch 7.5 Sherbert 6.0 Chocolate 5.0
Alaska Wild Chowder 7.5 Sundae 6.0 Cappuccino 7.5
Set#1 = Main Course + Chips + Soft/Hot Drink.
Set#2 = Main Course + Soup + Garlic bread + Soft/Hot Drink.
5 sauces individually matching with 5 types of Fish steaks/fillets.
Dine-in and Takeaway are of same prices.
Ingredients and weighing of all recipes are included in the Cost Analysis.

7.4 Products and Pricing of Major Competitors


Royal Asian, during conducting the market survey in Beijing in June, 2004, simultaneously
collected the data on products and pricing of the major competitors: Pizza Hut,
McDonald, and KFC, and has renewed these data in September, 2004 while finalizing this
feasibility report. It is necessary to mention that all pricing are the prevailing retail prices,
45
promotional prices are not included.
7.4.1 Pizza Hut

Table 7b: Menu and Pricing of Pizza Hut/Beijing Sept, 2004


Pizzas 9” 12” Favour
Lover’s Line 45 65 Hot, Garden Veggie, USA Special, Cheese
Deluxe Line 50 75 Supreme, Surf & Turf, Hawaiian
Supreme Line 55 85 Super, Seafood, Meat
Delight Line 50 70 Chicken, Veggie,
Maximum Line 55 85 Works, Seafood Catch, Meaty

Appetizers RMB¥ Quantity Pastas RMB¥ Quantity


Garlic Bread 10 (75g) Spaghetti Bolognaise 28 (350g)
Waffle Crispers 12 (85g) Beef Spaghetti 28 (350g)
Onion Rings 12 (85g) Beef Lasagna 35 (300g)
Chicken Kebabs 15 (3pc) Fresh Salad 28 (1 time/per head)
New Orleans Wings 19 (4pc) Twin Potato Salad 12 (1 serve)
BBQ Ribs 24 (3pc) Tuna Salad 15 (1 serve)
Fried Prawns 24 (4pc) Seafood Fruit Salad 18 (1 serve)
Escargots 28 (6pc) Minestrone 15 (200ml)
---- ---- ---- Creamy Mushroom 15 (200ml)
---- ---- ---- Clam Chowder 20 (200ml)
---- ---- ---- Chicago Beef Soup 20 (200ml)

Dessert RMB¥ Quantity Drinks RMB¥ Quantity


Ice Cream 10 (140g) Cold Drinks 8 (330ml)
French Crepe 12 (135g) Orange Juice 12 (250ml)
Tiramisu 15 (75g) Tea/Chocolate 10 (180ml)
Ice Cream Cake 15 (80g) Lemon Tea 12 (330ml)
Walnut Cake 15 (77g) Coffee Latte 12 (180ml)
Black Forest Cake 15 (70g) Ice Coffee 15 (330ml)
Sundae 18 (190g) Cappuccino 15 (180ml)
---- ---- ---- Black Angel 15 (330ml)
9” Pizza can serve 2 person, average per person¥22.5 – 27.5.
12” Pizza can serve 3 person, average per person¥21.6 – 28.3.

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7.4.2 McDonald and KFC

Table 7c: Menu and Pricing of McDonald & KFC/Beijing Sept, 2004
McDonald Single Order RMB¥ Set KFC Individual Meals RMB¥ KFC Family Meals RMB¥

Hamburger 4.5 12.0 Original Recipe Chick Thigh (1pc 90g) 7.0 Original Recipe Chicken (3pc) 21.5

Double Cheeseburger 6.5 14.5 Colonel Burger (187g) 7.0 Extra Crunch Zinger 17.5

Filet-O-Fish 9.9 17.2 Hot Wings (2pc 45g) 7.0 Hot Wings 21.5

Sausage McMuffin with Egg 9.9 17.2 New Orleans Wings (2pc 45g) 8.0 XXLDrumstick Burger 18.0

Chicken McNuggets (6pc) 10.0 17.0 Hot & Spicy Burger (145g) 10.0 Hot & Spicy Burger 17.5

McChicken 10.0 17.5 Zinger (175g) 10.0 Crunch Zinger 20.5

Hot’n Spicy McChicken 10.0 17.5 Mexico Chick Roll 10.0 Mexico Chick Roll 17.5

Big Mac 10.4 17.5 Popcorn Chicken (M 100g) 10.0 BBQ Wings Bucket 40.0

Chicken McGrill 12.0 ---- Kentucky Nuggets (115g) 10.0 Wings Bucket 48.0

Sausage McMuffin Special 12.0 ---- ---- ---- Family Barrel 58.0

BBQ Wings (4pc) 14.0 21.0 ---- ---- ---- ----

McDonald Side Orders RMB¥ KFC Side Orders RMB¥


McPrawn (6pc) 12.0 Carrot Bun 1.5
Big McNuggets (4pc) 16.0 Whipped Potato 3.0
---- ---- Seafood Soup 4.0
---- ---- Rice in Mushroom Sauce 4.0
---- ---- Corn Stick 4.0
---- ---- Coleslaw (S) 4.0
French Fries (S) 5.0 Fun Fries (S) 5.0
McDonald Dessert/Drinks RMB¥ KFC Dessert/Drinks RMB¥
Ice Cream Cone 2.0 Ice Cream Cone 2.0
---- ---- Crispy Ice Cream Cone with Nuts 3.5
McFlurry 6.0 Mashed Taro 4.0
Sundae 6.0 Sundae 6.0
Coke (small) 3.5 Pepsi (small) 3.5
Coffee/Tea (small) 4.0 Milo/Coffee/Tea/Milk 4.0
Hot Chocolate 4.5 ---- ----
Shakes (small) 4.5 Ice Lemon Tea 4.5
Milk 5.5 ---- ----
Orange Juice 7.0 Orange Juice 4.5

47
7.5 Pricing Comparison between Project QSR and Competitors

Table 7d: Pricing Comparison between Project QSR and Competitors/Beijing Sept, 2004
Pizza Hut Project McDonald KFC
Food Types
Weight/g RMB¥ Weight/g RMB¥ Weight/g RMB¥ Weight/g RMB¥

Main Course (Burger) ---- ---- 141.75 9.00 105.00 9.81 113.40 10.00
Main Course (Burger Sets) ---- ---- ---- 14.00 ---- 16.78 ---- 17.75
Main Course (Non-Burger) 300.00 25.00 261.70 25.33 ---- ---- ---- ----
Main Course (Special) ---- ---- 263.35 31.33 ---- ---- ---- ----
Minor Course 325.00 30.33 141.75 12.00 ---- ---- 75.00 4.00
Salad 150.00 15.00 105.85 5.00 ---- ---- 75.00 4.00
Soup 200 ml 17.50 177 ml 7.50 ---- ---- 85 ml 4.00
Chips 85.00 12.00 113.40 4.0 85.00 5.00 110.00 5.00
Drinks (Soft) 330 ml 8.00 250 ml 3.50 180 ml 3.50 180 ml 3.50
Drinks (Hot) 180 ml 12.00 178 ml 5.50 150 ml 4.00 150 ml 4.00
Ice Cream 140.00 10.00 85.05 4.00 85.00 6.00 85.00 3.50
Sundae 190.00 18.00 85.05 6.00 85.00 6.00 85.00 6.00
This table only provides an approximate pricing comparison, since not all classification is 100% accurate.

The figures are the rounded mean (the highest and lowest price deleted) of the items under same category.

48
Chapter 8–Production and Cost Analysis

8.1 Production
8.1.1 From the Source to the Plate
a) The raw fish, sourced from Alaska, is supplied exclusively by Alaska Wild
Seafoods Inc of USA. The Company employs a standard flow to manage
production from catching, butchering, grading, coarse processing,
quick-frozening, to packaging, and physically transports the products to
China port by reefer (refrigerated) containers. All products are guaranteed
freshly delivered within 1 month after caught, in order to fulfill the
Company’s marketing concept: From the Source to the Plate.
b) The project company will rent space in the warehouse of frozen goods to
store the imported raw materials, and delivers the appropriate quantity to the
QSR outlet according to the daily production schedule.
c) The QSR will then plan the division of labour for production:
#1 Ingredients distribution and preparation: main course, other items
(salad, soups, minor course, and snacks).
#2 Cooking: main course processing, other items (salad, soups, minor
course, and snacks) processing.
d) The beverage bar will attend and serve orders of all non-food (solid)
products; while most of the drinks and ice creams are prepared in advance
and packaged, green tea, coffee, etc require immediate and spot production.
8.1.2 Establishment of Production Standard
The project QSR will, according to the set quality standard, calculate the quantity
of production, cost of products, and standard procedures in quantitative terms;
these data will be used as indicators for inspection and supervision during the
entire production, in order to avoid working errors and to guarantee the stability
and excellence of product quality. The whole process: the inspection of the
product items, and together with the reference to the supervision results, shall aim
at achieving the efficiency in the management and control of quality standard.
a) Standard recipe: Formulating the unified quality standard, unified processing
steps, unified cooking methods, and serving package; explicating in the
internal menu, the quality requirement, cost, financial cost, and selling price
(as per table 7a and 8a).
b) Allocation standard: Allocating ingredients for each recipe; determine the
standard ratio and weight portion of which; and start initial preparation.
c) Processing standard: Formulating the standard of initially prepared product,
the yardstick of quality, and the content of semi-finishing before cooking;
this would need the standardization of “classifying and manipulating the
49
ingredients”, “the temperature control on ingredients before cooking”, etc.
d) Cooking standard: Finishing from the allocated, processed semi-finishes;
with the standard portion of sauce, seasoning, to the final product unified
by designated colour, fragrance, taste, and presentation; and ready to serve.
8.1.3 Formulating Control Measures
Having the production standards established, there requires a team of well-trained
staff of production and management to master the pertinent requirements, and to
guarantee the execution and accomplishment of these standards during the course
of production.
a) Allocation Control
It will be the core of cost control, therefore prevention from committing
errors, duplication, omission, wrong matching, over-allocation, will be the
key factor in quality control; it requires an appropriate weighing control, in
exact compliance with the recipe standard, to avoid waste of materials as
well as guarantee quality of production.
b) Processing Control
#1 Control on quantity of daily use and stock: requires daily schedule
prepared by production management for deliveries from warehouse
to QSR, and a checking system to control the stock and supplies.
#2 Control on the conversion ratio from raw materials to semi-finishes
in procession: the working staff will process according to the
designated ratio of different raw materials (eg: garnishings), and to
be approved by the production supervisor.
#3 Control on quality: the quality of semi-finishes directly effects the
colour, fragrance, taste, presentation of final product, therefore can
be only approved restrictedly by the required quality and exact
specification; the processing staff should follow precisely the
demanding hygienic and safety measures during procession, all
disqualified raw materials should be rejected and disposed properly
at the end of procession, and to be dismissed from entering into
further production procedures.
c) Cooking Control
It is the essential step to guarantee the quality of final product, thus requires
reinforced supervision and control on the standard cooking of the
production team, speed and temperature of finishing, and sales volume. The
cooking team should follow exactly the cooking norm and being strictly
inspected and examined by random checks according to daily schedule; as
well as a fixed-time control exercised on each cooking personnel, individual
stove (cooking unit), and the relevant speed, quantity, and quality of
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production should be recorded in substantial figures for statistical use.
8.1.4 Formulating Control Methods
To guarantee the efficiency of control measures, besides establishing the standards
for each procedure and spot supervision, it also requires effective and feasible
control methods.
a) Course Control
In respect to the different stages in the production flow, from allocation,
processing, to cooking; the finishing of each stage will be a controlling
point; the final “finisher” of each stage will be the quality controller.
However, while the processing staff are entitled to comment on unqualified
cooking finishes, the cooking staff are also responsible to criticize on
unqualified semi-finishes; thus every staff will be mutually monitored and
inspected during the whole course of production.
b) Responsibility Control
The control is exercised on rank-by-rank and procedure-by-procedure basis,
according to the job function of different ranks; the production manager to
be the head of control, sector supervisors to monitor, and to guarantee
individual responsibilities to be fulfilled, awards and penalties to be executed.
c) Key Control
A sort of “pinpointing”, which requires special attention and emphasis,
adopted on certain procedures expected to outburst of frequent problems;
solutions should be immediately sorted out based on past experience; this
method serves to be a precaution to quality problems.

