New World Deli

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Deli Restaurant Business Plan

Market Analysis Summary

We have three main markets:

  • People who work in the downtown area during the day, who will be looking for walk-in good food and convenience for late breakfast and lunch.

  • Surrounding businesses looking for phone-in lunch for business meetings.

  • Workers with families looking for take-out food to take home for family dinner at the end of the workday.  

Each of these market segments consists of people who either work in the downtown area or flow through this area during the normal work week.  As such, there will be a undetermined percentage of each market that will be seeking an eating establishment that will meet the requirements of  healthy food, fast service, and pleasant atmosphere. Furthermore, New World Deli will cater to the growing trend of middle-class professionals who seek a differing cuisine than that of the established food chains.

4.1 Market Segmentation

The total potential market in units is shown in the following table and chart, by type of market point. 

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Local businesses 0% 500 500 500 500 500 0.00%
Local workers 2% 20,000 20,400 20,808 21,224 21,648 2.00%
Other downtown traffic 1% 15,000 15,150 15,302 15,455 15,610 1.00%
Total 1.55% 35,500 36,050 36,610 37,179 37,758 1.55%

4.2 Target Market Segment Strategy

For the business market we need to focus on specific companies with specific opportunities. For individuals we need to lever off word-of-mouth recommendations, probably depending on business customers.

The business market has the potential of providing large volume sales to the company during the peak hours of 11 a.m. to 2 p.m., both through small groups of business people visiting NWD and delivery orders. Satisfaction of this group will provide a vital long-term revenue stream. For the business market, the company plans to do specific target marketing through flyers, business discounts, billboards, and creating a record of fast delivery.

For the individual groups seeking breakfast or lunch downtown, or take-home meals, it is necessary for the company to build an effective word-of-mouth marketing strategy. The company will do this slowly, realizing that much of this will grow from its business market. The company is also planning on doing a number of joint marketing efforts with other local companies such as the production and distribution of a referral book to be given to various individuals. This in turn would help to drive our word-of-mouth marketing efforts.

One of the most important recent trends in eating is the rise of interest in consuming healthier foods. The best known example of this is the move toward organic foodstuffs. NWD realizes that there is a significant percentage of the population in Western Oregon that is demanding more and more naturally grown, organic meats and vegetables and the company is well positioned to take advantage of this change. Ms. Ericson has already concluded preliminary deals with organic growers and suppliers that will allow the company to take advantage of this new market need.

4.2.2 Market Needs

As stated before, customers desire fast, healthy food that will appeal to their aesthetic tastes and is provided in a comfortable atmosphere. In addition, they desire a memorable dining experience that provides them with the chance to relax in the middle of the day. All of this needs to be delivered to the customer with the least amount of hassle. Furthermore, customers will also need a facility that can provide them with delicious, convenient take-home meals when there is no opportunity to cook at home.

4.2.3 Market Growth

We have no indication of market growth in this pulverized and diffuse market. No statistics are available for the local food industry in Eugene. What we do know is that there is growth potential, and plenty of potential market for the right combination of service, quality and choice.

4.3 Service Business Analysis

The restaurant industry is highly fragmented and competitive. Each company within this field has low capital costs and low margins, which create this high intensity of competition.

Suppliers have a great deal of power in setting and negotiating the prices of their products and services to the smaller eating establishments. This is due to the fact that the suppliers who absorb the greatest amounts of cash from "mom and Pop" outfits are large food distribution companies such as General Foods. These companies are more consolidated than the restaurant industry, have deeper pockets, an almost limitless number of substitute customers, and finally they are the single most important supplier to New World Deli's industry. Therefore, these companies can set whatever price they wish to. Furthermore, labor is a supplier in this industry as well, and salaries for such individuals are well known and not very flexible.

There also exists a very high degree of rivalry among firms due to the perceived overcapacity in this field. The larger companies often have cost advantages due to economies of scale that allow them to outcompete smaller rivals.

The barriers to entry and exit are very low in this industry. Switching costs are virtually non-existent and the costs to entry and exist the market are low. The large number of competitors in this field including substitutes such as Mcdonald's, Subway Sandwiches, and Coco's mean that the pricing for such services are very competitive. The only way to have an advantage in this industry is either a low cost leadership principal applied aggressively to all aspects of the business or to differentiate the entire eating experience through better and more unique food and to build up customer relations to a point where the switching costs are raised.

4.3.1 Competition and Buying Patterns

  • Location is critical to success.  Proximity to workers is very important, so is convenient parking for the end-of-workday traffic stopping to pick up takeout dishes.
  • Price is not very sensitive as long as we are not too high. Low price or lowest price is not essential. Many target customers mistrust low price in a deli.
  • Quality of food matters.  If the price isn't too high and the food is good, we'll have growth through repeat business.
  • Focus is an advantage; focusing on Pacific Rim food will draw customers from the competition.   

4.3.2 Main Competitors

In the immediate, downtown area, there are five main competitors. This includes Subway Sandwiches, Cleo's Sandwich shop, McDonalds, Taco Del Mar, and Famous American Deli.

The established chains, Subway and McDonalds have much more of a national focus and the individual managers have little or no ability to adapt to local desires. In addition, these outlets are franchised to individual owners. This method of franchising often leads to friction between the corporate office and the local owners that inhibits efficiency, cleanliness and other aspects. However, these chains also have the ability to cut prices at will, and have established and secure relations with their suppliers.

The more local stores such as Cleo's sandwich shop and Taco Del Mar are much more locally oriented. However neither company has particularly deep pockets that provide for growth.

4.3.3 Business Participants

The restaurant industry is "pulverized" in other words, it consists of an almost infinite number of companies from the small "mom and pop" style to the national chains.