human resources plan
TRANSCRIPT
Contents1.0 Executive Summary.........................................................................................................................3
1.1. Industry Overview........................................................................................................................3
1.2. Company Overview......................................................................................................................3
1.3. Value Proposition........................................................................................................................4
1.4. Operations Plan...........................................................................................................................4
1.5. Marketing Plan.............................................................................................................................5
1.6. Human Resources Plan................................................................................................................5
2.0 Introduction.....................................................................................................................................6
2.1. Vision...........................................................................................................................................6
2.2. Mission........................................................................................................................................6
2.3. Goals and Objectives...................................................................................................................6
3.0 Industry Overview...........................................................................................................................8
3.1. Expected challenges in the ice cream industry............................................................................8
3.2. PESTE...........................................................................................................................................8
4.0 Operations Plan.............................................................................................................................10
4.1. Organizational Structure............................................................................................................10
4.2. Daily Operations........................................................................................................................10
4.3. Supply Analysis..........................................................................................................................11
4.4. Service Providers.......................................................................................................................12
4.5. Technical processes and procedures.........................................................................................12
4.6. Capital Budget...........................................................................................................................12
4.7. Replacement of capital.............................................................................................................13
4.8. Working Capital Planning and Management.............................................................................13
4.9. Operating Expenses...................................................................................................................14
4.10. Cost of Foods Sold for Manufacturing...................................................................................14
5.0 Human Resources Plan..................................................................................................................15
5.1. Management expertise..............................................................................................................15
5.2. Training programs......................................................................................................................15
5.3. Labour and management costs..................................................................................................15
6.0 Marketing Plan..............................................................................................................................17
6.1. The Marketing Mix.....................................................................................................................17
6.2. Segmentation............................................................................................................................18
6.3. Targeting....................................................................................................................................18
6.4. Positioning.................................................................................................................................19
6.5. Competitive Analysis..................................................................................................................20
6.6. Marketing Strategy....................................................................................................................22
6.7. Marketing Expenses...................................................................................................................22
6.8. SWOT Analysis...........................................................................................................................23
7.0 Financial Plan.................................................................................................................................25
7.1. Introduction...............................................................................................................................25
7.2. Initial Costs................................................................................................................................25
7.3. Capital Structure........................................................................................................................25
7.4. Assumptions..............................................................................................................................26
7.5. Projected Financial Results........................................................................................................27
1.0 Executive Summary
The purpose of this business plan is to support a request for $150,000 of financing from equity investors
to purchase equipment as part of the financing for a Marble Slab Creamery parlour in Saskatoon,
Saskatchewan. The business will be located in leased space at the corner of 20 th Street East and 2nd
Avenue South. We will provide $50,000 in initial equity, and we have secured $100,000 in debt
financing with our financial institutions.
The business will serve healthy and premium ice cream and frozen yogurt to ice cream consumers in
Saskatoon. Based on the financial and competitive analysis presented in this plan, this Marble Slab ice
cream parlour will be successful. Supported by our analysis, we are looking to provide a rate of return
on equity of approximately 20%. Our cash flow projection indicates that the business will generate
positive cash flow of $160,085 by the end of the first five years of operations.
It is anticipated that our Marble Slab ice cream parlour will become firmly established in Saskatoon.
Marble Slab Creamery is one of the leading international ice cream franchises. Although we will face
competition from other ice cream parlours in Saskatoon, we believe that we will be able to distinguish
ourselves by having a first-mover advantage in the premium ice cream segment in Saskatoon.
Furthermore, we believe that we can capitalize on the booming economy in Saskatchewan as consumers
have an increased disposable income to spend on premium ice cream.
1.1. Industry Overview
In the past decade, the ice cream industry segment has transformed the ice cream parlor experience
from a simple and relatively inexpensive pleasure into a luxury product. There is a niche for high-end ice
cream and we believe that there is more than sufficient demand that we can satisfy.
1.2. Company Overview
Marble Slab Creamery started in Houston, Texas in 1983 and has since spread to 557 stores which are
located in 35 states, Puerto Rico, Canada, and in Dubai and Kuwait. There are presently 35 locations in
Canada. However, no franchises are currently located in Saskatchewan. The business model has proven
to be extremely successful. Given the boom that Saskatchewan is experiencing and the influx of people
that have returned to the province, this creates an excellent opportunity to establish a Marble Slab
franchise in the area.
Marble Slab Creamery prides itself on serving the freshest ice cream on earth and achieving the highest
standards of quality. Every batch of ice cream is homemade and is absent of additives and preservatives.
As a franchisee, we are able to increase profitability with the ability to leverage product purchases and
business systems to achieve greater efficiency. As a result of reducing the development costs, we can
spend our resources more efficiency on product development and marketing. The time to open a Marble
Slab Creamery in Saskatoon is now!
1.3. Value Proposition
Presently, Marble Slab does not have an established franchise in Saskatoon despite being located in
Alberta and Manitoba. Given the excess disposable income and the influx of residents into the
community, this is a phenomenal opportunity to open a well-established proven business in Saskatoon.
What sets Marble Slab apart from Dairy Queens and the remainder of the retailers is that the a whole
process is involved once you arrive at a Marble Slab. When you order an ice cream cone at Marble Slab,
you get more than just a scoop of ice cream. All the ice cream is mixed, flavored and frozen at each
outlet. With the initial cost, Corporate will provide all the necessary training and conducts national
marketing campaigns on behalf of all the franchisees.
1.4. Operations Plan
On a daily basis, the store owner and staff will make the ice-cream and ice-cream cakes in store. The
store will purchase supplies and ingredients from suppliers designated from the franchise. A local law
firm and accounting firm will provide basic bookkeeping, accounting, and legal services. The capital
budget includes initial costs for equipment such as display cases, ice cream freezers and a granite slab.
Work in progress inventory and finished goods will not be held as manufactured ice cream is perishable
and will be sold in a very short time period (1-3 days). The store will hold raw materials to meet
consumer demands.
1.5. Marketing Plan
Marble Slab offers a wide variety of ice cream flavours with Mixins® such as fruits, nuts, or candies.