8.2 Production Cost


The principal cost in catering business is production cost, the successful management of
which will be the key-stress in the operation of the project QSR.
8.2.1 Cost Control
At present, the majority of catering business adopts the gross margin control (the
purpose of cost computation is to determine and acquire the target ratio of gross
sales margin) to manage production cost, and has formulated a computation
model of which: by-the-books accounting and specific accounting. However:
#1 The sales structure is not at all the same – when high margin
products (for example, drinks and ice creams) occupy a bigger sales
volume, the average gross profit rate will sharply rise, thus effecting
the efficiency on the cost management on low margin products
(such as main courses).
#2 The gross profit rate cannot reflect the practical utilization rate of
raw materials – when high margin products (for example, drinks and
51
ice creams) occupy a bigger sales volume, the utilization rate of raw
materials will decrease, but the average gross profit rate may not
decrease.
Therefore, the gross margin control may not provide in details the practical reason
for cost variation, and will affect the efficiency the cost management and control.
The project management, hence, while adopting the industry’s conventional
methods on cost control and management, will simultaneously use a self-designed
cost management model with the main point as follows:
#1 The prerequisite is computer-aided computation;
#2 The proposition for computation is: the efficiency of material
utilization, and practical gross margin on sales;
#3 To analyze the efficiency of cost management through the
difference between the planned and practical operation cost.
8.2.2 Cost Analysis
The following table illustrates the recipe ingredients, weight, matching, and
production cost.
It is necessary to specify on the limitations of the table:
#1 USA, the producing country of raw materials, adopts
Anglo-American system of units, thus using ounces and pounds in
production, packaging, and pricing. For the convenience of
calculation in China, the table converts the measuring units to metric
system. There might exist tolerance, but believed not much effecting
on total cost analysis.
#2 The 11TH column in of the table is Cost, which is the sum of total
product cost of main ingredients, vegetables, and other items in
terms of “CFR QSR kitchen”.
#3 The percentage of profit is the division of the 13TH column over
Cost (11TH column), and is the sales profit before tax, and also
operation cost not included.

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Table 8a: Ingredients, Weight, Matching, and Production Cost
Menu Ingredient g cost Veg/g cost Others g cost Total g Cost Price Diff Profit (%)
Alaska Wild Burger Salmon Steak 56.7 3.1 28.35 0.15 bread/cheese 56.7 0.60 141.75 3.85 8.5 4.65 86
Cod Burger Cod Steak 56.7 2.5 28.35 0.15 bread/cheese 56.7 0.60 141.75 3.25 8.0 4.75 104
Salmon Burger Salmon Steak 56.7 3.1 28.35 0.15 bread/cheese 56.7 0.60 141.75 3.85 8.5 4.65 86
Halibut Burger Halibut Fillet 56.7 8.7 28.35 0.15 bread/cheese 56.7 0.60 141.75 9.45 20.0 10.55 80
Flounder Burger Flounder Fillet 56.7 4.0 28.35 0.15 bread/cheese 56.7 0.60 141.75 4.75 10.0 5.25 79
Assorted Fish Omelette Fish Cubes 56.7 2.5 28.35 0.15 egg 85.0 1.00 170.05 3.65 8.0 4.35 85
Salmon Chops Roll Salmon Cubes 35.0 1.9 28.35 0.15 bread roll 56.7 0.25 120.05 2.30 5.0 2.70 84
King Salmon Sashimi Salmon Steak 200.0 11.0 28.35 0.15 sauce 35.0 0.35 263.35 11.50 30.0 18.50 115
Assorted Fish Sashimi Fish Fillets 200.0 14.0 28.35 0.15 sauce 35.0 0.35 263.35 14.50 32.0 17.50 86
Braised Assorted Fish in Port Wine Fish Fillets 200.0 14.0 56.70 0.30 sauce 35.0 0.35 291.70 14.65 32.0 17.35 85
Coho Steak Coho Steak 170.0 9.3 56.70 0.30 sauce 35.0 0.35 261.70 9.95 22.0 12.05 87
Cod Steak Cod Steak 170.0 11.2 56.70 0.30 sauce 35.0 0.35 261.70 11.85 26.0 14.15 85
Pollock Steak Pollock Steak 170.0 7.4 56.70 0.30 sauce 35.0 0.35 261.70 8.05 17.5 9.45 84
Halibut Fillet Halibut Fillet 170.0 26.2 56.70 0.30 sauce 35.0 0.35 261.70 26.85 58.0 31.15 83
Flounder Fillet Flounder Fillet 170.0 11.9 56.70 0.30 sauce 35.0 0.35 261.70 12.55 28.0 15.45 88
Tak Chips Chips 113.4 1.5 ---- ---- Sauce 35.0 0.25 148.40 1.75 4.0 2.25 92
Crispy Onion Rings Onion Rings 113.4 1.0 ---- ---- Sauce 35.0 0.25 148.40 1.25 4.0 2.75 157
Garlic Bread (pc) Bread 56.7 0.6 ---- ---- garlic/butter 15.0 0.25 71.70 0.85 3.0 2.15 181
Table 8a: Ingredients, Weight, Matching, and Production Cost (Cont’d)
Menu Ingredient g cost Veg/g cost Others g cost Total g Cost Price Diff Profit (%)
King Salmon Hand Roll Salmon Cubes 35.0 1.9 28.35 0.30 rice/seaweed 56.7 0.80 120.05 3.00 7.5 4.50 107
King Salmon Salad Salmon Cubes 35.0 1.9 85.05 0.30 Sauce 35.0 0.35 155.05 2.55 6.0 3.45 97
Country Salad ---- ---- ---- 113.4 0.6 Sauce 35.0 0.35 148.40 0.95 4.0 3.05 229
Stewed Assorted Fish with Rice Fish Cubes 56.7 4.0 28.35 0.15 rice 85.1 0.80 170.10 4.95 12.0 7.05 102
Alaska Borsch Fish Cubes 35.0 2.4 28.35 0.15 cream/water 113.4 0.40 177ml 2.95 7.5 4.55 110
Alaska Wild Chowder Fish Cubes 35.0 2.4 28.35 0.15 cream/water 113.4 0.40 177ml 2.95 7.5 4.55 110
Alaska Mineral Water Mineral Water 200.0 1.0 ---- ---- ice/lemon 35.0 0.15 235ml 1.15 2.5 1.35 84
Honey Plum Juice Plum Juice 200.0 0.8 ---- ---- ice/honey 56.7 0.20 256ml 1.00 5.0 4.00 286
Low Sugar Lemon Tea Black Tea 10.0 0.5 ---- ---- lemon/sugar/water 200.0 0.30 210ml 0.80 5.0 4.20 375
Chinese Green Tea Green Tea 10.0 1.0 ---- ---- water 150.0 0.10 160ml 1.10 5.0 3.90 253
Charcoal-Roasted Coffee Coffee Bean 28.4 1.0 ---- ---- milk/sugar/water 150.0 0.20 178ml 1.20 6.0 4.80 286
Cappuccino Coffee Bean 28.4 1.2 ---- ---- milk/sugar 150.0 0.20 178ml 1.40 7.5 2.80 286
Soft Drinks Coke 200.0 0.5 ---- ---- ice 56.7 0.20 256ml 0.70 3.5 4.90 318
Fresh Orange Juice Orange Juice 200.0 1.0 ---- ---- ice 28.4 0.10 228ml 1.10 5.0 3.80 226
Chocolate Chocolate 28.4 1.0 ---- ---- milk/sugar/water 150.0 0.20 178ml 1.20 5.0 6.10 311
Ice Cream Ice Cream 56.7 0.8 ---- ---- syrup 28.4 0.35 85.05 1.15 4.0 2.85 177
Ice Cream Bun Ice Cream 56.7 0.8 ---- ---- syrup 28.4 0.35 85.05 1.15 5.0 3.85 239
Sherbert Fruit Juice 56.7 0.8 ---- ---- syrup 28.4 0.35 85.05 1.15 6.0 4.85 301
Sundae Ice Cream 56.7 0.8 ---- ---- syrup 28.4 0.35 85.05 1.15 6.0 4.85 301

