Question

For the last 10 years you have been working in the health food business. You have talked to many customers who have suggested a new restaurant concept. The restaurant would feature a variety of low calorie meals (under 500) made from healthy ingredients (organic fruits and vegetables and steroid/hormone free meat). The restaurant would include a bar with an extensive organic wine list and trendy décor. There would be an emphasis on high quality, friendly service, and colorful meal presentation. Your customers suggest that they would be willing to pay around $50 to eat a meal and have a glass of wine at this type of restaurant. They lament the fact that their community has no upscale restaurants that offer this type of fare.

You have conducted a detailed financial analysis of this potential business opportunity. You believe that you have good information on the costs of starting and operating the restaurant. You project that with a $50 meal price and anticipated demand you would earn a high profit and an excellent rate of return on your investment. You have the equity capital to start the business. Several friends with MBAs argue that you would be crazy to start this business. They claim that there are few entry barriers to the restaurant industry and that "every person with business training knows that you can't make profits in a competitive industry."

Should you drop the idea of opening a new restaurant based on this argument? Explain.

Answer 1

No, you should'nt drop the ideaof opening this kind of restaurant as the business works on the quality provided by the organisation. People gets attracted towards the quality they recive from the restaurant when they will recive in such a minimum cost best uality food automatically this will make you earn high rate of return. Every organisations main motive is to satisfy there customers and all the people attracts with the kind of behaviour they get to the place they come. and by providing cheap food with full organic material and good quality and quantity automatically people will like this and more and more customers will be attracted towards it. An every organisation has its competitors butit depends on you how you manage your organisation in such a way that it earns high rate of return. So, there is no problem in opening such kind of Venture.