calculate the B.E.P and financial ratios

 

 

 

 

 

 

Dal-Chawal Food truck in Toronto

 

 

Executive Summary

This research project is about a Dal Chawal food truck startup in Toronto city of Canada. The objectives of this project is to calculate the B.E.P and financial ratios, to understand strategies needed for business expansion, to learn how to sustain a business in this industry and to search and obtain license for operating in prime locations, to achieve 10,000 unit sales and 25,000 units sales in first 6 months and the first year itself respectively. Both primary and secondary market research have been performed within the startup research project and a very detailed competitor analysis was executed. For primary research food truck owner and restaurant owner were approached and a semi-strctured qualitative interview was performed to understand nooks and crannies of the food truck industry in Canada and in Toronto itself. Porter’s Five Forces was done for carrying industry analysis along with PESTLE for macro environment. SWOT of the food truck industry and that of for Dal Chawal idea itself had been assessed. Effect of covid-19 and how it can impact the business currently and in both near and distant future was delved in good depth.

The financial calculations reveal that the total capital requirement of the Dal Chawal food truck is $130,000 which is not high but it is not low either. The projected balance sheet provided with number of net profit expectation for the first year at $88,400 whilst for second year it is estimated to increase by at least $40,000, that is, 1.5 times. The depreciating cost of the food truck was done and a straight line was obtained meaning zeo depreciation. The break even point gives the required number of unit to be sold as 35,200 which statistically and practically speaking would not be possible to achieve within the first year itself. The asset turnover ratio would be 0.8 for 1st year and 1:1 of the 2nd year.

As for the marketing strategy, fresh, organic food and minimum oily yet tasty food has been chosen as the primary promotional approach for the product. The price will included in the marketing as cheap but tasty category at only $5 whilst, for promotion, social media websites and search engine reviews have been selected to give the business a boost. University of Toronto and Ryerson university will serve as perfect strategic location as they have a substantial asian and indian population. From the beginning till the opening of the business, around three and half months is the targeted timeline.

For sales strategy, AIDAS framework has been adopted where attention would be captured through social media promotion and designer digital posters. Mouth-to-mouth references are the prime choice for public relations build-up. For developing interest, raita would be provided with salad to add some punch to it. For desire, the sales and marketing strategy mix would be served in form of affordable, daily staples which is a healthier version of most Indian dishes. Action and satisfaction have been targeted to be delivered by the actual food and style of cooking itself. A thorough consideration of all the government health regulations and licensing procedures has been done so that no inspection failure can arise in the future.

A detailed risk analysis had been performed that revealed inaccessibility of the preferred location and inability to handle long customer queues are the topmost risks that can lead to rapid sales fall or create persistent low sales volume. Covid-19 lockdown and chances of road accidents is being viewed as moderate risks and other risks like supply chain disruption, freak gas leakage, skilled employee unavailability, or customer satisfaction have been perceived as low threats. The inbound logistics of inventory storage and parking garage have been considered meticulously. Human resources employment currently stands at only 2 employees and the startup owner himself. Supplier summary and B2B procurement details have also been listed within. Thus, overall all the aspects have been thoroughly discussed, analysed and evaluated before actual implementation of the Dal Chawal food truck business.

 

Executive Summary                                                                                                                        2

Introduction                                                                                                                                    6

Objectives                                                                                                                                        7

Pro Forma Budget                                                                                                                          7

Break-Even Analysis                                                                                                                      9

Preliminary Research                                                                                                                   10

Primary Research                                                                                                                         11

Conversation with food business owners for industry investigation                                        11

Types of competition and competitors                                                                                     13

Food trucks performance in Canada                                                                                    14

Effect of Covid-19                                                                                                                    14

Specifications about the license, vehicle permits                                                                     15

Secondary Research                                                                                                                     15

MBA concepts                                                                                                                               16

Swot analysis                                                                                                                            17

PEST Analysis                                                                                                                          17

Implementing Porter’s 5 principles                                                                                      19

Financial Analysis                                                                                                                         20

Competitive Analysis                                                                                                                    25

Marketing Strategy                                                                                                                      28

Timeline                                                                                                                                         29

Implementation Plan                                                                                                                    30

Risk assessments                                                                                                                           32

Exit strategy financial ratio                                                                                                         33

Operations and Human Resources                                                                                             35

Funding and Financing                                                                                                                36

Marketing and Sales                                                                                                                     36

Summary of Suppliers                                                                                                                  37

Sustainable Differences                                                                                                                38

Government and Health Regulations                                                                                         39

Conclusion                                                                                                                                     40

 

 

Introduction

A business plan is defined as a written formal document that outlines the target objectives of the business, the primary timeline to achieve those objectives and the means and modes with which they are achieved. The significance of the business plan lies in the fact that it helps an entrepreneur to bring clarity to his/her own thoughts which in turn allows the investors and audience to understand it and act accordingly. A business plan should also include a thorough financial aspect and extensive research and related analysis. It is based on this research that financial, marketing and business strategies are formed. This business plan indulges in the idea of a mobile food truck based in Toronto, Canada. Every business aspect has been covered in this research and analysis to facilitate this idea to be turned into a feasible reality.

A food truck is a mobile cafeteria or eatery that seeks to provide an alternative to the traditional idea of the static brick and mortar restaurant. A food truck usually comprises of caravan or trailer (can be even a bus) and the most common example of a food truck are ice-cream vans. Some of the food trucks serve a pre-cooked meal that is reheated and served as per order while the others prepare food according to the live customer orders. In this business plan, the learner has decided on the idea of serving Dal Chawal to the customers.

Dal Chawal is a prominent and regular staple food hailing from South Asian countries especially, in the Indian subcontinent. It is a relatively less spicy, less expensive, easily accessible food which makes it a daily staple in these countries. In Canada, the entire Indian-origin Punjab community is known to serve this dish regularly in their homes thus, making it o popular food choice even in this nation. Gourmet and readymade versions of this staple is also available in the country. Toronto is a culturally extremely diversified country, possess an increasingly growing young population who are vegan and prefer healthier but tasty food options. Hence, the business plan for a mobile and easily accessible food truck selling Dal Chawal on the streets of Toronto has been developed here.

