Restaurant Business

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Restaurant Business in London

Restaurant Business in London

Owing to gradual changes in London life styles, citizens now spend more money on restaurant food than they do on higher education, personal computers, new cars, movies, books, magazines, newspapers, videos, and recorded music. In 2004, London spent $148.6 billion on restaurant industry and accounted for 64.8 percent of the restaurant sales of the London that consumed fast food most in the world. In other words, the average London spends $492 per year on restaurant business. Despite the popularity of restaurant business, restaurants have historically operated on slim-profit margins ranging from 4 to 7 percent. The low-profit margin of the restaurant industry stemmed from the continuous wholesale-food price inflation. For example, the wholesale-food price rose 7.6 percent in 2007 and 8.5 percent in 2008. Due to the wholesale-food price inflation, the revenue of the London restaurant industry, declined by 4.7 percent in 2009. As such, restaurants have experienced intense competition in the recent years due in part to the saturation of a restaurant market and the worldwide economic downturn, with tighter profit margins and increasing competition (Keller, 2007, 52).

In a complex economic system such as that of London, little knowledge exists regarding operating effectiveness (OE) and cost efficiency (CE) in the service industry. That is surprising, because services were long thought to be laggards in the area of innovation. This perception still exists and is a major reason why innovation in services remains under-researched. Pizam (2009) noted that this unsatisfactory situation is partly due to conceptual problems and partly due to a lack of data. On the one hand, there are many well-established competitors with great marketing, personnel, financial, and other resources. On the other hand, we witness that changes in customer tastes and dietary habits as well as national, regional and local economic conditions and demographic trends have made the restaurant industry intensely competitive (Pizam, 2009, 39).

The current competitive business environment calls for a continuous emphasis on delivering superior quality products and services to customers. OE involves evaluating whether internal control is operating as designed. Clark (2008) observes operational effectiveness as the organisation's skill sets or “core competencies” which must fit and work together to implement the strategy. In other words, the possible strategies available to an organisation are constrained, at least in the medium term, by the skill sets available to implement them. Clark (2008) argues that taking the risk of investing in innovation may be a means of ensuring longer term strategic flexibility, thereby securing operational effectiveness. Furthermore, it is accepted that innovative organisations need to be ahead of what customers want and enjoy a greater OE due to the quality offered and better satisfaction (Clark, 2008, 44).

The customers tend to be more favourable to easily accessible and national fast-food restaurant franchises such as McDonalds, KFC, and Subway than less accessible, relatively new, and regional counterparts such as Wendy's, Fox's Pizza Den, and Groton Laundromat. This inclination might have a little bit to do with the risk-averse trend of ...
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