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ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT

INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
Page 1 of 44

CHAPTER I
INTRODUCTION
1.1 Background

One industry that places strong focus and emphasis on its customers is the
restaurant industry. The full-service restaurant industry has maintained a
healthy growth despite global economic downturn through the extensive use of
marketing strategies,

such

as

price

promotions,

loyalty

schemes

or

membership plans, and new innovative menu items (Zen 2015). Indonesias
economy has been experiencing steady growth recently, below are the growth of
Indonesia economy for the past 4 years;
Figure 1.1

Percentage Change of Indonesian


Economy
6.87
5.85

2011

2012

5.21

5.02

2013

2014

(Badan Pusat Statistik 2016)


This growth is caused by the emergence of middle class and affluent consumers
(MAC) population in Indonesia. According to Boston Consulting Group report in
2013, there are currently about 74 million MACs in Indonesia, and it will double
by 2020 up to 141 million people. Despite the weakened rupiah and falling of oil
prices, domestic demand remains strong with consumption of mostly goods,
vehicles, durable services, hotels and restaurants. The increasingly active and

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
Page 2 of 44

hectic lifestyle in urban areas is one of the underlying factors that support this
high consumption.

Indonesian consumers, particularly those living in urban areas, are becoming


increasingly busy, which means that they are spending more time away from
home. Their hectic lifestyles place limits on the amount of time that consumers
have for cooking and preparing food at home and this boosted growth in fullservice restaurants over the review period. A growing number of urban consumers
are now choosing to eat out whenever they can, usually with friends and family, or
opt for more convenient option such as home delivery instead (Wasserbauer
2015). The lifestyles of Indonesian consumers are expected to become
increasingly intense and more hectic for the forecasted period, particularly in
Indonesias major cities. Growing demand for convenient food is thus likely to
result in more entrepreneurs launching full-service restaurants. Competition
within the channel is likely to increase, with operators using a wider range of
strategies to attract consumers and to boost sales. (Euromonitor International
2015)

Tutup Panci, is located in Nusa Loka, Serpong, South Tangerang City, Province of
Banten. South Tangerang City is located in Banten Province, Indonesia and
Banten has a good growth of economy which is stated in the graph below;

Percentage Change of Banten


Economy
Percentage Change
6.83

7.13
5.47

4.03

2011

2012

2013

2014

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
Page 3 of 44

Figure 1.2
(Badan Pusat Statistik 2016)
Likewise, South Tangerang City, which is located in Banten, also has a good
growth of economy which is stated in the graph below;
Figure 1.3

Percentage Change of South


Tangerang City Economy
Percentage Change
8.99
8.86

8.81
8.66

2011

2012

2013

2014

(Badan Pusat Statistik 2016)


Target set by the central government is 6.4 percent the district of South Tangerang
has been having higher growth from the target, which is 8.4 percent for the
respective year (IniTangsel 2015), and 8% annually over the last five years
(Jamaludin 2015).

Tutup Panci itself is part of Food and Beverage Industry which is a part of South
Tangerang Citys economy and according to Badan Pusat Statistik, there are 16
categories which shaped South Tangerang Citys economy which Food and
Beverage Industry are one of them. The Food and Beverage Industry in South
Tangerang City Economy has a good growth which stated on the graph below;

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
Page 4 of 44

Figure 1.4

Percentage Change of South Tangerang City's


Accomodation and Food & Beverage Industry
Percentage Change
10.88
8.8
5.1

2011

2012

6.13

2013

2014

(Badan Pusat Statistik 2016)

Tutup Panci is, according to Indonesian Law 20 of 2008 article 6 number 2,


classified as a Small Enterprise. In the Law, it was stated that Small Enterprise
have a net worth of more than Rp50,000,000.00 (fifty million rupiah) up to at
most 500,000,000.00 (five hundred million rupiah) not including land and
buildings; or have an annual sales turnover of more than Rp300,000,000.00 (three
hundred million rupiah) up to at most Rp2.500.000.000,00 (two billion five
hundred million rupiah) (Bank Indonesia 2008). According to an interview with
Tutup Pancis owner, Aditya Putra Nova, Tutup Panci has earnings lower than
Rp500,000,000.00 (Nova 2016). Below shown are Tutup Pancis sales turnover
which clearly indicated that Tutup Panci are within the industry of Small
Enterprise, for the recent years (2012-2015);

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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Figure 1.5

Tutup Panci Sales (Sales Turnover)


490,000,000
480,000,000
470,000,000
460,000,000
450,000,000
440,000,000
430,000,000
420,000,000
410,000,000
400,000,000
390,000,000
380,000,000

476,619,500
458,221,987

452,788,525

416,565,443

2012

2013

2014

2015

(Nova 2016)

Small Enterprises in South Tangerang, based on Badan Pusat Statistik in South


Tangerang City, have a growth percentage with the average of 30% from the year
2011-2014, shown in the graph below;
Figure 1.6

Percentage Change of Small Enterprise in South


Tangerang City
Percentage Change
40.2

22

24

2011

2012

2013

(Badan Pusat Statistik 2015)

37.5

2014

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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According to the graph, it is shown that the percentage of Small Enterprise in


South Tangerang, where Tutup Panci is located, are experiencing a rapid growth
in recent years thus Tutup Panci as one of the small enterprise, need to be more
competitive in order to win the market.