Scope

According to the statistics, 65% of the people residing in Toronto is of the opinion that most of the food trucks operating in the city have a decent competitive edge when compared to the cheap and medium-scale restaurants in the city including the cafes. though, the city possesses a diverse culture and people from all over the world as mentioned above, good and authentic Indian cuisines that are light on the palate and on the pocket are not easy to find especially, for the workers and the students, that is, demography of lower-income groups. With the elevating number of migrant workers in Canada, demand for cheap, easily digested but flavourful food is in high demand. As stated above, Dal Chawal being a vegetarian dish with no dairy presence, is a great option for all the health-conscious, environmentally aware and vegan people. Also, as the food supply source opted for the lentils beans and rice would be completely organic, the market expansion scope for this food business idea is extremely high. But as of now organic vegan Indian dishes are mostly available in high-end restaurants and gourmet tea and coffee parlours.

Objectives

Business objectives can be defined as a phased method by the use of which business sustainability and profit growth are attained. However, for the long-running businesses or MNCs, it can also be termed as the defined means with which the mission and vision of the company can be accomplished. In this business plan, the short-term business objectives of the learner have been described.

  • To reach the break-even point within 6 months from the beginning of the business
  • To achieve business sustainability from the inception of the business
  • To obtain required legal permits and license of the premium locations across Toronto
  • To attain consistent business growth by employing strategic and ethical methods
  • To search for means and strategies for business and market expansion
  • To achieve a sales volume of 10,000 units in first 6 months and 25,000 units during the first year

Pro Forma Budget

Pro Forma budget can be defined as a pre-planned expenditure structure that is about to be incurred when an organization decides to execute a business idea or non-profit events. it is usually made keeping in mind the market fluctuations including disparity in demand-supply, contingency situations, monetary inflations, severe changes in government regulations, etc. But a pro forma budget statement can also be made to call attention to the disparity between the real expenditure and assumed expenditure. However, this can only be executed after the business operation starts.

Segments of Expenditure Estimated costs (amount in dollars)
Initial Capital required 130,000
Expense to buy Food truck 60,000 (single time)
Cost of legal permit
(for vehicle/truck)
20,000 (single time)
Cost for food licence
(mobile eatery)
100 (every month)
Expense for cooking appliances and utensils 20,000 (single purchase for time being)
Maintenance cost of the truck 2,000 (every 4 months)
Cost of electricity and gasoline 600 (every month)
Cost of raw material
(food for the initial 3 months)
10,000 (every 90 days)
Miscellaneous expenses
(Insurance costs, legal permits, on-road parking charges etc.)
5,000 (per year)
Parking and storage

(garage and inventory)

1,000 (every month)
Social Media promotion cost

(Facebook, Instagram, Twitter)

300 (depends)
Paint costs and expense for playing music 3,000 (single time)
Remaining working capital
(kept for emergency purposes)
8,000

Table 1: Dal Chawal business plan finance requirement (Pro Forma)
(Source: Created by the learner)

As it can be observed from the Pro Forma Budget, the monetary divisions demonstrates that most of the investments are one time investments only though, they need upgradation and proper maintenance. The issue of mobile food license is exclusively applicable for food trucks and vans in Toronto while, food vans or trucks that have fixed locations and remain stationary attract less parking expenses. Since the plan is to remain mobile to access different locations, on-road parking charges and garage charges have been shown in a separate category. Although a food truck can hold a decent bit of inventory, it reduces the operating space when in the field preparing orders. Hence, additional expenses for inventory has been taken into account.

Break-Even Analysis

Break-even Analysis is where the selling prices and the incurred costs equalize with each other thereby, giving a situation of no profit – no loss scenario. It usually refers to the number of units that are required to be sold to recover the invested capital. Any number of units sold above the break-even point is known as profit gain.

B.E P (Units) = F.C/ (S.P per unit-V.C per unit)

S.P (per unit) = $5.

(B.E P = Break-Even Point, F.C = Fixed Cost, S.P = selling price and V.P = Variable Cost)

The number of units sold in the first year = 400000/5 = 80000.

  1. C = 240000/8000 = $3.
  2. C = 70400.

B.E P = 70400/ (5-3) = 35200 units.

Thus, 35200 units of Dal Chawal must be sold per year if $5 is charged from the customers per unit of dal Chawal (on average) and the incurring cost for that same single unit remains $3. However, it is to be noted that any extreme changes or fluctuations in the food supply would result in a change in the selling prices per unit thus, affecting the break-even analysis and under those circumstances, recalculations must be performed.

The sales estimate value of 400,000 was based on mathematical assumptions sourced from the average daily sales data of an average food truck during the market research conduction. It is necessary to consider the preliminary data and numerical value of total selling price turnover when predicting future sales on the basis of market research data and information.

Preliminary Research

Preliminary research is the broader research and analysis of the study topic so that it can be used to constrict the area of research down to a more specific territory. It allows a researcher to concentrate on the particulars of the industries related directly to the business plan or study topic.

Target Market– One of the main segments of importance in this Dal Chawal business idea is for whom it is being developed. After some research it was found that this business idea is most suitable for the daily labourers hailing from Asia more specifically, having Indian origin and the college students especially, the vegetarians, vegans, and from Asian origin. Basmati rice and pulses are usually appreciated and used widely in entire Southeast Asia and this being a comfort food and homely meal would thus, attract these people. Since the price would be very reasonable, any Indian food lover can be a potential target market.

Business Particulars– As mentioned in the proforma budget, legal permissions for operating a mobile business and food license are crucial for running the business. Also in Toronto, the startups are required to register themselves with the government. Tax filings are compulsory to run any business in the city. Electricity and gasoline permit is mandatory along with a fire extinguisher.

