Flavor Burst (FB)
In 2006, Jacob launched a street-food stall specializing in fusion cuisine, which quickly gained popularity. Ben kept marketing expenses low by focusing on advertising directly on the stall and relocating it to high-traffic locations and events.
In 2009, Jacob reinvested the stall's profits to open a restaurant called Flavor Burst (FB), starting with a staff of 16. Over the years, employee turnover remained low, as staff received an annual bonus that grew with their length of service.
In 2017, Jacob expanded FB's reach by creating a website and embracing social media marketing. Customers were encouraged to share their experiences online, where reviews consistently praised FB's skilled staff and the food's exceptional value. Jacob responded to all reviews, and many customers joined an FB social media group, regularly engaging with the restaurant and each other. For many, the combination of vegan dining and social interaction created a club-like atmosphere.
Despite the positive reception, high labor costs, decent profits, and the use of premium ingredients resulted in FB's gross and net profit margins falling below industry standards.
Recognizing the rising demand for fusion options, Jacob borrowed funds from a family member in 2018 to open two additional FB locations in different cities, adding 32 employees to the team. However, in January 2019, a loyal customer of the original FB visited one of the new locations and left a negative review. The review quickly went viral, leading to a decline in sales across all three FB restaurants.
State two appropriate sources of finance Jacob may have used when he first opened his vegan food stall.
Appropriate sources of finance include:
- Personal savings
- Loan from family or friends
- Small business grant
- Loan from a bank secured by some personal asset of value
- Crowd sourcing
Explain one positive impact and one negative impact on FB as a result of having low labour turnover.
Positive Impact
1 mark Lower recruitment, induction, and training costs due to low employee turnover.1 mark Better customer service as experienced employees know the culture and operations of FB.
Negative Impact
1 mark Lack of new ideas and fresh perspectives due to low employee turnover.1 mark Higher labor costs due to the annual bonus scheme that rewards longer-serving employees.
Explain one advantage and one disadvantage for FB as a result of its use of social media.
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Advantage identification
1 mark - Low cost compared to other promotional methods OR
- Ability to build customer community
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Advantage explanation with application to FB
1 mark - Cost-effective promotion method for FB OR
- FB uses social media to develop customer loyalty through community building
-
Disadvantage identification
1 mark - Limited reach to non-customers OR
- Rapid spread of negative information OR
- Vulnerability to false competitor posts
-
Disadvantage explanation with application to FB
1 mark - FB's social media mainly reaches existing customers OR
- Negative information about FB spreads quickly among loyal customers OR
- Competitors can damage FB's reputation through false posts
Discuss Ben’s decision to enlarge the scale of BTO from one restaurant to three restaurants.
Advantages of expansion include:
- Leveraging its brand and USP to reach a larger market.
- Potential economies of scale.
- Potentially increased revenue and profits.
Disadvantages of expansion include:
- Loss of control, especially with respect to quality.
- Potential diseconomies of scale.
- FB loses its "small community feel."
- Increased costs for recruitment, induction, and training.
- New employees may not have the same attention to quality as long-time employees.
