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Asian Journal of Management Cases
DOI: 10.1177/097282010900600206
Asian Journal of Management Cases
Arif N. Butt and Shezeen Hemani
Polo Lounge The Restaurant in a Colonial Setting
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P
OLO LOUNGE—THE RESTAURANT IN A COLONIAL SETTING
Arif N. Butt
Shezeen Hemani
The case study focuses on the start-up decision of the entrepreneurial venture, pursued
by (two women) Hina Khar and Aasma Ramday. The young women entrepreneurs are
confi dent about their idea to open a restaurant and also have adequate resources to
pursue their venture. However, they are apprehensive regarding their lack of experience
in managing a restaurant business. Furthermore, they are also concerned about the
fact that the restaurant is based on a novel concept and will be located away from the
hub of the main eateries in the city. Therefore, prior to fi nalizing their decision, the
two entrepreneurs want to ensure that all risk factors are meticulously analyzed and
a thorough business plan is formulated to minimize the risks inherent in the new
venture.
Keywords:
Entrepreneurship, business plan, women entrepreneurs
In October 2002, as Hina Khar and Aasma Ramday left the vicinity of the Lahore Polo Club
(LPC), they were thrilled at fi nally receiving the contract for LPC’s offi cial cafeteria. In
July of 2000, the two partners had made their fi rst offer to the LPC management but were
turned down in favour of a competitor’s proposal, who was offering a higher rent for the
premises. The competitor, however, failed to fulfi ll the contract because of which LPC’s
executive committee re-approached Hina and Aasma in mid-2002. Both the partners, who
were determined to launch their restaurant, reconsidered the management’s proposal
and presented their business plan which was approved later during that year.
Although Hina and Aasma were excited about their long awaited entrepreneurial
venture, they were also apprehensive. Their major concerns were:
This is our fi rst experience as entrepreneurs and like most others we too are concerned
about our decision whether to go ahead with this project or not. We want to be sure
A
SIAN JOURNAL OF MANAGEMENT CASES, 6(2), 2009: 157–170
S
AGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DC
DOI:
10.1177/097282010900600206
This case was written by Research Associate Shezeen Hemani under the supervision of Associate
Professor Arif N. Butt.
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that we have done our homework thoroughly, especially in terms of having a robust
business plan which would mean that we have won half the battle.
Further, one of our major challenges comes from the fact that we would be introducing
an entirely new concept in a market which is still unexplored by small café owners.
Our aim is to establish a formal dining restaurant targeted towards those who value
quality in terms of food, ambiance and service. This is a market which has still not
been tapped by small cafe owners, and infact is a concept which exists only in hotel
based formal restaurants. Hence, it would be a major challenge to successfully launch
and popularize a new concept as apposed to simply opening a new restaurant.
Moreover, we also have concerns regarding the location of our restaurant mainly
due to the negative feedback from friends, family and other industry experts to whom
we have spoken to informally about our idea. They are of the view that since LPC is
situated away from the hub of restaurants and eateries in the city, it would act as a
deterrent in attracting new and regular clientele.
T
HE IDEA
Hina and Aasma, who had been friends and members of LPC since 1995, shared their
passion for riding and good cuisine. The two had frequently discussed opening a restaurant
within the vicinity of LPC long before the LPC management showed interest in launching
such a project.
From the very beginning, both Hina and Aasma were extremely focused on the concept
of their restaurant. They wanted to introduce a lounge–cum–formal dining restaurant based
in a location which would add to the entire experience of dining out. Both the partners
were confi dent that they could not fi nd as exclusive a location as the Lahore Polo Club
which was located away from the hustle and bustle of city life, with its lush green fi elds
offering a uniquely serene and peaceful ambiance.
According to Aasma and Hina:
We want our guests to go through a Zen like experience when they drive along the polo
fi elds before reaching the restaurant. Also, within the eatery, we want to create a very
relaxed and comfortable ambiance where our customers could stay for much longer
meals as compared to other restaurants. And of course, the food and the service have
to be exceptional to complement the entire dining experience.
