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Rockwood Lodge & Canoe Outfitters

a b u s i n e s s p l a n

APPENDIXbusiness plan based upon an acquisition

Prepared by Jason B. Correll

rockwood lodge & canoe outfitters

I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .754

II. BUSINESS DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .755

A. GENERAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .755

B. INDUSTRY BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .756

C. POTENTIAL OF THE VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .759

D. UNIQUENESS OF THE PRODUCT AND SERVICE . . . . . . . . . . . . . . . . . . .760

III. THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .761

A. KEY QUESTIONS REGARDING THE ACQUISITION . . . . . . . . . . . . . . . . .761

B. ASSESSING THE VALUE OF THE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . .764

IV. MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .768

A. RESEARCH AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .768

B. MARKETING PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .776

V. LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .786

A. LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .786

B. PROXIMITY TO SUPPLIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .787

C. ACCESS TO TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .787

VI. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .788

A. MANAGEMENT TEAM—KEY PERSONNEL . . . . . . . . . . . . . . . . . . . . . . . .788

B. LEGAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .790

C. BOARD OF ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .791

VII. FINANCIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .791

A. FINANCIAL ASSUMPTIONS AND METHODOLOGY . . . . . . . . . . . . . . . .791

B. RATIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .798

C. BREAK-EVEN ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .798

VIII. CRITICAL RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811

A. FOREST FIRES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811

B. WEATHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811

C. CANCELLATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .811

D. THE BOUNDARY WATERS CANOE AREA WILDERNESS (BWCAW) . . . .811

E. ENVIRONMENTAL AND ECOLOGICAL . . . . . . . . . . . . . . . . . . . . . . . . . . .812

IX. MILESTONE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .812

APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .813

7 5 3Executive Summary

I. executive summaryBusiness Description

Rockwood Lodge & Canoe Outfitters is an existing lake resort with 76 years of heritage,and is currently on the market. This resort provides lodging in the form of housekeepingcabins. This seasonal resort is open May through October. The cabins and business itselfare centered around a historic 76-year-old hand-built log lodge. This lodge houses a smallrestaurant and bar, gift shop, and check-in desk. The business also has canoe outfitting,which is essentially the service of providing outdoor enthusiasts with all of their needs (ca-noes, tents, food, orientation, etc.) to journey into the Boundary Waters Canoe AreaWilderness. The CCC Group will form a Limited Liability Corporation and purchaseRockwood Lodge & Canoe Outfitters. This will be a family business run by the Corrells.The Corrells will drive this business 24/7 and their primary focus will be to build this busi-ness into a premier resort along the Gunflint Trail.

Location

Located just south of the Canadian border along the famed Gunflint Trail, Rockwood Lodge& Canoe Outfitters is in a unique part of Northeastern Minnesota. Located deep inside Su-perior National Forest and surrounded by the Boundary Waters Canoe Area Wilderness, theGunflint Trail is a favorite destination for many outdoor enthusiasts. This region is one ofthe few remaining true wilderness areas in the United States. Hiking, canoeing, fishing, andgeneral relaxation are among some of the favorite activities to be enjoyed here.

Marketing

After conducting both primary and secondary research, which is presented later in thisplan, the CCC Group has determined a marketing strategy that will set Rockwood Lodge& Canoe Outfitters apart from the competition. This strategy incorporates both lodgingand meals in the form of all-inclusive packages. The CCC Group has determined that onlya small number of their competitors in this region offer such packages. The business willgrow, not in physical size, but rather by offering several different packages that have beendeveloped for specific target markets. These targeted customers are active outdoor enthu-siasts, nature lovers, and traditionalists. In addition to the packages, the CCC Group willfocus on creating an atmosphere that guests will enjoy and want to come back to everyyear. These guests will be reached through numerous marketing avenues.

One of the most important facets of the CCC Group’s marketing plan is the use ofthe Gunflint Trail Association. This organization markets the Gunflint Trail as a majortourist destination. It has its own Web site with pictures and descriptions of the area, butmore importantly, it has a link to the Web site for Rockwood Lodge & Canoe Outfitters.This is probably the most important way for the CCC Group to reach its potential cus-tomers; the Internet is a very important tool to use when people decide where they shouldgo on vacation. In addition to Rockwood Lodge & Canoe Outfitters’ Web site, variousother methods will be used to reach customers, including sport shows, color brochures,newsletters, and the company’s sign.