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Chapter 9–Branding Strategy

9.1 Brand Significance


9.1.1 The Characteristics of Brand in Modern Business
a) Connotation
#1 The brand refers to a name, a mark, a symbol, a design, or their
combiNation in use, for the consumers to identify an individual
product or service, and distinguished from the product and service
of the competitors.
#2 The brand is a trademark and its protection, from the legal point of
view.
#3 The brand is a recognition, from the commercial point of view. In
the catering industry (either fastfood or non-fastfood), the emphasis
of a brand is on its representation, prestige, creditability, market
influence, and the indication of product origin, quality, market
positioning, content of service, extent of satisfaction, and the
awareness by consumers.
#4 The brand is also a word-of-mouth effect, a status, a style, from the
concern of brand culture and consumer psychology, and when
considering its profile, publicity, reputation, and its association by
consumers.
b) Characteristics
#1 It is an icon of possession: representing a right of ownership, it is,
however, not significant to know who exactly is producing or selling
the product, the concern is: who or which enterprise owns the
brand.
#2 It is a means for the consumers to identify the product.
#3 It has become a symbol: not merely reflecting the winning of certain
ratio of market share, but has been in associate with a country or
region’s image, which reflects a significant economic strength.
#4 It is an added-value to a product: this explains why consumers
shows different brand preference on similar kind of products, since
their choice possesses an added-value, of solely emotional or
psychological related which might be totally beyond the competence
of the consumers to illustrate a concrete description.
#5 It can protect the interest of the enterprise and consumers.
9.1.2 Brand Management and Its Function
The brand management is an activity, in which the brand is positioned as the
enterprise’s independent resource and assets; and is the basis to link, and conjoin
with the enterprise’s other resources and assets, to maximize economic and social
benefit. The activity includes 2 related progress: brand creation and operation.
While creation initially serves operation, operation in return promotes creation.
Therefore from the economic point of view, the brand itself, though is an
intangible asset, possesses a value in real terms, which can be substantially
managed just like countable capital. From the legal point of view, since the brand
is a kind of intellectual property, which is part of the total property, thus can also
be substantially managed like countable capital, to acquire incremental values.

9.2 Brand Management


9.2.1 Brand Creation
It consists of the specific design and planning in both text and graphic, as well as
registration. The project inclines to adopt the following design to be the brand
logo. The registration is the trademark registration and to acquire the exclusive
right for the use of the integration of brand.

9.2.2 Brand Maintenance


The maintenance of the brand requires the project to utilize all the enterprise’s
resources, internal and external, in managing the brand “Alaska Wild”, in order to
maintain or increase its value. The first mission is to establish the quality of the
enterprise (project company) since it is the root of which the brand is dependent
on and adhering to. The next mission is the interaction between the enterprise and
the market, to achieve a good relationship with the consumers, social public, the
government and other intermediary organizations, in order to promote the
awareness and creditability of, and reinforce the image of, the enterprise and the
offering product and service. Finally it is necessary to apply the correlated legal
means to guarantee brand protection.

9.3 Brand Promotion and Development


On purpose to attract consumers, the project has to be well prepared to promote the brand
in both exterior and interior directions, to acquire a healthy development and growth.
9.3.1 External Promotion – a Tangible Measure
a) Brand Name
The promotion of brand name must adapt to the level of target consumers,
to adopt a name which can be easily remembered and called upon, with
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simple spelling and a clear text array. The typeface design to be artistically
elegant, displaying distinctness, and legible to read. Since tele-conversation is
sometimes required, the pronunciation of the brand name shall be
comprehensible without confusion, and to avoid employing weird words.
Reviewing the successful Western fastfood brands in the market, when
spelling out either in Chinese or in English, the syllables not exceeding 3
units: for example: Piz-za-Hut, Mac-do-nald, Ken-tuc-ky, also Wen-dy,
Bur-ger-King, Star-buck-s and so on, almost no exception.
The name “Alaska Wild”, is explicating the yearning towards Alaska’s wild
nature, and recommending the consumption of her wild, non-polluted fish
products. However, the entire pronunciation is 5 syllables in English
(A-la-s-ka Wil-d) and 7 in Chinese (a-la-si-jia de hu-huan) respectively, thus
might sound cumbersome to consumers, and therefore a brand name of not
more than 3-4 syllables is advocated.
b) Fascia
The fascia is the most significant means by the QSR outlet to initially attract
customers. Thus the design of which must be innovative, the presentation
of which must be striking, easily to be noticed, distinctive enough for
attraction; should be illuminated by neon lights at night to enhance
recognition from far distance; just consider the simple big yellow “M” of
McDonald’s fascia already enjoyed a great popularity.
c) Exterior and Interior Design
The project QSR, both the façade and interior decoration, will be elaborated
by the reputable designer, Ms Doris Tsui; there will be plants and flowers
both indoor and outdoor to ornament the QSR outlet and to provide an
appealing environment.
9.3.2 Internal Promotion – an Intangible Measure
a) Outlet’s Environmental, Atmospherical, and Sentimental Concern
It is required to create the most appropriate atmosphere and featured tone
in the outlet to match with the QSR ’s scope and style of business, based on
the design and decoration, setting and lay-out, functional partition, lighting
and hue, and light and enthusiastic music broadcasted during business hours.
b) Service Standard and Technique
It is required to train the attendants to demonstrate their professional spirit
and appearance; to restrict their only use of polite wordings, to receive
consumers with smiles; and to offer initiative approach and welcome to
customers. It is also required to train them on the QSR menu: its different
ingredients, processing, cooking, and taste; especially on the raw materials,
which bring forth a connotation of the distinctive Alaska wild produce.
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c) Hygiene and Cleanness
Needless to say hygiene and cleanness are the basic requirement in modern
catering industry, and the essentials for consumers’ choice of patronage,
loyalty, and frequent consumption. Thus the outdoor appearance of the
QSR should be clean and tidy, with the vivid and eye-catching fascia; while
the indoor appearance should be fascinating with, a floor clean and dry, no
disrepaired lights, especially the sanitized and appealing lavatories.
9.3.3 Brand Development
a) Significance of Brand Development
When newly enters the market, the brand by its name, attracts consumers’
coming to experience the feel of “Alaska Wild”, thus begins to spread out its
fame and gradually promotes its popularity. This is the preliminary stage
when the project QSR depends solely on the basic elements such as price,
quality, service, and products, to compete. However, when business matures,
battling on individual element will not be working any more, instead the
contest turns into the competition on the integrated capability of the brand,
and thus spelling out the significance of brand development.
b) The effective means for brand development is, through the most efficient
channels provided by advertising and publicity, to successfully convey the
culture of project QSR, its product characteristics and considerate service,
to the mass market. When the consumers, having acquainted with the
project’s brand from advertisement and after practical trials on the products,
discovers that the outcome of their direct experience is consistent to the
advertising effect, they will mutually introduce the project’s brand and
product among themselves. Since then the brand will become famous
progressively. Therefore the brand is life of the project, and advertising is
the root of the brand.
c) Brand Development and Advertising Theme
The brand is the greatest asset in manufacturing enterprises, so is among the
catering industry; the invisible values implied by the multi-National Western
fastfood brands like McDonald and KFC can justify. But it will be a long
course from “brand” to “prestige brand”, since the formation, growth, and
maturity of the latter require certain process without any immediate access;
besides, the whole process requires an innovative creation, broaden-minded
planning, package, and development.
In the course of creating brand image, the first issue is to establish the
advertising theme of “Alaska Wild”. The advertising theme is the core
concept of an advertisement, and after converted to a vivid presentation, the
project wishes to convey to the consumers. Thus the advertising theme is
the main axis, linking with the other components of the advertisement, to
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enhance an organic integration of a complete work.
The advertising theme requires also a fundamental tone or style, in order to
reflect the features of the project and to bring forth to the consumers a
conformed impression on the project. This further interprets why Western
fastfood chains all having unique decoration and outlook in their outlets,
since it is one of the most effective means to transmit the features and
image of their brands to the consumers.