The target market of Tutup Panci consists of the residents of BSD City area.
Primary market is focused on teenagers, in which it is believed that the concept of
Tutup Panci is relevant with the needs and desire of this particular market. The
age range for the teenager market starts from 15 to 21 years old, in which the
individuals would be currently undergoing education in Junior High School,
Senior High School and universities. The main competitor of Tutup Panci is Roti
Bakar (for example, Roti Bakar 88) which has established market and several
branches. (Putra, et al. 2013).

Soriano (2012) stated that, for the restaurant industry, it is important to understand
the attributes which influence customers decisions to return to a restaurant for
another meal. By understanding these factors, it is possible to satisfy customers
expectations and prevent their defection, leading to plentiful profits for the
restaurant (Haghighi, et al. 2012). As put by Hansemark and Albinsson (2004),
customer satisfaction has been believed to have an impact on the market share and
customer retention and thus, has been treated as the primary objective of
businesses (Srivastava 2015).

Soriano (2002) stated that Customer satisfaction is considered as a factor


encouraging customers to use the service again, though there is no guaranty that a
satisfied customer will return for a repeat purchase (Haghighi, et al. 2012).
Satisfaction increases because customer insight allows companies to understand
their customers better, and create improved customer value propositions and better
customer experiences. As customer satisfaction rises, so does customer intention
to repurchase (Buttle 2009). A higher customer satisfaction lead to number of
improvements like higher customer loyalty, higher consumption of the service,

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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acquisition of further customers (Rashid, et al. 2015) Creating customer


satisfaction and loyalty provides sustainable
competitive advantage and differentiation from rivals (Kursunluoglu 2014). There
are several important factors to measure customer satisfaction in restaurant
industry. The factors are product quality, price, service quality, and restaurant
environment (Haghighi, et al. 2012) (Sabir, Irfan, et al. 2014) (Sabir, Ghafoor, et
al. 2014) (Nasir, et al. 2014) (Andaleeb and Conway 2006).

After identifying several business process of the company, Tutup Panci, as a


Small Enterprise, has never done a research to measure their Customer
Satisfaction. For restaurant owners, it is important to understand specific decisionmaking criteria customers use for restaurant selection in order to be able to affect
customers selection decisions (Haghighi, et al. 2012).

The economy in Indonesia, especially in South Tangerang, has become more


competitive and will be even more competitive in the coming years, parallel with
the increase of economy and the growth of customers. Therefore, the need to
consider and research customer satisfaction as a part of business strategy is
becoming more important for a business like Tutup Panci. Tutup Panci have never
done a measurement on Customer Satisfaction, therefore this study will delve
deeper to observe what factors of affects customer satisfaction in small business,
in restaurant industry.

1.2 Research Problem


According to the above background, the problem of Tutup Panci, Tutup Panci
because Tutup Panci is a Small Enterprise and they have not done any research
regarding Customer Satisfaction within a restaurant setting which is Tutup Panci
The problems are mainly seen from the following points:.
1. Tutup Panci is a Small Enterprise and they have not measured their
Customer Satisfaction

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
Page 8 of 44

The problem have basically weakened the firms competitiveness in the next
period. The assumption will be proven statistically using the following questions
1. What are the factors that influencing customer satisfaction on small
business in restaurant industry in BSD?
2. What are the factors of customer satisfaction most affect Tutup Panci?

1.3 Research Question


Question #1: Is product quality positively related to customer satisfaction in
Tutup Panci restaurant?
Question #2: Is price positively related to customer satisfaction in Tutup Panci
restaurant?
Question #3: Is service quality positively related to customer satisfaction in
Tutup Panci restaurant?
Question #4: Is restaurant environment positively related to customer
satisfaction in Tutup Panci restaurant?

1.4 Research Objectives


There are two main purposes to this research study.
1. To analyze how significant product quality is to influence customer
satisfaction in Tutup Panci restaurant.
2. To analyze how significant price is to influence customer satisfaction in
Tutup Panci restaurant.
3. To analyze how significant service quality is to influence customer
satisfaction in Tutup Panci restaurant.
4. To analyze how significant restaurant environment is to influence
customer satisfaction in Tutup Panci restaurant.

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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1.5 Scope and Limitations


The scope and limitations of this study are as follows.
1. The research only focuses on Tutup Panci in Nusa Loka, BSD.
2. Due to time restrictions, the study was carried out only over a period of
four months from March 2016 to June 2016.
3. The analysis will only examine how significant correlation between
Customer Satisfaction towards customer loyalty.
4. The limited availability of the data gathered from several sources.

