DOWNFALL OF RAVI RESTAURANT

INTRODUCTION
Zameer ul Hassan, branch manager at Ravi Restaurant Faisal Town, was sitting in his office reviewing monthly sales of December 2012. He is concerned regarding the declining sales of the restaurant. He has been there for past eight years and has seen the peak of Ravi Restaurant. It was another day at restaurant when customer flow was very less. He was thinking about reasons and decisions which led to the declining sales of Ravi. To find the answers, he had to review the progress from the beginning of restaurant till now. So he started looking at the launching of the Restaurant. In 2004, Ravi Restaurant was one of most distinguished restaurant of Lahore. The restaurant had nearly 3,000 visitors every day. All of their branches were always crowded with food lovers. At that time sales always surpassed to Rs. 100,000 daily. It was about time they opened two new branches at Iqbal Town and Johar Town.

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 RAVI RESTAURANT
Ravi restaurant was opened in May of 1998 at Faisal Town, Lahore. Haji Arshad was the original investor in the business. However, his brother, Haji Afzal was handling the operations from the beginning. At that time Ravi was the only restaurant in 5KM of their surrounding area. They were offering 50 main courses meals and 15 side course meals at launch. Due to their great taste and service, Ravi restaurant gained a lot of respect and positive feedback from its customers. Soon Ravi restaurant launched their new branch in 2002 at Yaadgar Chowk, Ravi Road Lahore. In 2005, Ravi Restaurant opened their new branch in Iqbal Town and after few months the next branch in Johar Town. Each branch had a total of 15 full time waiters and 10 standby waiters. In kitchen they had 2 chefs and 10 people staff in every branch. Additionally an accountant and two managers were present on all branches. Every branch had a unique style of welcoming customers with a dwarf at door greeting with a smile. On the outside each branch had a parking space of 7-15 cars. On some branches there was also space for open-air dining. A desk and three staff persons are serving customers for home delivery and take away orders while one staff member is for valet parking and for security. Ravi restaurant mission was to achieve leadership in the market it served, which is pursued by achieving high quality, value to customers, traditionalism in food and freshness in taste. Few objectives had been established to achieve these goals. 1. Strive for the highest quality in all things - food, beverages, service & ambiance. The experience for our guests must be the best it can be. 2. Provide value to customers. The goal should be to meet all the criteria listed and do so within a reasonable time to moderate price structure. This is the key to long term success! 3. Do the things the "old-fashioned" way, from taking orders and food & drinks, to the physical appearance of our restaurants. Customers will get all sort of Chinese and continental foods but in a traditional style. Ravi restaurant has now expanded its main to 100 main courses and 30 side courses. It includes starters, Soups, Salads and noodles before preparing for main meals. In starters, Ravi Restaurant serves fish crackers, special fried prawns, deep fried chicken fillet along with 4 other items. Ravi Restaurant has 7 different types of soups which includes Ravi special soup, hot & sour and their famous chicken corn soup. Ravi Restaurant have a variety of salads including Russian salad, the traditional kachoomer salad and fresh green salad prepared in a very unique way. Ravi Restaurant only serves beef and chicken chowmein noodles to their customers. Ravi Restaurant has 15 types of Chinese special recipes which include chicken garlic, chicken Manchurian, chicken almonds, chicken ginger, hot plate chicken, chicken vegetable, chicken garlic and their special Chinese chicken. Ravi Restaurant has chicken

