Marketing Strategies for Frais and Fresh Part 1

The entire restaurant industry in Montreal has been drastically impacted by pandemic. This Montreal eatery is no exception as it has experienced a decline in sales since 2019. This being said, numerous market-oriented restaurants have been surviving due to their adaptions to their customers ‘needs and wants’. Frais and Fresh’s management believes that they too must adapt in order to maintain their place in the market. This was when I decided to investigate the question “How can Frais and Fresh maintain their market share in Montreal 2021?” Primary research was conducted by gathering a balance sheet, presenting a visual representation of the firm’s current financial strength, which was then used to produce a ratio analysis. Interviews were conducted with the business development director and the founder of F&F. Secondary research included recent articles written about the restaurant with comparison to other restaurants, giving a vague understanding of the market position and brand strength of F&F and was a basis for whether the company needed to strengthen their position in the market. A steeple analysis was undergone in order to identify external factors affecting the business. It was recognised that F&F only spent 2% of sales on promotion. In order to maintain their place in the market F&F needed to at least double their marketing budget. Word count: 215 Introduction Frais and Fresh is a contemporary style Montréal eatery that was founded in 2016. It has been inspired by the exquisite spirit of the city through the melange of different ethnicities, colours, energy and the ‘freshness’ of life in Montréal. With the founder being the father of the business development director, the restaurant’s management style is very democratic as other members of the family are also important stakeholders. Until just recently in 2019, the business decided to become a global franchise and signed their first franchise agreement in Saudi Arabia. F&F is family centred to the extent that the Saudi Arabian franchisees are also cousins. This proposes that the management of this business are usually on good terms with one another, and the business culture of this restaurant is ideally warming and family friendly. F&F claims to serve “wholesome, healthy, colourful and affordable food that you can enjoy on the go” (Frais & Fresh, 2017) Globalization has facilitated F&F to expand, however with the increasing competition of healthy style restaurants in Canada and the COVID-19 pandemic, F&F’s place in the market is being threatened. Henceforth, the research question: “How can Frais and Fresh maintain their market share in Montreal 2021?” Methodology The exploration consisted of both primary and secondary sources in order to gain adequate information to formulate a robust business-oriented investigation with clear potential solutions. Primary sources included two interviews and financial documents from F&F. The interviews were conducted in person regarding the threats that F&F’s management are facing according to the business development director (Appendix 1). The interview with the founder was more about the nature of the restaurant giving a clear understanding of their brand identity (Appendix 2). A Balance sheet was obtained directly from the DBD clearly showing the restaurant in Montreal’s capital structure. Information obtained from the interviews was used to produce a SWOTT analysis, Secondary sources including articles about the restaurant (Appendix 3) and online reviews from customers (Appendix 4) also aided in the production of the analysis. Main results and Findings Main findings from interviews with Business development director and founder: • Employees are generally satisfied and they get along resulting in intrinsic motivation • Diverse food and strong unique selling point, comparing them from competitors • Faces problems with increasing competition (restaurants of similar concepts) • Desire to expand through and reach more customer through globalisation and local food delivery apps • Changing location has positively impacted sales • Current location is strong as there is footfall and many potential customers • The only healthy restaurant on the block, however others nearby • Expanded as a franchise to Saudi Arabia • Business culture is family oriented so communication is easy, however important • Believes that they have filled many gaps in the market • Wish to further develop their menu items • The restaurant industry includes some of the businesses that are mostly impacted by COVID-19 • COVID-19 has limited full customer experience • Spends 2% of sales on marketing • Focused on keeping meeting customer needs and wants by keeping up with trends, always introduce new items to their customers • High staff turnover • Employees are easy to train • Do not believe that they should bring in house delivery Main findings from Articles advertisements and online reviews • Very few articles written about the restaurant in the past few years • Last article was published in 2019- None were published later • Google, Trip Advisor and Menu-Pix customer reviews are all above 4.5 stars • Was voted by Eater-Montreal as 13th best salad place in Montreal in 2019 Results of the Income Statement Income statement for F&F (promotion 2% sales) Sales revenue Cost of goods Gross profit Operating costs Net profit before interest and tax Gross profit margin Net profit margin 687,260 91,200 596,060 233,941 362,199 87% 52.69% *All figures are in Canadian dollars Estimated Income statement for F&F (promotion 8% sales) Sales revenue Cost of goods 687,260 91,200 Gross profit 596,060 Operating costs 263,753 Net profit before interest and tax 332,307 Gross profit margin 87% Net profit margin 48.35% *All figures are in Canadian dollars Results of the balance sheet Asse Assets ts Current Assets Fixed (Long-Term) Assets Other Assets $ 30,900 $ 73,646 Total Assets $ $ 8,939 113,485 Liabilities and Owner's Equity Current Liabilities $ 24,416 Long-Term Liabilities $ 20,388 Owner's Equity $ Total Liabilities and Owner's Equity *All figures are in Canadian dollars $ Analysis and Discussion SWOT analysis: Frais and fresh current market position 67,758 112,562 STRENGTHS • • • • • Strong USP- healthy yet wholesome and flavourful