1.6 Significance of Study


The study is significant for the following reasons.
1. The study provides useful insights for customer-centric organizations;
specifically full-service restaurants that seek to provide additional value to
their customers through various means and strategies including Customer
Satisfaction.
2. The study gives evidence on the role and extent that Customer
Satisfaction in service industries, such as the restaurant industry, which
can be useful for restaurants that are just starting up or looking to
restructure and/or renovate.
3. The study examines which indicators of Customer Satisfaction are the
most influential, and offers useful knowledge and information for the
restaurant industry in where and how to most effectively allocate
their resources.

ANALYZING THE FACTORS AFFECTING CUSTOMER SATISFACTION ON SMALL BUSINESS IN RESTAURANT


INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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CHAPTER II
LITERATURE REVIEW
2.1 Framework of Thinking
Figure 2.1 Framework of Thinking

Problem Definition
The Factors Affecting Customer Satisfaction On Small Business In
Restaurant Industry In BSD

Theoretical Aspects
Customer Satisfaction

Restaurant

Small Business

Research Questions
What are the factors that influencing
customer satisfaction on small business in
restaurant industry in BSD?

What are the factors of customer


satisfaction most affect Tutup Panci?

Analysis
Regression will be used in this research
Hypotheses Testing
H0: There is no significant
H1: There is significant influence
influence from respective
from respective independent
independent variables toward
variables toward customer
customer satisfaction (dependent
satisfaction (dependent variables)
variables)

Source: Author

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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2.1.1 Customer
Customer is the person who buys a product or a service offered by a business
organization, as the purchase process (Grigoroudis and Siskos 2010). Potential
customers may be considered as:
1. The need or desire to purchase the product or the service
(Grigoroudis and Siskos 2010)
2. The motive to proceed to this particular purchase (Grigoroudis and
Siskos 2010)
3. The necessary financial resources (cash or credit) (Grigoroudis and
Siskos 2010)
4. The ability to access the locations where the products or the
services are made available (Grigoroudis and Siskos 2010)

According to above definitions, customers may be categorized as:


1. Self-unit customers: All individuals are self-unit customers of
themselves. Self-inspection, a disciplined attitude, and a desire for
excellence should be a way of life for everyone (Grigoroudis and
Siskos 2010)
2. Internal customers: The personnel of an organization constitutes
the set of internal customers, who receive output from one or more
internal process owners, or even process outputs performed by
suppliers (Grigoroudis and Siskos 2010)
3. External customers: This category refers to the buyers or users of
the final products and services of the business organization
(Grigoroudis and Siskos 2010)

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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According to (Shamsuzzaman 2013) there are three types of customer which


are:
1.

New customers: Persons have never experienced the products or


services of the company before and they begin to try the products
or services and may gradually become current customers or lost
customers of business organizations

2. Current customers: Persons who are being in the process of a


purchasing. They have a certain degree of understanding and
knowledge of the company.
3. Lost customers: Persons who used to be the customers of the firm
but somehow change to other firms.

According to (Hunter 2016), a more detailed classification is introduced in the


following types:
1. Loyal Customers: This categorized customer is loyal to the
company and that is why they do not go to other companies so
frequently.
2. Discount Customers: They visit different shops and markets often
but do not purchase so frequently. Their buying depends on the size
of the concession.
3. Impulse Customers: These customers having no buying plan, when
come into stores, they much more interested to buy something
which seems good at the time.
4. Need-Based Customers: They have the necessity of specific
product.
5. Wandering Customers: these are the free mover customers with no
buying plan but they often visit different markets and shops to get a
sense of experience.

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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2.2.2

Customer Satisfaction

Customer satisfaction is the customers fulfillment response to a customer


experience, or some part thereof. Customer satisfaction is a pleasurable
fulfillment response. Dissatisfaction is an pleasurable fulfillment response.
The experience, or some part thereof component of the definition suggests
that the satisfaction evaluation can be directed at any or all elements of the
customers experience. This can include product, service, process and any
other components of the customer experience (Buttle 2009).

Outstanding marketing companies go out of their way to keep important


customers satisfied. Most studies show that higher levels of customer
satisfaction lead to greater customer loyalty, which in turn results in better
company performance. Smart companies aim to delight customers by
promising only what they can deliver and then delivering more than they
promise. Delighted customers not only make repeat purchases but also become
willing marketing partners and customer evangelists who spread the word
about their good experiences to others (Kotler and Armstrong 2012)

Customer satisfaction is a key to building profitable relationships with


consumers to keeping and growing consumers and reaping their customer
lifetime value. Satisfied customers buy a product again, talk favorably to
others about the product, pay less attention to competing brands and
advertising, and buy other products from the company. Many marketers go
beyond merely meeting the expectations of customersthey aim to delight the
customer (Kotler and Armstrong 2012). A dissatisfied consumer responds
differently. Bad word of mouth often travels farther and faster than good word
of mouth. It can quickly damage consumer attitudes about a company and its
products. But companies cannot simply rely on dissatisfied customers to
volunteer their complaints when they are dissatisfied. Most unhappy
customers never tell the company about their problems.

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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Therefore, a company should measure customer satisfaction regularly. It


should set up systems that encourage customers to complain. In this way, the
company can learn how well it is doing and how it can improve (Kotler and
Armstrong 2012).