These Mixins® are mixed into any ice cream on a frozen marble slab. The store also offers frozen
desserts such as frozen yogurt, smoothies, and ice cream cakes. In terms of promotion, the store will
remit monthly payments to the Franchise for national promotional efforts. At the store level,
promotional activities include printed advertisements in local newspapers, grand opening specials, and
weekly specials. The store will be located in the heart of downtown at the corner of 20 th Street East and
2nd Avenue South in Saskatoon, Saskatchewan. Currently, there is no Marble Slab franchise in
Saskatchewan. This will allow the store to capture the first-mover advantage in this premium ice cream
segment. Although the price of ice cream is higher than competitors, consumers will be able to enjoy
the Marble Slab experience.
1.6. Human Resources Plan
After extensive research and discussion with the corporate head office of Marble Slab Inc, we have
determined that we will need the equivalent of one full time manager earning a salary of approximately
$55,000 per annum and the equivalent of 4 part time employees earning a salary of $20,000 per person
per annum, before standard benefits. Salary rates are considered to be competitive relative to the
current market in Saskatoon in the industry.
Manager training will be provided by Marble Slab’s corporate office over the course of 10 days.
Employees will be trained in house by management.
Efforts to retain staff will involve supplementary benefits including employee discounts on ice cream,
employee of the month incentive programs, flexible hours, work life balance and a pleasant work
environment.
2.0 Introduction
Founded in 1983, Marble Slab Creamery (Marble Slab) offers fresh, high quality ice cream products.
Consumers come to the store to enjoy the Marble Slab experience and to choose from a huge
assortment of ice cream flavours and toppings. Consumers first choose their favorite flavour then select
their choice of Mixins (see Exhibit 3). Mixins® include the freshest fruits, the finest nuts, the sweetest
candies, and the yummiest cookies around. The ice cream and Mixins® are blended together on a cold
granite slab and served in a waffle cone baked daily in-store.
2.1. Vision
Marble Slab Creamery is the ultimate gustatory experience. We cater to each customer’s unique tastes
providing the perfect ice cream, just how they want it. Our ice creams are fresh, delicious, and of the
highest quality. We don’t just make desserts, we create experiences.
2.2. Mission
Our mission is to be the preeminent distributor of quality ice creams in Saskatchewan. We will provide
prompt service, a great experience, and the finest ice cream appealing to ice cream lovers of all ages.
2.3. Goals and Objectives
2.3.1. Short term goals
Our Marble Slab store will have the following business objectives during its first two years of operations
Net income of $32,220 by the end of its first year of operations
Sales growth of 8% for the first year
Return on shareholder equity of 13.9% for the first year of operations
2.3.2. Long term goals
Our Marble Slab store will have the following business objectives to be achieved in three or more years:
Profit of at least $73,668 by the end of the third year of operations
To be the market leader in the Saskatoon ice-cream market
To achieve the highest sales growth amongst all Marble Slab Franchises in Canada
To reduce variable and fixed costs as a percentage of sales price
To open further stores in Saskatchewan
3.0 Industry Overview
3.1. Expected challenges in the ice cream industry
3.1.1. Changing consumer consumption patterns
There are some expected challenges that will be faced by companies in the frozen desserts industry.
Canada is trending toward health consciousness. As consumers look for healthier alternatives to ice
cream, potential ice cream consumption levels could decrease. Anticipating this trend, our Marble Slab
store will address this challenge by offering a wide variety of healthier alternatives including frozen
yogurt, smoothies and non-fat ice-cream. We predict that this trend will be cyclical and are prepared to
adapt to changing consumer tastes in the super premium ice cream market.
3.2. PESTE
3.2.1. Political factors
Regulatory Health standards for the food service industry are constantly changing and may impact
Marble Slab’s operations. In addition, the ability to acquire and renew a business license may be a
relevant political factor for Marble Slab. These factors are not anticipated to be serious threats to our
operations.
3.2.2. Economic factors
The US is experiencing a recession reducing the disposable income of consumers. Normally, this reduces
spending on luxury goods and leisure activities. Based on our research of consumer spending behaviour,
the impact on ice cream consumption has not been significant during economic recessions. Marble Slab
is targeted toward customers aged 25-49 and families with young children; these consumers typically
have available disposable income and are less likely to reduce spending in economic downturns.
3.2.3. Socio-Demographic
As a fast-paced lifestyle becomes the norm; consumers have less time to spend in line-ups during peak
store hours. They may be unwilling to enjoy the relaxing, customized, Marble Slab experience. We
mitigate this factor by offering a selection of products to take home. These products include ice cream
cakes and pre-packaged ice cream.
Another consideration that may impact Marble Slab is that the ice cream market is mature and it is
questionable whether there is a sustainable niche for super premium ice cream as offered by Marble
Slab. Based on our market research in Saskatoon, consumers are willing to pay for high-end ice cream
as evidenced by the long line-ups at existing high-end ice cream parlours.
3.2.4. Technological
The ice cream manufacturing process may become more automated in the future increasing the
efficiency of the manufacturing process. To take advantage of this technology will require an increase in
future capital expenditure. This would be, in part, offset by a decrease in wages.
3.2.5. Environmental
Environmental factors impacting the ice cream industry include the availability and quality of input
ingredients. Many of the Mixins are fresh fruits and are affected by seasonality and changing weather.
Based on our review of other locations, the cost analysis is an annual average and is representative of
the average costs affecting the business. A sensitivity on input costs has been included in the financial
plan.
Dairy products such as cream, milk and farming products such as eggs face the threat of diseases such as
mad-cow disease or avian bird flu. Although these threats could adversely affect our input costs, they
highly unlikely to occur and are very difficult to quantify.
4.0 Operations Plan
4.1. Organizational Structure
Our Marble Slab franchise store will be incorporated under the Saskatchewan Business Corporations
Act. The owner will manage the store on a daily basis. Incorporating the business will provide limited
liability to the owner. It will also provide tax incentives such as the small business deduction and will
also make it easier for the business to raise capital through the sale of shares. Incorporating will also
allow the business to issue dividends to the owner.
4.2. Daily Operations
4.2.1.Hours of Operation
Winter Hours (October – May): Daily 10:00am – 8:00pmSummer Hours (June – September):Monday – Friday: 10:00am – 11:00pmSaturday & Sunday: 10:00am – 12:00am
The owner and staff would arrive at the store at 8:00am to begin ice cream preparation. Ice cream is
made fresh on store premises in 18 liter batches. Once doors open, staff would wait on customers,
restock goods, clean the store, and bake cones. They would also respond to phone orders. During slower
periods, the staff and owner would continue ice cream production, prepare and decorate ice cream
cakes, plan the employee schedules, and coordinate advertising and promotional activities. In addition,
staff would clean the ice cream machines, restock napkins, clean windows and make bank deposits. On
a weekly basis, inventory levels would also be assessed and inventory orders would be placed
accordingly. The owner would also review sales reports and other financial data.