9.4 Brand Marketing


The marketing of brand is under an environment of constant changes, therefore, in order
to adapt to the changing marketing environment, the project will adopt different means to
formulate the relative and operative marketing plannings.
9.4.1 Advertising
Advertising is a marketing means to directly promote the project QSR’s products
and service to consumers through public medias, the following various methods
will be considered:
a) TV Ads
The advantage is offering audio and video effects thus very impressive.
However the production will be costly and time consuming; in addition, the
effectiveness might be limited by time and rate on broadcast and receiving,
storage factors; and the messages are transmitted only in one-way direction.
Nevertheless, the coverage of TV ads is wide, it is inevitably to be used in
first priority since the project aims at developing to a sizeable catering chain.
b) Radio Ads
It is an intensive means of advertising and most applicable to the consumer
groups at the location of outlet and near-by regions (Tianjin and
Shijiazhuang city). Other advantages include its cheaper cost, higher
efficiency, and more popular. However it also exists the disadvantages of
low coverage on broadcast, non-availability of information storage, no direct
visual stimulation to consumers, thus would be adopted at the initial stage
during project commencement.
c) Graphic Ads
It will be only adopted for the project’s promotion on certain designated
programmes and special activities. The relevant coupons (for example, price
concession) can be designed and distributed for consumers’ additional
benefit. While this method is merited in information gathering, lower cost, it
is demerited in less imagiNation provided, slow spread-out speed, and above
all, a narrow coverage.
d) Project-made Publicity Items
The project will print some fancy leaflets frequently at fixed time to
59
advertise the QSR’s special promotions, such as: “King Salmon Week”; or to
introduce festival and entertainment activities; or to publicize details of
existing or new food products; and the paper sheets to be used for
decorating the serving trays but since they are so elegantly designed and
carrying, for example, QSR’s mini-menus, thus customers prefer to keep.
e) Ads on Printings and Publications
For example, on the telephone directory, yellow pages, tourist guide, city
map, admission tickets of Beijing’s places of interest, etc.
f) Outdoor Ads
Roadsigns, buildings, vehicles, light-boxes, billboards, even the blackboards
in supermarkets, tee-shirts, souvenir items, etc, – all of these can carry the
project’s ads and bearing similar advantages: low cost, lasting advertising
time, and the most suitable to promote the project’s company image.
9.4.2 Publicity
They are in form of reports, positively describing the project’s news, activities,
social behaviours (for example, doNations), or introducing QSR’s newly provided
products and service, advice to public (for example, of health concerns), etc,
through the means of radio and TV broadcasts, or newspaper, or other medias. In
compare with advertising, the messages carried by publicity appears to be more
natural and less artificial (though some publicity is on purpose), thus can more
easily win the confidence of consumers.
9.4.3 Public Relations
"Alaska Wild" is a sizeable catering project and aims at a promising development,
thus it is planned to establish a special function to execute brand marketing, in
which public relations will be one of the key focus. The PR staff will be proficient
in the project’s business, market conditions, all various products and service
offered, and daily operation by the QSR; thus reassuring the customers a
satisfaction on consumption.
9.4.4 Menu Marketing
It is also a direct means to promote the project’s brand image. Co-ordinate with
the production sector, the marketing sector will launch different menus and set
target on these particular sales. These menus, though carrying the same products
which the QSR is offering, are incarnated with special meanings, for example,
delicate set meals, lovers’ set meals, high nutritions set meals, holiday set meals,
etc; in addition, the special menus may be in associate with the QSR’s promotional
activities, such as: “Parade on Alaska Delicacy”, “The Call of Alaska Wild”, etc.

9.5 Section Conclusion


The marketing of modern catering industry lies majorly on brand development and
marketing. The project, in the operation form of QSR, must aim at the 3H’s: high
awareness, high creditability, and high market share. It is unquestionable that the brand era
60
has come, with the emphasis on size and scale. The fact is: the final acquisition of good
profit is dependent on upsurging development and downfallen cost, and only by achieving
considerable size can cost be reduced. Therefore successful creation of a prestige brand
image can guarantee the project’s pursuit of expanding QSR to chain operation, which
means successful size development. The project should study intensively the marvelous
experience of McDonald and KFC, which deserves good reference and imitation. In 2003
alone, McDonald and KFC ranked the 1ST two positions in Beijing’s catering business, with
the summed turnover of RMB¥12 h/million Yuan. In view of these 2 fastfood chain
giants occupied 13.85% of the turnover generated by Beijing’s total catering business, there
will be no more doubts on the effectiveness of brand marketing.
At present, the fastfood industry in China already became a market-oriented, energetic
business with intense competition and fast changing market environment. In order to stand
firm amidst the turbulent market, and not be extinguished from the competition, the
project cannot afford any ignorance on brand promotion, its management and marketing.

61
Chapter 10–Organizational Structure, Operation System, Human Resources

10.1 Organizational Structure


10.1.1 Board of Directors
The project management will be determined by the Board of Directors of the
Project company; the Directors will be appointed individually by the project
partners, Beijing XXX Group Limited and Royal Asian (Hong Kong) Limited.
10.1.2 Office of Project Company
The Project company is to execute the policy and decisions from the Board of
Directors, and to perform the routine management.
The office is headed by the Project General Manager (PGM), who will be
responsible for: the overall management on the project, apply for approval of
project establishment, researches and surveys, market positioning, market analysis,
organization of imports (raw materials and production facilities).
10.1.3 Functional Sectors and Working Staff
a) Functional Sectors in the Project Office
#1 Production: Catering Manager:
Products, processing, & production planning & management;
co-ordinate with PGM on production technology; menu design; R &
D for product items; purchase (raw materials excluded); cost control,
quality control
#2 Marketing: Marketing Manager:
Brand promotion & management; publicity; public relations; sales &
marketing
#3 Human Resources: Human Resources Manager
Recruitment & training; formulating service & employment manual
#4 Financial: Financial Manager
Finance & capital management; Treasurer; Cost analysis & control;
Inventory management; Bookkeeping & financial reports
preparation
#5 Logistics: Logistics Manager
Storage & Warehousing; Transportation; QSR Outlet maintenance;
Environmental Control, etc
Total 8 staff in 5 sectors, total 9 including PGM.
b) Working Staff: Job Function & Duty (Working in the QSR Outlet)
#1 Head Chef
Kitchen management; Production; Production staff management;
Material-food management; Daily produce schedule & report
preparation
62
#2 Chef (processing)
Processing raw materials & garnishings
#3 Chef (main course)
Production of main courses (fishburgers included); & management
#4 Chef (Misc)
Production of salad, side courses, soup, & snacks; & management
#5 Chef (beverage bar)
Production of drinks, & desserts; & management
#6 Outlet Manager
Overall management on outlet & working staff; Material – non-food
management; Liaison & communication with customers; Market
information gathering & feedback
#7 Supervisor (vacancy adjustable as per turnover size)
Assisting management on outlet & attendants; Posting by turns
(front door reception, etc); Daily sales report preparation; Counting
on customer flow
#8 Attendant
Sales counter reception; Order receiving; Cashiering; Order
allocation; Simple Packaging; Serving
#9 Cleaner
Outlet cleaning (outdoor & indoor, except kitchen); Clear-aways
after dinning; Tidy-ups before reception; Environmental hygiene
#10 Material Caretaker
Laundry & management (receive & dispatch) on cloth items;
Caretaking staff uniforms
Total 48 working staff in project QSR by 2 shifts:
(summarized in the following table)
A shift 20 staff; B shift 22 staff; On-leave relieved by 6 staff. Production
staff 20; Non-production staff 21; Management staff 7.
Security guards to be contracted with professional security companies.

Functions A Shift B Shift Relief Head


Management 3 3 1 7
Production 9 9 2 20
Attendant 6 7 2 15
Cleaning 2 2 1 5
Material 0 1 0 1
Total: 20 22 6 48

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10.2 Operational System
10.2.1 Office of Project Company
09:00–18:00 hrs daytime office-attendance, 12:30–13:30 hrs lunch break; 5 days
per week, leave on the Nation’s legal holidays; 12 days casual leave and 9 days sick
leave (certified by medical organizations) per annum; total daily working hours: 9.
10.2.2 Project QSR
a) Outlet Operation
#1 08:30–20:30 hrs, 12 consecutive hours per day
#2 365 consecutive calendar days per year
b) 2-Shift on Duty
#1 A Shift 08:00–16:30 hrs, 08:00–08:30 hrs preparation for QSR
opening; 30 minutes lunch break, released by turns on non-fixed
time; total daily working hours: 8.5.
#2 B Shift 12:30–21:00 hrs, 20:30–21:00 hrs tidy-ups for QSR closing;
30 minutes supper break, released by turns on non-fixed time; total
daily working hours: 8.5.
The working staff of project QSR will be on 1-day leave per week by turns on
non-fixed date; will be granted allowance when working on the Nation’s legal
holidays; 12 days casual leave and 9 days sick leave (certified by medical
organizations) per annum.
10.2.3 Operation Standard
a) Food Production Standard
In compliance with the “Food Production Standard” promulgated by the
Ministry of Health..
b) Industrial Standard
In compliance with the “Management on Food Hygiene in Catering
Industry” promulgated by the Ministry of Health.