2.2.2.1 Product Quality


Product Quality is one of the factors that influence customer satisfaction and
according to Peri (2006) quality can be defined as being appropriate for usage
and in the case of food, it can be defined as being appropriate for consumption
(Haghighi, et al. 2012)

Garvin (1987) proposed the most comprehensive definition of product quality


which are:
1. Performance:

It is how the product operate, or in restaurant case how

the taste of the food and how it is presented (Yuen and Chan 2010).
2. Features: Addition benefits of the product or service (Yuen and Chan
2010).
3. Conformance: Whether the product meet the standard or not (Yuen and
Chan 2010).
4. Reliability: The potential of how the product will work as it is supposed to
(Yuen and Chan 2010).
5. Durability: The duration of how long the product can be used (Yuen and
Chan 2010).
6. Serviceability: The capability of the product (Yuen and Chan 2010).
7. Aesthetic: How the product presented physically (Yuen and Chan 2010).
8. Customer-perceived Quality: Customer perception of a product s quality
based on the reputation of the firm (Yuen and Chan 2010).

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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2.2.2.2 Price
Price is considered as one of the factor which influences customer satisfaction.
For company point of view price is:
1. Value (Sabir, Irfan, et al. 2014)
2. Reward (Sabir, Irfan, et al. 2014)
Given in return of need fulfilment to company. Perceived customer
expectations and price should be in accordance with each other (Sabir, Irfan, et
al. 2014). Price is one of the four Ps of Marketing Mix that has significant
role in implementation of marketing strategy (Kotler and Armstrong 2012).

Price is playing a vital role in the customer satisfaction because the charges of
the product directly affect the customer, so if it is affordable then customers
satisfy it and willing to purchase the product again and again in future (Sabir,
Ghafoor, et al. 2014). The pricing of restaurant items also varies according to
the type of restaurant. If the price is high, customers are likely to expect high
quality, or it can induce a sense of being ripped off. Likewise, if the price is
low, customers may question the ability of the restaurant to deliver product
and service quality (Andaleeb and Conway 2006).

2.2.2.3 Service Quality


Service Quality is one of the factors to influence customer satisfaction because
customers would likely prefer a company with a good or better service quality
and An important factor driving satisfaction in the service environment is
service quality (Andaleeb and Conway 2006).

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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The one method to measure service quality is by using SERVQUAL method.


The SERVQUAL model, developed by A. Parsu Parasuraman and
colleagues in North America, identifies five core components of service
quality: reliability, assurance, tangibles, empathy and responsiveness (Buttle
2009):
1. Reliability: Ability to perform the promised service dependably and
accurately (Buttle 2009) (Markovic, Raspor and Dorcic 2011).
2. Assurance: Knowledge and courtesy of employees and their ability to
convey trust and confidence (Buttle 2009) (Markovic, Raspor and Dorcic
2011)..
3. Tangibles: Appearance of physical facilities, equipment, personnel and
communication materials (Buttle 2009) (Markovic, Raspor and Dorcic
2011)..
4. Empathy: Provision of caring, individualized attention to customers
(Buttle 2009) (Markovic, Raspor and Dorcic 2011)..
5. Responsiveness: Willingness to help customers and to provide prompt
service (Buttle 2009) (Markovic, Raspor and Dorcic 2011)..

The importance of SERVQUAL is that it offers managers a systematic


approach to measuring and managing service quality. It emphasizes the
importance of understanding customer expectations, and of developing
internal procedures that align company processes to customer expectations
(Buttle 2009).

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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2.2.2.4 Restaurant Environment


Restaurant environment is an important factor in consumer satisfaction and
behavior. In the restaurant environment, customers are directly in contact with
restaurant services (Haghighi, et al. 2012). Lim (2010) stated that the
atmosphere of the restaurant is influence the customer satisfaction such as
1. Music (Sabir, Ghafoor, et al. 2014)
2. Setting arrangement (Sabir, Ghafoor, et al. 2014)
3. Decoration (Sabir, Ghafoor, et al. 2014)

These are things which create the positive image of the restaurant in the mind
of customers (Sabir, Ghafoor, et al. 2014).

2.3 Restaurant
According to Gordon & Brezinki (1999) restaurants are places of business that
prepare and serve food, drinks, and desserts to patrons in exchange for money.
There are many types of restaurants including formal, semi formal, casual,
lunch spots, hotel restaurants, breakfast diners, pizza joints and take out
establishments (Wibowo 2013).

A restaurant is a general term to refer businesses serving gastronomic cuisine


to the community and provide a place to enjoy the dishes and set a specific
tariff for the food and service. Although the restaurant usually serves food in
place, but there are also restaurants that provide take-out dining and delivery
service to serve its customers. Restaurants usually have specialized in this type
food offered, such as Chinese food restaurants, Padang restaurants, fast food
restaurant (fast food restaurants) and so forth (Wibowo 2013).

