Ratcliffes

Executive summary

Ratcliffes is a family run business which has is based in Bristol. Ratcliffes was founded in 1968 by Jack and Ruth Ratcliffe. In the late 1980's they opened their second premises in North Bristol.

By the late 1990's Jack and Ruth Ratcliffe decided to retire. They then passed overall control over to a new management team.

Ratcliffes have a very comprehensive management structure and on the whole appear to be very strong financially. When you compare Ratcliffes against their competitors however they appear to be below average in terms of financial performance.

However to comply with current health and safety legislation both premises require some urgent updating.

To improve the financial performance I have suggested that as company Ratcliffes look at restructuring there management team. This would involve possible redundancies and employing a separate restaurant manager at both South and North Bristol. This alone would improve their return on capital employed.

Another area that will help improve Ratcliffes profit margin is introducing a takeaway service. By doing this they will reduce their average number of days for stock turnover. For this project there would be minimal rise in fixed costs as Ratcliffes are already in the catering trade. By doing a takeaway service you are also utilising your staff better.

Another area which needs to be improved is the accounting of the business; it would a better idea to have separate accounts for each restaurant to be able to monitor how each one is performing.

Introduction

The Task

This assessment is based on a case study: Ratcliffes Ltd.

The new management team have decided to make an initial assessment of the business as a whole. They employ a team of consultants to look at the financial opportunities and constraints, the people within the business, and whether they were being deployed most effectively, and the physical resources.

Taking on their task, you write a report. It should encompass the following:-

Ð'* Ratcliffes cannot develop its current business, without assessing its current financial performance. You need to assess current performance, using relevant ratio analysis. This will include an analysis of its main competitors. You should focus on the restaurant's ability manage its finances, and to maximize revenues. Recommendations should be made, based on your findings.

Ð'* The expansion of the South Bristol restaurant needs careful analysis. By creating a cashflow forecast, you will be able to evaluate how much additional funding may be required, and when it may be necessary. Your analysis will also assess where this funding may be repaid. You will obviously consider whether this is a viable option.

Ð'* Using break-even analysis, assess the viability of the proposed takeaway service. A break even chart should be included. Your report should consider the risks involved in making predications, and should use some adjusted figures in order to show break even for different volumes of customer use.

Ð'* The report should contain a summary series of recommendations, based on your analysis.

Ð'* You will also need to include an appendix to the report. This appendix will demonstrate your understanding of accounting conventions, and how they would apply to such a business

Findings

Background

Ratcliffes Ltd was founded by Jack and Ruth Ratcliffe in 1968.

Jack's background is in the fast food industry. He was mainly involved in the purchasing side of this sector, buying bulk for a large restaurant chain in central London.

Ruth's background was in retail, mainly part time. She did however help her parent's in a small cafeteria in busy periods.

The reason they opened up the restaurant in Bristol was due to the high business rates they would have to pay in London. With Bristol it made sense to them because the business rates were slightly cheaper and the affluence beginning to move down to the West Country.

They started to recruit more permanent basis in the late seventies, this is where the beginnings of an organisational structure started to emerge.

In the late 1980s Ratcliffes decided to expand. They bought the lease to a property in North Bristol. They also invested heavily at this time in the refurbishment.

In the late 1990s Jack and Ruth decided to take a well deserved rest, at this point they passed the overall control of the business to a management team.

Just recently Ratcliffes have successfully bid for a liquor license. This has already seen a boost in trade and revenue.

Both restaurants need some updating to comply with new health and safety regulations. This needs to be done as a matter of urgency and before any other plans can be properly look into and started.

Using the information from the case study I feel there are 5 areas we need to look at further.

Ð'* Present position of Ratcliffes

Ð'* Urgent and essential improvements

Ð'* Comparison against competitors

Ð'* Any future expansions or Investments

Ð'* Staffing levels and management structure

Present Position of Ratcliffes

The first area of concern with regard Ratcliffes as a business is that both the South Bristol restaurants figures and the North Bristol restaurants figures are combined. This makes it increasingly difficult to see how well each business is doing in its own right, or if one of the businesses is struggling.

Before any future investment is started on either premise's I feel it would be a good idea if the figures were separated to give a truer reflection on how each restaurant is doing.

For the purpose of this report it is not possible to do this so I will continue to analyse their performance as a dual company.

The first area to look at is the profit margin and operating profit margin.

Profit Margin

Ð'* Ratcliffes