Supply– Most of the raw materials needed to start the business is available in the country. However, chickpeas, red and yellow pulses, onions and green chillies need to be supplied from Saskatchewan, Ontario and Quebec, British Columbia respectively. Research revealed that good quality organic basmati rice needs to be imported from Asia preferably from Canada. Cooking wares and appliances can be bought from local stores in the city.

Logistics– As this business idea is rather on the cheaper segment and the capital requirement is also relatively low, it is necessary to buy gadgets, vehicles (truck), utensils that would be long-lasting. With the progression of research, it was found that most Indian cooking utensils are low in cost and high in value and are available in Toronto. Upon further research, the importance of getting strong throwaway cutleries and crockeries was understood. For serving customers from a mobile food truck, it is necessary that solid crockeries should be used to facilitate the comfort of the customers. An exhaust fan is another significant requirement.

Primary Research

Conversation with food business owners for industry investigation

Founder of xxxxx restaurant and owner yyyy food truck were approached for a qualitative data collection in form of semi-structured interviews with the intention of gaining insight into the market and industrial operations and threats.

Q1) How has the Covid-19 affected the business?

  1. RF) The government forced us to close dine-in and it was really bad for the business. Still, the average footfall has remained 22% below that of 2019. To cope with this, we shifted to take-away service completely and even now, the delivery service is attracting more customers than dine-in.

FTO) For my business, Covid-19 did make a negative impact but it was easily countered by switching to home delivery with the help of online food delivery apps. Since my business was always a portable one, I could track with data apps where the heavy inflow of takeaway orders was happening involving the cuisine I serve within my operational limit and I took my truck to that position.

Q2) How difficult is it to retain customers with limited food variety? Does a long queue affect online reviews?

  1. RF) For a restaurant having a limited menu is a really bad thing for business. Most of the restaurants in Toronto have 3 pages long menus and still receive complaints about not having enough variety. However, it must be kept in mind that having a dis on the menu but not being able to serve it is even worst!! Usually, on national holidays, festivals and rush hours at the weekends, the customers are willing to wait for a table but after securing their seats, most of them do not like to be kept waiting for the food to be served or order to be taken.

FTO) Well nobody banks on a food truck supplying a restricted variety of food as long as they are good and fresh in the mouth, easy on pockets and digestive systems. Yes, longer queues do tire people out and mismanagement of the service line can lead to customer gain for your competitor. No one likes to stand on the road, waiting for food!!

Q3) What are the prime challenges faced by this industry’s owners?

  1. RF) Higher operating costs, lack of trained staff, increasing competition from street food vendors and cafes, accelerating level of food safety, increase in commercial property tax and insurance premium, and disruption in the supply chain of the exotic and pan-continent sourced food items are the prime challenges faced by the food industry. Sometimes frequent and unannounced inspections from the health department lead to health and hygiene quality concerns in the mind of our customers for no reason.

FTO) Personally for me, ever-increasing traffic regulations, elevating insurance costs, harder to get prime locations parking permits are a few of the major challenges faced by the food truck owners. Road accidents and conflicts over the same location are also becoming common.

Q4) In your opinion, how is the market scope for Indian staple food in this industry?

  1. RF) Several big restaurants in the city serve Indian cuisine and employ Indian chefs. I personally believe that the influence of Punjabis for long so has altered the palate of the Canadians and now, they have acquired a fondness towards this spicy but delectable cuisine.

FTO) Most of the food truck business owners have either speciality cuisine or serve exotic fusion food. Thus, business in this industry booms if the owner opts for authentic cuisines or can supply delicious fusion food. The market for Asian food is increasing every year mainly, near the international colleges.

*RF= Restaurant owner and FTO= Food truck owner

Analysis: The interviews with the food business owners disclosed that at present chances of disruption from Covid and political instability are quite high in Toronto. Also, this has been evaluated that most food truck owners rely on speciality cuisine or fusion items and have chosen Product Development strategy, that is, 3rd quadrant in Ansoff’s Growth Matrix. The risks of supply disruptions are also high but can be avoided if shifted towards the local supply chain. This assessment from this qualitative data can be given that customers of the refreshment vehicle business do not expect a wide variety but they do want well-made speciality cuisine that is affordable for all.

Types of competition and competitors

Asessement of competition and competitors are mandatory in business research to align the strategies so that business sustainability can be achieved. Generally, in a business there are 4 types of competitors and competition- a) Direct, b) Indirect, c) Potential and d) Future. In this business idea, any food truck serving Asian cuisine is a direct competitor of the Dal Chawal startup because it possesses the maximum chance of substituting this staple. Any cheap, less oily staple serving cafes be it from Eastern or Western hemispheres are the indirect competitors as they do not directly substitute the product but can provide an equivalent alternative resulting in indirect competition. In the potential competition category, it is the Indian restaurant with moderate prices that can be labelled as the same because if one or multiple of these eateries decide to lower their products charges then, Dal Chawal startup would face direct competition with them with a great probability of huge substitution. The last category of competition is the Future one and all the small-scale food businesses serving fusion foods with Asian influences can be considered as future competitors. However, the cheap packaged pre-cooked Indian food has a chance of becoming a future competitor if the taste is improved and the prices are reduced.

Food trucks performance in Canada

In 2019 alone, Canada’s food truck business made an annual revenue turnover of $354 million and currently, it employs 2,825 jobs (Sobaihi, 2020). Even in the Covid-19, most of the food trucks remained open for business because the owners converted themselves into an only takeaway and in certain cases, home delivery businesses. As discussed earlier, Toronto has a thriving food truck customer population and a healthy population of food truck owners. In Canada, most of the food truck owners after the initial year or months of business earn around or over $150,000 annually making the food truck business in the country a successful startup idea. As sourced from Van Embden (2020), every year in Canada over 2,000 new food truck businesses are being set up and one can argue about the looming saturation of the food truck market in the near future but aftermarket research and analysis, it was found that many of these owners earned quite a good money and a decent credit line availability and thus, shifted towards bigger greener pastures in the food industry.