10.3 Human Resources: Management


The success of the project operation will be dependent, if all hardwares already being
determined, on the managing staff. Upon the formulation of market positioning and set-up
of outlet, the operation will be implemented by the working staff on different functions.
The execution and management, therefore, is the sole concern of “human resources
utilization”. To utilize human resources depends on a thorough planning, each rank shall
bear a specific function and requires a proper direction, to head for fulfillment and
development; and all staff grouping together is expected to create the best synergic effect
to exert the greatest working capacity.
10.3.1 Target Management
To stipulate a complete human resource support on the organizational structure:
a) Each staff shall have a proper rank; attaching department; responsibility of
co-operation; outline of duty; and standard requirement on work quality.
64
b) A detailed illustration on the functions of different departments, the
supervising and subordinating layout, and internal co-ordiNation system; the
reporting and responding shall be executed on level-by-level basis.
c) Explication on remuneration & fringe benefits of different ranking; and the
related stimulating (awarding and penalty, spiritual and material) mechanism;
thus each staff can be clear about his/her economic target.
d) Formulation of a strict recruiting and training programme, requirements for
different ranking, sourcing, routine training and target training; and
necessary to emphasize the principle of: “manage well individual functions,
perform well one’s job, unmistakable on duty and responsibility, and
concrete execution and award and penalty”.
10.3.2 Target Training
The competition on the quality of service in the marketplace is majorly the
competition on the quality of working staff. Thus only well-trained staff can offer
high quality of service.
a) Functional Training
To enhance each staff clearly defines his/her post functions, job nature,
scope of responsibility, ranking and attaching, and the standard rules set by
project QSR.
b) Cultivation on Personality
#1 Appearance
All staff – outward staff (attendants) and inward staff (production
staff) – must wear proper and clean uniforms on duty, appearance
must be modest and professional in order to give the customers
confidence in the QSR’s hygiene and cleanliness. The male staff
must not keep mustache; hands and nails must be clean; and pay
special attention to bad breath and body smell. The female staff
must have their hair neatly combed, and wear hair caps; nail paints
must not be raffish, and nails neatly trimmed; only long stocking and
low-heeled shoes shall be allowed, also requires to give customers an
impression of good civility and tidiness. During working hours, all
staff are prohibited from smoking and gum chewing.
#2 Working Attitude
When staff is on duty, performance must be energetic; movement
must be agile, demonstrating a professional spirit. In addition, all
staff, when receiving customers or inter-communicating among
colleagues, must be polite, amiable, using appropriate tones in
speech. Attendants must be affable and patient, pay careful attention
to customers’ requests. If something unexpected outburst, (for
example, controversy on changes), the attending staff should be
65
restrictedly tolerant, to figure out the incident by sincerity. The
Human Resources Department, when training working staff, must
introduce to them the different types of customers, and educate
them how to adapt themselves in different circumstances, grasp the
right chance to perform, be smart in responses, and according to
customers’ individual demands, accommodate them the best service.
#3 Temper Control
Every day, the attendants working in QSR outlet have to directly
receive numerous customers of various types, it is very often that
even they have performed their job according to requirement but
still unable to meet with customers’ satisfaction. However, under the
grand principle of project QSR: “customers are supreme”, therefore
the attendants and managing staff must control their temper, to win
the customers’ understanding by great patience.
#4 Honesty and Manners
Honesty and manners may not be successfully “trained”. But the
training staff should, by inducing and influencing, promote the
mutual respect and assistance among the working staff; educate
them to comply with the QSR rules – not greedy, especially not to
cheat customers. The working staff ’s self-cultivation must be
developed in all aspects, to enhance their winning of the customers’
favourable impression.
So long as the QSR can bring up the staff ’s overall cultivation, besides on
job functions, it will be doubtless the business operation will be running
smoothly, thus can enhance further development and fulfill the target of
profit-earning.
10.3.3 Corporate Cohesion
The project demands all staff to be serious and responsible, mutually cooperates,
to ensure success. The staff shall not only be competent if individual work, but
also willing to help other colleague's on own initiative: possessing the capability to
immediately apprehend the situation, and knowing how to assist. The achievement
of enthusiasm and teamwork spirit will be the ultimate goal of human sources
management, and which will constitute the sense-of-belonging and corporation
cohesion, and will be the invaluable intangible asset of the project QSR.

66
Chapter 11–QSR Management and Marketing Strategy

11.1 Internal – Quality Control


The project QSR is offering to the consumers the catering service which consists of a
sequence of behaviour on the purpose to serve them food and drinks. The foundation of
top-ranking catering service is high quality of catering management, and the core of which
is quality control. Quality control is the constituent within the QSR’s internal management
system, a means to control and monitor the quality of service, to provide satisfaction to the
consumers, and to attain a rewarding economic benefit.
11.1.1 Quality Control and Supervision
The basis for the control and supervision on project QSR’s quality of service
should have 3 requirements.
a) To Establish Standard Rules of Service
#1 When establishing the standard rules of service, the initial
determiNation should be the service content and procedures. A set
of unique action, language, timing of each item in the service
content should be ascertained, including the way and method to
resolve outbursted incidents, occasional requests, etc.
#2 The management staff should sternly execute and manipulate the
service rules, pay special attention to the linking for each service
item, and use the service procedures to unify these items. Thus the
whole package of service can reach a standardized quality, a norm
for designated posts, and a scheduled and systematic practice.
b) Staff Training
The standards on the project’s management and training of human
resources have been already defined in details. (see10.3)
c) Information Gathering on Service Quality
The project will specifically train the management staff to collect the
information on service quality, in order to ensure their comprehension on
the effects of service, by which whether or not the consumers are satisfied;
and for them to adopt relevant measures to improve and upgrade the
existing quality of service.
11.1.2 Control of Service Quality
a) Pre-Control
To enable the service quality meeting with the designated target, the goal set
in the management training before the project QSR’s operation is to
pre-control the occurrence of errors and deviation on the quality and
quantity with the various resources when business commences.
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The main content of the pre-control is:
#1 Pre-control on human resources
#2 Pre-control on material resources
#3 Pre-control on hygienic concerns
#4 Pre-control on emergencies
b) Spot Control
This refers to the spot monitoring and supervision during the procession of
catering service, to enable their standardization and programming; so that
emergencies can be attended and settled immediately. The content includes:
#1 Control on service procedures
#2 Control on production speed: according to the routine pattern of
orders (speed, frequency, etc), to exercise the exact requirement on
product processing and cooking, and to master well the rhythm of
serving.
#3 Control on emergencies: catering service is offering directly
face-to-face, thus may easily evoke customer complaints; if such
unfortunately occur, the outlet manager or supervisor must
immediately attend to the spot and adopt remedial measures to
speedily settle any controversies, in order not worsen the dispute and
affect the mood of others customers at dinning.
c) Control on Feedbacks
Through the feedback and comments on quality, to find out the deficiencies
in service, and to employ measures to reinforce the pre-control and spot
control, so as to improve the quality of service.
The control and supervision on the quality of catering service is the most critical concern
in the project management. In the execution of the operation system in catering practition,
while the different working sectors and teams are the backbones; the implementation of
job responsibility and operational procedures will be the guarantee; under the common
purpose to provide a steady and excellent service to customers.

11.2 External – Competitive Intelligence


While the project requires to well manage internally, simultaneously it should attend to the
peripheral competitive environments.
11.2.1 Attending Competitive Intelligence
When McDonald and KFC compete and expand in China at the same time, their
performance of frequent and effective marketing activities, not only have created
a strong brand prestige, but also promoted the popularity of Western fastfood in
the Nation. In review of their marketing strategies, from the means of progressive
public relations, then the bombardment of advertising of celebrity effect, then the
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multiplicity of promotional measures, and to the aggressive participation of
commonweal, all enhance their brand creditability and awareness, and finally
become tactics to satisfy the local market’s specific favouring. Both competing
chains possess respective features, and difficult to comment which is more
successful. However, it is understood that their triumph on formulating and
determiNation of their marketing strategies, is based on a thorough market
understanding and competitive intelligence. Thus, it can conclude that without the
source of competitive intelligence, the effective market strategies could not have
been invented.
11.2.2 Functions of Competitive Intelligence
a) It is the basis for the project to determine strategies adopted in competition,
which will be the key factor to the project’s success.
b) It is the basis for the project to perform public relations (especially when
handling critical issues). Extremely helpful is to identify the threats and
opportunities in the market, the faster in knowing responding, the better
competitive advantage can be acquired.
c) It is the basis for learning the competitors; and to apprehend the market
opportunity before their awareness.
11.2.3 Content of Competitive Intelligence
Take KFC as example, in related to market feedbacks, KFC promptly collects all
news and information referring to KFC, both positive and negative, from the
global media, in order to decide accurate judgments, pertinent response and
handling; in related to competition, KFC frequently collects all news and
information of its major competitors, for example, McDonald, Burger King; in
related to co-operative partners, KFC periodically gathers the news and
information of Pepsi Cola, Pizza Hut, Domino's Pizza, A & W, all of them (and
KFC) are under the same group; in related to the individual and relevant industry,
KFC gathers the news and information of Coca Cola, Nestlé coffee, etc; in
related to products, KFC gathers the news and information of Mexico Chick Roll
and Rice in Mushroom Sauce; in related to government policy and tendencies,
KFC will collect the news and information of governing laws and regulations on
the catering industry (both fastfood and non-fastfood), and of the activities of the
supervising governmental bodies.
McDonald, simultaneously and certainly, is collecting the similar information.
11.2.4 Acquisition of Competitive Intelligence
In order to collect such enormous and useful information, the marketing staff of
KFC and McDonald has to frequently browse through many different websites,
performs hundreds of inquiry every day; and requires to search on the
newspapers, subscribe the paper clippings, purchase intelligence from
investigation companies, and gather government policies, rules and regulations
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relevant to the industry. This type of work, not just boring and dull, the cost of
which is not cheap. However, if the information comes in pieces, slow speed, and
not complete, then it will lack of time effectiveness, thus will lose its value in
application.
According to the specialists, in comparing the utilization of nowadays’ competitive
intelligence with the traditional type of market information; on one hand, has reinforced
the use of information from mere theoretical research to the practical application, is a
revolution on the service of competitive intelligence itself; on the other, by use of the
internet network which enables the instant monitoring and collecting of the intelligence
from global network, is a revolution in the means of acquisition.
Therefore when facing the turbulent market competition, whether if the project can
acquire the necessary competitive intelligence on time will become the key strategy in its
management and marketing, which provides the functional departments of marketing,
public relations, production and R & D, sales, and even the administration, and human
resources, an overall picture of the competitive environment, and to be the index of
formulating the operational plannings.
Furthermore, another important function of the competitive intelligence is its application
in “public relations on crisis”. Public relations on crisis is the handling and managing of all
emergent and disastrous incidents which would jeopardize the operation and survival of
the project. A complaint or report, if is damaging the project’s image, can be promulgated
to every corner of the internet network in less than 45 minutes; or might be used as a
negative propaganda by the competitors. Therefore in consideration of the long-term
development plan for the project, the competence to obtain timely the crisis information
and to immediately resolve through public relations, is an equally important strategy to
internal management.

