Business Plan Development

One of the main reasons new businesses fail is that the owner did not write and follow a business plan. A business plan is a document that describes a new business and a strategy to launch that business. All businesses should have a business plan. Your aim is to emphasize the key points that will persuade the reader of the value of the business concept. Parts of a business plan include:

• Executive Summary A brief recounting of all of the points in the business plan.

• Management Team Plan Presents your management team's qualifications.

• Company Description Outlines the company's basic background information, business concept, and goals and objectives.

• Product and Service Plan Describes the features and benefits of the business's products and services.

• Vision and Mission Statement Sets forth the guiding principles by which a company functions.

• Industry Overview Addresses the basic trends and growth within companies that provide similar or complementary products and services.

• Market Analysis Presents your market research and features a customer demographic profile that defines the traits of the company's target market.

• Competitive Analysis Demonstrates that the proposed business has an advantage over its competitors.

• Marketing Analysis Describes how a company plans to market, promote, and sell its products or services.

• Operational Plan Includes information about all the processes that take place in the business.

• Organizational Plan Offers information about the business's legal structure, record keeping, and legal and insurance issues.

• Financial Plan Presents finances and financial forecasts, and explains the reasoning behind the forecasts.

• Growth Plan Looks at how the business will expand in the future.

• Contingency Plan Suggests plans to minimize the risks in the business.

• Cover Page, Title Page, Table of Contents, and Supporting Documents Basic information about the company, the business plan, and any items or documents relating to the business plan.

Types of Business Ownership

There are three common types of legal business ownership (See Figure 3.3).

Sole Proprietorship

A sole proprietorship (prs-'prT-s-tsr^ship)

is a business that has only one owner. About 75% of U.S. businesses are sole proprietorships. Sole proprietors earn all profits and are responsible for all expenses.


A partnership is a legal association of two or more people who share the ownership of the business. Control of the business and profits from the business are divided between partners according to the terms of a partnership agreement.


A corporation is created when a state grants an individual or a group of people a charter with legal rights to form a business. The owners buy shares, or parts of the company. These owners are called shareholders. They earn a profit based on the number of shares in the company that they own. If the business fails, the owners lose only the amount of money that they have invested in the business. There are several different types of corporations.

* ) FIGURE 3.3 Business Ownership Types

" Business Basics Each type of entrepreneurship business has advantages and disadvantages. What type of business would you most like to own?

Business Ownership



• Owner makes all decisions.

• Easiest form of business to set up.

• Least regulated form of business.

• Limited by the skills, abilities, and financial resources of one person.

• Difficult to raise funds to finance business.

• Owner has sole financial responsibility for company; personal assets sometimes at risk.


• Can draw on the skills, abilities, and financial resources of more than one person.

• Easier to raise funds than in sole proprietorship.

• More complicated than sole proprietorship.

• Tensions and conflicts may develop among partners.

• Owners liable for all business losses; personal property sometimes at risk.


• Easier to finance than other forms of business.

• Financial liability of shareholders limited.

• Record keeping often time-consuming and costly.

• Often pays more taxes than other forms of business.

Government Requirements

The U.S. economic system is known as the free enterprise system. Free enterprise means that businesses or individuals may buy and sell products, and set prices with little government control. Businesses however, are still subject to some government controls. The government passes laws that set workplace safety standards, price controls, and fair wages. These laws are meant to protect everyone who buys and uses goods and services.

Zoning and Licensing

Although the United States has a free enterprise system, government can still make rules about how businesses are run. Health codes, regulations, and zoning requirements must be met if you prepare food for sale. Zoning divides land into sections that can be used for different purposes, including residential (housing), business, and manufacturing. Only certain activities are allowed within these defined zones.

Before you set up a foodservice business, you will need to get a license that grants you permission to open a business. A license is a written permission to participate in a business activity. Business licenses are issued by local governments. You will also need special liability insurance. Insurance is a contract between a business and an insurance company. It provides financial protection against losses. Insurance policies are issued by insurance companies.

Record Keeping

You must keep accurate, or correct and updated, financial records to run a successful business. These records will include a detailed account of all income and spending for the business. These types of records are normally kept by the business owner or an accountant. Many people like to use record-keeping software to store an electronic copy of important information.

n List Name the three types of business ownership.


Review Key Concepts

1. Describe foodservice management entrepreneurship opportunities.

2. List the components of a business plan.

Practice Culinary Academics Social Studies

3. Write a one-page essay on how the concept of supply and demand can be used by a restaurant to develop a business plan.

NCSS VII B Analyze the role supply and demand play in determining what is produced.

English Language Arts

4. Imagine that you are opening your own foodservice business. Develop a company description and industry overview for your business plan. Outline the company's business concept and goals and objectives.

NCTE 12 Use language to accomplish individual purposes.

&S Mathematics V

5. It costs $4 to make a cupcake, for ingredients, labor, and overhead costs. If each cupcake sells for $5, what is your profit margin?

¿EH^ffltt Calculating Profit Margin Profit margin means the percentage of the price that is profit. Calculate profit margin by dividing the profit amount (price minus cost) by the price, and then converting the answer to a percentage. Starting Hint Determine your profit per cupcake by subtracting the cost ($4) from the price ($5). Divide the profit amount by the price, and convert the answer to a percentage by multiplying it by 100 and adding the percent symbol.

NCTM Number and Operations Understand numbers, ways of representing numbers, relationships among numbers, and number systems.

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