Financial Requirements

As previously mentioned, Rockwood Lodge & Canoe Outfitters is an existing business, andthis business will be purchased by the CCC Group. The CCC Group will be contributinga total of $270,000 in capital for the purchase of this business. Additionally, debt financingwill contribute $1,080,000 in the form of two separate loans, real estate and equipment.

7 5 4 a p p e n d i x Rockwood Lodge & Canoe Outfitters

The real estate loan will be financed at a rate of 7.5 percent for 20 years, while the equip-ment loan will be financed at 6 percent for 6 years. Together, the CCC Group’s contributedcapital and the debt financing will make up the $1.35 million purchase price. In additionto this, a $200,000 line of credit will be established in order to help the business meet itsseasonal cash flow needs. The CCC Group will service this debt while growing the businessinto one of the premier resorts along the Gunflint Trail.

II. business descriptionA. General Description

Rockwood Lodge & Canoe Outfitters, or just Rockwood, is an existing lake resort businessthat will be purchased by the CCC Group, LLC. For more information regarding this pur-chase, please reference the Acquisition Section of this plan. The CCC Group gets its namefrom the first letter of each of the three main partners’ last names. This will be a familybusiness run by the Corrells. It is located 30 miles north of Grand Marais, Minnesota, ina town located on the North Shore of Lake Superior. Rockwood is located halfway up thefamous Gunflint Trail in Superior National Forest and is surrounded by the vast wilder-ness of the Boundary Waters Canoe Area Wilderness (BWCAW). Rockwood is located onthe beautiful, island-filled Poplar Lake with access to the BWCAW. The business is centeredaround a historic, hand-built log lodge that was completed in 1926. This lodge has a din-ing room, kitchen, small bar, gift shop, and a store. Rockwood will have several profit cen-ters: cabin rental, canoe outfitting, dining, and store and gift shop sales.

Cabins

Rockwood will provide lodging accommodations in the “North Country” of NorthernMinnesota in the form of modern but rustic housekeeping cabins seated just a few feetfrom the shore of beautiful Poplar Lake. There will be a total of 8 cabins for weekly and 4-day rental. Depending on the particular cabin, they will sleep anywhere from 2 to 10 per-sons. They will be completely furnished with all the comforts of home. In addition tolinens and towels, the full kitchen is equipped with utensils, coffee makers, microwaveovens, and even popcorn poppers. All the cabins have their own deck, BBQ grill, picnicarea, and private dock. A boat or aluminum canoe is included with the cabin rental.

Canoe Outfitting

Canoe outfitting is essentially the service of providing individuals with all the necessitiesrequired to navigate the backwoods of the BWCAW. This function of the business providescanoeists with the proper equipment (canoes, tents, stoves, drypacks, food, etc.) and plan-ning needed for their journey into the BWCAW. Rockwood offers the finest, high-qualitylightweight adventure gear in order to make portaging easier and fun. Additionally, Rock-wood offers several packages for the customer to choose from. Rockwood will cater to boththe experienced and novice canoeists. For the novice, the outfitting service will also pro-vide an orientation before they depart on their journey.

Dining

Located in the historic Rockwood Lodge, the small dining facility will offer meals in theform of family-style dining. There will be a different meal offered each day. This restaurantwill only be open limited hours for breakfast, lunch, and dinner. After dinner, the bar willremain open to serve the guests as they relax inside the lodge and reflect upon their day.This dining facility will cater to guests who purchase all-inclusive packages, canoeists whopurchase complete outfitting packages, and anyone else who wants to dine there. There is atotal dining capacity of 60 persons.

7 5 5Business Description

Store and Gift Shop

Located inside Rockwood Lodge, the store and gift shop will also be a main profit center.The gift shop carries a wide variety of souvenirs for guests to purchase. The “store,” is com-prised of two categories, convenience items and fishing gear. The convenience items aresold out of the gift shop, while the fishing gear is sold out of the outfitting building. Thestore carries many convenience items for purchase that will be available for guests, andeven those who pass by along the trail. These items range from film to cigarettes to aspirinto charcoal. The fishing gear sold out of the outfitting building includes a wide range oftackle, gear, and even some live bait. With Rockwood located 30 miles from the nearesttown, the store will carry many essentials for the guests to purchase.

