1. The concept and target audience
2. How it works
3. Marketing
4. Possible directions of development of the business model

 

1. The concept and target audience

We are in the central business area of a major city, say San Francisco. 
It is packed with scores of office centres and simply offices staffed by tens or even hundreds of thousands of cubicle rats.. Clerks, sales managers, account managers, secretaries, record-keepers and other office folk. They all tend to get hungry at lunch time.

What options do they have now?

• a café/restaurant: too expensive and takes too long (you sit and wait till they bring you the menu card, then they cook for you, make you wait for the bill and then for your change; an hour or so all in all);

• a business lunch: also neither cheap (somewhat 200$ monthly; a substantial portion of one’s salary), nor quick; will hardly take less than half an hour;

• fast food like McDonald’s: cheap and quick, but: a narrow assortment; not wholesome, objectively, and poor quality, subjectively (with a lot of questionable stories about the horrors of fast food) – while the share of customers trying to eat healthy food is growing;

• food brought from home: cheap, quick, but not always convenient (must be cooked at home and taken to the office; eating at work is not encouraged everywhere, and there may simply be no eating space).

It follows that a format successful in the daytime business catering market must simultaneously feature:

• cheapness, ideally close to that of home-cooked food, i.e. supermarket prices plus a small mark-up;

• promptness similar to fast food;

• quality and choice similar to restaurant menus.

In our opinion, a chain of buffet restaurant clubs meets those requirements.

At a buffet restaurant, you can well eat three courses in twelve minutes.

The dishes" quality and choice will depend on the budget allocated for each guest and may equal those at high-price restaurants.

Big volumes mean low prices (and the buffet format itself is inherently industrial as regards catering organization, plus a multiplicative effect across the network), and direct purchases will keep the costs low enough for the final price charged to the customer (including the company’s normal margin) to be no dramatically different from the raw products" prices at a supermarket.

The work process (described in more detail below) makes our restaurants unfastidious to the premises as compared to traditional cafés/restaurants (area, configuration, and meeting a heap of kitchen organization requirements, both stupid and problematic — as no food will be cooked on the premises) and thus enables us to cover the areas of interest as densely as we need. In other words, to provide most of our prospective customers with service within a walking distance.

Cheaply — pay attention again. The deployment of a network in the above format will cost an order less than opening traditional eateries; premises rent and renovation will be much cheaper, and we don’t have to buy expensive kitchen equipment for each outlet.

Why a club restaurant? The format requires buying a contract rather than paying for a single visit. This permits a unique marketing policy (see below for details) and minimizes smuggling losses. Why smuggle food from the buffet if you’ve booked your meals for six month to come?

Our target audience is that very "office plankton" with relatively small incomes. This is the case at the first stage (see The Business Model’s Possible Lines of Development section below). Here we assume that its two other advantages (quality/assortment and speed) will also attract the attention of some people for whom the meal’s price is of lesser concern than quality.

Geographically, the format (in its base version described here; see The Business Model’s Possible Lines of Development section below) will be required in metropolitan cities with distinct and densely populated business areas.

We believe that the format described here is to occupy a major part of the public catering market in metropolitan areas. In other words, we see a multi-billion-dollar future for this business model.

 

2. How it works

The operation will be organized in a hub-and-spokes configuration, with one big factory located maybe on the outskirts (or, conversely, at the city centre) and producing cooked and semi-cooked meals on an industrial scale. The product is then shipped in industrial hot food containers on specially equipped vehicles (with temperature and humidity control) that deliver it to the restaurants. The cooking will be completed in transit.

Then different options are possible: the hot food containers can be installed directly in the restaurant hall for distribution, or the food may be issued into the hall in smaller containers; these details will be determined as the technologists finalize the business processes and process charts. The restaurant’s opening hours will be divided by process breaks (perhaps into the standard breakfast/lunch/supper plus a limited snack offer for night workers at some restaurants).

The clients will enter the restaurant through access control doors (one by one) opened by their client ID’s (barcodes from phone screens, with bar codes or RFID chips, etc). The ID reader information will be processed online in the central database to make sure that one cardholder has each meal only once.