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T
HE ENTREPRENEURS: PERSONAL PROFILES AND VIEWS ON POLO LOUNGE
Hina Khar
Hina completed her primary education from Lahore Grammar School and then went
to Lahore University of Management Sciences (LUMS) for her undergraduate studies,
followed by a postgraduate degree in Hospitality Management from the University of
Massachusetts, USA. She was extremely fond of trekking, riding and polo. She also keenly
pursued a political career, keeping up with her family tradition of having strong associations
in the government.
After graduating, Hina returned to Pakistan and worked for two hotel chains in Lahore.
Unfortunately, her experience with both the places was not very rewarding which convinced
her that she should set up her own business, where she could be more experimental
and have the freedom and fl exibility to work with new concepts. Although the plan
for Polo Lounge materialized after Hina completed her education, this was not the fi rst
attempt that she had made in pursuit of her goal. The fi rst offer made to the management
of LPC regarding setting up a restaurant was made while Hina was still a student in the
United States. As Hina recalled those days, she said:
I was willing to discontinue my studies only to set up the restaurant. It was in 2000
when I was visiting Pakistan during my semester break and got to know that LPC’s
management was looking for entrepreneurs interested in setting up a restaurant within
the club. That was when Aasma and I made our business plan and proposed to the
management. Unfortunately our proposal was turned down and that is when I went
back to complete my education. LPC’s management approached us again later and in
October 2002 our proposal was accepted.
In early 2002, Hina and Aasma also dabbled in the export business. Since Hina came
from an agricultural background and her father was involved in extensive farming, she
decided to look into mango exports. As Hina recalled her prior business experience, she
said:
Right after we decided upon going into mango exports, we made a trip to Germany and
Amsterdam to identify some potential buyers. Luckily we got contracts from Metro, the
world’s fi fth largest retailer, and from a couple of other small mom-pop retail outlets.
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But the business did not last for too long. It was within three months that we realized
that it was not a long-term venture. We were losing our profi t margins due to severe
price cutting by low quality suppliers. Plus, there were no proper systems for ensuring
complete quality control on our own product. As a result, our shipments were getting
rejected and hence we decided that we could not continue with this business in the
long term.
Aasma Ramday
Aasma was educated at the Lahore Grammar school from where she completed her A-levels
in 1996. She had always been extremely fond of cooking and it was her dream to pursue
this interest professionally. Aasma shared her passion for riding and polo with Hina.
Aasma comes from a business family and has been married for four years. Apart from
pursuing her interests and managing her home, she has been involved in community
service and extensive social work. Polo Lounge would just be the beginning of her career
in the food business, as she explained:
I have a couple of other ideas related to the restaurant business which I want to pursue
in the future. Given the opportunity and the resources I want to open a Noodle Bar and
a Boutique Hotel, which would be known for its high standards and exclusivity.
Aasma and Hina who had known each other for more than six years shared their
business philosophy, which made it very easy for them to work together as business
partners.
T
HE LAHORE POLO CLUB
The Lahore Polo Club was established in 1885, by the British for the purpose of promoting
Polo as a sport. Since then, the club had come a long way. By 2002, LPC owned 300 horses
and served 130 members. Tournaments were held each year, mainly during the polo
season, which lasted between the months of October and April. In 2003, for the very fi rst
time, the club had the privilege of hosting the Polo World Cup.
LPC was situated in the Government Offi cers’ Residence (GOR), one of the most prestigious
localities in Lahore. Although, this location was in the middle of the city, yet, its
logistics were such that it was secluded from the city traffi c and noise. The club comprised
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beautiful lush green polo fi elds surrounding the offi ce building where the offi cial cafeteria
of the club was situated. LPC had always had one cafeteria, catering specifi cally to the
members of the club. However, recently the management was considering replacing the
existing cafeteria with a proper restaurant which could not only be used by the members
but also facilitate outsiders, especially the guests, including dignitaries from different
countries; and other business executives who came to see the polo matches.