Company History

The history of Rockwood Lodge goes back to the early days of the Gunflint Trail, long be-fore there was a paved road. This trail was used by trappers, prospectors, and miners allseeking their fortune in the North Country. It was during this time that Rockwood Lodgewas built. Rockwood Lodge, an original landmark of the Gunflint Trail, is a log structureand was hand-built in the 1920s. This log lodge was an outpost and provided shelter fromthe harsh winters and the long summer journeys for the people who traveled the trail.Today, over 75 years later, Rockwood Lodge still sits beside the trail and caters to the visi-tors offering cabin-lodging accommodations, outfitting services, and dining.

B. Industry Background

National Level

The travel and tourism industry has always commanded attention in the United States.Every year, millions of people travel either on business or vacation, and every year these in-dividuals spend billions of dollars while traveling. For example, “in 2000, the U.S. travel in-dustry received $584.3 billion, including international passenger fares, from domestic andinternational travelers. These travel expenditures, in turn, generated 7.8 million jobs forAmericans, with $173.7 billion in payroll income, and $100 billion tax revenues for federal,state, and local government.”1 Of the 997.6 million person-trips for the year 2000, 75 per-cent were for leisure travel. A person-trip is defined as “one person traveling 50 miles ormore away from home and/or overnight. A trip is one or more persons from the samehousehold traveling together.”2 More specifically, the primary purposes of these trips arebroken down into percentages of person-trips in Chart 1. Notice that Outdoor is the sec-ond most popular with 17 percent and that National/state park is 10 percent of all the per-son-trips taken in a year. Combined, these two categories command 27 percent of all per-son-trips. That is approximately 269.4 million person-trips to the outdoors.

Since September 11, 2001, many experts have forecasted a gloomy picture for a wholeslew of businesses in the travel or travel-related industries. Particularly, airliners and thedestinations that often require airlines to get there have been hurt. For example, airlinersand major destinations like Disneyland have been devastated. According to http://www.callwva.com, tourism industry losses since September 11th are greatest in larger destina-tions and properties, urban areas, airlines, tour operators, travel agencies, Northeast and


1. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.

2. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/tvt.asp.

Southern regions, and anyone catering to international travelers. Additionally, a recent ar-ticle found that more travelers are choosing solitude and seclusion over big-city hot spots.3

With this kind of atmosphere in the travel and tourism industry, it is safe to say that thisbusiness located in the remote area of Northern Minnesota will be little affected.

Regional Level

On the regional level, Northern Minnesota should not be too affected by the new atmos-phere regarding air travel. This is partly because 61.3 percent of travelers to Minnesota areresidents of the state. Wisconsin, North Dakota, and Iowa make up 38.4 percent of out-of-state visitors. Additionally, “other states in the Midwest comprise an additional 30.9 per-cent of out-of-state visitors.”4 Therefore, for the vast majority of travelers to Minnesota, airtravel is not necessary.

In general, Minnesota is a promising state to be located in for operating a businessin the tourism industry. “In 1999, 23.6 million total domestic and international person-trips to Minnesota were recorded. This figure . . . can be broken down to pleasure travel-ers (18.8 million), business travelers (4.0 million), and international travelers (0.7 mil-lion).”5 Overall, gross sales generated by the Minnesota tourism industry grew 21 percentfrom 1996 to 1999. Adjusted for inflation, this represents a real average annual growthrate of 4.3 percent.6


Chart 1

33%

17%

14%

10%

10%

10%

9%

8%

7%

6%

4%

0% 5% 10% 15% 20% 25% 30% 35%

Golf/Tennis/Skiing

Sports Events

Nightlife/Dancing

Gambling

Theme/Amusement Park

National/State Park

Cultural Events/Festivals

Beaches

Historical/Museums

Outdoor

Shopping

Domestic Trip Activity Participation by U.S. Travelers(% of person-trips)

Source: Study of Current Area Tourists: Customer Profiles—Overview (Minneapolis/St. Paul: University of Minnesota, Extension Service,Tourism Center, 2001), 4.

3. “Tourism after Sept. 11,” Tourism News 2(7) (November 2001). http://www.callwva.com.

4. Study of Current Area Tourists: Customer Profiles—Overview (Minneapolis/St. Paul: University of Minnesota, ExtensionService, Tourism Center, 2001), 4.