In the winter, people’s ice cream consumption habits will change. Due to the harsh winter weather in
Saskatoon, there is a chance that business will be slower for ice cream parlors. Our research has shown
that seasonality effects due to decreased cone sales are offset by an increase in cakes and to-go orders.
Furthermore, catering efforts such as Portable Slab® are available for special events such as holiday
parties, school events, weddings, and company functions. Winter sales will be monitored closely during
the first few years and management will evaluate the appropriate staff allocation to these various
initiatives. Should operations be slower in the winter months, staffing will be adjusted.
4.3. Supply Analysis
Based on discussion with Marble Slab Franchise Operations, Marble Slab has licensed regional dairies to
manufacture the base mix from which Marble Slab Creamery brand ice cream is made. These dairies are
reputable suppliers and ensure the premium grade quality of our ice cream. Similarly, the franchise
designates certain brand names for flavorings and other ingredients to be used in preparing ice cream
and cones. The ice cream is made with ingredients such as vanilla extract from Madagascar and
chocolate and cocoa from Switzerland and Belgium. The menu board, miscellaneous supplies,
equipment and fixtures must be purchased from suppliers approved by the franchise. These
requirements are imposed to ensure that the franchisees purchase and use products that satisfy Marble
Slab’s quality standards. If a franchisee proposes a new supplier to Marble Slab, the franchise conducts
an investigation of the supplier and evaluation of their products. The franchise negotiates pricing
arrangements on behalf of the franchisees with suppliers. This results in volume discounts available to
franchisees.
4.4. Service Providers
4.4.1. Legal and Accounting
A local law firm and accounting firm will provide basic bookkeeping, accounting, and legal services. The
accounting firm will be engaged for bookkeeping and will provide tax preparation and other professional
services.
4.4.2. Computer Hardware and Software support
Restaurant Computer Solutions, Inc will provide technical support on the POS computer system. The
costs of these services are incorporated in the operating expenses and are based on discussions with the
Franchise.
4.5. Technical processes and procedures
The Franchise will provide a training program in the training facility in Houston, Texas. The training will
be provided for the store owner and one other employee. The training program lasts for 10 days and
consists of an in-depth review of Marble Slab’s Operations Manual. Furthermore, on-the-job training in
procedures necessary to operate a store will be provided. Training will be provided in the following
areas: store operations, sanitation and equipment, internal accounting systems, ice cream
manufacturing and product preparation, suppliers/orders, and personnel. New employees will be
trained by experienced staff. Should we expand operations to new locations, staff at those locations will
be trained by existing staff members familiar with day-to-day operations.
Exhibit 1 includes a proposed floor plan of the store.
4.6. Capital Budget
The capital expenditures outlined in the capital budget are based on discussion with Marble Slab head
office (the Franchise).
4.6.1. Computer Hardware and Software
Based on discussion with the Franchise, the POS terminal and the required POS software must be
purchased from Restaurant Computer Solutions, Inc. ("RCS"). This system will allow the store manager
to prepare sales, marketing and accounting reports required by the Franchise, as well as enable Store
managers to track customer orders, process credit cards, determine labor costs and monitor employees'
individual sales. The POS system must be connected to the Internet and configured to provide the
Franchise independent access to your sales data and related information. Two monitors, two
computers, and one printer are also required. Restaurant Computer Solutions, Inc. configures the
hardware and software and provides technical support.
4.6.2. Granite Slab
The Marble Slab formula consists of spreading ice cream on a frozen granite slab and mixing in fruits,
nuts and candies (Mixins®). The creation is then folded into a cone or cup. The granite slab is
refrigerated in order to keep the ice cream from melting. Originally, a marble slab was used; however,
marble was unable to bear the constant freezing and unfreezing and granite was shown to be far more
effective.
4.6.3. Other Expenditures
As the ice cream is manufactured in-store, an ice-cream machine and Ice Cream Cone Baking Oven
Systems are also required. Additionally, a fridge, a freezer, storage containers, scales and measurement
utensils, blender, menu board, signage, ice cream freezer and display cases, and small supplies (e.g. ice
cream scoops) are required. Other capital expenditures include parlor furniture (tables and chairs),
uniforms, and a franchise fee.
4.7.Replacement of capital
Based on our research, ice cream machines, related equipment and furniture are expected to have a
five-year useful life after which they will need to be replaced. In the capital budget, we have anticipated
that the uniforms will need to be replaced within 3 years; additional leasehold improvement costs will
need to be incurred within 3 years.
4.8. Working Capital Planning and Management
4.8.1. Inventory
Based on discussions with the Franchise, the store will hold raw materials to ensure there are adequate
ingredients on hand to cope with customer demand. Ice cream will be prepared fresh daily; as indicated
in the financial plan, it is anticipated that average inventory turnover will be approximately 12 days; this
is an average and includes non-perishable items such as flour, sugar, and frozen fruits and nuts. It is also
consistent with the shelf-life of milk and other dairy products. It is anticipated that the store will hold
$6,000 of raw material inventory in the first year. Work in progress inventory and finished goods are not
held as ice cream is perishable and manufactured on a daily basis. It is expected that manufactured ice
cream will be sold within a very short period of time (within 1-3 days).
4.8.2. Accounts Receivable
The store operates on a cash basis. Therefore, the balance in accounts receivable is trivial. The Portable
Slab initiative in addition to larger contracts may lead to small balances. To be conservative, these costs
have been built into our estimates of working capital.
4.8.3. Accounts Payable
The accounts payable balance is comprised of payments to the Franchise and suppliers for inventory
purchases and operating expenditures.
4.9. Operating Expenses
Operating expenses are shown in the financial plan. Operating expenses are expected to be consistent
for subsequent years and are adjusted for inflation. The costs are determined based on discussion with
the Franchise and market research.
4.10. Cost of Foods Sold for Manufacturing
Based on discussion with the Franchise and various suppliers, the breakdown of direct materials for food
manufactured is presented in the financial plan. Direct materials consist of ingredients required for the
production of ice cream including cream, milk, sugar and eggs. Flavorings and mix-ins are also required.