This eliminates the need to keep a doorman at the entrance.
Smuggling control can be based on cameras (this is mainly psychological; there can be more dummies than real cameras), duly motivated personnel in the halls, and electronic media. For example, the system compares the person’s weight as he enters and then leaves; if the difference is excessive, the exit is blocked and the administrator is called; the whole control procedure is instantaneous and invisible to the customer.

The restaurant’s and its personnel’s functionality will be strictly limited, mainly to unloading the vehicles and supplying the food to the hall, dish collection and washing (plus laying the tablecloths, wiping the tables and floors, etc.). The restaurant will have no cash desk (nor the resultant headaches or record-keeping, cash collection and the like), no subscription clerks, nobody and nothing redundant.

The staff will essentially be limited to the managing director responsible for the outlet’s operation and his/her assistant(s) responsible for cleaning and food logistics.

The assortment actually available at each restaurant (i.e. the presence of food in the respective containers at the counter) will be monitored electronically as well as visually. When shipped from the central production facility, each container will be marked with a bar code/RFID label carrying information particularly about the minimum residual weight for the dish, and each receiving container at the counter will be equipped with a weight sensor.

So, if the item’s weight left falls below a preset level (there can be a number of these, from "green" to "red"), a signal for the employee is generated. When a critical level is reached, an alarm signal will also be forwarded to the central office so that emergency corrective measures can be taken.

The central database server will query the sensors at certain intervals (e.g. every 30 seconds) and log the results. These data will help best adapt the company’s general process cycle to the customer’s needs and find out how food expenditure depends on the combination of the dishes and/or the number of the people inside. The presence of enough dinnerware available to the customers is monitored exactly in the same way.

The company’s commercial policy and the organization of mutual settlements with its customers will be basically similar to the system of mobile operators" accounts. That is, each client will have an account to which the money paid will be credited, to be written off after each meal or any other transaction. The customer will see his account balance online in his personal space and can subscribe to notifications.

Accidental one-time visitors will be kept out by a minimum payment requirement. And to stimulate higher prepayment (relatively free working capital), bonuses will be assessed in proportion to the amount prepaid (see the Marketing section).

Users will register their contracts on the website or in the app and pay online.
At the entrance to each restaurant there will be a self-service terminal.

In either case, the client’s identifier will be his/her mobile number that everybody has and remembers perfectly well.

The whole sales process thus requires no human participation with its respective costs. Cash processing is also eliminated, with its resultant costly headache of cash desks, records and collection, etc. Importantly, the business processes will be so organized as to encourage customers to predict their visits — what we shall refer to as meal reservation.

To reserve his meals, the customer indicates the meals that he wishes to visit and the restaurant (each meal may be at a different restaurant). The use of reservation will help us predict food expenditure at each restaurant more accurately and thus minimize the inevitable waste losses.

Meal reservation will be available not later than X hours before the meal begins. The value of X is determined by the central cooking facility’s processing rate and logistical system.

The customer is encouraged to reserve by granting discounts; a reserved meal will cost somewhat cheaper.

The discount is only granted if the client has attended the meal reserved. (In reality this will certainly be a discouragement system, with extra money charged for an unplanned visit). If a reserved meal is not visited, a penalty of e.g. 50% of its cost will be charged automatically.
The meals will be booked in the customer’s personal space on the website (see below) or in the app.

The whole meal reservation process is also conducted in fully automatic mode without human involvement. Booking cancellation will be penalized as well, with the penalty rate nominated as a percentage of the price of the meal being cancelled, and the percentage, in turn, will depend on the time left before the meal begins. Reservation cancelled at X hours" notice will not be penalized, and then the penalty will be charged incrementally.

Each kind of meal will have a fixed price that will be written off one’s balance as the client gets inside the restaurant. This is essentially an entrance fee, and when inside the customer is free to eat whatever and as much as he wants.

In addition, in his personal space, the customer will be able to choose a package of meals from among those offered by the company, with each meal in the package becoming somewhat cheaper. As the package is chosen, its full cost will be written off the balance upfront, irrespective of whether the client will actually visit the meal, and the meals will be reserved automatically with location preference data requested.