5. Travel and Tourism Trends (February 13, 2002) http://www.dted.state.mn.us/TravelTrends.asp.

6. Economic Impact (February 13, 2002) http://www.dted.state.mn.us/04x03x01.asp.

Specifically in the outdoor recreation aspect of the industry, it is important to pointout that over one-third of travelers to Minnesota participate in outdoor recreation.7 SeeChart 2 for a detailed breakdown of primary travel-related activities. Note that the per-centage of outdoor trips at the state level (32.6 percent) is almost twice that of the nationalfigure from Chart 1 (17 percent).


7. Tourism Highlights (February 13, 2002) http://www.dted.state.mn.us/04x03x05.asp.

8. Cook County Lodging Tax Report (Cook County, Minneapolis, MN: County Auditor-Treasurer, 2002).

9. Dave Tucci, Summary of National Visitor Use Monitoring Results for the Superior National Forest (Minneapolis, MN:Forest Service, 2001).

10. Marketing Goals & Strategies 2001(February 13, 2002) http://www.dted.state.mn.us/04x04.asp.

Chart 2

49.0%

32.6%

9.7%

4.5%

9.6%

7.7%

7.8%

10.2%

6.8%

6.0%

5.4%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Golf/Tennis/Skiing

Sports Events

Nightlife/Dancing

Gambling

Theme/Amusement Park

National/State Park

Cultural Events/Festivals

Beaches

Historical/Museums

Outdoor

Shopping

Minnesota Domestic Trip Activity Participation by U. S. Travelers (% of person-trips)

Source: “Travel and Tourism Trends,” Facts and Figures—Industry Statistics—Industry Reports (February 13, 2002) http://www.dted.state.mn.us/TravelTrends.asp.

In the specific region of the Gunflint Trail, a trend in the lodging industry can be seenthrough the Cook County Lodging Tax Report. This report shows the amount of taxes col-lected from overnight lodging on a monthly and annual basis. From 1993 to 1997, thesetax revenues grew 20.9 percent. Additionally, from 1998 to 2001, the Gunflint Trail lodg-ing tax revenue has shown an overall growth of 7.3 percent.8

In Superior National Forest, there were 2.4 million visits during the 2000 calendaryear. Additionally,“there were 4.3 million site visits, an average of 1.8 site visits per nationalforest visit. Included in this number were 282,043 wilderness visits.”9

Minnesota government takes an active role to promote this industry. “The mission ofthe Minnesota Office of Tourism (MOT) is to market Minnesota as a travel destination,sustain and increase tourism revenues, and lead tourism policy and product develop-ment.”10 Currently, the MOT is running an advertising theme called “Explore Min-nesota—Take Home a Story.” The objective is to brand Minnesota as a place to create last-

ing memories. The fruits from the state’s diligent effort can already be seen by the prelim-inary 2000 TravelScope survey data, which indicates “that total travel to Minnesota grewby almost 13 percent over 1999. This increase was the third highest in the country.”11

C. Potential of the Venture

The opportunity here is to buy a piece of history that is the Rockwood Lodge and the busi-ness that goes with it. The current owners have only had the place for three years and dur-ing that time, it appears that they have focused on the lifestyle change of running the busi-ness instead of focusing on the more important business first aspect. The result is that theyhave discovered they are not cut out for the hard work that is required to manage/marketthe business correctly. As a result, the sales haven’t grown like they should have, given thepotential and history of performance prior to their arrival as owner-operators, and theyare ready to get out. Despite this, the CCC Group sees many potential bright areas for thisbusiness.

The first area of the business that the CCC Group is going to focus on is the opera-tions and management of the resort while cutting expenses. It takes a lot of work and desireto run a resort of this caliber, and the CCC Group has the passion for this type of business,along with the business background, to take on the challenge. With a good managementteam in position, along with its central location, modern cabins, and quality outfitting, thebusiness has the potential to become a premier lodge and outfitter on the Gunflint Trail.

Another opportunity that the CCC Group sees in this investment is the possibility ofhaving the lodge listed with the historic register. The CCC Group has contacted Susan Rothof the Minnesota State Historic Preservation Program to inquire about this. She stated that“a resort built in the 1920s could conceivably be eligible for nomination to the NationalRegister of Historic Places provided that it was significant and retained sufficient historicphysical integrity to evoke that significance.”12 She went further to state that the process ofnomination is very rigorous and may take as long as six months to a year. The broker whois the sales agent representing the current owners was also asked about whether or not thelodge could be of such significance. His thoughts were that the current owners never pur-sued having it listed. Also, he seemed to remember that the windows on the building werenot original and needed to be restored to the original type and condition in order to belisted on the historic register. Due to this, the CCC Group does not plan to pursue this inthe initial years. However, further down the road, after positive growth of the business, theCCC Group may decide to dedicate some capital investment to pursuing this possibility.This possibility of being on the historic register could add important marketing, tax, anddeep-discounted loan advantages.