A
N OVERVIEW OF THE RESTAURANT BUSINESS
The restaurant industry was growing and becoming competitive with the mushrooming
of small cafes and the introduction of international franchises. There was a variety of
restaurants in the city, offering a very diverse menu ranging from typical Pakistani and
Punjabi specialties to Thai, Japanese, Chinese, Continental and Fast Food.
Athough restaurants were located all over the city, the most popular venue, informally
referred to as the ‘Modern Food Street’ of Lahore, was the M. M. Alam Road. Popular fast
food chains like Mc Donald’s, Kentucky Fried Chicken and Pizza Hut; Pakistani restaurants
such as The Village, Ziafat and Western style cafes like Café Zouk, were situated on this
road. Due to the fact that the street offered a mix of restaurants, it attracted a variety of
consumers ranging from children to adults, middle income to higher income groups and
local population to foreigners. Moreover, the booming business of the restaurants on M.
M. Alam Road led to the street becoming extremely busy and overcrowded, resulting in
parking problems.
The hotel based restaurants which offered formal dining were known for their specialized
cuisine, personalized service and exclusive hotel based ambiance. These included The
Steak House, Royal Elephant (Thai), Taipan (Chinese), Dumphukt (Pakistani) in the Pearl
Continental Hotel; and Fujiyama (Japanese) and Dynasty (Chinese) in the Avari Hotel.
These restaurants were most popular amongst business executives, foreigners and couples
and families from the higher income segment.
Other popular restaurants which could be referred to as fast food–cum–family restaurants
included Salt n Pepper, Paradise, Shezan and Go Go. These restaurants offered a mix of
Pakistani dishes (e.g. barbequed food, curries, etc.) and fast-food items (e.g. sandwiches,
burgers, etc.), at reasonable prices. Most of the restaurants in this category had more
than one branch and were located in the commercial areas close to shopping centres and
offi ces. These eateries had mass appeal, and were popular for takeaway and lunch deals,
especially, for offi ces and other organizations.
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M
ARKET ANALYSIS
The Competition
Since Polo Lounge was planning to enter the formal dining market, its major competition
came from hotel based restaurants like Café Zouk, one of the most high class and popular
Western style restaurants on the M. M. Alam Road. (Refer to Exhibit 1)
The main competitors were:
The Steak House
The Steak house, which opened in August 2001, was located in the Pearl Continental Hotel.
It was the fi rst restaurant of its kind in Lahore which served a large variety of imported
‘
halal’1 beef steaks. The restaurant’s interior, done in delicate wood and appropriate lighting,
created a very relaxed and exclusive ambiance for its guests. The Steak House was known
for its high quality food, innovative menu presentation and personalized service. The
restaurant also offered the facility of private boardrooms as an extension of the dining
area, mainly to attract businessmen. The Steak House was targeted towards in- house
expatriate guests as well as local population, mainly, executives of top multinationals,
businessmen and young couples.
Fujiyama
Fujiyama, the only Japanese restaurant in town, was located in the Avari hotel. The
restaurant served both lunch and dinner, and offered the facility of two private dining
rooms along with the main dining hall. Fujiyama was known for its authentic Japanese
cuisine prepared from fresh, sorted and imported ingredients. Its expert chefs helped in
maintaining high quality standards and consistency. The restaurant’s major clientele came
from the business community and consumers from the higher income segment.
Royal Elephant
Royal Elephant which opened in March 2002, was a modern designed Thai restaurant
located in the Pearl Continental Hotel. The restaurant gained popularity in a very short
period mainly due to its quality food, prepared from top quality imported cooking
1
Meat obtained by slaughtering an animal according to the Muslim law.
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ingredients, under the supervision of expatriate, expert chefs. Royal Elephant was designed
keeping into consideration the oriental element which was refl ected in every detail, be
it the live Kim Thai player, or the elaborate cutlery used in the dining hall. The peaceful
ambiance created by the soothing music and the view of the hotel’s poolside, made it an
ideal location for young couples and families. Moreover, the facility of an attached private
dining room was aimed at attracting business executives and those who wished to have
private sit-down dinners.