Effect of Covid-19

Interestingly, the investigation disclosed that although restaurants were closed in pandemic lockdown, owing to the mobile, deliverable and non-sitting nature of the food trucks, they were allowed to operate whilst maintaining social distancing. However, as these refreshment vehicles heavily rely on the young population in Toronto, the industry saw a drastic setback when the educational institutions closed down. Asian and Indian small-scale eateries and food trucks were the worst hit as their owners relied on the migrant students and workers who all went back to their respective countries. As a result, location-based competition increased at an exponential pace in this industry. Revenue from roadside food vending in Canada decreased by $84 million in 2020 and only increased by $20 million in 2021 whereas till 2019, the both on and off wheels street food industry in the country was growing by $10-20 million each year. This can also be attributed to the factor of disruption in the supply chain.

According to the conducted research, many of the food trucks serve exotic cuisine sourced across the globe that would have faced enormous disruption and supply shortage when the international flight ban stayed put for several months. And even now, with each wave of Covid, international mobility is greatly hampered. Thus, it can be said that the impact of Covid-19 has been detrimental to this industry but it is indeed less than most of the dine-in restaurants and can rise up to this challenge if supply chain disruption can be limited or avoided. For example, in the dal chawal business, Indian spices and Basmati rice can be stored in huge quantities to provide backup in emergency circumstances.

Specifications about the license, vehicle permits

A detailed enquiry at the city council office revealed that a Refreshment Truck license is needed for the owner in form of a Motorised Refreshment Vehicle Owner which costs $ 1,030 in the 1st year and $690 per year thereafter and in case of a mobile food truck, the owner must possess commercial vehicle drivers license which costs $342 in year 1 and $253. Annually thereafter. Furthermore, any employee working in this type of food industry needs a compulsory Refreshment Vehicle driver or assistant license. All these can be obtained from Municipal Licensing and Standards in Toronto.

 

Secondary Research

Inventory

Thorough secondary research reveals that the sustenance of a larger inventory can be a serious issue in this food truck business as it would mean extended expense for renting a substantial amount of space (torontosun.com, 2022). However, the problem with Dal Chawal is that basmati rice, an integral ingredient to the concept of this staple is needed to be imported to Canada and thus, requires a lot of inventory space. Also, to obtain a competitive discount on the wholesale rate of legumes and pulses needed to make the dal, 50kg of purchase is necessary thus, elevating the need for space.

Location

To make a success out of this business idea, it would ideal to place the food truck around the neighbourhood of Brampton and/or Scarborough in the morning (office-time crowd) owing to its proximity to the people of Indian aborigin. Construction sites and factories where the number of Indian continent migrant workers are maximum are a good choice in the afternoon which would attract people staying in the city without their families and looking for a comfortable, familiar and easy-on-pocket lunch option. Lastly, a daily visit to Ryerson University or the University of Toronto where a large chunk of foreign students are Indians would prove to be a smart selection of location. But it was also found that food truck businesses with extremely limited variety like Dal Chawal do not have high survival and success rates unless they are mobile. A start-up like Dal Chawal possesses a good chance of business growth and sustainability if it keeps switching its locations around twice a week whilst keeping the total number of locations constant. However, fuel expenses must be considered seriously before adopting this strategy.

Decoration

As the industry analysis of the food truck business was investigated in a more detailed manner, it was found that the students of the universities, young and enthusiastic vegan people, even Indian origin citizens of Scarborough prefer food trucks that possess a trendy and cool vibe along with highly ornated graffitis. A mix of the contemporary and reprised classic collection of music being played (that changes at regular intervals) was also found to be another factor added attraction for the food truck business.

MBA concepts

In this section, the application of three theories of management, that is, SWOT analysis, PEST assessment and Porter’s Five principles have been done to assess and discuss the market and industry in which the Dal Chawal food truck would operate.

Swot analysis

Swot analysis consists of an assessment of an organization’s or a person’s strengths, weaknesses, opportunities and threats.

Strength:

 

●       Pocket-friendly

●       Less spicy food, good for health-conscious people

●       Fast service

●       Location flexibility

●       Saves renting cost

 

Weakness:

 

●       Unlimited competition with renowned restaurants

●       Demand uncertainty

●       Costly food ingredients

●       Heavy reliance on suppliers

●       Huge expenditure in storing inventory

Opportunity:

●       Emerging business

●       Good sponsors

●       Easy accessibility of prime location

 

Threat:

●       Unavailibity of suppliers of raw materials

●       Parking issues

●       Interveining legal issues

PEST Analysis

A PEST analysis is applied to find the strengths and weaknesses of a particular nation within the periphery of an industry that an organization chooses or wishes to enter or expand to. It comprises 4 segments namely political, economic, social or sociological and technological. In some cases, legal and environmental segments are also added. It essentially portrays a country with industrial boundaries from various corners.

 

Political

Canada is a politically stable country with plenty of business opportunities. The political aspect has a significant role in the success of the food truck of dal chawal in Toronto because of legal permits and license requirements. The current state of the government of Canada does pose a threat where tax duties and trade policies and tariffs may be increased which could be harmful to a small but supplier reliant start-up like Dal Chawal truck business. However, despite chances of import of both the food supply chain, it would be easy for the food truck enterprises to be inclined to comply with the taxation and government policies as the Goods and services tax in Canada on food material import stand at a mere 5%.

Economic

The inflation rate of Canada is 4.8% which is the highest in the past 3 decades due to COVID 19 with a GDP annual growth rate at -5.4%. This can favour the food truck concept due to its cheaper price than the fancy restaurants. And this model can be a saviour also for those people who got jobless during a pandemic. Owing to the Covid-19 related economic depression, around 0.1 million jobs were lost in Toronto city which accelerated the unemployment percentage up to 8.8 which is the highest in the past 4 decades. Also, in 2022 this percentage was increased by another 1.9%. This could be an opportunity for this business idea as the people would opt for cheaper daily staples.