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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Wibowo (20013) stated that there are three types of restaurant which can be
divided on the purpose and core business of each. They are High Class
Restaurant, Family Restaurant, and Fast-Food (Franchise) Restaurants.
1. High Class Restaurant is a kind of dining place which serves with high
quality, imported food, cooked by professional, and have higher price
than others restaurant. This kind of restaurant is also provided by fivestars hotels and sometimes they bundled it with the room service or
meeting occasion. Some hotels, such as, JW Marriott, Le Meridien,
Sultan Hotel, and Sheraton, are the example of place that offer this
type of dining place (Wibowo 2013).
2. Family restaurant is a good place for family to spend their time and try
different kind of dishes. People come to this restaurant with their
family or friends. According to Restodb.com (a website contains all
family restaurant in Jakarta), there are 2,750 restaurants operating in
the city which 500 of them are foreign taste restaurants, such as:
European, Korean, Thai and Japanese restaurants in 2011 (Wibowo
2013).
3. Fast food is the term given to food that can be prepared and served
very quickly. While any meal with low preparation time can be
considered to be fast food, typically the term refers to food sold in a
restaurant or store with preheated or precooked ingredients, and served
to the customer in a packaged form for take-out/take-away. All fast
food in Indonesia are using franchise systems. Franchise restaurant
means A form of business organization in which a restaurant has a
succesful menu or dishes or services (the franchisor) enters into a
continuing contractual relationship with other businesses (franchisees)
operating under the franchisors trade name and usually with the
franchisors guidance, in exchange for a fee (Wibowo 2013).

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CASE STUDY: TUTUP PANCI RESTAURANT
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2.4 Small Business


A business that is small compared to large companies in an industry, has
geographically localized operations, is financed by only a few individuals, and
has a small management team (Longenecker, et al. 2012) or according to
Indonesian Law 20 of 2008 article 1 number 2, Small businesses are
productive economic activities that stand itself, which is carried out by an
individual or entity a business that is not a subsidiary or not branches of
companies owned, controlled, or be part either directly or indirectly from
Enterprises Medium or large businesses that meet the criteria of Small
Business (Bank Indonesia 2008)

Primary attentions of small business are:


1. Compared to the biggest firms in the industry, the business is small; in most
instances, the number of employees in the business is fewer than 100
(Longenecker, et al. 2012).
2. Except for its marketing function, the businesss operations are
geographically localized (Longenecker, et al. 2012).
3. Financing for the business is provided by no more than a few individuals
(Longenecker, et al. 2012).
4. The business may begin with a single individual, but it has the potential to
become more than a one-person show (Longenecker, et al. 2012).

According to Indonesian Law 20 of 2008 article 6 number 2, the criteria of


Usaha Kecil (Small Business) in Indonesia are as follows:
1. Have a net worth of more than Rp50,000,000.00 (fifty million rupiah) up to
at most 500,000,000.00 (five hundred million rupiah) not including land
and buildings; or
2. Have an annual sales turnover of more than Rp300,000,000.00 (three
hundred million rupiah) up to at most Rp2.500.000.000,00 (two billion five
hundred million rupiah) (Bank Indonesia 2008).

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INDUSTRY IN BSD.
CASE STUDY: TUTUP PANCI RESTAURANT
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2.5 Previous Studies

Figure 2.4 Previous Studies


Research Studies

Variables/ indicators

Key Findings

Evaluation of factors

Product quality

The obtained results show that

affecting customer loyalty

Price

product

in the restaurant industry

Service Quality

quality,

(Haghighi, et al. 2012)

Restaurant

environment, and perception

Environment

of price fairness had a positive

Restaurant Location

impact

Customer Satisfaction

satisfaction, but the impact of

Customer Trust

restaurant

Customer Loyalty

customer satisfaction was not

quality,

service
restaurant

on

confirmed.

customer

location

Also,

on

product

quality, service quality, and


perception of price fairness
had

positive

effect

on

customer trust. The results


show that product quality is
the most

important factor

affecting customer satisfaction


and trust
Restaurants.

in

Boof

Chain

Customer

satisfaction had a positive


impact on customer loyalty,
but the effect of customer trust
on customer loyalty was not
confirmed.

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Research Studies

Variables/ indicators

Key Findings

Customer Satisfaction in Responsiveness

The

the Restaurant Industry; Product Quality

restaurant

Examining the Model in Physical Design

focus more on these four

Local Industry Perspective Price

factors of service quality,

(Sabir, Irfan, et al. 2014)

physical

Customer Satisfaction

results

show

owners

design,

that
should

product

quality and price if they think


customer satisfaction as part
of their marketing strategy yet
among all these four variables
they

should

take

service

quality as the most important


tool of customer satisfaction.
Research Studies

Variables/ indicators

Key Findings

Factors Affecting

Quality

In all business or organization

Customers Satisfaction in

Price

customer satisfaction is most

Restaurants Industry in

Environment

important factor or issue and it

Pakistan (Sabir, Irfan, et

Customer Satisfaction

is consider as a more valid and

al. 2014)

reliable feedback from the


customers about your business
and for the goodness of any
business customer satisfaction
play a vital role in the market
field, and to measure the
customer satisfaction different
variables are select in the
study such like price, quality
in service and the environment
of the restaurants ,and through
different analysis it is