Café Zouk
Café Zouk was one of the fi rst Western style restaurants to open on M.M. Alam Road.
Within a few months, the Café gained immense popularity amongst teenagers and young
couples, mainly due to its palatable menu accompanied with a lively and happening
ambiance. Café Zouk’s menu offered a mix of Thai, Italian, Continental and fast-food items
that were both affordable and delicious. The café’s ambiance was created with modern
furniture, dim lighting and loud music that seemed to match perfectly with the tastes
of its young customer base. In fact, the café turned out to be a pioneer in the restaurant
business in Lahore. Many similar cafés and restaurants opened up on M.M. Alam Road
because of Café Zouk.
Competitive Strategy
Polo Lounge would be targeted to a very exclusive and sophisticated consumer base who,
in Hina and Aasma’s opinion, could be described as ‘those who were highly quality conscious
and had a distinguishable palate’. The restaurant’s polo theme and relaxed set-up
was aimed at attracting a very specifi c segment, as explained by Hina:
Our clientele would mainly be the relaxed connoisseur kind of a customer who would
want to stay for a much longer meal and enjoy the entire experience of eating out. This
means we were certainly not looking at the teenage crowd but a customer base which
would include couples, couple friends, families and business executives.
There were three major ways in which Polo Lounge would create an advantage over
its competitors:
Food quality
Ambiance
Service
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The competitive strategy would come from a mix of all the above three elements and any
one could not be looked at in isolation as explained by Hina:
You cannot enter the restaurant business without recognizing that food would always
be of primary importance. Even if you are giving people the best of ambiances but are
not offering the food that supports it and to a certain extent transcends it, you will fail
to generate a regular clientele.
Therefore, the formula for producing top quality food, as identifi ed by the owners,
was procurement of fresh, and in some cases, imported feedstock; personal supervision;
training of chef and helpers in the kitchen; and constant quality control through checks
and balances. Furthermore, the key to quality service was through involvement in every
aspect of the functioning of the restaurant. This would mean that the entrepreneurs would
also be involved in micro-management, especially during the initial stages of growth. As
emphasized by Aasma:
We are not a franchise and hence cannot seek to achieve 100 percent consistency in
terms of our food preparation and service. But the maximum which we plan to do is
to be involved in every aspect starting from the kitchen to ensuring that our client
leaves happily from our restaurant.
M
ARKETING PLAN
Pricing
The prices at Polo Lounge would be positioned less than that of the hotel-based restaurants
(Refer to Exhibit 2). The major consideration in pricing the items was the ingredient cost
which ranged normally between 28–35 per cent. There were other factors too which would
infl uence the pricing policy, as explained by Hina:
We do not aim to attract customers on the basis of low pricing which would imply that
we would not be offering any discounts, offers or deals. This could mean that we might
lose some revenue but we are sure that we do not want to operate in the discount
market. One of our trademarks would be our high standards which we do not want to
compromise by means of lowering our prices.
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Advertising and Promotion
The basic marketing plan was to advertise in a weekly magazine for two weeks and then
have a billboard on M. M. Alam Road the following week. The advertisement would initially
run right after the launch of the restaurant and later, whenever there was a change in
menu. Apart from this, the launch would be a two-day event for which open invitations
would be sent to friends, family and other major potential clients.
The advertising and promotional plan was backed by a marketing philosophy, as explained
by Hina:
I am a fi rm believer that apart from consumer products, services like hospitality do not
need much marketing. It is the product that should be able to speak for itself. Hence
we plan to advertise only when we have something new to tell our customers.
Products & Related Services
Menu
Polo Lounge would offer mainly Continental cuisine, complimented by a couple of
Japanese, French, Italian and Thai specialties on the menu. The menu would be altered
every three to four months, to include new dishes which would keep the novelty element
intact.