 

Social

Food truck business first began with the idea of serving the people who need access to quick take-away food at relatively moderate prices. Around ⅔ of the Canadian citizens living in the country have stated that they are attempting to move towards a healthy diet choice as a part of health awareness and around 60% of the citizens believe that they are obese and feel the urge to opt for less oily and organic food. Thus, for them, Dal Chawal is a less spicy and healthy option for them and proving to be a business strength.

 

Technological

The technology rank of Canada is 6th and the innovation index is 1.32. It is now the most essential part of any start-up. technology now can reduce the number of employees and that saves a lot of money. Apart from that by any application or something people can track it in a prime location. Advertisement is one of the most important things to keep in mind to expand a business which has become easier to do with high technological availability in Canada. Apart from that cooking wares are also needed on a large scale to run the business. In Canada due to the development of technology it is easier to avail high-quality appliances at affordable rates. Thus, technology can help the business to grow faster and successfully.

Implementing Porter’s 5 principles

Porter’s five forces is a model used in the industry about sustainability and profitability. The 5 segmentations of this theory are as follow- a) Industry Competition, b) New entry potential, c) Supplier power, c) Customer power and e) Threat of substitution.

Industrial Competition– The first part of Porter’s five forces is competition in the industry. Suppliers or buyers seek companies that give lower prices and better quality of products. Here in this startup, it is seen that dal chawal is a combination of cheap products and healthy products. Better quality of dal chawal will attract customers. market competition is quite high but the Asian food industry is not that available till now.

Threat from new industrial entries– Entry of new companies obviously has some effects on the industry. An industry with strong barriers to entry is ideal for existing companies within that industry since the company would be able to charge higher prices and negotiate better terms. Though dal chawal startup is a unique idea but the lower expense barrier and ease to obtain legal permits eases the way of a new entrant in the industry and hence, the threat from them remains on the higher side.

Negotiating strength of suppliers– One of the important factors in the five forces is the power of suppliers. It is obvious that if there are fewer suppliers in the market then they are the dominators. They actually dominate the industry. But if suppliers are higher in number then a company can keep its input costs lower and enhance its profits but increased negotiation. For the dal chawal truck in Toronto, the basmati rice which will be used have to be imported and that’s why the negotiation power of the suppliers would be substantially higher.

Bargaining strength of customers– The ability that customers have to drive prices lower or their level of power is one of the five forces. The number of customers has a great effect on prices and better deals and also, more the number of substitute products available in the market greater is the bargaining power of the customers. the citizens of Toronto have decent options of food from mobile food vehicles thereby, possessing a great bargaining power. But if they want the taste of authentic Asian cuisine at an affordable rates then, the place is reversed giving Dal Chawal idea a better bargaining power.

Threat of substitute products– This can be the most serious menace for a company. If there is no substitution of products then the company which produces that particular product becomes more powerful and sustains in the market easily in the long run. Substitution of products can create less demand. Dal chawal is an uncommon idea in Toronto has less fear to get substituted although, subsitution from indirect competitors are high which had been discussed in the next segment.

Financial Analysis

Financial Analysis can be defined as the process of assessing and analyzing the feasibility and sustainability of an upcoming or running business based on its monetary viability. It is usually done in the form of pre-existing or predicted Income, Cash flow and Profit and Loss statements for running and upcoming businesses respectively. It is also performed when reviewing the financial position of the company in the market and generally, it is based on this analysis that a financial audit is carried on at a later stage to understand and minimize the monetary risks.

Particulars 1st Year 2nd Year
     
Sales $ 400000 $ 500000
Variable costs of items $ 240000 $ 250000
Gross Profit Margin $ 160000 $ 250000
     
Legal Permit $ 20000  
Mobile Food License $ 1200 $ 1200
Cooking utensils and appliance expense $ 20000  
Cost for maintenance $ 2000 $ 2000
Costs for electricity and gasoline $ 7200 $ 7200
Miscellaneous costs $ 5000 $ 5000
Expenses for garage and inventory $ 12000 $ 12000
Marketing expenses in social media $ 1200 $ 600
Paint costs and expense for playing music $ 3000  
     
Net Profit Margin $ 88400 $ 222000

Tab: Statement of profit and loss
(Source: Made by learner)

Particulars 1st Year 2nd Year
Operations    
Sales $ 400000 $ 500000
Capital $ 130000 $ 0
Capital remaining for emergency requirements $ 8000 $ 0
Legal Permit $ -20000 $ 0
Mobile food licence $ -1200 $ -1200
Cooking utensils and appliance expense $ -20000 $ 0
Cost for maintenance $ -2000 $ -2000
Costs for electricity and gasoline $ -7200 $ -7200
Variable costs of items $ -240000 $ -250000
Expenses for garage and inventory $ -12000 $ -12000
Marketing expenses in social media $ -1200 $ -600
Paint costs and expense for playing music $ -3000 $ 0
Net cash flow owing to operations $ 231400 $ 227000
Activity of investments    
Miscellaneous costs $ -5000 $ -5000
Food vehicle buying expense $ -70000 $ 0
Net cash flow from activity of investments $ -75000 $ -5000
Activity of investments finance    
Loan Repayment $ -100000 $ -30000
Net cash flow from activity of finance $ -100000 $ -30000
Cash flow of previous year $ 0 $ 66400
Net Cash Flow $ 56400 $ 258400

Tab: Statement of Cash flow
(Source: Made by learner)

Projected Balance Sheet
Liabilities  1st Year Amount 2nd Year Amount Assets  1st Year Amount 2nd Year Amount
Capital $ 130000 $ 200000 Food truck $ 70000 $ 63000
add: Net profit $ 88400 $ 222000 Inventory $ 210000 $ 250000
  $ 218400 $ 422000 Cash $ 56400 $ 248400
Sundry liabilities $ 18000 $ 69400      
Bank loan $ 100000 $ 70000 Sundry assets    
Total liabilities $ 336400 $ 561400 Total assets $ 336400 $ 561400

Table 3: Projected Balance sheet
(Source: Made by learner)

This aforementioned table indicates that the total capital of this company would be $ 1,30,000 and expected net profit is $ 88,400 in year 1 and 2,22,000 in year 2. The rate of depreciation of food trucks is % on a straight-line method. However, if the management expect that in any uneven circumstances, if the company suffers from the loss by 20% then it would affect the whole cash flow and the balance sheet. In this scenario, company needs to transfer its loss or the carry forward the losses in the next 5 financial year. If, the company gains profit of 20% then company would focus on its cost and revenue structure to become more beneficial.

