Allison has a Masters of Arts in Political Science
How do you know that your business is better than others in your industry? In your business plan, the industry analysis is a detailed and informative section that explains the industry you will be operating in and why your business is a unique addition to the industry.
The moment has arrived! You've waited many years for the opportunity to franchise your fast casual organic restaurant. Somehow you just knew that restaurants that provide quick food in a classy environment were bound to pick up! You believe that the organic theme is just perfect for the new 'health craze' hitting the market today.
As you prepare to meet with investors, you start putting together your business plan. In your mind, you know that the fast casual industry is on the rise. Even better, few competitors are doing it as well as you!
However, although you're sure of this, the investors say that 'numbers don't lie,' so you're conducting a full industry analysis for your business plan. The industry analysis for your business plan will include a detailed, well-researched analysis that indicates you have a deep understanding of your business's potential in a given market. This analysis will provide you with a comprehensive understanding of how well your franchise should do, given your strengths and weakness in your market.
In the Business Plan
As you prepare your business plan you will need to include several sections that indicate your knowledge of the industry you will be operating in. This includes:
An overview of your industry
Outlook of potential profitability
Relevant risks in your industry
Think of your industry analysis as a process of peeling an onion to get to the center. You want to look at the many layers of your industry so that you can best understand what is occurring, and how it may influence your business for good or bad.
Industry Overview and Target Market
When you first begin the industry analysis section, you will want to provide an overview of your industry as a whole.
What is going on in the food industry that is making fast casual popular?
What about the organic industry?
Is your industry growing?
If yes, how quickly?
If no, why should you still move forward?
In this section of your industry analysis, you want to provide several details about the industry as a whole. It is important to address the past, present, and future of your industry. You also want to discuss how the growth in the industry trends is positive for your business plan.
It is important to be detailed. You may be in the fast casual industry, but you are also in the organic industry. Both of these appeal to different markets. What is the trend for fast casual? What is the trend for organic? How do these two trends pair together, and why will it be successful? When conducting your industry overview, it is important to be comprehensive. You want to fully understand every detail possible about the industry your business is operating in.
Once you have identified the general landscape of your industry you want to discuss your target market.
Where do you intend to operate?
Why is this your target market?
How is this the best market for your industry?
Consider your fast casual restaurant. You will want to identify where organic restaurants are the most lucrative and explain why those markets are the most appealing to your industry. You may decide on a location because health and organic products are a part of the local culture. This could mean that the consumers are willing to pay a bit more if the food you source is organic, maybe even locally produced. When you select your target market you want to clearly describe why it is the most advantageous market for your industry.
Competition and Profit Potential
Once you have clearly defined your industry and its outlook you should identify your competitors. You not only want to know the history, but also who your competitors are. You will want to explain why they are your competitors and what is your competitive advantage, or what is it that you offer that they don't.
What do your competitors look like?
What do your competitors sell?
How are you different and why is that good?
It is important to be detailed when understanding your competitors. You want to know what makes them tick and why their customers keep coming back. Then you want to identify what you offer that they don't. Explain why customers will choose your product over theirs.
When you discuss why customers will select your business you will want to be as specific as possible.
What percentage of customers will choose organic over conventional products?
How much more are consumers willing to pay for organic products?
How will you market your products?
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Through this section of your industry analysis, you're given the opportunity to define what makes your business unique. What makes you different from everyone else? Why do consumers want this? Provide specific numbers, percentages, and charts to help make your case.
Through your industry analysis, you also need to identify the potential for profitability.
How much does it cost to source necessary products?
What is the typical wage in this industry?
What is the average consumer price point for your goods or services?
What are the profit margins on your products? On your competitor's products?
How much does it cost to source organic products?
At what price point will you sell your menu items?
How does this compare to other fast casual restaurants? How about organic restaurants?
How much profit do you expect to make on your menu items?
It is important to be detailed in your profitability section and fully understand the cost of operation. When you understand how much it will cost you to operate, you can determine whether or not your prices are competitive in the industry.
Risks in the Industry
The risks relevant to your industry are an essential component of your industry analysis. You want to identify the risks, define them, and describe how you will overcome them. When evaluating your industry risks, you want to look at social, legal, political, and economic risk factors.
You might ask:
What are the obstacles to entering this market?
What legal factors do I need to consider?
How stable is the economy? Will people have money to buy my products?
Are there relevant political factors?
Consider your franchise:
What are the regulations to entering the fast casual market?
What do I legally have to pay my staff?
How long can I store food products?
How long can I store organic products?
What are the challenges to starting an organic restaurant?
How difficult will it be to obtain organic products?
Are there laws that affect the sale of organic foods?
Are there laws that impact franchising?
A comprehensive analysis of industry specific risks will help you to have a clearer picture of what challenges you will face operating in different locations. It will also help you to determine if the risks are something you can overcome or if they will cripple your business.
For example, consider your organic franchise. If someone wants to operate in a location where the minimum wage is two times the federal average this will affect the cost of menu items. If the price you have to pay employees forces the price of your menu items above what consumers are willing to pay, you may need to reconsider your strategy.
The industry analysis section of your business plan allows you to dig into the details of operating in your specific industry. In this section, you will go into detail about your industry as a whole, the market you intend to enter, your competitors, potential profits, and the risks associated with your industry. You'll want to be detailed and thorough throughout this analysis. It is your opportunity to prove that your business is competitive within your industry and to show that you're providing something unique.
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