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shashlik and chicken cutlets in their continental category. Beef lovers can enjoy 3 varieties of sliced beef at the restaurant. Lastly Ravi Restaurant has over 50 traditional Pakistani foods items. It includes various types of chicken and mutton handi, chicken and mutton karahi and Ravis special murgh makhni handi. Apart from that they have 12 different rice meals and 12 different Bar B. Q. items. For snack food lovers Ravi restaurant has 10 different types of burgers and sandwiches. Their side courses include much type of sweets and ice creams. They have 6 types of roti and Nan prepared at restaurant. Finally they serve customers with various beverages and fresh juices and for tea lover they have variety of teas. As the industry expands, Ravi Restaurant is looking forward to expand their food range in future to 150 main courses. Ravi Restaurant biggest strength is its monopoly in the southern area of Lahore. They have been the only restaurant in the area for many years and had enjoyed it by offering foods at a premium prices until 2005. After the entrance of new restaurants, Ravi still has the advantage of being the oldest restaurant in the area and they have evident brand recognition in the area. Another advantage Ravi has over its competitors is a big sitting space. Ravi was the only restaurant to have basement dining experience in the area until September 2012. They have sitting in basement, ground floor and top story. Ravi Restaurant owns the property of all their branches and the rest of the branches were franchised to their relatives. This is in big advantage of the business because it helps the owners to expand their branches without going for financial leverage. Apart from that they have outdoor sitting at their Johar Town branch.

RESTAURANT INDUSTRY
Pakistan is a huge and growing market for food. In big cities like Karachi and Lahore, restaurants of all types and sizes are jam-packed during opening hours. Looking at the restaurant business, it appears that very little; including economic uncertainty has adversely affected food consumption. The popular media has also picked up on this culinary zeitgeist and almost all the TV channels in the country have programmes on cooking and other aspects of food. While the headline GDP numbers suggest sluggish economic growth, not all sectors are underperforming. A closer look suggests that the economic slowdown has been far from uniform, with some sectors booming, while others are in a deep slump. The retail and restaurant sector in Pakistan was worth about $40 billion in fiscal year 2012, and has been growing at 5.3% in real (inflationadjusted) terms for the past five years, much faster than overall economic growth during that period.[1] For some years a number of food streets have sprouted up in different cities, most notably Karachi, Lahore and Islamabad. In terms of growth potential and expansion,

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Lahore offers exciting opportunities. The area that stands in the shadow of the historical Badshahi Mosque is a great example of regeneration that the government of Punjab successfully undertook. Such regeneration projects in different parts of the country are not only developing a culture of sophisticated culinary habits, but are also creating sustainable employment opportunities for many. Creating business opportunities around the consumption of food is arguably the foundation of a sustainable economy, especially in a country the size of Pakistan. There are numerous examples of successful global food businesses that have contributed immensely to the economies of their respective countries of origins. Local food businesses in Pakistan like Ravi Restaurant (Lahore), Bundu Khan (Karachi & Lahore), Salt & Pepper (Lahore), Savour Restaurant (Rawalpindi & Islamabad), Bar-B-Q Tonight (Karachi and Islamabad) and Chicken Dabu (Gujranwala) have great potential to grow as national and eventually international brands [2]. Pakistanis spend 90 billion rupees (US$924-million) a year on eating out at the 20,000 restaurants nationwide because of a paucity of other entertainment facilities, said Nauman Mirza, founder and chief executive officer of Food Connection Pakistan, an online restaurant guide. Pakistan is an amazing destination for food outlets because eating out has become the nations biggest source of entertainment, said Ghulam Hussain Soomro, Every new place that opens up is packed because the spending power of the masses when it comes to eating out is amazing [3]. Because of this foreign restaurants look for the opportunity to open their chains in Pakistan. It helps them explore new markets and bring new recipes for the customers. It also encourages local businesses to raise their standards and bring innovation in their products and services. Customers are also appreciating the change since customer taste has changed a lot in the previous years. It is mainly because restaurants are getting the main form of entertainment for the customers where they enjoy and eat.

COMPETITIVE LANDSCAPE
Based on the major restaurants opened near Ravi Restaurants, Zameer ul Hassan has identified 4 restaurants as its competitors. 1. 2. 3. 4. Grourmet Family Restaurant Salt n Pepper Nadeems Buffet Shahi Khaima

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GOURMET FAMILY RESTAURANT

Gourmet Restaurant was opened in 2005 and has since become one of the biggest successes in town. The Gourmet restaurant Lahore Faisal Town is among the best restaurants in Lahore. Gourmet is a successful Pakistani bakery which now owns Gourmet restaurants that are basically a dedication of owner to his daughters. The atmosphere, the price and the food is excellent. The Gourmet Restaurant Lahore menu includes the typical Pakistani, Chinese and Continental options of most family style restaurants in Lahore. Gourmet is known for their Stuffed Chicken with Pineapple Sauce, as well as their sizzling Steaks and many more. Some of the very common items include Chicken Mulligatawny Soup, Chefs Special Chicken, Chicken Steak with Black Pepper Sauce, Stuff Chicken Breast with Pineapple Sauce, Chicken Manchurian, Chicken Shashlik, Beef Steak Mexican, Garlic Prawns and many other items[4]. When customers arrive at the Gourmet Grill, they are greeted by several parking attendants in bright orange jumpsuits. Bright orange is Gourmet's signature color.