The packages will naturally be so formed as to ensure maximum attendance of unpopular meals (e.g. on weekends).

In the future, after our restaurants become crowded, we’ll possibly use the floating price technique to maximize profit. We shall vary each meal’s price on each day online, depending on the reservation dynamics. This is similar to airlines" pricing technique.

The website will include personal space where a customer will see his history of visits and balance and book his meals. Automatic weekly meal reservation will certainly be available, e.g the customer will indicate his lunch hour on Mondays, Tuesdays, etc. In the personal space we shall also implement the choice of preferred dishes (integrated with the menu design wizard — see more under Marketing).

The customer will see each day’s menu and can choose what he is going to eat. This will help predict food expenditure even more accurately and optimize production while also enhancing customer loyalty.

The same tool can collect statistics on customers" satisfaction with food quality and the restaurants" operation; the customer can give marks to each meal and even to each course if he so wishes. And on our website we’ll show the number of people at each restaurant plus history in plot form. This is both an additional interactivity feature and a tool for distributing load in time and across the restaurant chain.

The preferred restaurant, prediction of visits and choice of one’s favourite dishes will form (in addition to statistics) the rated number of helpings to be delivered to each restaurant (and, consequently, the company’s total output for each day and meal).

A special note #1:
choosing one’s favourite dishes will not be mandatory. We shall not check what exactly the visitor eats — nor shall we be able to. This is just one more tool for reducing waste and stimulating customer loyalty.

A special note #2:
it seems quite likely that the whole procedure of meal booking will turn unnecessary on getting a sufficient number of regular goers. The statistic data accumulated within IEM System will be just enough to forecast the load at each restaurant and the amount of food consumed.

Corporate membership will be available; we shall sign a contract with an employer and cater for a certain number of their employees. In this case, there will be a master login entitled to perform the counterparty’s financial transactions, and limited user logins — so that our client company’s employees can book their meals and use other personal space services on our website.

 

3. Marketing

The sales strategy will use both traditional and relatively unique instruments.

Firstly, the traditions:

• contextual online ads;

• viral ads on the Net + PR in social media;

• articles in business press, and business Internet portals) — virtually free, for this unique format will be of great interest to business writers and their audience alike);

• targeted visits to office centres with offers of free membership to employees for a short period of time (e.g. a week. Who will refuse to have free lunches for a whole week?)

Generally, we’ll perhaps offer free membership to everybody at first. Both to attract the public and to minimize frustration at the initial stage of the company’s work, while the business process is debugged. The client will be embarrassed to make any serious quality claims, for "you don’t look a gift horse in the mouth".

Temporary free membership can be implemented as follows:

a) the customer makes an established minimum prepayment — so that non-paying spongers can be kept out;

b) yet his meals will be free during the free membership period, entered at $0 on his account;

c) after the free membership period is over, the customer may have his prepayment refunded if he is dissatisfied.

Of course we’ll have to go through the details of implementation to prevent abuse.

And now some know-how: an MLM attraction system. We want a highly loyal clientele — enthusiastic about the company and its services and publicizing it wherever possible. And where impossible, too. This effect can be achieved by using a full-fledged MLM bonus system. The bonus rewards assessed can either be used for extending one’s own contract or received directly in cash form.

Positioning. This was generally described in the first section: we shall position our services as Cheap, Quick and Wholesome.

We’ll use the last component in this scheme to promote moderate food intake and thus reduce our costs as well.

Healthy lifestype promotion: posters on the walls, specially designed (smaller) dinnerware, food scales (for powdered/liquid products — dispensers showing portion weight); energy, protein, fat, carbohydrate content, etc. indicated everywhere.

On the website we have a menu design wizard (Your Personal Dietologist) that factors in the customer’s goal (weight gain/fat burning), personal characteristics and dietary preferences / dislike of some foods. From the wizard, one can get a specific set of dishes composed from the company’s actual offers for each day but intended for the specific person.

If properly implemented, this tool will become widely popular and virally advertise the company by itself. Complementing this is the advocacy of a good breakfast, something of paramount importance for keeping one’s body in tone all day long and for one’s health in general. This is a perfect truth that will enable us to better utilize our capacity for the day’s first meal.