Direct materials also include the ingredients necessary for the production of ice cream cones including
sugar, milk, butter and flour.
5.0 Human Resources Plan
5.1. Management expertise
The manager of the franchisee store has 2 years of management experience at a Dairy Queen store. He
holds a Bachelor Degree in Commerce and also has extensive experience in marketing.
5.2. Training programs
Under the franchise agreement, Marble Slab Creamery Inc. provides a 10-day training course for
franchisees in Norcross, GA. Subsequent training classes are available in Houston, Texas to franchisees.
Consultation support from the Franchise is available via telephone and email. In-house training will be
provided to employees by the store manager.
5.3. Labour and management costs
Four full-time-equivalent staff will be hired (one full-time employee and three part-time employees).
During the operating hours, two staff will serve the customers, one will clean up tables and restock
napkins as well as clean windows before store opens, and one will make ice cream and cones.
Employees are trained to perform different duties and are rotated to different roles on a weekly basis.
During slow hours, cleaning staff and service staff will be expected to help ice creams and cones
preparation.
We offer an annual salary of $55,000 to the manager in the first year while part-time staff will receive
$10.15 per hour. Salaries and wages increase by 3% per year to adjust for inflation. CPP, EI and WCB
benefits are provided to all staff. Part-time employees are also entitled to holiday pay. Considering the
nature and size of the business, we do not plan to hire extra employees in the next five years. A 5-year
projected payroll expenses is provided as follows:
2008 2009 2010 2011 2012Wages and Salaries
Salary staff 55,000 56,650 58,350 60,100 61,903Hourly staff 73,415 75,617 77,886 80,222 82,629
Benefits – salaried staff
CPP 2,723 2,804 2,888 2,975 3,064EI 1,332 1,372 1,413 1,456 1,499WCB 1,650 1,700 1,750 1,803 1,857
Benefits – hourly staff
CPP 3,634 3,743 3,855 3,971 4,090EI 1,778 1,831 1,886 1,943 2,001WCB 2,202 2,269 2,337 2,407 2,479Holiday pay 4,258 4,386 4,517 4,653 4,792
Total payroll expenses
90,992 93,722 96,534 99,430 102,413
In order to motivate employees, we will have an Employee of the Month Program and the employee
name and photo will be posted in store. All employees are entitled to an annual bonus which is linked to
sales. During their employment, employees are entitled to a 25% employee discount on ice cream
purchases. We emphasize providing a work-life balance and are committed to providing a happy
working environment. Employees have the opportunity to work flexible hours and are welcomed to
make suggestions to our day-to-day operations. To help improve our operations, a “Suggestion Box” will
be placed at the cashier for customers to make comments on our products and services provided by our
staff.
6.0 Marketing Plan
6.1. The Marketing Mix
6.1.1. Products & Services
Our home-made ice cream comes with a wide variety of flavours (see Exhibit 2) from traditional Sweet
Cream and Strawberry to more unique flavours such as Cheesecake or Chocolate Amaretto. We serve
hand-rolled freshly baked waffle cones dipped in dark or white chocolate. For the more adventurous, we
offer specialty dipped cones such as dark chocolate with Butterfinger®.
Ice cream lovers can indulge in a variety of “mixins” such as fruits, nuts, or candies, mixed into any ice
cream on a frozen marble slab, a.k.a. Marble Slab. Other specialty products include frozen yogurt,
smoothies, shakes and malts, sundaes, banana splits, ice cream cakes and pies, as well as our home-
made brownies. The Franchise also offers three catering options: Sundae Bar, Portable Slab and Ice
Cream Social.
6.1.2. Pricing
A higher-than-average price will be charged for our high-quality ice creams. In our first year of
operation, price ranges from $4.95 for a regular ice cream in waffle cone with one mix-in to
approximately $30.95 for an ice cream cake. Prices will be increased by 3% per year to adjust for
inflation.
6.1.3. Promotion
Under the franchise agreement, Marble Slab Creamery Inc. will place and run commercials and
promotional materials in the national media. The store will remit monthly payments to the Franchise
for these national promotional efforts. At the store level, we have proposed to promote our store and
products via a series of local marketing efforts:
Printed advertisements in local newspapers
Grand opening
o Free samples of ice cream and waffle cones will be provided. With a minimum purchase
of $10, customers can participate in a draw for one of the fifty certificates each worth
$10 by submitting their business card.
o Facebook® group will be established; promotions on this group will be announced. This
was done in Vancouver, BC. Photos from the grand opening were posted and the event
was very successful.
o Grand opening party will be advertised via press release and we will discuss the
opportunity of having a radio station present on site to broadcast the event and
festivities.
Weekly specials
o Customers can enjoy a selected flavour of our premium ice cream in regular waffle cone
for as little as $3.50.
6.1.4. Place
We are committed to providing a super-premium product to satisfy consumers’ craving for ice cream.
Customers, health-conscious or creative, will find something they love in our store. Our price is
compensated with superior quality. Higher income families are anticipated to be our main customers.
The two main commercial areas in Saskatoon are the downtown area and on 8 th Street. Based on our
research, there is a Dairy Queen store and Jerry’s on 8th Street. We plan locate our store in the
downtown area in a leased space on the corner of 20th Street East and 2nd Avenue South. This location is
in the heart of downtown and is within walking distance to the Midtown Plaza, Galaxy movie theatre
and the Spadina shopping district.
6.2. Segmentation
Ice cream consumption is affected by age, gender, household characteristics and income level. A report
by Agricultural and Agri-Food Canada showed that the presence of a person over 65 in a household
increased the likelihood of ice cream purchase. Based on a research on choice of food type, females
prefer high-calorie sweet foods such as ice cream, while males prefer protein-rich foods like steak.
Families with children purchase more ice cream than those without. Families or individuals with higher
disposable income tend spend more on recreational expenditures including items such as ice cream.
6.3. Targeting
According to census data, there are 21,000 families with children in Saskatoon with a median household
income of approximately $85,000. We plan to target these high income families in additional to high
income individuals. These groups will be more willing to purchase premium ice cream as a function of
having disposable income.
6.4. Positioning
“All together, it's a special ice cream cone that's made just the way you like it, just when you want it. Welcome to the world of freshness.”From Marble Slab Creamery Company Website
Marble Slab Creamery has been offering customers super-premium ice cream products and is by far the
2nd largest player in the high-end segment. We aim to be the Starbucks of the ice cream industry. With
endless varieties, we provide our customers premium quality ice cream and unique experiences by
providing customized desserts.
