Themed Restaurant Business Plan

In the case of specialty centers such as The Greensward, estimating sales potential becomes significantly more subjective than that of a more traditional retail center with defined areas of trade.  In the case of The Greensward, Claritas, Inc., a nationally recognized vendor of demographic information to the retailing industry, quotes it will attract patrons from fairly distant locales, making it a destination, rather than a convenience center.

In the region, there are several such specialty centers.  These specialty areas tend to draw day or weekend patrons attracted by the appeal of goods offered.  The Greensward’s proximity to densely populated areas of Renaissance, Blisstate and Stasistate is expected to indicate a reasonable expectancy for success.

The Greensward’s Draw and Trade Area

According to Claritas, Inc., it is likely that The Greensward’s draw will be as extensive as a two-hour commute.  This appears reasonable as South Stasistate receives many visitors throughout the year, many of whom spend long weekends or longer.  For analytical purposes Claritas, Inc. has divided the trade area into primary and secondary zones.  “Between 40% and 60% of a specialty center’s retail sales are generated from the primary trade area.  Another 20% to 25% comes from the secondary area.  The balance is derived from inflow of transient customers passing through or working in the properties trade area.”  Claritas, Inc. determined that the primary trade area for The Greensward is a radius of 20 miles with the secondary trade area extending outward to a 40 mile radius. 

While a certain level of subjectivity exists in attempting to quantify the limits of a property’s trade area, based upon  observations and discussions with the owners, The Greensward’s total trade area is quite expansive.  The Firedrake Glass School, combined with available lodging facilities and water frontage tend to create characteristics which, at minimum will draw patrons within a reasonable commute.  Niceburb is within 20 minutes of Megametro, receives, 35 minutes of Gigametro and 30 minutes from the Regional Transit Rail Station.  There is good accessibility to and from nodes of residential development (specifically the Swampy Ridge region recently designated as the largest housing growth sector in the state (Construction Data News)) as well as the anticipated tenant mix at The Greensward relative to alternative centers form the basis of this opinion.

Trade Area Population

Claritas estimates the current households of the secondary trade area of The Greensward property at 1.47 million.  This represents a 5.8% increase since 1990.  The population of the total trade area is now estimated to be 5.38 million, which is a 4.6% increase over the same time period.  Looking forward, Claritas projects the population of the total trade area to increase further to 5.43 million (0.98%) while that of the secondary trade area is expected to become 1.49 million (1.69%) by the year 2006.

Trade Area Households

A household consists of all the people occupying a single housing unit.  National trends indicate that the number of households is increasing at a faster rate than the growth of the population.  Claritas shows that the number of households in the primary trade area of The Greensward is now 551,039, which is up 9.11% since 1990.  Within the total trade area, the number of households is now estimated to be 2.03 million, an increase of 7.3%.  By the year 2007, Claritas estimates that the number of households in the primary trade area to increase by 2.9%.  The secondary trade area is expected to experience a slightly lower increase of 2.0%.  Considering the above, there is growth in the number of households in the trade area.  Additionally, a greater number of smaller households with fewer children generally indicate more disposable income which is a positive factor for a property like The Greensward.  Disposable income is generally spent on eating out and entertainment (National Restaurant Association 2005 Report and Outlook) with sales exceeding $440 billion in America for 2004.

Trade Area Income

The median effective buying income (EBI) or disposable income after federal taxes in the Gigametro Metropolitan Area is currently estimated to be $43,800.  Throughout the entire metropolitan area it is estimated that 20.4% of the 1.925 million households have an effective buying income under $35,000 annually while 42.0% of households have yearly EBI in excess of $50,000.  Border County’s current median household income level of $38,834 is 11.3% below the metropolitan area’s median.

Income levels, whether on a per capita, or per household basis, indicate the economic level of the residents of the trade area.  Median household income, when combined with the number of households, is a major determinant of an area’s retail sales potential.  According to Claritas, the total trade area of The Greensward has an estimated household income of $70,025, which is more than that of the region and Border County as a whole.  Focusing on the smaller primary trade area, the current estimated household income is $74,742, reflective of the high incomes in neighboring areas such as Gigametro and Megametro.

