The goal of this assessment is to determine the viability of purchasing Mel’s Country Café. This is important because it allows the investor the opportunity to ascertain whether or not purchasing or initiating a start-up company is the best option. This analysis is being done by discussing the company’s background, business model, potential for training needs, feasibility, due diligence, negotiation areas, and the advantages and disadvantages of purchasing an established company versus initiating a start-up company.
The café was established in 1977 by Charles Weirich Sr. for his wife, Mary. Originally, the café was called Mary’s Fried Chicken. Significantly, in the beginning, all ingredients were purchased from locally grown farms. The restaurant became a local favorite. In 1985, the restaurant’s name was changed to Mel’s Café for Melody, Mary’s only daughter. At the time of the population surge in Tomball, the menu changed to encompass hamburgers. Furthermore, the restaurant resisted pressure to grow and, instead, kept their prices low. In 1994, the café received a fresh start ad Mel’s Country Café (Mel’s Country Cafe).
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The business model determines how product is sold to the customer. However, there are different types of business models. For instance, the business model can be: “manufacturer, distributor, retail or franchise” (Root III, 2015). Since the company is a restaurant, it can be considered a manufacturer. This is because “a manufacturer takes raw materials and creates product” (Root III, 2015). This is shown by the café purchasing goods from local farms and utilizing them to create menu items.
In order for this to be a viable investment, training would be necessary. This is because the restaurant prides itself on recipes that have been utilized since the restaurant’s inception. Therefore, unless the staff remains intact after the sale has been conducted, the recipes would need to be passed down to the new staff. However, on the contrasting side, if the restaurant is going to embark in a new direction, training of current recipes may not be necessary.
A feasibility analysis is designed to “determine if it (1) is technically feasible, (2) is feasible within the estimated cost, and (3) will be profitable” (Feasibility Study, 2015). Therefore, it will be necessary to consider the current technology capabilities of the café. If upgrades are needed, it is necessary to consider this in terms of the estimated cost of restaurant purchase. It is also important to determine if customers will remain loyal to the café if it changes owners. Since Tomball has a dedicated population, this could render the café to be less profitable. Therefore, it is necessary to consider the customer base before purchasing the café. This concern could be alleviated by taking time to meet the current customers and getting viewpoints on the possibility for sale, as well as any projected changes to the restaurant.
When purchasing the business, it would be beneficial to consider purchasing the recipes. This is because it is important, especially as a new business, to maintain a positive customer base. As the current customer base becomes more knowledgeable about the new owner, it may be possible to expand the menu to incorporate new items. This could be highly beneficial for future restaurant growth. It may be beneficial to negotiate technology upgrades. For instance, it may be wise to be willing to spend more on the purchase if the current owner is willing to install technology upgrades.
There are advantages and disadvantages to purchasing Mel’s Country Café. However, there are also advantages and disadvantages to initiating a start-up restaurant. For example, if the café was purchased, the infrastructure would already be established. The building, furniture, and equipment would be part of the purchase. However, the infrastructure may be outdated or not applicable to the new needs of the business. Thus, upgrading the infrastructure may be more costly than initiating a start-up restaurant. Therefore, it can be deduced that if an upgraded infrastructure is needed, it may be more cost effective to start a new restaurant.
It is noted that the café has an entrenched customer base. Therefore, it may do more harm than good to purchase the café. This is because the customers may not be receptive to new owners and ways of doing business. However, if the new owners are willing to work with the existing owners, staff, and customer base, it may be possible to effectively merge the café to the new restaurant and still maintain a profit. In contrast, if this cooperation cannot be achieved, it may be more beneficial to start a new restaurant.
A new restaurant may be more expensive than purchasing an existing restaurant, such as Mel’s Country Café. Furthermore, the new restaurant would have to earn an entire customer base. These are major disadvantages and potential prohibitions to earning a profit. As a result, it is important that interested parties consider numerous aspects of the purchase, including how the purchase is to be made, when it is to be made, what is included, what training (if any) will be provided to the new owners, and what upgrades (if any) will be included for the new owners. This can allow the new owners the opportunity to assess if the purchase is feasible and will meet business needs and expectations.
