You and two friends, Pat and Ron, have decided to form a new business, running a

Question

You and two friends, Pat and Ron, have decided to form a new business, running a restaurant. Your friends, pat and Ron, bring the following to the business: Pat is something of an entrepreneur. He has several ventures and ready access to financing for your business. Because of his varied interests, however, he doesn’t want to be an employee of the business. He does, however, want to have some input into the management of the business. Ron has a full time job, which she is willing to leave to make a full time commitment to running this restaurant. She has limited funds available and hopes to develop “sweat equity” in the restaurant through her work effort. She is a skilled chef who will manage the kitchen and the food production. You are the “idea person”. You have conceived of this enterprise, and are charged with getting everything lined up. You will be involved in the day-to-day running of things, and will be the manager of the business side of the restaurant.

II. Having chosen the form of business, you also need to arrange financing to obtain all of the kitchen equipment, dining room equipment, stock the bar, purchase food, pay rent, get operating capital for the first two months of operation, and a million other details. A arranges through his sources to get financing. The lender requires that you do whatever is necessary to minimize his risk and each of the three of you to be responsible for the loan. Include all of the forms of financing and lending that we have discussed in this case. What are the options, which ones are best, and how do they work?

Explanation / Answer

Ans;

I. For procuring supplies of food and drink, the restaurant will have to contact vendors which sell these supplies. For example Foodservicedirect.com is an online portal selling restaurant supplies like dry foods, drinks etc. Besides the vendors, the restaurant will have to procure fresh ingredients from the local market. Options are manifold in terms of the number of vendors and the items they supply. As the manager, you will have to select the optimal option so that you get your required items. The items should be of good quality.

Yes, you will need written contracts with vendors and suppliers. The contract will have terms and conditions pertaining to the price, the required quality and the available quantity. The contract will help safegaurd the interests of the restaurant in 2 ways - firstly, the price will be determined for a period of time and secondly, the required quality will be stated. This will protect the restaurant from rising prices (as prices are already determined for a period of time) and possibility of poor quality of ingredients.

If you run into problems with suppliers, like delayed delivery or sub-standard products, then the best option is to look for the next best option in terms of another vendor. Contract with the vendor with whom you are facing difficulties should be terminated. This will obviously depend on the options you chose at the start of the relationship. This is because these options will determine the policy of trade and the terms of commerce between you and the supplier.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.