6.5. Competitive Analysis
Marble Slab Dairy Queen Jerry's Food Emporium
Homestead Ice Cream
& Cappuccino# of stores 0 6 1 1Locations 22nd Street West
College Drive33rd Street West8th Street EastPrimrose DriveLudlow Street
Grosvenor Avenue Victoria Avenue
Special features
Mix-ins,Specialty cone,Non-fat yogurt
No sugar-added DQ® Fudge Bar,
No sugar-added DQ® Vanilla Orange Bar,
No sugar added Chocolate Dilly® Bar
Saskatchewan grown fruits ice
creams, gelatos and
sorbets when in season
Also a coffee shop
Catering availability
Yes N/A Yes N/A
Retail distribution
N/A N/A Saskatoon Co-op stores
N/A
Other notes
High-priced premium ice
cream,Customized
treats
No frozen yogurt, DQ merchandises
Drive-Thru
Other foods available
Low service rating
# Flavors Accessibility Quality Experience Price # Products
Marble Slab
Dairy Queen
Jerry's
Homestead
Store Bought
In today’s market, the leading ice cream franchises are Baskin-Robbins, Ben & Jerry’s, Cold Stone
Creamery, Dairy Queen, Häagen-Dazs, Marble Slab Creamery as well as MaggieMoo’s International.
Among these Cold Stone, Marble Slab and MaggieMoo’s are the three largest players in the premium
segment.
The above table lists the major ice cream parlors in Saskatoon along with their defining characteristics.
As shown in the table, none of the major players have entered the Saskatoon market. Dairy Queen
stores are scattered in 6 different areas, with one outlet close to Jerry’s Food Emporium and a local ice
cream parlour. We also compared our store with the three largest competitors in Saskatoon in terms of
variety of flavors in ice cream, accessibility, quality, experience, price and products offered. As displayed
in the value curve, Marble Slab holds competitive advantages in all aspects considered apart from
accessibility.
6.6. Marketing Strategy
The ice cream market in Canada is relatively small with little competition when compared to other
countries which provides enormous growth potential in a market with few competitors.
Country Liters per capitaNew Zealand 26.3United States 18.7Australia 17.8Finland 13.9Sweden 11.9Canada 9.5Italy 9.2Ireland 9.0Denmark 8.7United Kingdom 7.7Chile 5.6Malaysia 2.0China 1.9Japan 0.01Table 1 - Ice Cream Consumption per Capital (2002). Source: http://www.dairyinfo.gc.ca/
Based on our preliminary research, the main consumers of ice cream are high income families.
High income
Families with children
Students
National advertising and marketing campaigns are conducted by head-office.
6.7. Marketing Expenses
As mentioned previously, in addition to national advertising provides by Marble Slab Creamery Inc., we
will launch a series of local marketing programs to enhance awareness of Marble Slab in the city. We will
advertise our grand opening in local newspapers, at an estimated cost of $6,000. Give-away gift
certificates will also be distributed at an estimated cost of $500 for the grand opening. Ongoing
advertising is estimated at $1,000 per month. In-store discounts and coupons are budgeted in the first
year of operations to create further awareness. Estimated marketing expenses are summarized in the
following table. In-store discounts and coupons expenses have been adjusted for inflation at 5% in 2009
and 3% thereafter.
2008 2009 2010 2011 2012
Printed ads. 11,000 12,000 12,000 12,000 12,000
Grand opening gift certificates
500 - - - -
In-store discount and coupon
9,500 3,750 4,223 4,709 5,210
Total 21,000 15,750 16,223 16,709 17,210
6.8. SWOT Analysis
6.8.1. Strengths
High-quality ice cream
Marble Slab Creamery has established a well recognized brand-name in the industry based on its
super-premium home-made ice cream and hand-rolled freshly baked waffle cones.
Customized treats
From ice cream to smoothies, we provide a wide variety for our customers. Every customer is
unique as will be their desserts.
Universal proprietary recipe and training
Operating as a franchise, we will receive proprietary recipes and training from the Marble Slab
Inc. This ensures that a customer who had Marble Slab ice cream in other city can find the exact
experience with us.
6.8.2. Weaknesses
Low brand-recognition in the local market
Currently in Canada, 35 Marble Slab stores are operating in British Columbia, Alberta, Manitoba
and Ontario. No establishments have yet been made in Saskatchewan. Low brand-recognition
imposes challenge to the business and more local marketing efforts are needed to create
awareness.
Control over suppliers
Under the franchise agreement, we are required to buy materials from the franchisor or
designated suppliers. This prevents cost-savings in the event that a cheaper supplier could be
found. As noted, we can propose new vendors if we discovered a cheaper alternative.
6.8.3. Opportunities
First-mover advantage
As mentioned previously, there is no Marble Slab franchise in Saskatoon. By opening the first
Marble Slab store in Saskatoon, we are able to capture the first-mover advantage in this
premium ice cream segment.
Booming economy in Saskatchewan and increased disposable income
Saskatchewan was rated as Canada’s fastest growing economy in 2007 with a 2.8 percent GDP
growth. Migrations to the province also increased significantly. As the largest city of the
province, Saskatoon is a great potential market for high-end ice cream products.
Unsaturated market
The short but hot summer in Saskatoon still provide huge growth potential for the business.
Line-ups are seen at the existing competitors. In the afternoons and nights, residents are craving
for a cool treat.
6.8.4. Threats
Entrance of other industry leaders
The biggest threat to Marble Slab is the entrance of other industry leaders. With the booming
economy and increased disposable income, people are willing to pay more for a high-quality ice
cream dessert. This attracts other industry leader especially those in the high-end segment to
reap the profit.
Regulation on frozen dessert industry
Like other ice cream chains, operation of our store will be subject to any health and license
regulations imposed by the government and its agencies.
7.0 Financial Plan
7.1. Introduction
As financial and accounting estimates are always fundamental to any prospective business, we have
developed an extensive 5 year projections for our proposal.
7.2. Initial Costs
In order to establish how much we would need as initial start up fees for a Marble Slab, we have done
research necessary at corporate headquarters. According to Marble Slab (corporate), we will require
$300,000.00 to fund initial start up costs. This assumption is crucial in our analysis as it is the basis of
how much financing is required.