The next area of potential the CCC Group will focus on is the lodge itself. Currently,the lodge is used as a check-in for guests and as a gift shop. The lodge was used as a restau-rant for years and has a full commercial kitchen, but the current owners closed it whenthey bought Rockwood. However, the current owners do use the dining room, which has12 tables and seating for 60, as a place to feed the canoeists a hot breakfast the morning oftheir departure. The CCC Group plans to continue this service, but will add lunch and din-ner and offer dining to all the guests of the resort as well. This will be done by offeringall-inclusive packages that include housekeeping cabins and meals. Additionally, even



12. Personal communication with Susan Roth, March 13, 2002.

guests that do not opt for the all-inclusive plans or complete outfitting will be able to dinethere. This restaurant will also be open for the public. It will offer family-style dining witha different meal served each day. Due to their religious beliefs, the current owners discon-tinued the sale of beer when they purchased Rockwood. The CCC Group plans to re-es-tablish the lodge as a place for the guests to relax and enjoy a beer at the end of their dayfishing on the lake, etc. This lodge is on the water’s edge and has an excellent view over-looking the lake. This will certainly provide a nice rustic dining opportunity for the guestsand others who want to dine there.

One of the most interesting areas of opportunity is the property itself. In this area ofthe state where the national forest and the Boundary Water Canoe Area Wilderness dom-inate the landscape, there is not much land left for development. The government ownsand protects most all of the land that isn’t currently developed, and the result is that theprice of lake-front property has skyrocketed over the last decade. When existing propertycomes up for sale, they now say that the land is not priced by the acre, but rather by thefoot. In fact, the property in the area has risen in value by 80 percent from 1990 to 1998.13

This trend means that the value of the property itself can double every 10 years. This willprovide an excellent return for the CCC Group, should it sell the resort years from now.

The CCC Group sees another area for potential in winter business. The Gunflint Trailis abundant with activities in the winter months. In fact, the two strongest seasons aresummer and winter, followed by late spring and early fall. Several resorts on the Gunflintare open year-round and do decent business as the area boasts world-class, cross-countryskiing, snowmobiling, and ice fishing. Currently, Rockwood is not open in the wintermonths and is missing out on this potential. With the correct management of the opera-tions, the CCC Group feels that this resort could make money year-round. During the firstthree years as owners, the CCC Group will focus on improving the biggest seasons, latespring, summer, and early fall, but will keep an eye on the possibility of opening the resortfor the winter season after that.

D. Uniqueness of the Product and Service

Product and Service

Service is what sets Rockwood apart from its competition. With the CCC Group manag-ing, Rockwood will be one of the best-staffed resorts on the Gunflint Trail! Premier serv-ice, combined with deluxe cabins, direct access into the BWCAW from Poplar Lake, expe-rienced outfitting, and the heritage of 76 years of operation makes it unique! Rockwoodspecializes in ultra-lightweight equipment and canoes to minimize the weight and bulk inportaging. From feather-light tents and sleeping bags to the lightest Kevlar canoes avail-able, Rockwood Outfitters offers the highest quality products available that provide com-fort while meeting the demands of the rugged wilderness.

Lodge

Rockwood Lodge is a log structure that was hand-built in the 1920s. At that time, lodgesof this sort sprang up along the Gunflint Trail. However, since then many of the lodgeshave crumbled or burnt down, and only a few of these original log lodges remain. Out ofthe 23 lodging establishments along the 60-mile Gunflint Trail, there are only 5 of these


13. Northeast Minnesota Initiative Region 2000 (February 13, 2002) http://www.dted.state.mn.us/PDFs/econ-nrtheast.PDF.

historic lodges, and today, Rockwood Lodge is still in excellent condition. RockwoodLodge sits right on and overlooks beautiful Poplar Lake. It is furnished with much of theoriginal handmade wooden furniture, many trophy mounts, and other northwoods décor.Rising from the floor in the heart of the lodge is a majestic stone fireplace that warms thelodge and the soul. The ambiance of Rockwood Lodge is unforgettable.