70
Chapter 12–Financial Analysis

12.1 Project Programming


The initial programming for the Project’s first stage of development:
#1 Nov 2004 — Apply for project approval; Conduct market research (this
feasibility report will be the foundation)
#2 Nov 2004 — Project approved by pertinent governmental bodies
#3 Nov 2004 — Order on small quantity of raw materials for R & D purpose
#4 Dec 2004 — Registration of Project Company, QSR; selection and rental
of outlet; order on production facilities and raw materials
#5 Dec 2004 — QSR Outlet decoration
#6 Jan 2005 — Installation and test on production facilities
#7 Jan 2005 — Local sourcing on other ingredients and materials
#8 Jan 2005 — Recruiting and training on human resources
#9 Jan 2005 — Mock-running of QSR outlet on 3 days by end of month
(Open or not to public will depend on practical situation)
#10 Feb 2005 — QSR outlet commences business operation

12.2 Financial Analysis


12.2.1 Project QSR’s Basic Requirements – as per the following table:

Table 12a: Basic Requirements for the Project QSR


Standards for QSR Outlet Data Illustration
Front door/Outlet 6,500– People flow is the basic consideration on choice
People flow (day/average) 8,500 head of location.
Customers/Consumption 1,000/¥30 500–999 head/RMB¥30 Yuan
Estimated RMB A location with sufficient people flow to
Monthly Turnover ¥45–900,000 generate the estimated monthly turnover.
For: Dinning area, order and cashier, children
Total Area 2
450 m games, lavatories, kitchen, store room, manager
(practical in use)
room, staff sector
Estimated Kitchen Area 100 m2 For: Kitchen, store room (dry & wet)
Estimated Seat (unit) 160–180 According to finally-fixed dinning area & setting

12.2.2 Investment Cost


Total capital: RMB¥5,000,000 Yuan
a) Paid-up and use by stages according to the project programming:
#1 Nov 2004 — RMB¥200,000 Yuan
#2 Dec 2004 — RMB¥3,445,000 Yuan
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#3 Jan 2005 — RMB¥300,000 Yuan
#4 Feb 2005 — RMB¥1,055,000 Yuan
b) The content of capital in use by stages – as per the following table:

Table 12b: Use of Investment Capital by Stages


RMB¥Yuan Illustration
1ST Stage Investment 5,000,000
Registration, Business License Fee, etc for Project
Set-up
#1 200,000 Company, QSR Outlet; Order on small quantity of
Cost ①
Raw Materials; Business trips, Social Expenses, etc
1ST Payment Estimated rental: RMB¥45,000 Yuan/m2/month
on Outlet 135,000 (RMB¥100 Yuan/m2/month); the 1ST payment may
Rental require for 3-month rent, depending on rental terms
Inclusive: design fee, ceiling, floor, wall finishes,
fume outlet, waste water disposal, plumbing &
electricity, fascia & neon lights, illumiNation, menu
Project Programming –Time-Schedule

display light boxes, price display, air-conditioning,


dinning furniture, surveillance system, fire
Outlet
950,000 prevention system, acoustic system (not including:
Decoration
outlet size increase, outdoor structure renovation,
#2 staircase)
The cost is estimated, with ±5% tolerance,
adjustable by setting, rental area, and practical
conditions.
1ST Order Estimated cost of 1ST lot raw material imports:
for Raw 360,000 estimated month turnover × 40% × 1-month; order
Materials volume and cycle adjusted by actual month turnover
1. Imports of kitchen & production facilities
1,784,700
Production (see table 5b)
Facilities 2. Purchases and installation of other production
215,300
facilities from local
Pre-opening rentals, water & electricity, misc,
Set-up
#3 300,000 working staff recruitment & training, pre-opening
Cost ②
marketing, advertising, promotional fees
#4 Reserve 1,055,000 Capital for Operation

12.2.3 Estimated Return


In view of the life quality of the QSR’s target market (location as well as
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consumers) is constantly promoting, possessing the enthusiasm in pursuit of
healthy, nutritious, stylistic delicacy; the project is confident to offer the most
appropriate products and service to satisfy the urge of market demand, and can
acquire considerable return on investment.
a) Average Difference in Price and Cost and Cost Ratio
It should be marked that the cost ratio is only rough calculation due to
variations on items/cost/price/sales ratio.

Table 12c: Project QSR’s Cost Ratio for RMB¥100 Sales


Average Estimated Cost Ratio* for
Product Category Items
Cost Price Diff Sales Ratio ¥100 sales
#1 Main Course (Fishburger) 5 5.03 11.00 5.97 16.50 % 7.55
#2 Main Course (Breakfast) 2 2.98 6.50 3.52 8.50 % 3.90
#3 Main Course (Lunch/Supper) 8 13.74 30.69 16.95 15.00 % 6.72
#4 Leisure Bites & Snacks 3 1.28 3.67 2.39 14.50 % 5.06
#5 Side Course 6 2.89 7.42 4.53 8.00 % 3.12
#6 Drinks, Ice Cream 13 1.10 5.04 3.94 37.50 % 8.18
6 Total: 37 ---- ---- ---- 100.00 % 34.52

b) Estimated Expenses
Based on a monthly turnover of RMB¥ 900,000 Yuan:

Table 12d: Project QSR’s Estimated Expenses


Expenses RMB¥Yuan Month Year Illustration
Outlet Rental 45,000 540,000 (RMB¥100 Yuan/m2/month)
Human Resources 42,840 514,080 48 head ×¥3.5/hr × 8.5hr × 365 day
Management Cost 22,500 270,000 Wages and other expenses for Project Company
#1 36,000 432,000 Water & Electricity
Operation #2 5,000 60,000 Hygiene
Cost #3 5,000 60,000 Miscellaneous
#4 8,000 96,000 Unforeseen
Advertising Funds 27,000 324,000
Promotional Cost 60,000 720,000 (Including price concessions)
Total: 251,340 3,016,080
+10% Tolerance: 276,474 3,317,688

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c) Estimated Return
Table 12c provides 3 contingencies for reference and comparison:

Table 12e: Project QSR’s Estimated Return


Estimated ROI ① ② ③
(Return on Investment) RMB¥ % RMB¥ % RMB¥ %
Turnover 600,000 100.00 900,000 100.00 1,000,000 100.00
Less: Tax 30,000 5.00 45,000 5.00 50,000 5.00
Less: Product Cost 207,120 34.52 310,680 34.52 345,200 34.52
Gross Profit: 362,880 60.48 544,320 60.48 604,800 60.48
Outlet Rental 45,000 7.50 45,000 5.00 45,000 4.50
Human Resources 45,000 7.50 45,000 5.00 45,000 4.50
Management Cost 15,000 2.50 22,500 2.50 25,000 2.50
Operation Cost 36,000 6.00 54,000 6.00 60,000 6.00
Advertising Funds 18,000 3.00 27,000 3.00 30,000 3.00
Promotional Cost 42,000 7.00 63,000 7.00 70,000 7.00
Depreciation 24,000 4.00 24,000 2.66 24,000 2.40
Expenses: 225,000 37.50 280,500 31.16 299,000 29.90
Profit after Tax: 137,880 22.98 263,820 29.32 305,800 30.58
Month: 161,880 ---- 287,820 ---- 329,800 ----
Cash Flow
Year: 1,942,560 ---- 3,453,840 ---- 3,957,600 ----
ROI (by Year): 2.57 ---- 1.45 ---- 1.26 ----

It is necessary to further illustrate the table:


#1 The monthly turnover may vary by months and seasons, above
turnover based on 3 estimated turnover value;
#2 Depreciation: on Facilities = 10 years; on Decoration = 7 years;
#3 Cash Flow = Depreciation + Profit after Tax;
#4 ROI (by Year) = Total Investment ÷ (Cash Flow/Year).

74
Chapter 13–Check List on Project Establishment

13.1 Check List for Project Initiation


The following illustrates the work content of the project, and to be the check list for
examining the project’s preparation:
a) Formulating Project Proposal (Feasibility Report). Sep, 2004 
b) The first meeting of joint-venture partners and Oct, 2004
determine the means of investment. 
c) Organizing the project company. Nov, 2004 
d) The project company commences work. Nov, 2004 
e) Formulating the project’s progress and supervision, and the
mechanism of reporting to the Board of Directors. 
f) Marketing positioning and operation planning
Marketing positioning will be the first mission, then the relevant “operation
planning” should be stipulated. The marketing positioning should be based
on market research and the background of the project:
#1 The habits of target market within the outlet plan; 
#2 Economic data; 
#3 The food consumption habit, the updated market trend; 
#4 The macro- and micro-environment of the outlet plan. 
g) The setting and plotting of QSR outlet
DetermiNation of the outlet setting of:
#1 Fascia and light boxes; 
#2 Installation of production facilities; 
#3 Installation of public and ancillary facilities; 
#4 Fume outlet, air-conditioning passage for individual areas,
partition, etc; 
#5 Waste disposal system; 
#6 Hygienic control facilities, first-aid kit; 
#7 Installation and on/off control of water plumbings, gas,
electricity, illumiNation; 
#8 Ratio of cashier/sales counters to QSR’s (dinning area)
dinning seat/space; 
#9 Co-ordiNation of production flow and QSR service; 
#10 Customer passage, logistics passage, product-serving flow; 
#11 Recess area for customers, guest and staff lavatories, QSR
office, and storage area; 
#12 Interior design and furnishings; 
#13 Focus on environmental protection and greenization; 
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#14 Conjugation of different lighting system; 
#15 All entrances and exits, outdoors passenger flow, passages
connecting to the surroundings (including the fire escape), way
in/out to parking space/garage. 
h) Management plan on human resources
#1 DetermiNation of job posts, ranking, allocation, supervising
and subordinating, division of labour, standard work quality
and model, corporate staff regulations; 
#2 DetermiNation of wage standard, award/penalty mechanism; 
#3 Formulation of recruitment standard and training scheme; 
#4 Recruiting. 
i) Planning for operation and administration
#1 Material resources: periodic purchase and procedures, payment
mechanism, standard for delivered goods inspection, storage
and transports, inventory management, internal distribution,
control on proper use; 
#2 Cost control: supervision on material resources, and human
resources; 
#3 Sales: determiNation of menu, pricing, discount strategies,
planning for R & D; 
#4 Promotion: advertising, publicity, public relations schedule and
production. 
j) Plan for financial and accounting work
In fastfood industry, there are 7 major elements: sales income, direct cost,
material and human resources, energy, finance, facilities maintenance, and
governmental charges. A profitable project depends on the management of
the former 6 elements and their outcome, and then to formulate a target for
financial and accounting job which mostly suits to the actual sales income,
cost, and profit margin:
#1 Sales income: food, drinks, advertising (other products
advertised in QSR, for example, candies for children), home
banquet (only a possibility), reselling of materials or to-let,
outlet to-let (functional booking) etc; 
#2 Direct cost: the administration cost of the management of,
tele-communications, transports, laundry, garbage, furnishings,
greenization, maintenance and administrative fees, fire
prevention and security fees; and necessary to be distinguished
as fixed and non-fixed costs; 
#3 Cost for material resources and human resources: printing,
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production, stock and inventory, wages, labour insurance
(medical insurance) benefits, training, catering (boarding),
uniform and laundry, etc; 
#4 Energy cost: water, electricity, fuel gas, steam gas, cooking gas,
waste disposal, cable-TV, etc; 
#5 Financial cost: depreciation, interest, taxation, governmental
tariff and charges, etc; 
#6 Maintenance on facilities: intensive repairs, inspection, routine
maintenance, etc, of all installations. 
k) Planning for brand management
Establishment of constant and gradual progressive planning for brand
cultivation, apply brand consciousness to guide the project development:
#1 To standardize the service concept, high-lighting the featured
products and service; 
#2 Design of fascia, logo, slogan, production; 
#3 Formulation of control measures on service quality. 
l) Planning for market competition
#1 DetermiNation of information collecting mechanism; 
#2 The analysis and utilization of competition information. 