It should be noted that the most substantial of the initial costs we will need to incur will be for leasehold
improvements, at $120,000, to render our premises up to Marble Slabs’ standard. The next highest
initial cost will be for the equipment necessary to produce the ice cream and for storage which will cost
approximately $95,000. The last expenditure that will be of significance is the initial franchise fee of
$25,000. All franchisee are required to pay an initial franchise fee of $25,000 for the first franchise. It
should also be noted that no part of this fee will be refundable and it is to be paid upon the signing of
the franchise agreement. If additional stores are warranted, a lower franchise fee will be assessed for
each additional store that is opened. The fee is reduced to $22,000 for each additional franchise that is
opened.
Additional costs will include but is not limited to $6,000 for grand opening marketing costs, $7,000 for
legal and accounting costs, $10,000 for inventory, and $10,000 for signage.
7.3. Capital Structure
As outlined above, approximately $300,000 of initial capital is required to commence operations as a
franchisee for Marble Slab. The corporate franchisor does not offer direct or indirect financing.
Although they do not offer financing, they have established relationships with several regional and
national banks and several companies that specialize in franchise financing.
The capital structure we have derived will be a combination of debt and equity. We propose a mix of
$200,000 of equity and the remaining $100,000 in debt financing. Based on discussions with several
financial institutions, the best offer that we received was for $100,000 in debt financing at a rate of 7%
which is repayable over 10 years. Based on the terms noted above, payments have been calculated to
be $14,238 per annum.
In relation to the equity of $200,000 that is required, we have raised $50,000 personally and are seeking
an additional $150,000, the balance, from outside investors.
7.4. Assumptions
As a Franchisee, two of the significant costs that will be incurred include the royalty fee and the
advertising fee. The royalty fee that is payable is equal to 6% of gross sales. This fee is payable weekly.
Gross sales includes all revenues from the store but excludes sales tax, coupon credits, and employee
discounts.
An advertising fee is also assessed that is equal to 2% of gross sales, which is payable at the same time
as the franchisee fee.
Based on our market research and consistent with similar Marble Slab franchises, the we have
determined that the initial price for the standard seven ounce serving of ice cream will be $4.95. This is
consistent with similar establishments that have been established in British Columbia and Alberta. The
initial price for an ice cream cake will be set at $30.95.
In preparing our financial analysis, we have assumed that we will be able to achieve an 8% growth rate
in the first year which will be followed by 1% for each subsequent year for ice cream sales. Due to the
rising popularity of ice cream cakes, we believe that we will be able to sustain a 3% growth rate in the
first year and for each subsequent year. These are very conservative growth estimates. We strongly
believe that once we established and consumers embrace the Marble Slab experience, the growth will
be significantly higher.
We have also estimated that inflation will be approximately 3% for each of the years in our analysis. We
believe that this is reasonable given the boom that Saskatoon is experiencing.
When determining the sales revenue, based on our market research, we presumed that we would be
able to achieve a sales quantity of 78,000 scoops of ice cream over the first year (~214 scoops per day –
average). This would increase to 87,500 scoops in Year 5. In terms of quantity of cakes, our market
research indicated that we would be able sell approximately 1,460 cakes (4 cakes/day) over the first
operational year. This would increase to 1,650 cakes in year 5.
Based on discussions with Corporate, we were able to obtain the actual sales figures for similar
establishments located in Canada and the United States. In a sample of 68 stores, the range of actual
sales was between a low of $258,711 to a high of $867,770. The average sales amongst the 68 stores
that were sampled totaled approximately $350,419. The sales varied due to numerous factors. Stores
located in malls tend to achieve higher gross sales compared to strip center stores. However, these
stores located in malls will incur higher rent and operating expenses compared to strip center locations.
Free-standing locations typically achieve the highest gross sales.
7.5. Projected Financial Results
7.5.1. Projected Income Statement over 5 years
In Exhibit 4, we have provided a projected the statement of income and retained earnings over the five
year period.
If we look solely at ice cream sales, we anticipate gross ice cream sales to total $386,100 in Year 1, which
will increase by 8% in Year 2 and 1% each subsequent year to reach gross sales of $487,486 in Year 5.
Cake sales are expected to total $45,187 in Year 1 and grow at 3% subsequently to reach total sales of
$57,477 in Year 5.
Cost of goods sold will equal 51% in Year 1 and decline slightly to 49% in year 5. The average of 5 years is
expected to equal 50%.
Given the cost of goods sold, the gross profit margin is expected to equal 49% in Year 1 and increase to
50% in Year 2 and to 51% in Year 5.
Operating costs as a percentage of gross sales is expected to total 40% in year 1 and decrease to 30% in
year 5. These operating costs are comprised of rent and leasehold expenses, accounting and legal
expenses, accounting and legal expenses, insurance expenses, utility expenses, interest and capital cost
allowance.
Net income after tax is estimated to total $32,220 in our first year of operations. We anticipate that net
income will grow to $60,519 in Year 2, $73,668 in Year 3, $85,068 in Year 4 and up to $94,835 in Year 5.
Net Profit Margin is expected to total 7.5% in Year 1 and increase up to 17.4% in Year 5 with an average
of 13.7%.
7.5.2. Projected Balance Sheet over 5 years
We have also provided a five year projection of the balance sheet for our proposed franchise in Exhibit
5. Limited balances in accounts receivable and inventories are expected given that this is a food
establishment. We estimate accounts receivable to total $5,000 in Year 1 and increase to $5,885 over
the five year period. Total inventories are expected to equal $7,000 at the end of Year 1 and increase to
$8,000 over the five year period.
Accounts payable is also expected to remain fairly minimal with an expected balance at the end of year
1 equal to $17,761 and increase to $20,269 by the end of Year 5.
Overall working capital which is comprised of cash, accounts receivable, raw inventory, inventory in
progress, finished inventory, and accounts payable is expected to total $80,282 in Year 1 and increase to
$153,701 by the end of year 5.
The liquidity ratios demonstrate that we do not anticipate any problems with paying off short term
liabilities. The projected current ratio in Year 1 is expected to equal 5.52 and is not expected to decrease
but rather increase to 8.58 by 2012.
Liquidity Ratios
Current Ratio 5.52 7.61 8.96 8.13 8.58Quick Ratio 5.13 7.21 8.56 7.74 8.19
The investment utilization ratios demonstrate that we expect our inventory turnover to equal 32 in 2008
and remain fairly constant over the five year period. Given the limited accounts receivable in this
particular industry, we expect a high accounts receivable turnover which is expected to equal 86 in Year
1 and increase to 93 by 2012.