Location

Rockwood is in a unique location halfway up the Gunflint Trail with direct access to theBWCAW. This strategic location enables Rockwood to provide access, via a short van shut-tle, to any BWCAW entry point along the Gunflint.

Located inside Superior National Forest and surrounded by the BWCAW, Rockwoodis on prime real estate. The federal government protects all of the surrounding area andthere is no further development allowed. This means that the existing resorts and busi-nesses are in a niche market being the only ones able to cater to the traveler seeking a“northwoods” vacation along the Gunflint Trail. Any future resorts will have to be devel-oped further away from the BWCAW leaving the existing resorts closest to the BWCAW.This kind of atmosphere leaves little room for new competition to come into the marketon the Gunflint Trail.

III. the acquisition

A. Key Questions Regarding the Acquisition

Why Is the Business Being Sold?

The opportunity to purchase Rockwood by the CCC Group, LLC is a combination of manyfactors. Upon meeting and conversing with the current owners, it is the CCC Group’s im-pression that the most obvious reason the business is for sale is because the current own-ers are not cut out for this business. It can be seen in the long look on their faces. In 1998,the current owners, inspired by their oldest son who had worked several summers at an-other resort along the Gunflint Trail, bought Rockwood with the idea of running it as afamily business. The next year, that son got married and he and his new wife moved out ofstate. Loosing this key person who was passionate about the business and got them to gointo it in the first place was a major blow. Following this, the current owners started tostruggle with the operations. This can be seen in the financials that they have provided theCCC Group with. Even though the business was still drawing healthy revenue, the growthwas not there. Last year, a partner took a job in the Twin Cities and his presence at the re-sort was nonexistent. This left only one partner and her youngest son, age 19, to run thebusiness. They did hire two part-time international students to help them, but all the workthat it takes to run a resort of this caliber started to take its toll on the divided family.

The CCC Group has also determined that another very important reason why thelevel of business has not grown is because of the current owners’ lack of marketing skills.Currently, Rockwood’s business brochures and Web site advertising does not have anypackages that are specific to its target markets. They simply have rates on their lodging.This lack of business skill, along with the division of the family, is the main reasons whythe resort is currently for sale.

Despite these apparent problems, the CCC Group sees great potential to rebuildRockwood into one of the premier resorts in the area. In 1998, the business and propertywere appraised by Nordic Appraisal Service Inc., to be worth $1.75 million. This is the

7 6 1The Acquisition

same value of the purchasing price that the current owners are asking. However, the CCCGroup plans to have the business and property re-appraised during their due diligence.Also, the fact that the current owners have driven down the net income during their tenurewill also play a part in lowering the purchase price. In spite of this information, the CCCGroup feels that if the current owners will agree to a reasonable purchase price that is lessthan what they are asking, Rockwood will be an excellent investment to grow into a lucra-tive business.

What Is the Current Physical Condition of the Business?

Upon the CCC Group’s first inspection of the business, it has been determined that allstructures and the property have been kept in excellent repair. There are a total of 19 struc-tures on the property. These buildings are broken down as follows:

• Lodge

• Shelter

• Eight cabins

• Bunkhouse

• Sauna/shower house

• Boat house

• Outfitting building

• Employee house

• Owner’s residence

• Garage

• Laundry building with attached apartment

• Pump house containing pumps and water treatment

All of these structures are modern buildings with the exception of the outfitting buildingand the lodge. The outfitting building is actually an old log structure, but is in good con-dition, perfect for the home base of the outfitting operations. The lodge is also a log struc-ture and was completed in 1926. Even with its age, this lodge is in impeccable condition,possibly the nicest along the Gunflint Trail. There is also a nice wooden sign located rightalong the roadside indicating the turnoff for Rockwood. This sign is in excellent condition.According to the Cook County assessor, the current value of the property and buildings is$577,100.14 In order to separate the value of the buildings and property, the CCC Groupresearched 10 different properties for sale with similar characteristics. It took the cost peracre of these properties and averaged them together to arrive at a land value of $22,600 peracre. This cost per acre was then applied to Rockwood’s 11.26 acres. This yielded a landvalue of $254,476 for Rockwood, which means the remainder of the $577,100, or $322,624,is the value of the buildings. Going back to the appraisal record done in 1998, the value ofall the furniture, fixtures, and equipment was valued at $213,000.15 Conservatively ad-justed for an estimated 5 percent depreciation over the last four years, this value is now anestimated $202,350. After a careful evaluation of all the outfitting equipment, the CCCGroup has determined a total current value of $100,159.16 This figure includes all canoes,


14. Personal communication with Carol Pratt, March 13, 2002.

15. Real Estate Appraisal, Nordic Appraisal Service, Inc. (November 18, 1998).

16. See Outfitting Equipment Values spreadsheet located in the Acquisition Appendix.

boats, tents, canoe trailers, Chevy Suburban, etc. All together, the total assumed value of allthe long-term assets of the business (land, buildings, furniture, fixtures, equipment, andoutfitting equipment) comes to $879,609.