77
Chapter 14–Extra Chapter for Project Development

14.1 Prospects for Project Development


14.1.1 Chain Operation
At present, chain operation already becomes the most vital business means in the
catering industry in China. Among the Nation’s leading 100 catering (fastfood and
non-fastfood) enterprises in 2001, there were 79 brands operating in chains, and
their annual turnover amounted to 85.6% of these 100’s total turnover. In other
countries, chain brands also occupy important rankings in the catering industry.
One of the key elements of chain operation is franchising.
Franchising becomes the trend of nowadays’ interNational business operation
model, in USA, more than 35% of its total retail turnover came from franchising.
14.1.2 The Vitality of the Project
The vitality of the project will be dependent on the fulfillment of chain operation,
by adopting the franchising model, to develop and implement group management,
thus becomes a sizeable business.
a) Advantages of Chain Franchise
#1 The gross profit of fastfood business is comparative low. Therefore
only by accomplishment of a large sales volume can acquire
satisfactory margin. Chain Franchise is the most effective means for
the project to speedily expand its scale within a short time, to
diversify into new markets (regions), and to increase total sales
volume considerably.
#2 It can enhance a centralized system of purchases and storage, thus
can guarantee the control on quality and quantity (inventory) of the
raw materials, as well as reducing the cost of buying.
#3 Production centralization (central kitchen) is also an effective means
on achieving economy of scale. Only mass production can reduce
costs and maintaining the quality at the same time. All successful
catering chains, with no exception, depend on incessant expansion
to bring down their management cost.
#4 The top management of the project can congregate the capital and
efforts to develop more effective production technology and
management strategy, apply to implementation, and share among the
chain outlets.
#5 Franchising being a model of business operation and management,
promotes the project to a faster development, growth, and
expansion; in addition, the prevailing government attitude on
78
supporting franchising represents an extraordinary opportunity.
b) Advantage of Specialty Products
The offering of specialty products from “Alaska Wild” will be the project’s
competitive characteristics. Under the benefit of exclusive (relatively
speaking) availability of raw material resources, if the project’s R & D can be
continuously upgraded (for example, on cooking methods, or invention on
new recipes), then the products will possess more distinctive features, be
easierly identified by consumers among other competing products, and
therefore can acquire larger market shares.
c) Advantage of Specialty Brand
The project’s brand marketing should create a successful brand advantage.
Franchising, despite its effectiveness, low cost, fast development and
expansion, still requires the support of the project’s brand image, the media
to identify the quality of its product and service, as well as to meet with the
specific market demand, for example, QSR’s fishburgers, fish products, etc.
A prestige brand, not just a symbol of intellectual property, is also an
important asset in quantitative terms. Since prestige brands can create an
advantageous brand effect, therefore it can promote QSR’s products to a
higher value and market price.
d) Advantage of Tactical Concerns
At present, the nature of catering competition worldwide has been changing
from monomial to multinomial, which means a concern of integrated
operational competence. The project clearly understands the crucial
elements required in successful competition, consist of the comprehensive
management, company image, sales and marketing, customer service, all of
them are more tactical than technological. Therefore the project will adopt a
scientific management style by exercising more data processing and tactical
concerns in order to build up the non-empirical advantage.

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14.2 Terms and Conditions for Franchising by Competitors
Table 14a collects the existing terms and conditions of franchising offered by the major
Western fastfood chains in China, and provides a useful reference for the project to
develop franchising in the coming future:

Table 14a: Franchise Terms and Conditions for Major Western Fastfood Chains
Western Fastfood Chains Brand McDonald KFC Dicos
Commencement of Franchise 1997 1998 1999
Years of Franchise Experience in China 7 6 5
Establishment in China 1984 1997 1996
Basic Investment Size/1 Outlet (RMB¥) 2,000,000 8,000,000 2,000,000
Franchise Terms and Conditions

Franchise Fee (RMB¥) ---- 300,000 200,000


Warranty (RMB¥) 500,000 ---- ----
Total Investment Capital (RMB¥) 2,500,000 8,300,000 2,200,000
ROI Not Showing Not Showing 5%
Royalty ---- ---- ----
Area Requirement on Outlet 250 m2 250 m2 250–350m2
Estimated Seats (unit) Not Showing Not Showing 120–180
Contractual Period (year) 3 10 Not Showing
Regional Authorization N/A N/A N/A
Estimated Monthly Turnover (RMB¥) Not Showing Not Showing 30–500,000