Despite a limited accounts payable balance which is incurred for operating expenses, the only projected
liability is the long term debt. As outlined in the financing section, the $100,000 loan will be paid out
over 10 years. Given the debt payments of $14,238 per annum, the balance of long-term debt will
decrease from $92,762 at the end of year 1 to $58,378 at the end of year 5. There is sufficient cash to
pay down the value of the long-term debt. The debt to equity ratio is expected to decrease from 0.48 in
the initial year to 0.30 in Year 5.
Total assets are expected to total $342,743 at the end of year 1 and remain approximately equal to
$300,000 over the five year period. Therefore, we feel that the franchise will maintain a very health
balance sheet.
7.5.3. Cash Flow Projections
In Exhibit 6, we have provided cash flow projections over the five year period.
A healthy balance of cash is expected to be maintained. Based on our projections, we anticipate a cash
balance of $86,043 at the end of 2008. Cash is expected to increase throughout the five year period.
Based on our discussions with corporate, the majority of the equipment will have a useful life exceeding
five years; however, some of the equipment may need to be replaced. Thus, a reserve of cash will be
maintained in the event that capital expenditures are incurred. Excess cash in cases where re-
investment is not appropriate will be distributed via dividends.
As can be seen from our projected statement of cash flows for the next five years, cash flow generated
from operations is expected to start out modest in 2008 with an increase of $57,281 and it is expected
to almost double into 2009 as a result of reduced inventory purchases and increased capital cost
allowance after overcoming the initial year in which only half of capital cost is used as the basis for
depreciation. After 2010, we see less dramatic increases, but increases nonetheless, in cash generated
from operations.
Net cash flow from investing is expected to be negative in Year 1 and Year 4 due to the capital
purchases. We do not anticipate any sales of capital assets over the five year period.
Net Cash Flow from Financing is expected to be positive in Year 1 and negative subsequently as we do
not anticipate taking on any more debt nor do we anticipate seeking any more equity financing. The
only deviations arise from increased dividend payments in correlation with expected higher levels of net
income and increased reduction in principal repayments on debt.
7.5.4. Investment Analysis
Highlights as follows:
Required rate of return = 20% Net present value of equity investment = $60,895 at 20% required rate of return Internal rate of return on equity investment = 33%
When performing our analysis, based on a required return on equity of 20%, the net present value of the equity investment is expected to be $60,895.
Total net cash flows to equity are expected to equal approximately $86,043 in Year 1, $85,933 in Year 2, $91,333 in Year 3, $69,919 in Year 4, and $106,857 in Year 5. The drop in the net cash flows to equity in Year 4 arises due to the additional anticipated capital expenditures that will be incurred.
The external rate of return on equity investment is expected to total 9.3% over the five year period. We expected to be able to commence paying dividends in Year 2. We anticipate paying the following dividends assuming that our financial results will materialize:
$40,000 in Year 2 $65,000 in Year 3 $80,000 in Year 4 $95,000 in Year 5
The return on total assets (after tax income) is expected to equal 9.4% in Year 1 and will increase over the five year period to over 27.7%.
The return on total equity (after tax income) is expected to equal 13.9% in Year 1 and will increase to 40.8% in Year 5.
7.5.5. Product Costing and Breakeven analysis
Direct Material Estimates
Direct material costs have been determined for ice cream scoops based on discussions with Marble Slab
Franchise and based on a review of average costing documents published online. It is estimated that
direct material costs per scoop are typically 20% of selling price per scoop. This is a very conservative
estimate of costs per cone. Per our review of other ice cream franchises, this cost is normally estimated
at between 10-20% of selling price. Cakes include 12-13 scoops of ice cream on average but a cake does
not require as many Mixins® or a cone. As such, the total variable cost per cake has been estimated at 8x
that of the cost of a cone.
Direct labor costs have been determined by calculating hourly staffing requirements in summer and
winter months and allocating these costs to the cones based on the expected sales volume. Once
operations begin and more appropriate cost drivers are determined, we will adapt our financial models
to reflect more accurate drivers. Sensitivity on labor costs has been performed in our financial models
and we have opted for a conservative estimate due to the large impact on our financial viability. It is
likely that these costs are overstated; however, we wish to take a conservative approach to prevent
surprises.
Variable overhead costs have been allocated to cakes and cones based on selling price. That is, total
expenses per dollar sales revenue was determined; this was multiplied by unit selling price to estimate
overhead costs per cone.
Based on these variable costs, cones provide a unit contribution margin of $2.25 whereas cakes provide
a unit contribution margin of $17.31. These margins are exclusive of higher margin items such as
additional scoops of ice cream, dipped cones, or Mixins®. Consistent with our approach toward labour
costs, we wished to remain conservative with our estimates. Our total fixed costs are $141,098 based on
this, as seen in Exhibit 7 our estimated breakeven point is 56,081 units for cones and 854 units for cakes.
This implies average sales of 4,673 cones per month, 17 per hour, or 4 per 15 minute intervals.
Exhibit 1 – Floor plan
Exhibit 2 – Available Flavours
Our ice cream is made fresh daily in each store using the freshest ingredients. Whatever your pleasure, Marble Slab Creamery offers fresh and tasteful ways to indulge. Pick a flavor to try today!
