Goel has identified a niche in healthy vegan food and customers concerned about the impact of restaurants on the environment. He is contemplating whether to add vegan menu to the Yalla Momos restaurant brand or start a new restaurant brand called Dinefest to provide vegan and low-cost healthy-eating options. He thinks he has a good chance of becoming a market leader if he introduces low gourmet membership fees and a no-frills service concept and highlights the environmentally friendly attributes of the Dinefest. He estimates that Dinefest can generate AED 1.3 million in 2017 to AED 3.5 million in 2019 in sales revenue. He estimates that the number of restaurants he operates will also increase between 2 and 5 restaurants within the period. He will increase the number of restaurants through a mixture of organic growth and acquisition of existing restaurant groups. Dinefests business model will offer a no-contract gourmet membership, i.e. there is no fixed membership period. Dinefest will use eco-friendly cookware and equipment based on ceramic technology to prevent food from sticking to them. This non-stick technology will provide a better alternative to Teflon, which has been traditionally used in some cookware but tends to break down in high cookingtemperatures. Other eco-friendly cookware products will be sourced from recyclable materials and designed to heat food faster.In order tooffer low Gourmet membership fees, their model will be based on a no-frills concept, meaning that he will restrict the restaurant to cuisines prepared with organic ingredients sourced locally. There will be no buffets and no caf or bars that you would expect to find in traditional restaurants.The low-cost model that will be used by Dinefest will be dependent on advanced technology. Prospective Gourmet members can join using a simple online process that can be completed in minutes. Members can also managetheir accounts, view cooking class timetables and book cooking lessons online.The use of technology results in an efficient staffing model with, for example, no need for dedicated in-restaurant sales and marketing teams.

GOURMET MEMBERSHIP

DinetfestGourmet membership will be on a no-contract basis, i.e. it will not involve a fixed membership period, and members are free to cancel their membership at any time without penalty. There will be two types of membership: basic gourmet membership, where the member can access two chosen restaurants and premium membership where the member can access restaurants nationwide. Both types of membership require payment of a monthly fee. It will be possible to access restaurants daily by booking online or by telephone. Membership fees vary depending mainly on the location of the restaurants. Occasional marketing campaigns will be run, offering discounted membership to all new members. Student members will also receive a discount, and kids below the age of five can eat for a fixed price yet to be determined. Each gourmet member will be provided with a club card which will be used to get the privileges meant for members. Premium members will have access to free cooking classes and healthy living dieting guides. They can also arrange for individual coaching from a master chef without an additional fee.

STAFFING

A typical restaurant will have five employees (three chefs and two waiters), a manager and an assistant manager, who manage the restaurant. Other staff will work at the head office in various functions including IT, HR, Finance and Marketing. Restaurant staff will be complemented by some ad hoc waiters that will be hired on a zero-hours contract where they are not guaranteed to be offered work in any one week. The ad hoc waiters will be paid the minimum hourly wage rate but will able to supplement their income with tips that they will receive from benevolent customers. All waiters will be trained to be courteous, polite and respectful to the customers. They will be trained to be diligent in their duty and to uphold the motto: the customer is a king, and they will be expected to attend additional training sessions related to health and safety. Goel will empower restaurant managers to run their sites independently, but he will determine the membership fees.

MARKETING

The marketing teams main activities are market research; the promotion and advertising of new and existing restaurants; raising brand awareness and advising on pricing strategies. The Marketing team will work closely with the IT and Properties department. Marketing efforts will be directed at both existing members, to try to ensure member retention and the recruitment of new members. The marketing team will use the website to provide members with details of cooking classes being operated each week and any other news or member offers. The managers will also use the customer database to communicate electronically with members using email and text messages. Regular marketing campaigns will ensure that the awareness of the Dinefest brand is high.

FINANCE

The financial information system will be developed to produce monthly management accounts and half-yearly and annual statutory accounts. It also will generate daily and weekly sales revenue and membership number information for management to monitor actual results against budgets. The Finance team will also carry out ad-hoc projects, including investment appraisal and investigations, along with ongoing decision support. Some areas, including all internal audit work, will be delivered by external experts. Budgets will be produced annually using incremental budgeting for sales and cost items. All budgets will be broken down into monthly periods, with the exception of the sales budget, which is broken down into weekly periods.

What costs will be relevant if Goel wants to establish a restaurant. You will need to look at the Income statement (Statement of Profit and Loss) and Balance sheet (Statement of Financial Position) on the attached page below. You will need to demonstrate your understanding of what cost is relevant or irrelevant and explain why they are relevant or irrelevant.

Identify the relevant costs for establishing Dinefest. You will need to look at the Income statement (Statement of Profit and Loss) and Balance sheet (Statement of Financial Position) on the attached page below. You will need to demonstrate your understanding of what cost is relevant or irrelevant and explain why they are relevant or irrelevant.