SALT N PEPPER
Salt' n Pepper was established in 1983 on the Mall in Lahore. The Salt n Pepper Restaurant is a reflection of tradition, hospitality and memorable dining experience since the last 27 years. The Restaurant which is in its second generation has a fan following like none other. The Faisal Town Branch is similar to the Salt n Pepper branches in Liberty and the Mall. The same high standard of food is ensured along with courteous services and reasonable prices. Salt n Pepper is specialized in serving Pakistani, Continental Chinese and Thai food. Fast food items are also available in the restaurant. The specialties primarily include a wide variety of chicken items including stuff chicken breast, chicken stakes, boneless chicken handi, and boneless chicken kebab. Burgers, sandwiches, steaks & hot favorite stuffed chicken breast are also available at the restaurant. Slat n pepper hold the capacity of 250 persons.

NADEEMS CATERERS
Established in July 1993, Nadeem's Catering Company spelled out its vision for setting new standards of excellence in the catering industry of Pakistan. Their first buffet restaurant was opened at Faisal Town in 2007 with a vision of serving Pakistani food lovers. Nadeems Buffet has set the highest standard for their food items and consequently is not providing orders in the restaurant. They offer only buffet to their customers. Their buffet includes Chefs Special Chicken, Chicken Steak with Black Pepper Sauce, Stuff Chicken Breast, boneless chicken kebab, Burgers, sandwiches, steaks, fish, and variety of salads. They are famous for their service and great taste. The warm lighting and music adds great ambiance to the environment. Nadeems Buffet has the capacity to hold 250 persons and have a parking space of 20 cars.

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SHAHI KHAIMA
Shahi Khaima was opened in 2012 in front of Ravi Restaurant. Even though it is new in the market, Shahi Khaima has earned a lot of positive feedback for its royal atmosphere. They serve different types of Asian Fusion, Barbeque, Chinese, Fast Food, Indian/Pakistani, Sandwiches, Seafood and Vegetarian items at the restaurant. Shahi Khaima is famous for their special Mughlai, Pakistani, Bar B Q and Chinese Foods. They have a capacity of 150 people and a parking space of 10 cars.

TARGET MARKET
Ravi Restaurant has targeted the upper-middle class from the launch. They have identified businessmen and house owners as major target segment of their restaurant. Zameer also have contacts with banks and companies who organize their weekly and monthly meetings in the restaurant on a regular basis. This helps Ravi Restaurant in sponsoring many events for the small firms. Ravi Restaurant is always interested in customers who enjoy food and not perturbing about price. Recently Ravi Restaurant has streamlined its approaches and has acquainted their customers with take-away, home delivery and low priced food items for middle and lower class.

WHAT WENT WRONG?

In 2011, Ravi had to close down some of its branches due to financial issues. Their turnover was going negative for most of the other branches which was exceptionally bad news for the owner. They shut down their Iqbal Town and Yaadgar Chowk Branch. Ravis main branch is also generating very less turnover for the past few months. Zameer ul Hassan has identified possible reasons for such fewer sale figures. Zameer ul Hassan compared monthly sales from December 2005, December 2009 and December 2012 and finds a big difference in the Profits. While the restaurant was able to save more than 450,000 monthly, it was cut down to half in 2009 and this December Ravi generated only 50,000 profits which was a big reason to worry (Exhibit 2). The Salaries and rents have also increased by time while Zameer ul Hassan approximated taxes to be equal for past years. One cause of this is increasing prices of commodities. Chicken and mutton prices have rose to almost 120% and 170% respectively per pound (Exhibit 1). Other prices of spices and cooking oil also increased 200% since 2005. Due to the increased competition the company has lost its economies of scale and is now struggling to maintain its position in the market.