Competitive Analysis

Competitive analysis is about evaluating the strategic position of the company in comparison to the other competitors with respect of the level of competition. It helps in determining the future strategy of an organization so as to obtain a competitive edge over the others. Dal Chawal business proposition’s position in the market can be assessed with the help of Perptual Mapping technique. This competition analysis method determines the potential or present locale of the organization and its competitors based on how the consumers would perceieve their products and services.  The following table has been used to provide the perceived strategic assessment of the industry competitors and the possible future position of the dal chawal business.

Type of competitor Example Perceived position in market Analysis
Direct Other food trucks serving Asian food 4th quadrant- Low Price, low quality Cheaper goods and services are usually associated with low quality by the customers and most of the food trucks sell food at a highly affordable price to retain customers. Also often, a line can be seen in front of the better food trucks and this waiting time reduces the perceived quality of service.
Indirect Healthy, cheap cafes 2nd quadrant- Low price, High quality Greater menu variation at a very moderate, sometimes even cheaper pricing is the very defintion of high value for money from a consumer’s perspective and this is what most of cafes provide.
Potential Indian restaurants 1st quadrant- High price, high quality Customers associate restaurants with tasty, authentic and premium quality food operating at high price range which is often justified because higher profit margin per unit allows the restaurants to purchase premium quality and train their employees to provide the customers a great experience.
Future Pre-cooked Indian food 2nd quadrant- High Price, low Quality As almost all the pre-cooked foods have higher preservatives and priced substantially high, they fall in this category but this being readymade food, always has a good client base.
Dal Chawal N/A 4th quadrant- Low Price, Low quality Being a small startup, and serving relatively simple menu customers are bound to perceive this as the low in quality. Moreover, extremely limited menu and only 1 employee at a time would result in degradation of perceived quality.

(Source:Made by learner)

Consumers always tend to associate price and quality in a directly proportional manner and thus, they perceive every product and services in the same way until, they themselves try the goods and services or hear/read mouth-to-mouth references and reviews regarding the same before retaining or changing their decisions regarding the same. This is known as the Halo-Effect.

Marketing Strategy

Marketing strategy is rhe method by which an organization can promote its products and/or services by focusing on the business objectives resulting in judicious allocation of the resources. For Dal Chawal business 4P marketing model has been applied to determine where the focus of the business should be.

Product– Like all other food serving business, this startup provides both product (cooked food) and service (serving the meal). All the product would be organic and they would freshly prepared in small batches to retain quality whilst avoiding food wastage. Dal Chawal being simple to cook is easy to make in batches between the interval hours. Red and yellow lentils, dried chickpeas, onions, tomatoes, green chillies and Indian spices like coriander and cumin seeds along with Basmati rice would be used to make the food. Every Saturday, specially prepared Dal and Jeera rice can be served to provide a menu variation (the variable costs would not be much higher than the weekday menu).

Price– As calculated above, the price of the Dal Chawal would be kept at $5 to apply a cost focus strategy in accordance to Porter’s generic strategies. As found from the research above, Covid-19 has disrupted every business and a lower pricing strategy would be a good policy to gain competitive advanatge in the target market.

Place– After concentrating on the secondary research findings and conversing with the city council office for license and permits, it has been decided that thrice a week, the truck would park near Ryerson University and University of Toronoto college campuses from 6pm till 8pm alternatively. From Monday to Saturday, the truck would visit 3 factories from 1pm- 3pm where South Asian and Indian workers are employed in sufficient numbers. In the morning, the truck would park in the Scarborough region from 8am- 10am. These choices would be in compliance with the research on location.

Promotion– By extending the idea of the budgetary plan, monthly expense would be allocated to promote the startup in the social media. As a significant portion of the target market is youth, extensive Instagram, and Facebook promotion is an ideal choice- if needed paid promotion should be opted. Help of a digital marketing expert would be taken for the initial promotion. Use of banners, leaflets, and posters must be done as a part of physical marketing and promotion. Use of vibrant graffiti and contemporary Indian decoration would be applied to provide authentic yet modern vibe. A wide array of music could be played from mobile phones with the help of cheap, durable and portable speakers to draw attention to the presence of the truck.

Timeline

Undertakings Day 0-15 Day 15-30 Day 30-45 Day 45-51 Day 51-75 Day 75-90 Day
97
Day
105
Formation of business plan                
Doing a basic research on industry and the market                
Researching about the market competitors and their strategies                
Evaluating the feasibility of the financial planning by a through mathematical analysis                
Searching for potential investors and persuading them                
Confirming supply sources and solving logistics issues                
Obtaining necessary legal and parking permits                
Attending to last moment purchase, negotiations and arrangements                
Starting the Dal Chawal business                

(Source: made by learner)

Implementation Plan

What to achieve How to achieve Duration for achieving (in days)
1) Prelim market evaluation By conversing with the suppliers and the restaurant owners 15-30
2) Assessment of competition ➢     Using Perpeptual mapping, Porter’s Five forces

➢     Communicating with cuatomers

30-37
3) Analysis the potential strategic position of the Dal Chawal Applying Ansoff’s Matrix and Generic strategies 37-45
4) Formation of financial plan ➢     Use of Break-Even analysis

➢     Talking with the legal consultants, city council, and food truck owners

45-51
5) Completing the search for investors By presenting the-

●       business idea

●       financial assessment

●       determined strategies

to persuade the interested investors

51-75
6) Arrangement of the business particulars ➢     Buying and decorating food truck

➢     Hiring the employees

➢     Purchase of pulses and importing rice

75-90
7) Issue of mobile food license, vehicle and parking permit ➢     Visting commercial license and tax office

➢     Filling all the necessary forms to get GST number

➢     Receieval of Food license registration

➢     Permit for electricity

90-97
8) Completion of all possible arrangements and requirements ➢     Renting inventory and garage

➢     Buying cookware and installing appliances

➢     Purchase of gasoline cylinders, light bulb, spices, vegetables, etc.

