? In this project, we intend to analyze the financial feasibility of opening a new small burger
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In this project, we intend to analyze the financial feasibility of opening a new small burger restaurant in downtown Victoria, British Columbia (BC). Burger restaurants are part of the fast-food industry. They are classified under limited-service eating places. Companies in this classification operate under conditions of monopolistic competition; that is, players compete with each other while acting as monopolists in their own segment. The monopoly power is justified by the player's competitive advantage, which could be a characteristic of the product or service, quality, taste, efficiency, or any other key aspect of the service provided. In this industry, the level of competition is high whereas the market concentration and the barriers to entry are low. According to Statistics Canada (2018), in BC, there are nearly 11,000 food and drinking places, and 41.2% of these places are limited-service restaurants. This data validates the monopolistic competitive structure of the industry. We begin by estimating the market share of this new business. In 2019, the total revenue of limited- service restaurants in BC was CAD$5.07 billion (Statistics Canada, 2019). 27.7% of this total revenue is the market share of the major players in the industry (Ibis World, 2019). Thus, the total revenue of small limited-service eating places for minor players, i.e., for businesses similar to ours, is approximately CAD$3.7 billion: $5.07 billion x 72.3% = $ 3.7 billion. (1) According to Statistics Canada (2017), the total population in BC is 4,648,055 and the total population in Victoria is 85,792. Thus, the ratio of the population of Victoria to BC is 85,792 4,648, 055 x 100% = 1.85%. Taking this ratio and applying it to the total revenue of small limited-service eating places for minor players in BC, one can project the total revenue of small limited-service restaurants in Victoria to be approximately CAD$ 68.45 million: 202 restaurants x (2) $3.7 billion x 1.85% = $68.45 million. (3) Now, since we have estimated the total revenue for this industry in Victoria, our next task is to estimate the total revenue of one small burger restaurant in the city. In Vancouver Island, the number of small food and drinking places per 100,000 persons is 202 (Statistics Canada, 2017b). Thus, in Victoria, with a total population of 85,792, the number of small food and drinking places ought to be 173 restaurants; that is, = 173 restaurants. (4) This number, however, includes all types of restaurants in the region. But, according to Statistics Canada (2018), 41.2% of eating places in BC are limited-service restaurants. Thus, the estimated number of small limited-service restaurants in Victoria is approximately 71 restaurants 85,792 100,000 In this project, we intend to analyze the financial feasibility of opening a new small burger restaurant in downtown Victoria, British Columbia (BC). Burger restaurants are part of the fast-food industry. They are classified under limited-service eating places. Companies in this classification operate under conditions of monopolistic competition; that is, players compete with each other while acting as monopolists in their own segment. The monopoly power is justified by the player's competitive advantage, which could be a characteristic of the product or service, quality, taste, efficiency, or any other key aspect of the service provided. In this industry, the level of competition is high whereas the market concentration and the barriers to entry are low. According to Statistics Canada (2018), in BC, there are nearly 11,000 food and drinking places, and 41.2% of these places are limited-service restaurants. This data validates the monopolistic competitive structure of the industry. We begin by estimating the market share of this new business. In 2019, the total revenue of limited- service restaurants in BC was CAD$5.07 billion (Statistics Canada, 2019). 27.7% of this total revenue is the market share of the major players in the industry (Ibis World, 2019). Thus, the total revenue of small limited-service eating places for minor players, i.e., for businesses similar to ours, is approximately CAD$3.7 billion: $5.07 billion x 72.3% = $ 3.7 billion. (1) According to Statistics Canada (2017), the total population in BC is 4,648,055 and the total population in Victoria is 85,792. Thus, the ratio of the population of Victoria to BC is 85,792 4,648, 055 x 100% = 1.85%. Taking this ratio and applying it to the total revenue of small limited-service eating places for minor players in BC, one can project the total revenue of small limited-service restaurants in Victoria to be approximately CAD$ 68.45 million: 202 restaurants x (2) $3.7 billion x 1.85% = $68.45 million. (3) Now, since we have estimated the total revenue for this industry in Victoria, our next task is to estimate the total revenue of one small burger restaurant in the city. In Vancouver Island, the number of small food and drinking places per 100,000 persons is 202 (Statistics Canada, 2017b). Thus, in Victoria, with a total population of 85,792, the number of small food and drinking places ought to be 173 restaurants; that is, = 173 restaurants. (4) This number, however, includes all types of restaurants in the region. But, according to Statistics Canada (2018), 41.2% of eating places in BC are limited-service restaurants. Thus, the estimated number of small limited-service restaurants in Victoria is approximately 71 restaurants 85,792 100,000
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To compute the payback period of the project we need to determine the time it takes for the initial investment to be recovered through the projects cash flows The payback period is the point in time w... View the full answer
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Auditing and Assurance Services
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6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws
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