80
Chapter 15–Conclusion

15.1 Comprehensive Appraisal on the Project


15.1.1 Appraisal on Products
The project offers fresh fish products from the nature of Alaska, free from
disease and pollution, and will be a distinctive characteristic in the market.
The production techniques and product scenario mostly suit the market
conditions and demand; the source of raw materials, though depends on imports,
is secured and reliable; modulation on the production facilities is not complicated,
neither is the manipulation.
Therefore from the analysis of product planning, the technics is guaranteed, and
the cost is reasonable.
15.1.2 Appraisal on QSR Outlet Operation
The city, district, and business area determined to be the QSR outlet, are the most
vital location and endowed with the strongest economic advantages in China at
present; thus enable a smashing success by the project’s first strike.
Therefore from the analysis of outlet operation, the advantage of location can
shorten the time span when the project initially launches into the market.
15.1.3 Appraisal on Crisis
From the crisis analysis, since deep-sea fishes are not produced from artificial
cultivation, seldom would disastrous epidemics arise, such as Mad Cow disease,
Avian Influenza (Bird Flu), etc; thus the project is capable for risk-resistant.
15.1.4 Appraisal on Finance
a) Total investment of the project is RMB¥5,000,000 Yuan, inclusive of a
reserving operational capital of RMB¥1,000,000 Yuan, is adequate enough
for the QSR to execute the brand marketing activities of all aspects in a high
profile, aiming to penetrate into the market more speedily.
b) All financial indices show a considerable workability of the project. It is
estimated conservatively an annual sales turnover for the first development
stage is RMB¥10,950,000 Yuan, the ROI by year will be 1.54, with a
distinctive rate of 85.2% pa. The economic benefit of the project is superb,
possessing an outstanding level of profit-earning and cash flow, thus feasible
from the financial analysis.
15.1.5 Appraisal on Development Potentials
The remarkable result achieved by chain business is perceptible, and the market
opportunity at present (will be illustrated in details in next section) is
unprecedented rare. The right time has come: so long as the project can establish
its own distinguishable brand and awareness, then it will possess superior
potentials to develop into chain franchising.
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15.2 Opportunity for Development
15.2.1 Prospects in Domestic Market
Striding towards the 21ST century, the connotation and outlook of modern
Chinese catering industry has been undertaking a tremendous transformation,
conveying the significant meanings as follows:
a) The catering industry enters into fast development.
In Beijing alone, the catering industry exposed itself in various forms such
as: Chinese food, Western food, canteens, bars, tea-houses, fastfood, snack
bars, and with the catering provided in entertaining facilities, the practition
enterprises are numerous; demonstrating the vast market place.
b) The consumption structure enters into transformation.
It is reflected in the increasing dinning-outs. According to a survey, Beijing
citizens consume dinners outside at average 4–8 times per month; those with
a better salary (approx 20% of the Capital’s population) seldom have dinners
at home, average less than 10 times per month. These new rising habits have
offered the opportunity for the catering industry to expand the market size.
c) The demand on quality enters into promotion.
It is reflected in 3 characteristics:
#1 By increasing consumption amount but not the quantity volume –
good food demanded;
#2 By increasing the quantity volume but not the physical burden –
healthy food demanded;
#3 By equating the monetary value but more consumption experience –
variety of food demanded.
d) The consumption concept of new generations enters into the mainstream.
It is very important to study the consumption trend and direction of the
younger generation: the present youth is the generation grown up after the
Nation’s economic reform, and their trend is to enjoy life, catering is one of
the important content in their enjoying of life.
e) The socialized catering consumption enters into popularity.
It popularizes one that the food and beverage is consumed to socialize
entering.
The socialization of catering consumption was brought up in volume by the
tourism industry since mid 90’s, just within the Nation, the mobility of
people flow already reached to average 9 h/million per year, and then was
upsurged in pursuit of quality; and until recent years, due to the promotion
on the Nation’s consumption structure and living standard of the citizens,
enters into the period of popularization.
f) The governmental support enteries into the catering industry.
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In particular, the chain franchising operation model, received the most
unprecedented attention.
Therefore the catering practitioners, by facing the above developing opportunities,
are eager to get hold of these opportunities to upgrade the level of the industry
and their existing business.
15.2.2 Market Situation after Joining WTO
Since December 11, 2001, China became WTO member state.
Thus it is necessary for the project, on its own initiative, to learn and to practically
apply the rules related to WTO, and comply with the global catering trend, in
order to stand firm in the catering industry in China.
The first mission is to apprehend and adapt to the market’s new situations:
a) Being the important component of the tertiary industry, the catering
industry in China possesses the good prospect of a huge market, speedy
development, employ more workforce by relatively lesser investment; hence,
a few developed countries have already output their capital (direct foreign
investment) and brands to China, the flourishing catering brands such as
“McDonald”, “KFC”, and “Starbucks” are good examples.
b) The competition among the catering industry is intense and cruel, however,
in general, the market continues to be attractive because the profit is still
greater than the risk, and opportunities are more than challenges. Therefore
so long as the project has studied the WTO rules intensively, to be brave
when facing the reality of the industry, and to adopt aggressive and relevant
measures; it can ensure a more driving position, instead of just a mere
survival, amidst the strong rivaling brands in the industry. The project will be
facing the following arcanum in the market:
#1 The establishment of pertinent law and regulations will standardize
the development of the catering industry:
Since the regulations and market rules have been further established
and strengthed, the competing practitioners will have to comply with
interNational practice, thus the market will be further customarized
and refined.
#2 The catering industry will develop to a larger scale and more speedy:
The Nation’s 13 h/million population, after fulfilling the basic
adequacy on food and clothing, will certainly demand upgradation:
not merely satisfied in home catering, but will increase rapidly the
frequency of dinning out. At present, the annual expenses per capita
used for dinning out is US$1,000 dollars in USA but only US$35
dollars in China, thus there is considerable space for development. It
is expected the existing 3.5 million catering enterprises in China with
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total turnover of approx RMB¥4,300 h/million Yuan will continue
to increase and the market will be expanded to a larger scale.
#3 The market will enhance the cultivation and mobility of high-skilled
personnel, enables construction of workforce who can meet the
needs of modernization:
In the keenly competing catering industry, only dependent on
empirical management and traditional operation model can not keep
up the pace of changing situations, therefore it is significant to train
more professionals, in particular, the mid-level management and
senior technical staff.
#4 The competition in the industry is increasingly acute, and will be
extended from district to regions, to cities, and even interNationally:
In recent years, the catering industry becomes the hot target of
domestic investment. Different levels and grades of catering
enterprises have driven the market competition into all aspects and
the industry has transformed from sellers’ market to buyers’ market.
After China’s joining WTO, there will be more foreign catering
enterprises of prestige brands targeted at the Nation to strive for the
market share, thus justifies business opportunities are here in the
market, but also implies more intense competition.
#5 There will be more innovative products and service provided by the
industry:
The catering product will not be limited by only food components;
instead it will be an organic composition of recipes, menu,
environment, and activities. The recipes will follow the 5 L’s in the
interNational trend of food consumption: low grease, low sodium,
low sugar, low fat, and low seasoning, and more emphasize on
nutrition and health. The menu will be more concerned on associate
of recipes, and to become a theme menu, or a specialty menu. The
dinning environment will partially depend on the uniforms, serving
manners, as well as the designed recreational activities which match
with the dinning activities or the theme of certain promotional
activities. It is therefore expected that catering service in future will
be more concerning on consumers’ emotional feeling, individuality,
and standardization.
#6 The operation model of the catering industry will be more
innovative, meanwhile the 6 major forms:
— Direct chain operation – implements socialized production,
economy of scale, and creation of company and brand image.
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— Franchise operation – multi outlets utilizing one kind of
technology, offering same products, under the same brand,
with unique company image, unique advertising programmes
and publicity, unique quality standard; and to be profit-sharing.
— Supermarket Catering – in which the customers not only can
directly consume, but can also pick up their own choice of
ingredients, and cook by themselves; thus can satisfy the
psychology of consumers in innovation, all-round concern,
convenience, and low cost.
— Takeaway and deliveries – these services meet the demand of
consumers with increased intensity of work and accelerated
rhythm of living, through which same quality of catering
service is available, but additionally accompanied by
convenience and practicality.
— No-Retail-Outlet operation – omits the kitchen production on
spot and saves a large amount of operational cost, but offering
same good quality. (But a sophisticated system of logistics and
payment required)
— Conglomerate management – through the measures of assets
consolidation, strategic restructure, to perform trans-enterprise
cooperation by mergers and acquisitions, thus reinforcing the
competitive strength.
#7 The marketing activities of the catering enterprises will be further
fortified, in the following areas:
— Service marketing – emphasizing on customer satisfaction;
improvement of service; provide creative and distinguishable
service; aiming at satisfying customer needs and to attract
more consumers.
— Cultural marketing – through mutual cultural understanding
and harmonization, to enhance the catering enterprises in
exchange of transNational culture; this is especially important
to foreign brands to understand the local culture and develop
their operational and marketing activities most suitable to the
local market.
— Brand marketing – via the brand effect to enhance the linking
with and support by the loyal consumers.
— Network marketing – the establishment of retail network and
its marketing activities can enhance the catering enterprises
and consumers an intimate relationship and reinforce mutual
recognition and interaction.
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15.2.3 Market Opportunities after Joining WTO
After joining WTO, the catering industry in China has been approaching to new
opportunities. The project will encounter these opportunities as below, which the
industry had never been available before:
a) The market will be promoting to a more favourable investment
environment, and will attract MNC’s (such as the project company), brand
new products, and specialty brands, to bring forth new development and
prosperity to the catering industry in China.
b) The vast market implies the possibilities of lower cost, thus enhances the
project to promote better quality of service.
c) The market is ripe for acceptance of the project’s investment funding and
import of equipment (the production facilities).
d) The market is well prepared for the project company’s advanced experience
of management.
e) The market is ripe for the project to create a new catering brand.
15.2.4 Market Challenges after Joining WTO
Market opportunities and challenges often go hand in hand; the same time when
opportunities are there, the challenges also cannot be ignored.
a) Other interNational prestige catering brands will consider entering into the
market.
b) The foreign catering enterprises, will also possess the advantageous
conditions, strong investment capital, and will adopt all kinds of means to
compete in the market.
c) Many of the domestic catering enterprises, exercising a flexible mechanism,
and considerable economic strength, providing localized products, and
absorption of foreign management techniques through these recent years,
might be the project’s strong rivals.
d) The educational level of the catering practitioners at present in China, from
the base attendants to the mid-level management staff, is relatively low, and
commonly lacking professional knowledge, and well-matured consciousness
of service; therefore might impose difficulty in the project’s planning on
human resources recruitment and training.
However, by name of challenge it possesses 2 other meanings, which is a pressure
as well as a drive. Viewing on long-term basis, the catering industry in China, after
the baptism of the challenging competition, is expected to great leaping forward
on the quality of service; and can bring forth to the project, an excellent
environment for gradual development.

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15.3 Conclusion
Combining together the various analyses in the report, the project will certainly be a
business of good margin and high developing potential.
Therefore, the top management of the project should determine to firmly seize of the
opportunity and move at the greatest speed.
Finally, the following 6 considerations suggested to be the key reference for the project’s
future development, as well as the conclusion of the report:
a) Reinforcing the consciousness in brand image
To constantly improve and stimulate brand marketing and promote “Alaska
Wild” to a prestige brand.
b) Reinforcing the consciousness in quality
To strive for authentication of ISO9002, and create the brand, and project
image by quality.
c) Reinforcing the consciousness in technics and innovation
To actively research and adopt new technics, and develop new products.
d) Reinforcing the consciousness in intelligence
To constantly master the market trend, especially in comprehending the
competitive environment.
e) Reinforcing the consciousness in talent
The catering industry is labour intensive, thus staff training is critical.
f) Reinforcing the consciousness in service
The catering industry is the service business, and the service is consigned to
nobody but consumers.

The Last Page

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Attachment 1:《The Sample Contract for Beijing Rentals》
合同编号:
出租人: 签订地点:
承租人: 签订时间:

第一条 租赁物
租赁物名称 数量 质量 配套设施 用途 使用方法和性质

第二条 租赁期限自________ 年___ 月___ 日至________ 年___ 月___ 日。第八期届满,


双方有意续订的,可在租赁期满___日内续订租赁合同。
(注:租赁期限不行超过二十年,超过二十年的,超过部分无效。 )

第三条 租金及其支付方式与期限
租金(大写):___________________________________。
支付方式与期限:_________________________________。

第四条 租赁物交付的时间、地点、方式及验收:_________________________。

第五条 租赁物的维修
出租人维修范围及时间:_______________________________。
出租人未履行维修义务的,承租人可以自行维修,维修费用由出租人承担。
承租人维修范围及费用承担:_________________________。

第六条 因租赁物维修影响承租人使用的,出租人应当相应(减少租金/延长租期)

第七条 租赁物的改善或增设他物
出租人(是/否)允许承租人对租赁物进行改善或增设他物。改善或增设他物不行因
此损坏租赁物。租赁合同期满时,对租赁物的改善或增设的他物的处理办法是:
______________。

第八条 出租人(是/否)允许承租人转租租赁物。

第九条 在租赁期间因占有、使用租赁物获得的收益 ,归_____________ 所有。

第十条 租赁期满返还租赁物的时间、地点、方式及验收:_____________。

第十一条 违约责任:______________________________________。
违约金或损失赔偿额计算方法:_________________________。

第十二条 合同争议的解决方式:本合同项下发生的争笔名,由双方当事人协商解决,也可以
由当地工商行政管理部门调解;协商或调解不成的,按下列第____种
方式解决; (一) 提交____________仲裁委员会仲裁;
(二) 依法向_____________人民法院起诉。

第十三条 其他约定事项:_________________________________________。

出租人 承租人 鉴(公)证意见


出租人(章): 承租人(章): 鉴(公)证机关(章)
法定代表人: 法定代表人: 经办人:
委托代理人: 委托代理人: ________ 年___ 月___ 日

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