food Only healthy restaurant on the block Employees are happy and enjoy the job Good source of finance from franchisee royalties High customer reviews on the internet WEAKNESSES • • • • OPPORTUNITIES • • • Growing market- potential franchise opportunities Consumers desire vegan products Training new staff does not take too much time Poor brand recognition in Montréal Team isn’t permanent- high staff turnovers No recent articles/ advertisement Social media platforms need more awareness and recognition THREATS • • • Increasing competition- similar concept restaurants Restaurants are closed due to the pandemic F&F only serve non-alcoholic products Frais and fresh currently stand at a good market position, their clients are generally satisfied as F&F have already filled many gaps in the market however now with the pandemic and other complications frais and fresh’s place in the market is in jeopardy. According to the DBD the restaurant has a strong unique selling point as they are one of the only few restaurants in Montreal to serve a large variety of vegan, vegetarian and healthy products. Frais and Fresh currently outsource their delivery services. Since delivery companies only deliver to the downtown areas of Montréal, Frais and fresh can bring their delivery services in house in order to market their products to a wider geographic reach and possibly deliver to the suburbs of Montréal. However, F&Fs buyer persona are healthconscious students whom are mainly found in the downtown area of Montréal. Currently since Frais and Fresh only operate one restaurant, it is both financially and rationally best for them to continue outsourcing. According to financial documents and statements made by both the founder and the business development director, frais and fresh were doing much better in their earlier years and now due to increasing competition they are losing many customers. The DBD claims that “you don’t need to educate people to eat healthy anymore” (Yamak, 2021). An option for F&F is to introduce new products to their customers which could potentially boost sales; however, the majority of F&F’s products were created by a Michelin star chef. According to online reviews, customers claim F&F’s food to be “delicious fresh and tasty” (Pacifique, 2020) as well as “fulfilling and satisfying” (Rizwan, 2021). The average rating for customer reviews exceeds 4.5 stars, clearly showing that customers enjoy the food, service and ambience of frais and fresh. If frais and fresh were to introduce new products, not only would this be time consuming and expensive (due to the hire of the Michelin star chef and stages of tasting, refining and reviewing) however business to customer relations may be at stake due to new products not meeting the standards of current loyal customers. Secondary research was conducted in order to find recent articles about frais and fresh however it was found that the restaurant does receive high brand recognition throughout social media. It is possible that this is the result of poor marketing campaigns due to the very low budget that frais and fresh allocate towards promotion. Articles and advertisements can potentially boost F&F’s sales, gain higher market recognition and as a result maintain F&F’s place in the market. Since Frais & Fresh is a socially conscious business, advertisements in the media may potentially inform and educate consumers about F&F’s healthy products, recyclable packaging and fair-trade suppliers. Frais and fresh lacks in internet advertising and the new market for online advertisements is a lowcost option for F&F. Promoted posts on Instagram and Facebook, target specific consumer markets ensuring that those who view F&F’s advertisements are most likely potential clients. Liquidity ratios 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = 30900 24416 = 1.27 𝐴𝑐𝑖𝑑 𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 = 30900 − 1200 24416 = 1.22 Financial analysis Frais and fresh had a Gross profit margin of 87% when the business allocated a budget 2% of sales for promotion. Using the same figures however with a budget of 8% of sales for promotion, the gross profit margin went down by less than one percent. Meaning that if frais and fresh were to increase their budget to 8% of sales they would have almost increased their budget by C$30,000 without decreasing the gross profit margin. The estimated income statement did not take into account the sales that frais and fresh would gain as a result of increasing their promotion as there was no simple way of measuring this. However, if frais and fresh decided to increase their marketing budget by 6% the possibility of them gaining sales is very high and the risk of F&F making a loss or even less profit than the previous year is extremely minor. Frais and Fresh’s stands at a good liquidity position with their current and acid test ratio both being significantly greater than 1. F&F are able to pay all of their loans and do not seem to have an issue with finance showing that they are able to spend their finance on promotion. Conclusion Frais and Fresh Canada must increase their promotion budget in order to maintain their current market share due to; • Increasing competition- competitors are all advertising • Expansion of offerings and adaptations to the menu items has a high chance of poor market recognition and unhappy customers • Current promotion is very poor • Increasing budget has minor negative impact on sales Especially now with new sources of finance from F&F franchisees, increasing F&Fs marketing budget will have a minor impact on their financial position. Recommendations It is recommended that F&F increase their marketing budget to 8% of sales. Therefore, the most e cient way to maintain and possibly increase F&Fs market share is to concentrate on marketing and promotion techniques like advertisements and articles. As a result, they must first increase their marketing budget to at least 8% of sales. Limitations • Articles may be risky as the company has minimal control over what the producers want to write about them • Advertisements could lead to lead to a misrepresentation of facts • Deferred revenue expenditure, F&F may not immediately recognize results of advertising • Di culty in measuring how e ective each advertisement/ promotion