Budget information 2019 Gourmet Membership Fee Budget 2017 Number of Restaurants Average number of members per Premium restaurant Basic Total Average membership fee per month Premium (AED) Basic iotal membership fees per year (AED Premium 000) Basic Total City 3 365 115 480 50.00 25.00 18,250 2,875 21,125 Suburbs 2 305 104 409 45.00 20.00 13,725 2,080 15,805 Total 5 670 219 889 95.00 45.00 31,975 4,955 36,930 Sales Budget 2019 Number of Restaurants Average number of members per restaurants Total sales revenue (AED 000) 5 889 36, 930 Per member AED Total AED 000 Number of members per restaurant 670 219 Yearly membership fees Premium Yearlymembership fees Basic Total sales revenue from membership 47.50 22.50 31,825 4,927.50 36,752.50 Task 2 Explain which of the costs will be relevant if he decides to establish Dinefest as a separate restaurant brand. Explain any other factors that Goel should take into consideration before deciding whether to go ahead with Dinefest. Task 3 Explain how the application of beyond budgeting could benefit Goel. Operating Profit Budget 2019 AED 000 Total AED 000 36,752.50 Per Restaurant AED 000 AED 000 7,350.50 Sales revenue Operating expenses Restaurant operating costs Lease costs Staff costs Head office costs Depreciation Amortisation (15,920) (1,500) (8,822) (3,065) (2,650) (1,215) (3,184) (300) (1,764.4) (613) (530) (243) (33172) 3,580.50 (6,634.4) 716.1 Operating profit Budget information 2019 Gourmet Membership Fee Budget 2017 Total 5 Number of Restaurants Average number of members per Premium restaurant Basic Total Average membership fee per month Premium (AED) Basic Total membership fees per year (AED Premium 000) Basic Total City 3 365 115 480 50.00 25.00 18,250 2,875 21,125 Suburbs 2 305 104 409 45.00 20.00 13,725 2,080 15,805 670 219 889 95.00 45.00 31,975 4,955 36,930 YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED) Amount in AED 504,000 151,200 352,800 Particulars Net Revenue Cost of Food sales Gross Profit Operating Expenses Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement costs Operating Profit Interest Net Profit 68,000 54,000 23,000 30,200 13,000 15,800 0 148,800 13,000 135,800 Note: AED = United Arab Emirates (Emirati) Dirham; US$1 = AED3.67 on April 30, 2016. Source: Created by the authors based on company data. YALLA MOMOS PROJECTIONS WITH AND WITHOUT EXPANSION (2016) (IN AED) Amounts shown in AED Sales price per unit Sales volume per period (units) Raw material cost Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement cost Without Expansion 20.00 27,720 6.00 75,000.00 61,400.00 26,000.00 34,720.00 14,000.00 17,060.00 8,000.00 With Expansion 20.00 36,360.00 6.00 88,000.00 75,000.00 34,000.00 38,360.00 19,000.00 19, 180.00 12,000.00 16,000 Interest 13,000 Budget information 2019 Gourmet Membership Fee Budget 2017 Number of Restaurants Average number of members per Premium restaurant Basic Total Average membership fee per month Premium (AED) Basic iotal membership fees per year (AED Premium 000) Basic Total City 3 365 115 480 50.00 25.00 18,250 2,875 21,125 Suburbs 2 305 104 409 45.00 20.00 13,725 2,080 15,805 Total 5 670 219 889 95.00 45.00 31,975 4,955 36,930 Sales Budget 2019 Number of Restaurants Average number of members per restaurants Total sales revenue (AED 000) 5 889 36, 930 Per member AED Total AED 000 Number of members per restaurant 670 219 Yearly membership fees Premium Yearlymembership fees Basic Total sales revenue from membership 47.50 22.50 31,825 4,927.50 36,752.50 Task 2 Explain which of the costs will be relevant if he decides to establish Dinefest as a separate restaurant brand. Explain any other factors that Goel should take into consideration before deciding whether to go ahead with Dinefest. Task 3 Explain how the application of beyond budgeting could benefit Goel. Operating Profit Budget 2019 AED 000 Total AED 000 36,752.50 Per Restaurant AED 000 AED 000 7,350.50 Sales revenue Operating expenses Restaurant operating costs Lease costs Staff costs Head office costs Depreciation Amortisation (15,920) (1,500) (8,822) (3,065) (2,650) (1,215) (3,184) (300) (1,764.4) (613) (530) (243) (33172) 3,580.50 (6,634.4) 716.1 Operating profit Budget information 2019 Gourmet Membership Fee Budget 2017 Total 5 Number of Restaurants Average number of members per Premium restaurant Basic Total Average membership fee per month Premium (AED) Basic Total membership fees per year (AED Premium 000) Basic Total City 3 365 115 480 50.00 25.00 18,250 2,875 21,125 Suburbs 2 305 104 409 45.00 20.00 13,725 2,080 15,805 670 219 889 95.00 45.00 31,975 4,955 36,930 YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED) Amount in AED 504,000 151,200 352,800 Particulars Net Revenue Cost of Food sales Gross Profit Operating Expenses Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement costs Operating Profit Interest Net Profit 68,000 54,000 23,000 30,200 13,000 15,800 0 148,800 13,000 135,800 Note: AED = United Arab Emirates (Emirati) Dirham; US$1 = AED3.67 on April 30, 2016. Source: Created by the authors based on company data. YALLA MOMOS PROJECTIONS WITH AND WITHOUT EXPANSION (2016) (IN AED) Amounts shown in AED Sales price per unit Sales volume per period (units) Raw material cost Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement cost Without Expansion 20.00 27,720 6.00 75,000.00 61,400.00 26,000.00 34,720.00 14,000.00 17,060.00 8,000.00 With Expansion 20.00 36,360.00 6.00 88,000.00 75,000.00 34,000.00 38,360.00 19,000.00 19, 180.00 12,000.00 16,000 Interest 13,000