Trade Area Sales

In order to estimate the sales potential for a project such as The Greensward, Outland-Goathum Real Estate (OGRE) has made some qualitative estimates of potential patrons based on their experience with specialty centers and the competition in the region found in their, “Complete Appraisal and Self-Contained Report.”  These projections include the average limit of travel, the number of visits per year, households and income levels of prospective patrons, and spending habits.  This analysis incorporates generalities abstracted from various publications with subjective adjustments which OGRE believes are reasonable and applicable to The Greensward property and its market area.  

The Greensward will be anchored by the enclosed Firedrake Glass School, a restaurant/dinner theater, as well as a hotel and European spa showcased by the famed Pierre and Carlo management of salons and spas.  The 40,000 square foot working glass museum and retail center will be exciting with live glass blowing and cutting.  Customers will be able to have personalized pieces created in front of their very eyes and be involved in the creation of their own pieces.  One of the most prominent artists will be Mr. Measham Stilton – the, “Gustave Caillebotte of Glass.”  As a related example; the, “Corning Center,” located in Corning, New York has 7m (seven million) visitors a year according to the recent Director Peter Yenewen who owns Crystal Signatures.  The Corning Glass Center and Museum has recently completed a 65 million dollar renovation in 2000 by Smith-Miller and Hawkinson.  In addition to the anchor tenants The Greensward will also include approximately 40 specialty shops and it is expected that patrons will spend from a half day to a weekend during each visit (OGRE).  Some of the other specialty shops include; a Ralph Lauren Outlet, art gallery and shop, food court under tent, Jolly Jack-tar Nautical Gift Shop and other shops.

On the other hand, unlike traditional shopping centers, specialty centers are typically visited only occasionally. This sporadic patronage is conservatively estimated by us at one to two visits a year per household.  Likely, those visitors within a 20 mile radius would be more inclined to visit more often, while the opposite is true of those from 20 to 40 miles out.  OGRE and Claritas concluded that households within 20 miles would visit an average of 1.5 times per year, while those living within the 20 to 40 mile radius would likely visit about half as often.

Based on figures provided by Claritas, 72.6% of households within 20 miles and 68.2% of households within 40 miles distant quantitatively equates to 1.4 million households purchasing goods and services at The Greensward.  Due to the specialty nature of the property, it is not typical that all of the households within these radii would be interested in The Greensward, or may choose an alternate location offering similar products or services.  This is even more likely for those households outside of the 20 mile radius, which have more alternatives within the same driving distance.  Considering these factors, we have conservatively projected that 50% of those potential visitors within 20 miles would patronize The Greensward, while 25% of those 20 to 40 miles out would visit regularly.  Combined this is an average of 32.1% which results in 451,826 households visiting an average of 1.08 times per year or 1,238 households visiting per day (with local staff at the shops, restaurants and hotel this is approximately 1,300 total).  Our business plan is based on 195 lunches and 195 dinners per day (130 winter).  This will escalate as the landlord brings in 20 to 40 buses per day with visitors from retirement homes, societies, churches and other special interest groups.  It may further escalate as gaming becomes a reality and the two casino barges are docked at The Greensward as early as fall of 2005.  For our estimates, though, we are only, conservatively utilizing the OGRE and Claritas figures (no buses and no gaming).  It should be of particular interest that the developer and landlord previously built the outlet malls in Centerville and utilized successful busing schemes to bring in thousands per day.

The U.S. restaurant industry is expected to post a record $476 billion in sales in 900,000 restaurant locations in 2005, according to the National Restaurant Association (NRA). The industry outlook for our region is also bright, as sales are expected to reach more than $48.1 billion next year.  In addition, the region is expected to add 129,800 restaurant-industry jobs over the next 10 years.

“The nation’s restaurants are proud to continue being an essential part of Americans’ lifestyles, as American consumers will spend almost 47% of their food dollars in the restaurant community in 2005,” said Steven C. Anderson, president and chief executive officer of the Association.  In 2005, Stasistate restaurants are expected to post sales of $10.4 billion (5.1% increase from 2004); Mythtate, $23.3 billion (4.9% increase); and Blisstate, $14.4 billion (4.3% increase).