97-105

(Source: made by learner)

Risk assessments

Analysis of potential risks is as important as identifying successful business strategy because it assists an organization to prepare for contingency circumstances and allows to note the probable bottlenecks that can arise during business conduction. For this business scheme’s risk evaluation, Risk Matrix framework has been implemented.

Risks Likelihood Consequence Extent of Impact
Lockdown owing to viral pandemic Likely Significant Medium High
Unavailability of employees Unlikely Significant Medium
Road accidents Possible Severe Medium High
Equipment damage Very unlikely Moderate Low Medium
Disruption of supply chain Unlikely Moderate Low Medium
Accidents from gas leak Very unlikely Negligible Low
Inaccessibility of preferable locations Highly likely Significant High
Accelerating costs of insurance Possible Minor Low Medium
Issue of parking tickets Likely Severe High
Long customer queue leading to service lag Highly likely Severe Very High
Customer boredom due to menu limitation Unlikely Moderate Low Medium

 

Exit strategy financial ratio

An exit strategy financial ratio for a new business venture refers to the valuation of total assets and liabilities to measure the market valuation of this company. In this respect, Dal Chawl analyses asset turnover ratio, liquidity ratio to evaluate the financial performance of the upcoming business.

Calculation of Asset turnover ratio
Entity: Dal Chawl
Particulars Year 1 Year 2
Total assets 336400 561400
Total revenue 400000 500000
Asset turnover ratio 0.8 1.1

Table 4: Asset turnover ratio

(Source: created by author)

It is expected that the company will increase the financial efficiency and the managerial efficiency to stay competitive in the market. In the first year, it is expected that the asset turnover ratio will be 0.8 and in the second year, it will be 1.1.

Calculation of Debt ratio
Entity: Dal Chawl
Particulars Year 1 Year 2
Total assets 336400 561400
Total  liabilities 218400 422200
Debt ratio 1.54 1.33

Table 5: Debt ratio

(Source: created by author)

It is expected that the company will increase the financial efficiency and the managerial efficiency to gain competitive advantage from the market. In the first year, it is expected that the Debt ratio will be 1.54 and in the second year, it will be 1.33.

Operations and Human Resources

In the supply channel, barred Basmati rice, everything would be sourced locally to reduce transportation costs. Medium quality basmati rice would procured from Indian suppliers. At least 2 suppliers would be maintained to prevent any sudden disruption. Cooking utnesils would be purchased from the specialty Indian kitchenware stores in Toronoto and premium quality product would be bought to assure long-term use. Electricity supply must be secured and energy-saving lights, induction stove must be bought to lower the costs.

Commercial gas cylinder must be obtained as huge amount of food cooked in Indian style using indian utensils require a large volume cylinder along with giant gas stove. Weekly parking permits should be obtained beforehand to avoid any parking tickets. 6 portable stools could be carried inside the food caravan to provide a small sitting space wherever, it goes thus, attracting more customers by providing roadside comfort.

As the business would just be a very small-scale startup with limited menu variations and extremely small amount of prep work is involved, two employees are enough as helping hand. Engaging just two employees would be beneficial for that employees because they would get a good salary. Legislated benefits for the employee is mandatory in Canada. It could have been managed with one employee also but, since the work duration is substantial with 6 days a week work schedule, engaging two people in rotating shifts would be preferable choice. Both the employees must have prep and cooking skills. All the monetary and financial transactions are required to be dealt by the startup owner directly. However, a financial consultant must be engaged to oversee the tax payments and financial statements.

Funding and Financing

Funding and financing are associated with gathering money to start a new business venture. In the context of Dal Chawl, it has been decided that the money will be arranged from debt financing and equity financing. Debt financing is engaged to borrow the money from Government, Commercial banks. Dal Chawl would raise the funding of money by taking a bank loan of $ 1,00,000 with a certain interest. This company will have to pay 6% of the interest rate. The management has chosen debt financing as lenders have no control over the business and the relationship with a lender will end after the full- repayment of the loan. This company has also decided that it will raise money from equity financing. The capital structure of this company will be 1:2. Thus 1/3 capital would become from equity financing and 2/3rd capital would be raised from debt financing. It is expected that this finance structure would help this company to maintain its daily working capital flow. However, a larger amount of debt can increase the risk of bankruptcy.

Marketing and Sales

Market growth and business sustainability is directly proportional to manner in which marketing and sales of a company is managed. It can be said that any organization intending to boost its sales volume needs to formulate the robust marketing and sales strategy and just manufacturing products or services is not enough. To strategise this segment, AIDAS framework has been applied below.

Attention– To capture the attention of the customers, extensive promotional strategy must be implemented. Mouth-to-mouth references from family and friends would provide a great source of free promotion. Banners on the streets, near the potential locations and wide circulation of digital posters would be done.

Interest– To develop interest within the consumers, catchy promotional content highlighting the use of Basmati rice, organic food source, healthy cooking method, addition of salad and yoghurt (raita) and the emotional comfort of this staple should be done.

Desire– As the interest of the customers is aroused, the final push towards buying and tasting of the Dal Chawal would be made by emphasing on the extremely affordable price tag and the circulating the knowledge of the interchanging locations. This would inform the customers about whether can afford or not and from where to afford it.

Action– This segment is about the proverb- “Proof’s in the pudding” meaning that the ultimate sales boost would occur only if the quality and product match the expectation of the customers and if there is no disparity between what is promoted or advertised and what is being served. Tasty and fresh preparations made every day would be served along with fresh yoghurt and salad.

Satisfaction– As the service and food provisions starts meeting satisfaction level of customers, online reviews and personal references would result in gaining more customers and retaining the older ones.