The key to including any new item on the menu or serving a particular kind of cuisine
was based on ideas which were very clear to the entrepreneurs:
Anything that is exclusive, of quality and which people cannot fi nd in the market would
be included in our menu. For example, we would be focusing more on the continental
side but we would not mind offering something like cheese
parathas2 which is a blend
of Pakistani and western cuisine; the idea being that whatever we offer has to be of
extremely high quality and have an element of exclusivity.
Production
Food production would take place in the kitchen of the restaurant, which would be
supervised by Aasma herself. The key to producing quality food was to use the freshest
2
Parathas: Pakistani style bread.
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and highest quality ingredients on which no compromise would be made. Initially, a
couple of items such as desserts would be outsourced mainly to keep costs under control
but, later in-house production will begin in order to ensure strict quality standards.
Service
The restaurant would have a capacity of fi fty seats and a separate lounge–cum–waiting
area which would accommodate around twenty people. The lounge area would comprise
a fi re place and a sixty-inch fl at TV screen, surrounding the couches where guests could
either wait or enjoy a cup of coffee. Polo Lounge would serve both lunch and dinner to
begin with, and the option of catering and arranging private gatherings would be pursued
if found feasible.
T
HE FINANCIAL PLAN AND ECONOMICS
Sales levels and prices developed by an informal market forecast, have been used to
draw fi nancial statements (Refer to Exhibit 3) depicting the forecasted results of the
fi rm’s operations from 2003 to 2005. (Refer to Exhibit 4 for basic assumptions used for
the projections).
As the initial investment for the restaurant, a total amount of Rs 1.4 million would be
required. This amount would be contributed 50:50, by each partner. The capital would
mainly be used to renovate the restaurant and set up the kitchen. Approximately, 60 per
cent of the total capital would be spent on the interior and the remaining 40 per cent on
the kitchen.
C
ONCLUSION
Although both Hina and Aasma were convinced about the concept behind their restaurant,
they wanted to revisit their business plan to ensure that the venture was indeed a lasting
and rewarding one. They were apprehensive about the restaurant’s concept and location.
The partners also wanted to be certain that all the risk factors that could possibly affect
the success of the business, were taken into account and analyzed thoroughly before
moving on to the next stage.
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A
PPENDIX A
During the development of the case, the case writer interviewed the two founding partners of Polo
Lounge to determine their future roles, views about each other and the business.
Hina Khar
Case writer: Hina, what is your planned role in the business?
My job would be to look after marketing, accounts, system development and the overall management
of the restaurant. Moreover, I also plan to do the interior of the café myself.
Case writer: What makes you so sure about Aasma being your partner?
First, she is a great friend and we get along very well. Second, we are exceptionally lucky that
our work complements each other and we would bring a totally different set of expertise to the
business. I have a marketing and fi nancial background and am extremely interested in interiors
whereas Aasma is totally not into this but simply into food. And when it comes to managing the
kitchen she is just perfect in what she does. Hence, it is the relative degree of specialization that
our partnership would add to our business model and hopefully would contribute towards our
success.
Case writer: Do you foresee any issues between the two of you which could pose a problem
managing the business?
I doubt if we would ever have any issues between the two of us. I can say this with confi dence
because our areas of responsibility are very well defi ned and do not overlap with each other’s
work. Moreover, I think we have a mutual understanding that we can trust and have confi dence
in each other’s decision regarding our specializations.
Case writer: Do you see any risks associated with your forthcoming project?
Well, there are certain issues that we are apprehensive about. To begin with, we have friends and
family who are not very impressed by our idea of setting up the restaurant mainly because we will
not be situated on the M. M. Alam Road. In their opinion the location of our restaurant would pose
a problem in attracting a regular clientele. Although this means that we are taking a risk but we
want to take a chance to prove what we believe in so strongly. Besides this, there are other minor
concerns. For example, the lounge cum formal dining concept for our restaurant puts a burden
on the economic effi ciency of the project since the place would not be fully utilized. But again we
plan to stick by our plan since this kind of a setup would add to the ambiance of the eatery.
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Aasma Ramday
Case writer: What is your planned role in the business?
I will mainly take care of the kitchen. This would include taking responsibility for procurement,
production, training and ensuring that quality standards are met.