What Is the Condition of the Inventory?

The inventory of Rockwood is broken down into four categories. They are outfitting, giftshop, store, and dining. Outfitting includes freeze-dried food and fuel. The gift shop includesmany items that are for sale, such as sweatshirts, coffee mugs, etc. The store contains con-venience items and fishing tackle that are available for purchase. The dining inventory con-sists of food. At the time of the acquisition, there will be no dining food inventory because itis perishable. Also, the store items have been depleted and will therefore have to be restockedby the CCC Group. The CCC Group has estimated the value of this inventory as follows:

Outfitting $2,000.00Gift Shop 5,000.00Store 0.00Dining 0.00

Total $7,000.00

How Many Personnel Will Remain?

Currently, there are only two people working at Rockwood, a partner and her son. Both ofthese individuals will no longer work at Rockwood after the acquisition. The current own-ers also employ students during the summer, but the CCC Group has enough people torun the business without this summer help. Therefore, none of the personnel will remainafter the acquisition.

What Type of Competition Does the Business Face?

Rockwood is involved in the tourism industry and therefore competes with all forms oftourism choices that vacationers have to choose from. Potential customers have the optionof choosing to go to the Gunflint Trail or to some other destination to spend their vaca-tion. For example, Disneyland, Las Vegas, and cruise lines all compete with Rockwood andthe Gunflint Trail for vacationer’s interest.

On a more local level, once a potential customer has chosen the Gunflint Trail as theirdestination, including Rockwood there are a total of 23 lodging establishments spread outalong the 60-mile Gunflint Trail. These businesses all work together as a network to buildthe area as a major draw. If one resort is booked, they send people to another resort thatthey recommend. This is why it is important for the CCC Group to build and maintaingood relationships with the tourism industry there on the Gunflint Trail. The attitude andatmosphere that the CCC Group has run into when talking with other resort owners is thatthey don’t see one another as competition, but rather allies to create a better tourism des-tination. Even with this cooperation between resorters, once a potential customer decideson visiting the Gunflint Trail, these resorts do compete with each other for the customer’svacation dollars. Please refer to the Marketing Section of this plan for more informationabout the competition facing Rockwood.

What Does the Firm’s Financial Picture Look Like?

The only financial statement that the current owners were able to provide for the CCCGroup was an income statement. From this, the CCC Group ran both vertical and hori-


zontal analysis, as well as some key financial ratios. However, without the other two finan-cial statements, the ratios examined were limited to income statement items. These ratiosare listed in Table 1. A copy of the vertical and horizontal analysis is located in AcquisitionAppendix. Of the ratios run on Rockwood, total asset turnover fell just below the industryaverage. Also, the ratio of EBIT to interest was right on par with the industry average until2000 when the current owers took a second loan and the amount of interest went up by 52percent. This drastically effected the ratio and thus fell below that of the industry. Theother ratios the CCC Group was able to calculate were not available in RMA for industrycomparison.


Table 1

Ratio Rockwood 1999 Rockwood 2000 Industry*

Total Asset Turnover .31 .25 .5 Gross Profit Margin Ratio .83 .89 N/ANet Profit Margin Ratio .20 –.11 N/AOperating Profit Margin Ratio .66 .66 N/AEBIT/Interest 1.75 .87** 1.7

*SIC 7011 Hotels and Motels—Restaurant/Lodging (sales volume less than $1 million)**Owners took second loan in 2000 (they will assume that loan after the acquisition)

The vertical analysis performed yielded a couple of points worth noting. First, theoutfitting business went from being 29 percent of sales in 2000 to 40 percent in 2001. Sec-ond, repairs and maintenance quadrupled from 1 percent to just over 4 percent of sales.However, this is not necessarily bad. It represents a one-time expense and leaves the prop-erty in better condition. Third, the amount of interest went up drastically due to the cur-rent owners second loan. Overall, the vertical analysis seemed to be pretty much in check.

