ABC Restaurant

1. Introduction

UConn Goldenson research team led by Prof. Jay has an initiative to research and analyze small business and perform risk analysis. The small businesses the team are looking into include minority owned, women owned, LGBTQ owned, black owned, and many more. Our small team, consisting of 5 UConn undergraduates, has been working tightly and closely with each other under one and only goal: help ABC restaurant minimize risk and achieve their goal. ABC restaurant, the UConn Asian students’ favorite Chinese restaurant, agreed to cooperate with the team and provided data and information regarding their business. With their assistance, the team came up with this company risk analysis which includes: background and history of the restaurant, recent data (avenue, costs, and income for the past few years), analysis and findings, and ultimately, recommendation!

2. Background of ABC restaurant

Business: ABC restaurant is a Chinese restaurant located in Connecticut. The owner of this restaurant is XXX, who has over 20 years of experience in running restaurants. Started in 1998, ABC restaurant has since become the “go-to” place for many university students and faculties.

ABC restaurant is a family business. The majority (about 80%) of employees are the owner’s family members or people she knew. They do have issues with hiring people outside of their family circle, mainly because the responsibility could be very demanding and they think their wage is not enough to cover their effort.

ABC restaurant only provides dine-in and take-out. They don’t provide food delivery themselves, nor are they on any third-party food delivery service like Grubhub and Doordash. They have tried once, but were disappointed with stolen food issues, so they decided not to use any food delivery platforms.

Customer Base: Most customers are Chinese international students and professors, but their unique location also attracts people from other backgrounds. They have observed a high rate of returning customers and they usually gain new customers through word of mouth.

Competition: Other asian-based businesses around the area

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Despite their competition, these restaurants around, including ABC restaurant, all contribute to the popularity of the town as a recreation site for the residents. The more stores that town has, the more people it can attract. As a result, restaurants may also benefit from each other’s existence as well.

3. Data

The data for our analysis was acquired through financial statements including yearly sales records, monthly produce delivery receipts, as well as daily customer order receipts. Non major product amounts were determined through daily inventory.

Table 1. Annual Sales
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2019 2020 2021 2022
Alcohol $ 43,890.46 $ 21,902.53 $ xxxx.xx $ xxxx.xx
Appetizer $ 453,534.74 $ 383,294.31 $ xxxx.xx $ xxxx.xx
Catering $ 14,630.15 $ 10,951.27 $ xxxx.xx $ xxxx.xx
Dessert $ 14,630.15 $ 54,756.33 $ xxxx.xx $ xxxx.xx
Dining food $ 833,918.71 $ 580,417.09 $ xxxx.xx $ xxxx.xx
Drink $ 102,411.07 $ 43,805.06 $ xxxx.xx $ xxxx.xx
Total Sales $ 1,463,015.28 $ 1,095,126.59 $ xxxx.xx $ xxxx.xx
Chart 1. ABC Restaurant Annual Sales Chart (Become a sponsor and read more details)
Chart 2. Dine in VS takeout. Chart 2 is one way in which the ratio of dine-in to takeout was calculated. It can be seen that customers who dined in accounted for around 40% of ABC restaurant’s total annual sales and customers who ordered takeout accounted for 60% of sales. This shows that overall takeout accounts for more sales than dining.

From table 1 and chart 1 it can be seen that ABC restaurant’s main sales are through food products. Specifically, appetizers and dining foods account for more than half percent of the restaurant sales and show a positive trend despite a dip in 2020 due to Covid. It can also be seen that dessert sales have been on a steady incline since 2020. Catering shows no fluctuation at all.

Table 2. Dine-in VS Takeout Dollar per Order
Average Order Total
Dine in $79.27
Takeout $36.52

Table 2 shows the average receipt amount of dine-in and takeout orders. It can be seen that the average dine-in order from ABC restaurant is more than two times the average takeout order. This calculation implies that each dine-in customer contributes to ABC restaurant’s sales more than each takeout customer.

Table 3. Cost of Sales
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2019 2020 2021 2022
Food $ 409,644.28 $ 416,148.10 $ xxxx.xx $ xxxx.xx
Labor $ 629,096.57 $ 405,196.84 $ xxxx.xx $ xxxx.xx
Maintenance/ Other $ 219,452.29 $ 164,268.99 $ xxxx.xx $ xxxx.xx
Total Costs $ 1,258,193.14 $ 985,613.93 $ xxxx.xx $ xxxx.xx

Table 3 shows that much of ABC restaurant’s sales costs stem from food and labor, with the greatest cost being labor. It can also be seen that sales and cost of sales have a direct relationship.

Table 4. Net Income
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xxx xxx xxx xxx
xxx xxx xxx xxx

Table 4 and Chart 4 show that despite a steep dip in 2020, ABC restaurant’s net income seems to be positively linear

Table 5. Net Profit Margin
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xxx xxx xxx xxx
xxx xxx xxx xxx

Table 5 and Chart 5 show that ABC restaurant is managing their expenses very efficiently with a profit margin over 10% for all years.

4. Analysis of Risk Associated with ABC restaurant

    • Labor needs

    ABC restaurant, as a Chinese restaurant, its production of Chinese food can hardly be replaced by technology and that makes the labor indispensable. Workers in Chinese restaurants are extra busy than other kinds of restaurants so that laborers are hard to find in town.

    • Competitions

    24 years ago, there were only 2 restaurants in town, one is the XXX, the other one is ABC restaurant which takes the absolute advantage of the entire market. At this time, more than 10 restaurants have shown up, including two chinese restaurants. Even though ABC restaurant has its own advantages of foods, sites, and great reputations, the potential risk of competition with these newborn restaurants should be noticed and actions should be taken.

    • The Persistence of the business

    ABC restaurant does not own the land property, the whole plaza might be sold in 5 years, the business plans of future developments should be considered.

5. Recommendations

ABC restaurant has done a great job over the years sustaining themselves through established clients, word of mouth and a prime location. Since ABC restaurant has decided that the online delivery services are not worth the extra difficulty for them due the amount of times a order was half delivered, a lot of their services are offered through dine in and take out. ABC restaurant has some amazing specialty food that requires a particular cooking skill that isn’t offered anywhere that isn’t even on the menu. So our recommendation is for the staff to introduce these items verbally or even print out a small special menu. To make the work of the waiting staff easier when it’s busy, we suggest using QR code to order food. It’ll be easy to modify the menu online and it will minimize the needs of labor. On the QR code, that could be a place to include a certain speciality food or the amazing dessert selection. Entering the restaurant, one may not even realize the fridge full of delicious desserts out in the front. Listing the dessert section under the QR code or even making a sign for dessert will help attract more customers to that section, greatly improving the exposure to the unique foods offered. Tiktok account