Case writer: What made you feel that indeed Hina was your ideal choice as a business partner?
I have known Hina for more than six years now. I see her as a friend, a sister and someone with
whom I have great understanding. Moreover, I have full confi dence in her as a business partner
because she is extremely good at whatever she does and is very serious about whatever project
she undertakes.
Case writer: Do you foresee any issues between the two of you which could pose a problem managing
the business?
I second Hina’s opinion about our clearly defi ned job responsibilities, which will help in avoiding
any problems or confl icts in the future.
Case writer: What in your opinion are the risks associated with your restaurant?
To begin with we are quite optimistic about the potential of the restaurant business mainly because
eating out is one of the most popular forms of entertainment in Pakistan. Therefore, anything
new and good that is offered to the consumers is likely to do well. However, talking specifi cally
about our restaurant, there are a few concerns which might give us a tough time. First, there is
an emerging trend in the consumer restaurant selection process. Since M.M.Alam Road offers a
wide variety of restaurants to choose from, most consumers decide on a particular restaurant once
they physically reach the location. As a matter of fact, we ourselves do so when deciding where
to eat. So selecting a restaurant which is off M.M. Alam Road would have to be a conscious and
planned decision, which means that we have to offer something exceptional and extraordinary to
our clients for them to make this choice.
Secondly, due to the hot and dry climate of our city, people prefer to stay indoors during the
long summer months which begin somewhere as early as April and continue till late September.
Hence, our entire idea of wanting our customers to take a detour off the polo fi elds before reaching
the café and enjoying a meal while looking at a polo match could not be functional during the
hot summer days. Hence, this implies that we would have to work extra hard during the winter
season to cover up for the lost summer sales.
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Exhibit 1
Polo Lounge
Profi le of Major Potential Competitors of Polo Lounge in 2002
Restaurant Location Specialty Capacity
Average Number
of Covers Per Day Trading Hours
Fujiyama Avari Towers Japanese 144 persons including two
private dining rooms for
12 persons each
60 Lunch and
Dinner
The Steak House The Pearl
Continental
Hotel
Steaks 31 persons plus two
boardrooms seating of
12 persons each and exclusive
sitting area for 8 persons
40 Dinner only
Royal Elephant The Pearl
Continental
Hotel
Thai 130 persons including private
dining rooms (10–16 persons
each)
60 Lunch and
Dinner
Café Zouk M.M. Alam
Road
Continental, Thai,
Italian, Fast Food
90 persons 270 Lunch and
Dinner
Source:
Case Writer’s Notes.
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Exhibit 2
Polo Lounge
Pricing Structure (in Rs) of Potential Competitors of Polo Lounge in 2002
Food Category Steak House Royal Elephant Fujiyama Café Zouk
Average Starters 302 275 210 150
Average Mains 532 345 390 250
Average Desserts 149 180 170 100
Source: Case Writer’s Notes.
Exhibit 3
Polo Lounge
Projected Income Statement, 2003–05
(in Rs)
Dec-03 Dec-04 Dec-05
Revenues 7,200,000 12,420,000 21,424,500
Direct Cost:
Food Cost 2,520,000 4,347,000 7,498,575
Gross Margin 4,680,000 8,073,000 13,925,925
Expenses:
Rent 300,000 330,000 363,000
Utilities 432,000 648,000 972,000
Administration 948,000 1,422,000 2,133,000
Total Operating Expenses 2,880,000 4,968,000 8,569,800
Profi t before Tax 1,800,000 3,105,000 5,356,125
Source:
Company Documents.
Exhibit 4
Polo Lounge
Basic Assumptions for the Projection
2003 2004 2005
SALES
Number of customers per day 50 75 110
Average per head (Rs) 400 460 529
COSTS
Direct Cost as a % of sales 35% 35% 35%
% increase in Rent – 10% 10%
% increase in indirect costs – 5% 5%
Source:
Company Documents.Downloaded from http://ajc.sagepub.com at K.R.E.T'S TRIDENT INSTITUTE on April 11, 2010
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