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EXHIBIT 1
Poultry Chicken Prices. (Dec 2005 - Dec 2012) Change :PKR 52.391 (122.97 %)

Beef Prices. (Dec 2005 - Dec 2012) Change: PKR 121.201 (175.38 %)

Commodity Food and Beverage Index. (Dec 2005 - Dec 2012) Change: PKR 75.830 (75.38 %)

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EXHIBIT 2

Income Statement
Approximate 31st December, 2005 Sales Foods Beverages Catering 1,408,152 97,888 63,944 1,569,984 164,254 661,631 (165,000) 660,885 Approximate 31st December, 2009 1,126,522 58,733 79,930 1,265,184 263,450 640,000 (194,370) 709,080 Approximate 31st December, 2012 788,565 41,700 99,913 930,178 294,370 550,000 (228,967) 615,403

Total Sales Cost of Goods Sold

Opening Inventory Purchases (Closing Inventory)

Less: Total Cost of Goods Sold

Gross Profit Operating Expenses

Salaries Rent General & Selling Expenses Depreciation & Amortization

909,099
70,000 30,000 40,000 19,800 159,800 749,299 30,000 719,299 287,720

556,104
82,460 50,000 40,000 17,820 190,280 365,824 30,000 335,824 134,330

314,775
100,138 40,000 40,000 16,038 196,176 118,599 30,000 88,599 35,440

Total Operating expenses

Earnings Before Interest And Expense=EBIT Less: Interest Expense
Earning Before Tax=EBT Tax (40%)

Profit After Tax

431,579

201,495

53,159

*Original figures not disclosed and have been modified to secure companys privacy

CUSTOMER DISTRIBUTION
With a lot of food chains opened near Ravi Restaurant, customers now have choices going to other restaurants. Gourmet has become the biggest rival of Ravi Restaurant. Most of the customers now prefer Gourmet over Ravi. Other fast food chains like McDonalds and KFC has gained the market share from Ravi Restaurant. Many local fast foods now provide variety of quick meals. Customers now have time constraints due to which they prefer fast food restaurants. Other than that Ravi Restaurant has not tried to retain its loyal customer due to which they lost 70% of their customers to other food chains. Discounts and offers encourage customers to come back and try the product.

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SERVICE AND QUALITY CONTROL

Service is the main factor customer tends to come back to restaurant. Be the service with a smile or service in speed of delivery. Ravi Restaurant is lacking both in the past years. The waiters have are not very friendly with the customers and it feels like they are very sluggish. With that quality of everything matters. From food to crockery, Ravi has not been able to maintain the quality. Customers complain about the taste and smell of the food which does not seems to be fresh. Crockery does not always feel clean. Crockery is the same for many years. Ravi Restaurant imports their crockery from Gujranwala. Their supplier, Hafiz Steel, tells us that Ravi Restaurant has cut down on crockery since they are using the unused items from the closed branches. These small issues make up a big impact in customer minds.

CATASTROPHIC OCCURRENCE
Haji Afzal was the head of all the operations since the beginning. During his time Ravi Restaurant has not seen a day without a customer. He and his daughter Faiza were very active in all operations of the business. Faiza was the brains behind the uniform and logo of the restaurant. She used to help the accountant and work as a receptionist. Haji Afzal used to come commence meetings with all the employees and took suggestions from them. But in 2005, Faiza had a fatal car accident. Ever since that incident Haji Afzal lost his interest in the operations of the business and due to his very low involvement he left the operations and gave the authority back to Haji Arshad.

