Sales Forecast
Italian food, based on the observation that there is no any other Italian restaurant in the neighborhood, is not popular compared to fast-food offered by indirect competitors such as McDonalds. Therefore, the sales in the first one year are expected to be slow as the firm will be penetrating a market previously dominated by other types of food eateries. Due to barriers to market entry that will be mounted by the indirect competitors, it should be expected that the sales will start from a low point but gradually increases as the Italian foods restaurant gains a bigger share of the market through popularizing Italian foods. Also, the economy is booming, and it is expected to that way in the foreseeable feature. Therefore, since the restaurant is targeting the low to middle economy, the sales are expected to grow as the middle to low class people in this neighborhood increases, projected to grow at 6% per annum. It is also assumed that the aggressive marketing strategy to win a considerable market share will be intensified over the five years. Further, the firm is expected to keep improving on its customer experience through increasing its variety. Also, the population in the neighborhood is expected to increase thus increasing the market size of the restaurant (Hyndman & Athanasopoulos, 2014: Morlidge & Player, 2010). As such, the firm rate of growth will be accelerated by sound economic factors, aggressive marketing, increase in the neighborhood population and improved customer experience. The market is expected to have gained a new equilibrium factoring the Italian food restaurant from the fifth year. As such, the pace of growth should start to slow down as seen in the percentage values.
Using the expected sales in the year the restaurant is established, a five-year projection is carried out. The following table summarizes sales projections.
Methods and Assumptions
Adopting the average sales price per of $7 and serving at least 300 customers per day and operating 360 days in a year, the table below summarizes the expected sales per year. The number of transaction per day is based on the assumption that the firm restaurant will attain 40% of MacDonald’s transactions. It is further assumed that inflation will not lead to a change in the prices thus the prices, selling price, will remain stable (Morlidge & Player, 2010).
References
Hyndman, R. J., & Athanasopoulos, G. (2014). Forecasting: Principles and practice. Newyolk: Xulon Press.
Morlidge, S., & Player, S. (2010). Future ready: How to master business forecasting. Hoboken, NJ: Wiley.