technique was Reflections All pro t and loss estimates are made under the ideal case, there is a chance that the company will make less revenue than anticipated. The pro t and loss account where 8% of the budget was allocated did not take into account the anticipated number of sales after advertisements and promotions. In the financial research, it is agreed that Frais and Fresh stand at a good financial position and are a liquid business. It is clear that increasing marketing budget is beneficial, it is suggested that the budget should be focused on promotion. After assessing multiple resolutions, I have reached a conclusion with a solid potential solution to maintain Frais and Fresh’s place in the market during 2021 and is most effective through promotion and advertisement of goods. Bibliography • Adra, L. (2017). Frais and Fresh I Order On The Go I Online Order. Retrieved 16 February 2021, from https://www.fraisandfresh.ca/ • Bracken, J. (2021). Bracken's IB Business. Retrieved 11 December 2020, from https://sites.google.com/site/brackensibbusiness/ • Hoang, P. (2016). Business Management for the IB Diploma Study and Revision Guide. Hodder Education Group. • Stimpson, P., & Smith, A. (2015). Business and management for the IB Diploma. Cambridge: Cambridge University Press. • B, M. (2021). Advantages and Disadvantages of Advertising. Retrieved 19 January 2021, from https://www.economicsdiscussion.net/advertising/advantages-and-disadvantages-ofadvertising/31464 20 • FRAIS & FRESH, Montreal - 48 Rue McGill, Ville-Marie - Menu & Prices - Tripadvisor. (2021). Retrieved 20 February 2021, from https://www.tripadvisor.com/Restaurant_Review-g155032d12325782-Reviews-Frais_Fresh-Montreal_Quebec.html • Appendices Appendix 1: interview with founder and business development director (DBD) What separates F&F from any other restaurant, what is your unique selling point? Founder: Go Ahead Bilal DBD: Our food is very diverse compared to all our competitors. We still offer the same range of products, salads, soups and wraps. However, for example, our soups are all vegan which is very hard to find. Founder: Healthy yet filling and prepared very fast, that’s what makes us different. How do you think competition has changed in the last five years since F&F just started? DBD: You don’t really need to educate people to eat healthy anymore, resulting in increased competition with many healthy food concepts opening all over Montreal. In light of this increasing competition, are there any strategies that F&F are implementing. DBD: Trying to reach out further and targeting different markets through delivery apps and marketing. In terms of business developments how has changing the location of F&F affected their market position? DBD: We moved to a more prime location which as a result has positively affected our market position. There is a lot of foot traffic on crescent street, many restaurants nearby and we are one of the very few healthy food concepts in the area, which has its benefits and its limitations. May you describe the culture and the internal environment of the physical restaurant? Do employees get along? Are operations consistent and efficient? DBD: Yes of course employees get along, more or less they have to get along. Our culture is very happy, we have many workshops for our employees which builds relationships and results in good communication between the staff. Our back of house is always communicating with our front of house which is very important to maintain efficient operations. Do you believe that frais and fresh need to expand, in terms of finance is F&F liquid enough to do so? DBD: Yes, I believe that we do, we are currently expanding to Saudi Arabia Founder: We decided to start selling franchises in order to help us with liquidity issues, we have already signed a contract with franchisees in Saudi Arabia, and plan to expand even further to other countries around the world. Coincidentally just like Bilal and I, our Saudi franchisees are related. Bilal Is my son and they are first cousins. Is there a gap in the Montreal restaurant market, do you believe that frais and fresh have a legitimate opportunity to introduce new ranges of products? DBD: I believe we have already filled so many gaps in the market and especially at this point in time with the pandemic there is not much to introduce other to continue developing our menu my creating new salads, shakes for example. How as the Pandemic affected Frais and Fresh? DBD: It obviously has been very damaging for us and all other restaurants like us. So, it has negatively affected us and the business, since we cannot offer the full dine in experience anymore where which is usually a great experience for all our customers. We endeavour to never let a customer walk out unhappy. Do you believe that in house delivery will cut costs rather than through a delivery service? Founder: Eventually when we expand and have more stores yes, however at this moment in time since we are still at the beginning, it is better to outsource. Are there any external threats that are impacting frais and fresh’s sales? Founder: There are always external threats, the biggest one being unforeseen pandemics. Competition is also increasing. Do you believe that F&F promote their products the right way? DBD: We spend 2% of our sales on promotion. This is a low budget however I personally believe that we do not really need to spend more money on marketing as finance is needed elsewhere. How often does F&F recruit new staff? are staff turnovers high? DBD: Being a restaurant in a ‘student city’ has its benefits however it also negatively impacts our recruitments. We mostly hire mostly students who are looking for short term jobs whom eventually end up leaving us. However, in the meantime we are coping as this doesn’t really affect operations. Compared to other restaurants our training is quick and easy which is basically the concept of this franchise. Was there anything else not mentioned and is vital to maintaining F&F’s presence in the market? DBD: To keep expanding and as I mentioned before, to keep developing our menu in order to meet customer demands Founder: Always bringing something new and exciting to the customer experience DBD: and definitely to keep up with trends Appendix 2: Income Statement