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concluded that there is


positive and significance
relationship between these
variables and the customers
satisfaction.
Research Studies

Variables/ indicators

Key Findings

Impact of Different

Price

Our research is on the things

Determinants on

Quality

that are considered as most

Customers Satisfaction

Environment

important before visiting a fast

Level (A case of Fast

Security

food restaurant. The selected

Food Restaurant) (Nasir,

Exceptional Employee variables are price, quality,

et al. 2014)

Service

environment, security and

Customer Satisfaction

exceptional service. We have


find out that the price is the
most important factor for
people in two cities of
Pakistan i.e. Gujrat and
Gujranwala. Price is ideal
determinant for increasing the
satisfaction level of fast food
restaurant consumers. A
model for customer
satisfaction is proposed that
tells the major factors in
determining customer
satisfaction.So these five
factors should be considered
when formulating a marketing
strategy. However priority of
one factor over another would
be diverse for different

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regions.

Research Studies

Variables/ indicators

Key Findings

Customer satisfaction in

Service Quality

The regression model

the restaurant

Product Quality

suggested that customer

industry: an examination

Price

satisfaction was influenced

of the

Customer Satisfaction

most by responsiveness of the

transaction-specific model

frontline employees, followed

(Andaleeb and Conway

by

2006)

price and product quality (in


that order). Physical design
and appearance of the
restaurant did not have a
significant effect.

2.6 Study Differences


The difference between this study and previous research works lies in:
1.Indicators: Questions designed for each variables indicators are:
a. Security
b.Exceptional Employee Service
c. Product quality
d.Restaurant Location
e. Customer Trust
f. Customer Loyalty
g.Responsiveness
h.Physical Design
i. Security
j. Exceptional Employee
k.Service
2.This study will focus on restaurant industry on small business and the
customers of Tutup Panci at Nusa Loka, BSD, South Tangerang City.

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3.This variables under research are Product Quality, Price, Service Quality,
and Restaurant Environment Customer Satisfaction

2.7 Research Model


Figure. 2.5 Customer Satisfaction Research Model Tutup Panci

Product
Quality
Price

Customer
Satisfaction

Service
Quality
Restaurant
Environment

Source: (Haghighi, et al. 2012) (Sabir, Irfan, et al. 2014) (Sabir, Ghafoor, et al.
2014) (Nasir, et al. 2014) (Andaleeb and Conway 2006).

Based on compiling the each of the variables and the previous research, the
model which was constructed are as above.

2.8 Hypotheses

Question #1: Is product quality positively related to customer satisfaction in


Tutup Panci restaurant?
H0: Product Quality does not play a significant role in Customer Satisfaction
H1: Product Quality plays a significant role in Customer Satisfaction

Question #2: Is price positively related to customer satisfaction in Tutup Panci


restaurant?

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H0: Price does not play a significant role in Customer Satisfaction


H1: Price plays a significant role in Customer Satisfaction

Question #3: Is service quality positively related to customer satisfaction in


Tutup Panci restaurant?
H0: Service Quality does not play a significant role in Customer Satisfaction
H1: Service Quality plays a significant role in Customer Satisfaction

Question #4: Is restaurant environment positively related to customer


satisfaction in Tutup Panci restaurant?

H0: Restaurant Environment does not play a significant role in Customer


Satisfaction
H1: Restaurant Environment plays a significant role in Customer Satisfaction

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CHAPTER III
RESEARCH METHOD

3.1 Type of Study


This research is a quantitative research based on statistical approach. Quantitative
research attempts to measure something with the questions how much, how many,
when, and who (Cooper und Schindler 2011).

There are 4 categories of

quantitative research; they are descriptive research, correlational research, causalcomparative/quasi-experimental research, and experimental research.

This will be a descriptive study due to the fact that this research will observe how
factors of Customer Satisfaction especially in restaurant industry, in small business.
The research is most related to the observing associated indicators from one to
another, therefore establishing paper as a descriptive study (Monroe College 2011).

3.2 Unit of Analysis


The unit of analysis can either be an individual or an organization depending
on the nature of the study and the topic under research. Since the variables
studied and measured in this research all revolve around customers opinions, the unit
of analysis is people.

3.3 Population & Sample Planning

3.3.1

Population Target

This research will use Tutup Panci Restaurant and the target population will be
limited to customers who visit Tutup Panci Restaurant, Nusa Loka, BSD,
South Tangerang City. The total population in this research is unknown, since
so many people pass this criteria.

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3.3.2

Sampling Method

According to Cooper & Schindler (2011), there are two types of sampling
method, which are probability sampling and non-probability sampling.
a. Probability sampling is the process to select random sample from
population, which offers a chance to each object in the population to have
the same probability to be chosen (Cooper and Schindler 2011).
Probability sampling will include simple random sampling, proportionate
stratified random sampling, disproportionate stratified random sampling,
and cluster sampling (Sugiyono 2012).
b. Non-probability sampling is the process of selecting samples from a
population specifically with a scheme of the sample applied (Cooper and
Schindler 2011) Non-probability sampling includes systematic sampling,
incidental sampling, purposive sampling (judgment sampling and quota
sampling), cencus sampling, and snowball sampling (Sugiyono 2012).

