Marketing
Market Analysis
In the U.S, there are 878,000 restaurant locations that are expected to grow over 1,000,000 locations within 6 years from the current year (2004). To give a rough estimation of how big the restaurant industry is, the industry sales equal 4% of the U.S gross domestic product, which has attained $440.1 billion in sales this year(see Figure 2.1). We are estimating 3 years for system development period, which schedules us to step into market by 2007. By that time there will be more than 900,000 restaurants in the industry. The market will keep growing after we release our product, which will result in a long term existence of our product.
Medium or larger sized restaurants, hotel and chain restaurants, showed their interest for our product (see Figure 2.5). When we actually asked restaurant managers "Do you like the our device?" we had no negative feedback at all. The few "unsure" replies were mostly from small restaurants, because the price was too high for them.
Small size restaurants and fast-food restaurants are not our target market because they already have an organization system within their unique business environments which focuses on mostly frozen package and fast selling products. Small restaurants are taking advantage of their size to regulating their inventory system, and from our interview data they would not invest more than $1,000 for an inventory system. So we define our target market as chain, hotel, and possibly other medium or larger size restaurants.
Figures 2.2 and 2.3 show the different segment sizes of restaurant business. These 2 charts give us an approximation of the market size, which is roughly estimated at 40% of the restaurant industry for our potential market. Even if we are targeting only 40% of the total restaurant industry, the entire market is at nearly one million restaurants, which can provide more than enough revenue for our solution.
Figure 2.4 supports the notion that our target is the primary group who encounter the majority of food loss. Figure 2.4 describes the percentage of food wasted in different segments of the restaurant industry. Buffet, fine-dining, and chain restaurants are taking the top 3 places in prepared food loss. This confirms again our targets are in need of our product. The more prepared food you have, the more items you will have to monitor.
To summarize, our target market is primarily chain, hotel restaurants, and medium or larger size restaurants. According to our interviews of 20 restaurants (Figure 2.4, 2.5, 2.6), these restaurants are struggling with inventory management. This information means that the managers of restaurants waste their time for monitoring their inventory, while still loosing food. This food loss is due to expiration of foods. These restaurants are looking for better solutions than their current methods. Most of the restaurants interviewed were using a software system for their inventory. It might save their food and give good reports for overall regulation, and forecasting, but it still does not save time because those software products depend on input data that is done by hand. Also these systems still require much time and effort for gathering inventory data. We can derive this statement into two facts: The restaurant industry invests their money to solve their problem, and that our product will solve their problem. The software that they currently use costs 2k to 3k dollars and the estimated price for our product is $7500. The cost difference is not much between our product and existing software products considering that we have many integrated hardware components. But the performance difference over the competition is huge. Simply, our target market would not mind investing money for some products that solves their problem a lot.