Service quality and customer satisfaction of restaurant industry in

Butwal Sub-Metro Politian City

Hari Phullel

Roll number: 409/020

A proposal submitted in partial fulfillment for the degree of Master of Business

Administration- Banking and Finance (MBA-BF)

Submitted to the
Master of Business Administration-Banking and Finance (MBA-BF)
Department of Business Administration
Lumbini Banijya Campus
Tribhuwan University

Butwal
April, 2022
1. Introduction

Consumer buying interest in a variety of products and services has shifted

substantially as a result of mature economies, rising markets, and market
segmentation. Consumers have higher expectations and are more demanding than
ever before. Consumers are now aware of this, they are looking for high-quality
products at a reasonable price. Companies must be innovative able to take the
consumer from competitors' hands by delivering higher value. It is necessary to
identify the dimensions of a particular quality that can make a significant
contribution.(Karani et al., 2019). Service quality and customer satisfaction are
critical components of any organization's external relations system, and they heavily
influence the organization's capacity to compete. Organizations have begun to
concentrate on developing and implementing service standards accordance to their
intention to manage customer connections, where the evaluation of these standards as
a component of a company's culture in order to develop efficient ways to execute
them.(Joshy et al., 2020). Service quality has been frequently addressed in the
foodservice business, with the majority of restaurant owners agreeing that it is one of
their competitive advantages in serving clients and competing with other competitors.
A restaurant's service quality is measured across the board capable of improving
customer happiness, generating profits, attracting new customers, and make the
customer feel special.(Razak et al., 2020). Researchers and operators have paid close
attention to the issue of providing high-quality service in the restaurant sector.
According to past studies, the quality of service is traditionally seen to be the most
important component in keeping customers happy, increasing profits, and increasing
market share shows delivering high-quality services and food may boost customer
satisfaction even in the worst-case scenario. As a result, to comprehend the aspects
that influence consumers' purchasing decisions, their allegiance and their satisfaction
in this industry, service quality indicators must be determined.in addition to the
client's loyalty relationship.(Joshy et al., 2020)

2. Statement of problem
The critical challenge for foodservice is a competitive market where all the restaurants
in Malaysia struggle to maintain and sustain their services in the market(Razak et al.,
2020). Customers have their right and choice to fulfil their demand and intent to have
a new experience of the services provided in the restaurant. A survey performed
among local restaurants in Bukit Jelutong revealed that only responsiveness and
tangibility were not supported, whereas assurance, empathy, cost, and reliability were
all significant factors in this study.(Razak et al., 2020). Research study conducted in
Pakistan indicates that there is a highly significant relationship between service
quality (tangibles, assurance, responsiveness, reliability, empathy) and customer
satisfaction in restaurant industry.(Murad & Ali, 2015).
A study of Arab restaurants in Malaysia demonstrated that all service quality variables
have a positive significant impact on customer satisfaction, with the except the
responsiveness, which has a negative significant impact on customer
satisfaction(Joshy et al., 2020). All of the restaurant quality dimensions (tangibility,
assurance, responsiveness, reliability and empathy) studied have a significant and
positive impact on customer satisfaction, according to the findings of the study
conducted in Saudi Arabia(A Almohaimmeed, 2017). According to the findings from
Ghana, tangibility has a statistically significant association with customer happiness.
The findings shows that responsiveness, empathy, and assurance have insignificant
bearing on customer satisfaction in the cafeterias and restaurants studied(Mensah et
al., 2020). Though there is evidence in the context of other countries but in Nepal
there is a lack of evidence using more recent data that exists in the context of
restaurants in Butwal. In the context of Nepal, various study has been done in hotel
industry regarding customer satisfaction and service quality. So the researcher intent
to identify the effect of service quality on customer satisfaction on restaurant sectors
with five dimensions which are tangibility, responsiveness, assurance, reliability and
empathy.

3. Research question
To study the effect of service quality on customers' satisfaction, corresponding
research questions are:
1. Does tangibility influence customer satisfaction in restaurant sector?
2. Does reliability influence customer satisfaction in restaurant sector?
3. Does responsiveness influence customer satisfaction in restaurant sector?
4. Does assurance influence customer satisfaction in restaurant sector?
5. Does empathy influence customer satisfaction in restaurant sector?
4. Objective
The main objective of this study is to identify the impact the service quality on
customer satisfaction of Butwal restaurants in Nepal. The specific objectives of the
study include:
1. To examine the effect of tangibility on customers satisfaction.
2. To examine the effect of reliability on customers satisfaction.
3. To examine the effect of responsiveness on customers satisfaction.
4. To examine the effect of assurance on customers satisfaction.
5. To examine the effect of empathy on customers' satisfaction.

5. Theoretical Framework and Hypothesis

Service quality

Tangibility

Reliability

Customer
Responsiveness Satisfaction

Assurance

Empathy

Source:(Joshy et al., 2020)

The hypothesis of this study is mentioned below:

 H1: There is a positive significant impact of tangibility on customer satisfaction.

 H2: There is a positive significant impact of reliability on customer satisfaction.
 H3: There is a negative significant impact of responsiveness on customer
satisfaction.
 H4: There is a positive significant impact of assurance on customer satisfaction.
 H5: There is a positive significant impact of empathy on customer satisfaction.