The sampling method technique used in this research is non-probability


sampling, which is judgment sampling which the customers that visits Tutup
Panci Restaurant more than 2 times.

3.3.3

Sampling Size

A number of people are chosen to answer the questionnaire in order to find out
to obtain the meaningful information for this research. Referring to the
calculation result of PHStat, which is explained below, the minimum number
of respondents should be at least 97 people with the estimation of true
population is 50% and 10% for error tolerance, but able to achieve 95% level
of confidence with the sample.

Table 3-1 is acquired through the following steps:


1. Open PHStat in Microsoft Excel.
2. Click the PHStat icon on the top.
3. Drop down to Sample Size and follow the arrow and click
Determination for the Proportion

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4. In the new window, input as follows


a. Proportion: 0.5
b. Error: 0.1
c. Confidence Level: 95%
5. Click OK.
Figure 3.1 Sample Size Determination Table
Sample Size Determination
Data
Estimate of True Proportion
0,5
Sampling Error
0,1
Confidence Level
95%
Intermediate Calculations
Z Value
-1,9600
Calculated Sample Size
96,0365
Result
Sample Size Needed
97
Source: PHStat Results
According to PHStat, at least 97 respondents are be used in this study.
3.4 Type of Data & Collection Method
3.4.1

Primary Data Collection

There will be one type of data collection used in this research which are Primary Data
through quantitative (numeric) and Primary Data through qualitative (non-numeric)
thus, primary data though quantitative will be used in this research as it is what
needed and data are collected straight from corresponding customers of Tutup Panci.
The process of quantitative data collection will be structured and a questionnaire will
be used to collect the data in a statistical manner. The questionnaire will be distributed
through to the customers of Tutup Panci Restaurant whom are commonly known as
respondents (Sarwono, Teknik jitu memilih prosedur analisi skripsi 2014) and the aim
of using the questionnaire itself is to find out the factors which most influences the
customer satisfaction in restaurant industry, on small business, which is Tutup Panci
as the case study.

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The type of the data will be formed to answer several questions and the answer will be
into two formats which were checklist / categorical and scale which nominal
scale (to gather demographic information and classify specific characteristic) and
likert scale.
The measurement of the 5-point Likert Scale is explained below:
o 1 = Strongly Disagree
o 2 = Disagree
o 3 = Neutral
o 4 = Agree
o 5 = Strongly Agree
Figure 3.2 Question Table
Variable
Product
Quality

Indicator (s)

Scale

1. Performance

Likert

(Yuen and Chan Scale


2010).

Question
1. The

in

this

restaurant taste good


2. The

2. Features (Yuen and

food

food

in

this

restaurant served fresh

Chan 2010).
3. Conformance
(Yuen and Chan
2010).
4. Reliability

3. The appearance of the


food is appealing
4. The

(Yuen

food

served

in

appropriate temperature

and Chan 2010).


5. Durability

(Yuen

and Chan 2010).

5. The food tastes as good


as when it is served

6. Serviceability
(Yuen and Chan

enough to serve you

2010).
7. Aesthetic

6. The restaurant is capable

(Yuen

and Chan 2010).

7. The

food

served

are

innovative

8. Customerperceived Quality

8. The restaurant provides a

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(Yuen and Chan

high quality product

2010).
Price

1. Value (Sabir, Irfan, Likert


et al. 2014)

Scale

2. Reward

(Sabir,

Irfan, et al. 2014)


Service
Quality

1. Reliability (Buttle Likert


2009)

(Markovic, Scale

Raspor and Dorcic


2011).

(Markovic,

Raspor and Dorcic


2011)..

in

this

restaurant is affordable
2. The price is worth the
quality
1. The

staff

in

this

restaurant are friendly


2. The

staff

has

good

3. The

staff

dresses

properly
4. The staff are always
willing to help me

3. Tangibles
2009)

price

knowledge of the menu

2. Assurance (Buttle
2009)

1. The

(Buttle

(Markovic,

5. The

staff

always

provided quick service

Raspor and Dorcic


2011)..
4. Empathy
2009)

(Buttle

(Markovic,

Raspor and Dorcic


2011)..
5. Responsiveness
(Buttle

2009)

(Markovic, Raspor
and Dorcic 2011)
Restaurant
Environment

1. Music
Ghafoor,

(Sabir, Likert
et

2014)
2. Setting
arrangement

al. Scale

1. The background music is


pleasing
2. The dining areas are
thoroughly clean
3. The

restaurant

had

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(Sabir, Ghafoor, et

attractive decoration

al. 2014)
3. Decoration (Sabir,
Ghafoor,

et

al.

2014)

3.4.2

Secondary Data Collection

Secondary data was taken from books, journals, magazines and newspaper, published
electronic sources, websites, government records, and the company profile.