Summary of Suppliers

The supplier for electronic appliances and gadgets for the food truck would be Costco as the price is cheaper than the other suppliers like A1 Cash & Carry. Vegetables like onions, tomatoes, garlic, etc. would be sourced from local markets that brings fresh from farm to table. It is because most of the large grocery stores do not store reasonably priced organic food. To get basmati rice, lentils and spices, the choice of supplier is Shah Trading company Ltd. This company provides affordable basmati rice, Indian spices and herbs and lentils and that too of organic variety (Shah Trading Company, 2022). The backup company for these supplies in case deal with Shah Trading Ltd. fails in future is Sadroo’s Grocery Supplies Ltd. For obtaining Indian cooking utensils, Sinhals grocery Delivery has been selected because of their extensive range of cooking utensils and because of the great online reviews and the advantage of quick home delivery (Singal’s, 2022).. The paint for the truck would be sourced from Steeles Paint as the products are eco-friendly although, slightly higher in the price range.

Sustainable Differences

The sustainable difference can be termed as the expectation vs the actual achievement of any business, organization or even of an individual person to incorporate and adapt the green goal of sustainability (Castro-González et al., 2019). The main segments of sustainable difference include- a) Social responsibility, b) Economic responsibility and c) Green energy.

Social responsibility– Social responsibility within the periphery of a small startup like the Dal Chawal food truck will include responsibility towards the employees, the customers and the society itself (Castro-González et al., 2019). This food truck would demonstrate its social responsibility in the following manner:-

  • Encouraging the employees by creating a healthy workplace environment.
  • Recruiting people in a non0discriminatory method and respecting workplace diversity.
  • Giving away left food to charitable organizations or to the homeless instead of dumping the food (Castro-González et al., 2019).
  • Providing the customers with fresh food daily and not stale ones and supporting the healthy lifestyle choices of the customers.
  • Take part in the community building in the areas of operation.

Economic responsibility– It is basically the inherent liability towards the society and its people from a broader financial perspective and the outlines of what the Dal Chawal food truck would be following are enlisted below.

  • Generating as many employment opportunities as possible.
  • Creating a stable financial environment and management to secure the jobs of the employees.
  • Providing the employees with necessary medical and other employment benefits (Nave & Ferreira, 2019).
  • Employing local talented and eligible youth of the areas where Dal Chawal will operate as part of community giveback service.
  • Take responsibility for serving the domestic and international tourists with sincerity and faithfulness for the economic prosperity of the city.

Green energy– It is nothing but accountability towards the environment itself and in other words, environmental sustainability goals. Below the methods for Dal Chawal of achieving this are listed.

  • Promoting organic and non-GMO food through buying its own lentils, spices and rice.
  • Making modifications to the food truck so that it can operate on both fuels and on battery/electricity to reduce the carbon footprint (Nave & Ferreira, 2019).
  • The paints that would be used to draw graffiti on the truck would be eco-friendly.
  • Takeaway plates would be made from recycled material and no use of plastic.
  • A water recycling system would be maintained to reduce water wastage.

Government and Health Regulations

Canadian though supportive about business and startups, has strict regulatory norms and can cancel all necessary permits if entrepreneurs do not adhere to every rule. For opening a food truck busines, food license acquisition is a must which is usually issued in form of Legal permit for Mobile Preparation Premises where vehicles are considered to the premises. Inspectors from Toronto Public Health Department  investigate the health concerns on the basis of cuisine served (for Indian cuisine, use of hand and cooking in clay pot/oven is not considered unsanitary) and inspection for dry materials like rice, pulses, and spices are usually separate from perishables like vegetables and cooking oil.

The owner needs to take a self-paced exam to get Food Handler Certification without which he/she cannot operate in the Canadian food industry. For business like Dal Chawal where fuels are used Gasoline registration issued in the name of the business must be done. GST registration and number on behalf of the company must be obtained to assure operational transparency to the Commercial Tax department of Toronto without which B2B invoices cannot be issued.

Conclusion

It can be concluded that several aspects are needed to be considered as a part of the business development plan and thorough research is compulsory to understand the multi-faceted paradigms of business. For the Dal Chawal business scheme, small-scale investment is enough to cover the initial expenses and a moderate amount of net profit margin would easily cover the annually renewable expenses. It can be firmly deduced that a proper marketing strategy can have a humungous impact on sales if the business opt for a product development strategy combined with a cost-focus policy when tied with strategic location-based vehicle positioning.

This can stated that in the food truck industry, employing minimum people possible for help in cooking and serving is a smart method to limit overheads expenses and prevent disgruntled employees. It can be inferred that this type of business possess both direct and indirect competition and substitution threats from all types of cuisines of all operating scales (well may be not exotic gourmets and Michelin stars). This can also be stated that vehicle license, drivers license, employee permit, food safety license and parking permits are crucial to avoid any criminal or financial fraud charges. Lastly, it can be surmised that Dal chawal business idea is both creative and feasible from business sustainability and market growth perspective.

Reference List

Shah Trading Company. (2022). Products | Retrieved 13 May 2022, from <https://shahtrading.com/products/>

Singal’s. (2022). Pressure Cooker, Tea Strainer, Rolling Pin, Masala Dabba – Retrieved 13 May 2022, from <https://www.singals.ca/collections/kitchenware>

Castro-González, S., Bande, B., Fernández-Ferrín, P., & Kimura, T. (2019). Corporate social responsibility and consumer advocacy behaviors: The importance of emotions and moral virtues. Journal of cleaner production, 231, 846-855.

Nave, A., & Ferreira, J. (2019). Corporate social responsibility strategies: Past research and future challenges. Corporate Social Responsibility and Environmental Management, 26(4), 885-901.

Sobaihi, M. (2020). The Urban Food-Truck Phenomenon: History, Regulations and Prospect. Rev. Eur. Stud., 12, 39.

Van Embden, K. (2020). Effects of Food Truck Image on Consumers Perceived Risk and Experiential Value (Doctoral dissertation, University of Guelph).