6. Literature review

Many studies have been conducted to research the quality of different types of
restaurant in numerous countries. Several quality dimensions have been proposed as
independent variables to have relationships with different dependent variables.
Sumaedi and Yarmen (2015) developed a model for restaurant service excellence in
Islamic nations. There are eight dimensions to their model: Physical health in general,
waiting, the surroundings, the Islamic physical environment, the quality of the food,
time, staff, process, Islamic-related expertise, and halal certification are all factors to
consider quality. Jaini et al. (2015) looked at the elements that influence fast-food
restaurant service quality, specifically the relationship between customer experience
and total quality. They made use of three key dimensions when evaluating a
restaurant's overall quality: Service quality, food quality, and the quality of the
environment. Surapranata and Iskandar (2013) evaluated the service quality of a
family restaurant in Indonesia using the SERVQUAL dimensions, i.e. tangibles,
reliability, responsiveness, assurance and empathy. SERVQUAL is an instrument for
measuring the dimensions of service quality proposed by Parasuraman, Zeithaml and
Berry (1988). As noted by Santouridis and Trivellas (2010), service quality is
measured using this instrument as the gap between customer expectations and
perceptions, characterized by five dimensions: tangibles, reliability, responsiveness,
assurance and empathy. Tat et al. (2011) carried out a study among undergraduate
students in Malaysia to explore their purchase intentions in fast-food restaurants,
adopting the SERVPERF dimensions. Previous studies have demonstrated a positive
relationship between quality, consumer loyalty and behavioral intentions in the
connection of eateries; nourishment, administration and experience quality have been
accounted for to have a positive effect on consumer behavioral plan. (Li and Petrick,
2010; Walter et al., 2010).

7. Research methodology
7.1. Research design

The main purpose of this study is to examine the effect the five adopted variables and
customer’s satisfaction; Descriptive research design will be adopted with the
deductive approach. As the data collection will be done by using questionnaire. So,
this research is quantitative. Therefore, positivist paradigm is adopted. In this study, a
quantitative approach will be adopted, where the data collection method will be done
by survey questionnaire

7.2. Population and sample

The target population of this study consists of all customers served at service
restaurants in Butwal starting from the age group 20-44 year. The total size of
population for the age group is 76657(BSMC, 2020).The sample size for the study
was taken using Yamane’s equation:

By taking 95% confidence level and a margin of error (e) of ±5%

N
n=
1+ N (e) ²

76657
=
1+ 76657(0.05) ²

= 398

Thus the sample size would be 398 respondents from different wards of Butwal city.

The selection of the customer used a convenient sampling technique that every
customer entered the restaurant was selected as the sample of this study.
7.3. Sources of data and collection procedure

The primary technique for data collection is questionnaire. The questionnaires will
have six sections. The first section is related to tangibles and second is the assurance.
Then the third section is responsiveness and fourth section is reliability. The fifth
section is empathy and the sixth section is customer satisfaction. The data will be
collected from the total customers of restaurants in Butwal. A structured questionnaire
will be handed to each customers by visiting the concerned restaurants.

7.4. Data analysis

This study has been based on a descriptive and analytical method for the presentation
and analysis of data to prepare the final report. The collected data will be statistically
analyzed using software i.e., SPSS. Various tools such as: Descriptive statistics and
Regression model will be used to analyze the data from the responses received.

Regression model

The following multiple regression model will be run to achieve the results of the
mentioned objectives.

Y = β0 + β1 X1+ β2X2+β3X3+β4X4+ β5 X5 + ε……………... (1)

Where:

Y= dependent variable representing customer satisfaction

X1, X2, X3, X4 and X5 = independent variables representing the 5 service quality
dimensions (Tangibility, Reliability, Responsiveness, Assurance and Empathy
respectively)

β0 = Constant term

β1, β2, β3, β4, β5 = Regression coefficients

ε = Error term

8. Expected outcome

This research is expected to find the significant relationship between dependent and
independent variables. Expected result of this result is, all variables of service quality
will have a positive significant impact on customer satisfaction except the
responsiveness has negative significant impact on customer satisfaction.

Research work time schedule:

Task Appropriate Time Required

Pilot work 10 days

Selection of sample and tools, preparing 20 days
questionnaire, and printing
Collection of data 45 days
Processing of data 15 days
Analysis of data 10 days
Preparing report 45 days
Total time 145 days

Submitted By:

Hari Phullel

Lumbini Banijya Campus

T.U Reg no: 7-3-302-1246-2019

MBA-BF 4th Sem

REFERENCE

A Almohaimmeed, B. M. (2017). International Review of Management and

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BSMC. (2020). BSMC Profile.

Joshy, K. T., Peterkumar, F. J., & Vakayil, S. (2020). The impact of service quality on
customer satisfaction; an empirical study. International Journal of Management,
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Karani, L. M., Syah, T. Y. R., & Anindita, R. (2019). Influence of Service Quality
and Customer Satisfaction on Customer Loyalty in Restaurants of the Tangerang
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147. https://doi.org/10.18551/rjoas.2019-08.15

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https://doi.org/10.4018/ijthmda.2021070101

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MANAGEmENt StudIES, 4(6), 71–81.

Razak, N. A., Aminuddin, Z. M., & Ghazali, A. R. (2020). Service Quality And
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