“Several economic indicators, such as improvements in regional economic conditions, gains in disposable income and general population growth, pave the way for continued solid performance and growth,” said Hudson Riehle, senior vice president of the Association’s Research and Information Services Division. In our region sales are expected grow at a 4.8% rate.  With the number of restaurant locations in the United States growing to 900,000 in 2005, the number of restaurant jobs will also increase; the industry is expected to add 1.8 million jobs in the next 10 years.

Lastly, we have considered the spending habits of potential visitors.  Although it would not be unusual for upper income families to spend several hundred dollars per visit, we must consider that 35% of the potential patrons have a median household income of less than $75,000, with nearly half of these families in the $35k to $50k range.  Overall, it is in our opinion that a reasonable estimate of average spending would be in the range of $100 per visit.  Factoring in all of the above, results in net potential sales for the The Greensward at approximately $48.9 million per year.  A summary of the calculations is as follows:

Estimated Sales Potential

The Greensward and it’s impact on Full of Bologna, Jolly Jack-tar Restaurant and Show and The Highfalutin Hotel and Spa

Based on the proposed building area of 189,842 gross leasable square feet this indicates potential sales of $258 per square foot. As a check on the reasonableness of this figure, we have reviewed data assembled by the Urban Land Institute (ULI). Community shopping centers in the Eastern United States average sales of $251.28 in sales per gross leasable square foot, with centers in the upper decile averaging just under $480 per square foot. Given the specialty nature of The Greensward with it’s proposed mixed use (i.e.) hotel rooms, restaurant, antiques mall, Firedrake Glass School, it is likely that sales would, overall, be slightly above average. However, the purchasing power within the radii would likely keep the center from categorization in the upper decile. Therefore, the results displayed above appear reasonable given the attributes of The Greensward property proposed.

4.1 Market Segmentation

In the following tables we detail and show households by age of household and households by household income.  Our target market consists of households between the ages of 35 to 44; 45 to 54; 55 to 64 and 65 to 74.  Within the primary and secondary target markets (per OGRE analysis) of 20 and 40 miles the result of this demographic trend is 68.43% of the market – 2002 estimate (Claritas 2002 Study).  Claritas, while compiling this information, used the 1990 Census figures and converted it to Census 2000 geographics.  Claritas further projected that in 2007 this will rise to 69.26% of the market.

Our target market consists of household earners of over $35,000 per annum.  Within the primary and secondary target markets (per OGRE analysis) of 20 and 40 miles the result of this demographic trend is 68.17% of the market – 2002 estimate (Claritas 2002 Study).  The average household income was $70,025.  Claritas, while compiling this information, used the 1990 Census figures and converted it to Census 2000 geographics.  Claritas further projected that in 2007 this will rise to $83,607 or 69.26% of the market.

Demographic Trends

Yet another Market Segmentation Analysis using different segments is shown in the table and chart below.

4.2 Service Business Analysis

What is in store for the restaurant industry in 2005?  No one has all the answers, but the National Restaurant Association SmartBrief paints a picture of the year that lies ahead.  The Year-End Report presents the results from a survey of SmartBrief readers on issues facing the industry and insights from National Restaurant Association Chairman of the Board Burton “Skip” Sack.    

Thoughts From the Industry:   
   
1. What do you predict will be the hottest new food or beverage items in restaurants in 2005?

1. “Healthy” eating — low-carb, low-fat, low-calorie, low in trans fats
2. Ethnic foods — Asian, Indian, Mexican and fusion cuisine top the list
3. High flavor — bold/spicy flavors in foods; flavor-infused cocktails, milk, water
4. Teas — specialty teas, diet spiced teas, tea-infused dishes
5. Natural/organic foods and beverages
6. Sandwiches — gourmet, deli, new flavors and breads
8. Seafood
7. Comfort foods
9. Wraps
10. Coffees — specialty coffees, flavored lattes, even coffee-based sauces

2. As a restaurant industry professional, what is the one issue that keeps you awake at night?

1. Rising costs (food, labor, energy, insurance, etc.)
2. Recruiting and retaining employees
3. Food safety/food security
4. Competition
5. Litigation/government regulations

3. When planning your next family vacation, will you:

Research restaurants ahead of time — 13.1%
Wing it and choose your restaurants once your vacation gets under way — 37.5%
Both of the above — 49.4%

4. In 2005, restaurants will receive about 47 cents (46.7%) out of every dollar consumers spend on food.  What do you think the percentage will be by 2015?