3.5 Variable Operationalization


3.5.1

Research Question

Question #1: How likely is Customer Satisfaction to influence customer loyalty in


Tutup Panci?
Question #2: What is the most significant factor of Customer Satisfaction which has
the most impact on customer loyalty in Tutup Panci?
3.5.2

Hypothesis

Hypothesis #1
H0: Customer Satisfaction does not play a significant role in Customer Loyalty
H1: Customer Satisfaction plays a significant role in Customer Loyalty

3.6 Data Analysis Technique


3.6.1

Pre-Testing

Pre testing is very important before conducting the actual research; it is


advisable to conduct Pre-testing. Pre-Testing will use 10 Questionnaires that
were distributed to 10 respondents. The primary purpose of conducting PreTesting was to verify validity and reliability in this research. Validity and
reliability are two different things but related to with each other. Moreover,
validity does not guarantee reliability and reliability does not guarantee
validity.

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3.6.2

Post-Testing

After pre-testing can show valid and reliable results, the researcher should
continue to distribute the questionnaires to all respondent means 100
respondents. In order to avoid data error from the questionnaire, which is not
valid (Respondent did not answer some question), the researcher distributed
the questionnaire based on total sampling that had already been calculated.
After all data has collected, the researcher can measure validity and reliability.
This post testing result is very essential to be evaluated.

3.7

Validity and Reliability Test


3.7.1

Validity

Validity testing is a measurement tool to see whether the data collected can be
used in the research. A valid questionnaire is where the relationship to be
measured is significant. It determines a relationship that the research aims to
present can proceed from the data collected using the questionnaires.
The measurement of this validity will use KMO & BARTLETTs test through
SPSS software. The steps for the validity test are follows:
1. Open SPSS 2.0 Software
2. Click file > Open > Data and choose the correct file to be computed
3. Click analyze > Dimension Reduction > Factors
4. Moves all variables into the variables table from the left side to the right
side
5. Click Descriptive > Choose KMO & Bartletts test of Sphericity in
Correlation Matrix > click continue
6. Click Extraction > check factor to extract > Change to value 2
7. Change number of iterations for convergences to 100 > click continue >
Click Ok
8. On the output screen > scroll down to the section titled KMO& Bartletts
test. If value result is above 0.5 it is considered as valid.

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3.7.2

Reliability

Reliability testing is known as the degree for a measurement tool in order to


create consistent results and minimizes degrees of error. Cronbachs Alpha
was utilized to evaluate the reliability of the research instrument for pretesting
result. If the persons score is same as test given that collected two times, the
measurement might be assumed reliable. The approach is taken to outline
reliability of the research instrument was calculated using SPSS program, as
follows;
1. Open SPSS 2.0 Software
2. Click file > Open > Data and choose the correct file to be computed
3. Click Analyze > Scale > Reliability Analysis
4. After Reliability Analysis dialogue box has appeared, transfer the variable
from left side to right side and set as Alpha to represent Cronbachs Alpha
in SPSS
5. Click on Statistic Box > Select the item, scale, and scale if item deleted >
click continue
6. Click Ok > the display will return to reliability Analysis dialogue
box
7. Scroll down to the header Reliability Statistic, Reliability result will be
shown under Cronbach Alpha of standard item. If value results above 0.7 it
is considered as Reliable.

3.8

Data Analysis Method


3.8.1

Regression Analysis

This research is using multiple regression analysis because this research


have 4 independent variables which are product quality, service quality, price,
and place. This analysis is aims to evaluate the influence of independent
variables that use in this research toward the dependent variable.

Source: Author

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Figure 3.3 Model of Multiple Regression Analysis


Where:
Y = Customer Satisfaction
X1= Product Quality
X2= Price
X3= Service Quality
X4= Restaurant Environment
a0= Intercept
a1= Coefficient regression between product quality and customer satisfaction
a2= Coefficient regression between price and customer satisfaction
a3= Coefficient regression between service quality and customer satisfaction
a4= Coefficient regression between restaurant environment and customer
satisfaction
e= Random Error

3.8.2

F-test

F-test or ANOVA (analysis of variance) is use for multiple regression


coefficient when the hypotheses is complicated. F-test aims to evaluate
hypotheses that use multiple parameters.
== = = 0
H: at least one of the coefficient is not zero
Thu null hypothesis shows there is no relationship between all independent
and dependent variables. While in the contrary the alternative hypothesis
indicates there is relationship between all independent and dependent
variables.
The formula of the Ftest is as follow:
The F-test analysis follows the rule of F distribution,
F statistic> F table; His rejected and His accepted
F statistic< F table; His accepted and His rejected

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Figure 3.4 F-test graph


Source: Author

3.8.3

F-test

T-test is used to show the relationship between each independent


variables (X) and dependent variable (Y), therefore T-test is use to test the
hypotheses. The null and alternative hypotheses are,
For X1 :H0 : =0 X not significance
H: 0Xsignificance
For X
H0 : = 0 X not significance
H: 0Xsignificance
For X
H0 : = 0 X not significance
H: 0Xsignificance
For X
H0 : = 0 X not significance
H: 0X significance

The significance level must be divided by two because this is two tail test,
decision making for t-test are:
If the value of t output + t table or output t table then H0 is rejected
If the value of t table t output + table then do not reject H0

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