Sweet CreamVanillaVanilla BeanFrench VanillaVanilla CinnamonButter PecanStrawberryCoffeeCheesecakeAmarettoRumPeanut Butter
Peanut Butter BananaFudgeChocolate SwissChocolate MintChocolate RumChocolate AmarettoChocolate Peanut ButterDouble Dark ChocolateBirthday CakeMaple
MangoHoneyCaramelApple 'n' SpiceBubblegumPumpkinPralineBananaBanana RumLemon CustardCoconutRaspberryEgg Nog
Black WalnutPeppermintPeachPiña ColadaMochaKey LimeCinnamonBlueberryPistachioCotton CandyWhite ChocolateBlack Cherry
Exhibit 3: Delicious Mixins
Assorted SprinklesBananasBlueberriesButterfinger®CashewsCherriesChocolate ChipsChocolate SprinklesChocolate-Covered Peanuts
Chocolate-Covered RaisinsCookie Dough Ding Dongs®GranolaGummy BearsHeath® BarKit Kat®M&Ms®Miniature Marshmallows
Mint PattiesNestle Crunch®Nestle® Rainbow MorselsOreo® CookiesPeanut M&Ms®Pecan PralinesPecansPineapplePistachios
RaisinsRaspberriesReese's® Peanut Butter CupsShredded CoconutSliced AlmondsSnickers®StrawberriesWalnutsWhoppers®
Exhibit 4: Projected Statement of Income and Retained Earnings
Statement of Income and Retained EarningsFor the year ended December 31 2008 2009 2010 2011 2012
Sales Revenue:
Ice Cream Sales 386,10
0 428,27
4 446,37
4 467,87
8 487,48
6
Cake Sales 45,18
7 47,81
8 50,89
4 54,11
2 57,47
7
Total 431,28
7 476,09
2 497,26
8 521,99
0 544,96
3
Cost of Goods Sold
Ice Cream Sales 206,82
2 222,20
4 230,44
6 239,79
3 248,65
8
Cake Sales 14,97
0 15,84
1 16,86
0 17,92
6 19,04
1
Total 221,79
2 238,04
5 247,30
6 257,71
9 267,69
9
Gross Margin 209,49
5 238,04
6 249,96
2 264,27
1 277,26
4
Operating and Marketing Expenses
Operating Costs 171,36
5 166,42
6 162,78
1 163,59
9 165,03
3
Total Expenses 171,36
5 166,42
6 162,78
1 163,59
9 165,03
3
Income Before Taxes 38,130 71,620 87,181 100,672 112,231
Income Taxes 5,91
0 11,10
1 13,51
3 15,60
4 17,39
6 Net Income(Loss) 32,220 60,519 73,668 85,068 94,835
EBITDA 64,430 110,990 119,093 129,476 138,425 EBIT 45,130 78,114 93,132 106,043 116,981
Beg Retained Earnings
- 32,22
0 52,73
9 61,40
7 66,47
5
Net Income(Loss) 32,22
0 60,51
9 73,66
8 85,06
8 94,83
5
Dividends
- 40,00
0 65,00
0 80,00
0 95,00
0 End Retained Earnings 32,22
0 52,73
9 61,40
7 66,47
5 66,31
0
Exhibit 5: Projected Balance Sheet
Marble Slab FranchiseBalance SheetAs at December 31 2008 2009 2010 2011 2012
AssetsCurrent Assets:
Cash 86,04
3 131,97
6 158,30
9 148,22
8 160,08
5
Accounts Receivable 5,00
0 5,51
9 5,49
4 5,78
0 5,88
5
Total Inventories 7,00
0 7,50
0 7,60
0 7,80
0 8,00
0
Total Current Assets 98,04
3 144,99
6 171,40
3 161,80
8 173,97
0
Capital Assets:
Plant and Equipment 264,00
0 264,00
0 264,00
0 294,00
0 294,00
0
Accumulated C.C.A. (19,30
0) (52,17
6) (78,13
6) (101,56
9) (123,01
4)
Net Plant and Equipment 244,70
0 211,82
4 185,86
4 192,43
1 170,98
6
Total Assets 342,74
3 356,82
0 357,26
6 354,23
9 344,95
7
Liabilities Current Liabilities:
Accounts Payable 17,76
1 19,06
3 19,12
8 19,89
9 20,26
9
Noncurrent Liabilities
Long Term Debt 92,76
2 85,01
8 76,73
1 67,86
5 58,37
8
Total Liabilities 110,52
3 104,08
0 95,85
9 87,76
4 78,64
7
Shareholders' Equity
Owner's Equity 200,00
0 200,00
0 200,00
0 200,00
0 200,00
0
Retained Earnings 32,22
0 52,73
9 61,40
7 66,47
5 66,31
0
Total Shareholder's Equity 232,22
0 252,73
9 261,40
7 266,47
5 266,31
0
Total Liabilities and Shareholder's Equity
342,743
356,820
357,266
354,239
344,957
Exhibit 6: Projected Statement of Cash Flow
Marble Slab FranchiseStatement of Cash FlowFor the year ended December 31 2008 2009 2010 2011 2012
Cash from (used in) Operating Activities:
Net Income(Loss) 32,22
0 60,51
9 73,66
8 85,06
8 94,83
5
Depreciation 19,30
0 32,87
6 25,96
0 23,43
3 21,44
4
Accounts Receivable (5,00
0) (51
9) 2
6 (28
7) (10
5)
Inventory (7,00
0) (50
0) (10
0) (20
0) (20
0)
Accounts Payable 17,76
1 1,30
2 6
5 77
1 37
0
Net Cash Flow from Operations 57,28
1 93,67
7 99,62
0 108,78
6 116,34
4
Cash from (used for) Financing Activities:
Owner's Equity 200,00
0
-
-
- -
Long Term Debt 92,76
2 (7,74
4) (8,28
7) (8,86
7) (9,48
7)
Dividends - (40,00
0) (65,00
0) (80,00
0) (95,00
0)
Net Cash Flow from Financing 292,76
2 (47,74
4) (73,28
7) (88,86
7) (104,48
7)
Cash from (used for) Investing Activities:
Buildings and Equipment (264,00
0)
-
- (30,00
0) -
Net Cash Flow from Investing (264,00
0)
-
- (30,00
0) -
Increase(decrease) in Cash 86,04
3 45,93
3 26,33
3 (10,08
1) 11,85
7
Cash beginning of year - 86,04
3 131,97
6 158,30
9 148,22
8
Cash end of year 86,04
3 131,97
6 158,30
9 148,22
8 160,08
5
Exhibit 7: Break Even Analysis
Per Unit AnalysisBreak Even Analysis - Year 1 (Cont'd) Cones % Cakes %
Units sold 78,00
0 1,46
0
Unit selling price
4.95
30.95
Variable costs
Direct materials 0.9
9 20%
7.92
26%
Direct labour 1.1
7 24%
2.33 8%
Variable O/H applied
0.54
11%
3.38
11%
Total variable costs 2.7
0 54%
13.64
44%
Unit contribution margin 2.2
5 46%
17.31
56%
Fixed costs per unit 1.6
2 33%
10.13
33%
Operating income per unit 0.6
3 13%
7.19
23%
Break Even (Units)
56,081
854
Break Even ($'s)
277,601
26,426
Average Break Even per month 4,67
3 7
1 Average Break Even per day (360 days)
153
2
Average Break Even per hour2 1
7
0