In the future we may use additional tools to emphasize the Wholesome component even more — holding lectures on healthy foods, distributing/mailing pamphlets, and sponsoring physicians" associations and conferences on the subject.

After our business develop on a serious scale, we shall certainly broaden the list of the promotional tools. In most developed markets, where consumers are concerned about their environmental impact as well as their own health, we have an open opportunity to vividly position us in the sustainable organic food segment. As opposed to, say, fast-food chains and expensive restaurants of exotic cuisine, our production facility can use regional produce ("from within 100 km"), focus on organic foods, etc.

As some cooked food will remain uneaten anyway (3% is a good industry level), the remainder can be used to exploit the fashionable topic of socially responsible business/philanthropy: free lunches for orphanages, pensioners, etc. With the respective positive PR.

 

4. The business model’s possible lines of development

A weakness of the above format’s economics is low occupancy that is probable on week-day evenings and weekends. A good profitability margin may make this problem negligible, and the lost earnings will be compensated by higher prices of breakfasts/lunches that are in high demand on weekdays.

If this is impossible (or less than optimal) for any reason, we see the following opportunities:

• special packages can be formed for evenings, including alcohol (e.g. a bottle of wine per person);

• family brunch format can be used on weekends (perhaps including liquor as well);

• the restaurant chain can be extended to cover residential neighbourhoods and positioned as a replacement for home cooking. In the commuter belt the opposite problem of low attendance at lunch time may arise, so this decision should be thoroughly checked for feasibility using an Excel model. Anyway, network extension will result in greater visibility and fuller coverage of the target audience plus probable economy of scale.

In the future, it may become economically feasible to segment the restaurants depending on food assortment and dish complexity and, consequently, prices. For example, restaurants for the general public or middle class, vegetarian, ethnic, or organic ones (with the essential condition that the whole menu range is produced at a hi-tech central factory).

Liquor will be sold like at hotels where the order price is included in the bill that the guest pays as he checks out; we charge it to the customer’s account online, accordingly.

Perhaps we can organize automatic alcohol dispensation through taps with client ID readers. The client will take a glass from a tray, goes through identification at the tap he needs, and the dispenser will pour out his drink. This will exclude additional personnel and both the direct costs and theft associated with it.

Despite the fact that selling alcoholic drinks increases food consumption it as well enlarges the administrative burden. Thus introducing alcoholic drinks must be thoroughly calculated and tested.

Office lunch deliveries fit rather seamlessly into this work scheme. The lunch delivery procedure is similar to deliveries to captive outlets, but the company’s responsibility ends as the full industrial food containers are handed over and yesterday’s ones collected. Naturally, this service makes economic sense if the client company employs many people, probably a hundred or more.

An elaboration on the office catering technology is catering on the client’s grounds; we actually get a temporary/travelling restaurant. A restaurant team comes (on the food vehicle or separately, as required for optimal logistics), serves a meal (time-limited), packs up and leaves.

If the service gets popular, the lunch times at different companies are well co-ordinated, and the visits are well synchronized with the overall logistics, one restaurant team will be able to hold a number of similar meals a day at locations that are not too far apart.

The most probable users of the travelling restaurant services are office centres that abound in motley office plankton.

Highly standardized business processes make franchising a promising line of cheap extensive growth, especially for high-risk markets.

Franchises can be issued in two varieties: a simple franchise in the form of a license to open a non-cooking restaurant at a specific place, supplied from the central factory kitchen, or a master franchise issued for a city/region and permitting the organization of the full cycle including a factory kitchen and a network of restaurants.

Looking farther ahead, we can envisage outsourced cooked food supply for a broad range of organizations — from hotels to other restaurants, and catering for big events. The large scale of these operations and streamlined logistics will result in a dramatic cost advantage and the very best final prices, and standardized processes will ensure high and stable quality.

After really big food transshipment volumes are reached, it will be possible to consider vertical integration options like buying/creating captive farms. In addition to concentrating more profit from the whole chain, supplier control will help better synchronize the process in the entire product flow path — from the farm to the customer’s stomach, to produce a synergetic effect.