46.7% (current share) or less — 21%
46.8% to 50% of every dollar — 19%
50.1% to 55% of every dollar — 31%
More than 55% of every dollar — 29%

Median answer: 52% of every dollar

The U.S. restaurant industry is expected to post a record $476 billion in sales in 900,000 restaurant locations in 2005, according to the National Restaurant Association (NRA). The industry outlook for our region is also bright, as sales are expected to reach more than $48.1 billion next year.  In addition, the region is expected to add 129,800 restaurant-industry jobs over the next 10 years.

“The nation’s restaurants are proud to continue being an essential part of Americans’ lifestyles, as American consumers will spend almost 47% of their food dollars in the restaurant community in 2005,” said Steven C. Anderson, president and chief executive officer of the Association.  In 2005, Stasistate restaurants are expected to post sales of $10.4 billion (5.1% increase from 2004); Mythtate, $23.3 billion (4.9% increase); and Blisstate, $14.4 billion (4.3% increase).

4.2.1 Competition and Buying Patterns

Full of Bologna, A Taste of North Italy and the Jolly Jack-tar restaurants will be the only full-service restaurants within the 25-acre Greensward complex.  The business plan projections are based on 15% of the 1,300 person-per-day traffic flow of the OGRE Appraisal Report.  Additional patrons are expected due to the following factors:

1. Bus tours set up by Loess Cairn Commons, LLC (landlord) bringing in an additional 1,000+ persons per day to visit the Firedrake Glass School which will be the centerpiece of the newly created “Firedrake Glass School Trail.” 
2. Special events held throughout the year such as the Offshore Powerboat Association (OPA), “Liberty Grand Prix,” with it’s high-powered big-bore racers.  Will be able to contribute sponsorship for the races at The Greensward.
3. “Naval Battle on the River,” a re-enactment of a colonial era warship battle on the geographics River with the Civil War Sailor and Marine Magazine and Association (CWSMMA).  This will be held on Saturdays and Sundays (May 15 – September 30).
4. Loess Cairn Commons, LLC (landlord) currently has a commitment from Barkdust Mills for 3,600 room nights (occupancy) in The Greensward’s, “Highfalutin Hotel and Spa,” resort.  In addition to this, the current available capacity of room nights in this, the largest growing sector of the our multi-state region is inadequate.  Both Bowsprig, Inc. and Grumpliere Co. are increasing workers capacity in the Wetdryland district, along Center Edge Road and ultimately in Bogsboro.

The Full of Bologna restaurant and lounge should capture a minimum of 15% of the traffic flow traveling to the destination center because there are few restaurants in the Niceburb area other than the restaurants listed below:

The most popular eating places in the area are explained below:

1. Golden Diner: This is an 80 seat, typical, diner, open all week and serves breakfast, lunch and dinner. It is located within an 8 minute drive of The Greensward.  Their price range is $4 – $9 for lunch and $6 – $12 for dinner entrees.
2. The Italian Kitchen: An upscale restaurant/lounge/bar with an Italian menu, it is located within a 15 minute walk of The Greensward and has been open for 30 years (demonstrating viability of concept).  They are open for lunch and dinner.  The entrees on their menu range from $16 – $49 and a mixed drink is $4 – $9.  This is a strict Italian eatery very similar to Full of Bologna.  They offer common, good, traditional Italian peasant food. It is well known, with people coming from three states to eat there, and does extremely well (sometimes at 350+ dinners even on a Thursday night) regardless of the fact that the area is still undeveloped and uncultivated. 
3. The Riverview Inn: This restaurant is about 30 minutes south of The Greensward, on the water.  It does not have easy access from the Interstate highway.  They have normal seating for 185 people between their two dining rooms.  The menu range is from $15 to $30.  This facility also can handle banquets of up to 250 people.  This is a wonderful restaurant to visit and has been building it’s reputation slowly, through the years.