MANAGEMENT INVOLVEMENT
From the time when Haji Arshad took charge, he has been unable to impress the employees and other management. His involvement in the business is very infrequent. Due to his lack of interest the purchasing system is very informal and decentralized. Managers make decisions themselves and dont bother asking the owners. They make purchases and sometime the head chef orders extra supplies. No one is accountable if there is any mistake. Zameer ul Hassan himself makes all the accounts, takes all catering orders, is responsible of payrolls, makes all arrangements with clients and takes necessary steps for purchases. The Johar Town branch operations are also controlled by Zameer ul Hassan sometimes. This has coxswained many problems for Zameer on many instances. There is no employee motivation from the administration or the management. Management have never considered in assessing employees and giving them increments. Being the highest paid employee, Zameer ul Hassan gets less than Rs. 40,000 salary after taxes. The waiters get Rs. 9,000 monthly salary. Compared to this, Gourmets Manager, Mr. Ali who was former manager at Ravi Restaurant get a sum of Rs. 175,000 salary after taxes. He was also provided with a New Honda Civic and Dissertation Case Ali Arshad: MBA 02093 - 152

accommodation. This is the cause managers leave Ravi Restaurant. From the beginning Ravi had 8 manager from which 2 are working in Gourmet Restaurant, 1 has joined Salt n Pepper and others are also getting attractive salaries.

HIGH PRICING
The high pricing of Ravi Restaurant is hurting their customers. Inflation is increasing in the country which is reducing customers disposable income. They need good quality food at a competitive price. Ravi Restaurant set its prices according to its target market but is now suffering low sales due to it. Gourmet Restaurant is able to offer the same quality with more quantity of food at a cheaper price. Similarly, Salt n Pepper offers good quality at a more reasonable price. Ravi has ignored the price factor in the competition and is now struggling to cope with the new situations. Zameer cannot abruptly decrease price and offer better quality at same time.

EXCRUCIATING BRAND IMAGE

A companys logo is a recognition tool for the public to link their services or products to the company. In other words, it is part of a companys branding. Without such branding, the public will not be able to differentiate between companies, and therefore unable to expect a certain standard or quality from the company which they interact with. A logo, if designed effectively, can bring to peoples mind the unique selling proposition of an organization, which inevitably promotes the company on a sub-conscious level [5]. Ravis brand name and logo has been a very strong area for their business for a decade. Lately, Haji Arshad decided to put a Pepsi logo signage for their Restaurant for the sake of some extra cash. This in turn has put a bad influence on customers. Zameer ul Hassan gets a very negative feedback regarding the issue. He believes doing do has damaged their brand value since no other respected restaurant does so to their signage. To add more to Zameer worries, Haji Arshad has put catering signboard which is not a professional look and feel. While it is advertising their service, Zameer feels this could have been done with a better approach.

FINAL WORDS
Zameer ul Hassan believes major steps needs to be taken in order to increase customer flow. He believes price should not be an issue for the customer since other restaurants are offering more quantity but their weight per plate is less. For instance, Gourmet offers a Chicken Handi which is cheaper but weights 600 grams. Ravis Chicken Handi weights 1200 grams. Conversely, Zameer thinks as the customer disposable income decreases, he is concerned about price, not quantity. He depends on his target market to Dissertation Case Ali Arshad: MBA 02093 - 152

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decide the price. Ravi has targeted upper class for many years and Zameer believes it is still now time to target middle and lower class but if he is to target them; he has to make a better branding strategy. He has to think over his pricing and consumer strategies. The financial data has reflected a lot of insights for Zameer and he thinks solutions are not distant. He needs works need to be systematized first in order to focus on other issues. Employees need to be motivated it is essential for Haji Arshad to motivate the employees. If Zameer prepares to fix the issues but if doesnt make his move in time, he faces major competition and may lose customers in the long run. With all this thoughts in his mind, Zameer ul closes his accounts book and gets back to restaurant operations.

BIBLIOGRAPHY
[1] [2] [3] [4] [5] Farooq Tirmizi (2012), Why is the retail sector in Pakistan booming?, Express Tribune Humayon Dar (2012), Culinary zeitgeist: The food business in Pakistan, Express Tribune Faseeh Mangi (2013) Second Cup among chains fuelling Pakistans fast food boom, Bloomberg News Shehzad, Gourmet Restaurant Lahore Menu & Food Quality Standards, GroupIn Michael Poh (2011), Logo Evolution Of Famous Brands, Hongkiat

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