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New Restaurant Concept

For the last 10 years, you have been working in the health food business. You have talked to many customers who have suggested a new restaurant concept. The restaurant would feature a variety of low-calorie meals (under 500 calories) made from healthy ingredients (e.g., organic fruits and vegetables and steroid/hormone free meat). The restaurant would include a bar with an extensive organic wine list and trendy d├ęcor. There would be an emphasis on high quality, friendly service, and colorful meal presentation. Your customers suggest that they would be willing to pay around $50 to eat a meal and have a glass of wine at this type of restaurant. They lament the fact that their community has no upscale restaurants that offer this type of fare.

You have conducted a detailed financial analysis of this potential business opportunity. You believe that you have good information on the cost of starting and operating the restaurant. You project that with a $50 meal price and anticipated demand you would earn a high profit and an excellent rate of return on your investment. You have the equity capital to start the business.

Several friends with MBAs argue that you would be crazy to start this business. They claim that there are few entry barriers to the restaurant industry and the "every person with business training know that you can't make profits in a competitive industry." Should you drop the idea of opening the new business based on this argument?

Explain your answer. What are key to your success?

Solution Preview

No, I should not drop the idea of opening the new based on this argument. The key to my success will lie in my differentiated offering. I will try to establish a strong niche for myself ...

Solution Summary

Discusses decision regarding opening of a new restaurant.