Fonda Mexican Restaurant

Business Structure (6)

-Structure of Fonda is a combination of trust and company

-One parent company owned by family trusts

-Shareholdings by himself and business partner (now two partners)

-Shares are held within own private discretionary family trusts

-The shares in a parent company

-Parent company owns the rest of the corporate structure

-Each restaurant is its own propriety limited company in its own right

-Separate propriety limited company which is in charge of all the payroll

-Everyone in corporation is employed/paid by one company despite the fact they work in different restaurant

Business Planning (7)

-Business plan was a little different than conventional business plan

-The most important part of the business plan was the cash flow projections

-Cash flow projections were how much Fonda was going to cost to set up, what sort of turnover it will have (revenue hard to project but looked at direct/indirect competitors), and what expenses will occur as the business is ran (percentage of turnover)

-From a product/brand side of things - ensuring that you have a product that people will want. Important to get feedback and collaborate with focus groups

-Base model of what they saw overseas in America

-Tested name, colours, menu, price

-Business planning is about derisking the venture

-Business plan has been changed - core of product/brand hasn't changed, revenue was larger than expected (also larger costs)

-Infrastructure needed to operate business was at a higher level

Non-Financial Performance Indicators (7)

-NFPI are most important - often flow into financial performance indicators

-Key NFPI is the secret shopper program - measured weekly

-Culture surveys and staff turnover can give a clear picture on how staff are feeling

-Strong link between happiness and financial performance of business

-Food safety compliance needs to be adhered to

-Food ordering times

-Number of complaints

Performance against Budget (8)

-Performance is assessed by location

-Dashboard put together for each restaurant which incorporates secret shopper results, sales (tracks how leadership team are managing labour costs and cost of goods)

-Also have profit share system going - each leadership team are on base salary but also a % of profit that the restaurant performs

-Leadership team therefore looks closely at profit/loss statement

-Monthly meeting to go through results of each restaurant

-Quantifiable measurements means there is a high level of accountability

-Staff drive the budgeting

-Company structure (rather than franchise) means you maintain control of culture, who is hiring

-Disadvantage means you don't have necessary an owner - but get around this by having the profit share system

CVP (9)

-CVP has a huge impact on planning

-First hurdle is breaking even, next is making a profit

-Had a worst case + realistic + best case projection

-Worst case was breakeven - so no emotional/financial hardship

-Gives you a guide on how much you can invest as breakeven will change with investment

-Starting small means breakeven point is obtainable

Profit Share Scheme (9)

-Taken off flight centre model

-Every leader is making more money than on fixed company

-Business is also making greater profits - even though there is greater saleries

-Management links to accounting

QUESTIONS

1. discuss the operating model and its pros and cons.
2. discuss the reelevance of Cost-Volume-Profit (CVP) Analysis.
3. Was CVP relevant to starting and expanding operations for Fonda?