The horizontal analysis was able to show several important issues. First, cabin rentalsales have continued to decline, not too much, but definitely not growing since the currentowners purchased Rockwood. Second, the gift shop sales have also dropped. Third, the cat-egory listed as supplies dropped drastically over the three-year period, possibly due tooverstocking the first year as owners. On the bright side, as previously noted, the outfittingbusiness has prospered quite well, rebounding 50 percent in 2001 after dropping 36 per-cent in 2000. Also, the sales of fishing licenses have continued to rise during this period.All the other changes appear to be in check.

After examining the income statements provided, the CCC Group has determinedthat the current owners are not doing an adequate job of accounting. From vague accountsto not keeping a balance sheet or statement of owner’s equity, the owners appear to notcare about the financial picture of Rockwood. This is definitely an area that the CCCGroup feels is essential and should be improved to help control costs of the business.

B. Assessing the Value of the Business

Starting in July 2002, the CCC Group plans to spend a due diligence period of two monthsin order to gather data that will be needed to accurately arrive at an offer to buy the busi-ness. The CCC Group plans on bringing in a commercial real estate appraiser to have anappraisal done. Also, several experts will be brought in to inspect the water system, septicsystem, and integrity of the buildings. In addition, all of the assets will be gone through tocheck if they are obsolete or not, and to determine exactly what useful life they have and

what their current or liquidation value is. It is at the end of this due diligence period thatthe CCC Group will come to what it feels will be a realistic offer and from there start ne-gotiations with the current owners for a fair purchase price.

For the purposes of this business plan, the CCC Group has put together as much in-formation as possible. Additionally, the CCC Group has been unable to communicate withthe current owners until a purchase agreement is signed. The CCC Group was able to ob-tain some key information from the seller’s broker.

In order to assess the value and determine the fair purchase price for Rockwood, theCCC Group has identified several different business valuation methods. These methodsare presented on the following pages and then followed by an average of the results fromthe different formulas to arrive at the initial offer price. In the following methods, the val-ues that were discussed previously under the physical condition of the business were used.Again, these values are summarized:

Property $254,476Buildings $322,624Furniture, Fixtures, & Equipment $202,350Outfitting Equipment $100,159Inventory $7,000

Valuation Method #1: Valuation of Hotels and Motels17

Two methods were used to arrive at a good estimate of what the business is worth. The firstmethod is to use a multiplier of 7.5 times the average net operating income. The secondmethod is to use a capitalization rate of 13 percent. Both of these formulas should be usedtogether and should be in general agreement with one another. For these formulas, theCCC Group took the recast income for the three years of financials provided and averagedthem to arrive at $148,224. This is applied to Rockwood in Figure 1.

Valuation Method #2: Formula from “How to Buy or Sell a Business”18

The formula to arrive at a value for a business was derived from the Small Business Reporterand adapted to Rockwood in Figure 2.


17. Calvin G. Schoene, Valuation of Hotels and Motels (Toronto, Canada: John Wiley & Sons, Inc., 1992).

18. Adapted from “How to Buy or Sell a Business,” Small Business Reporter 8(11) (San Francisco: Bank of America, 1982):11.

Figure 1

Part 1:Average Net Operating Income $ 148,224Multiplier 7.5

Total Value of Rockwood $1,111,680

Part 2:Average Net Operating Income $ 148,224Capitalization Rate (divided by) 13%


Valuation Method #3: From “Business Management”19

This formula was found in an article on the Internet and appears to be simple and straight-forward. The formula is:

Net assets + property + 1X to 2X owner’s salary and perks = value

The last part of the equation is used to determine the value of intangibles such asgoodwill and customer lists. It not only includes the owner’s salary, but also the retainedearnings of the business. This formula is applied to Rockwood in Figure 3.


Figure 2

Step 1Market Value of Assets Less Liabilities

Inventory $ 7,000Furniture, Fixtures, and Equipment 202,350Land and Buildings 577,100Outfitting Equipment 100,159

Total Asset Market Value $ 886,609Less Liabilities 0

Market Value of Business $ 886,609Step 2Earning Power = 886,609 � 10% $ 88,661Step 3Salary for Owner-Manager $ 20,000

Earnings of Investment and Owner-Manager $ 108,661Step 4Average Annual Recast Earnings 148,224Step 5Extra Earning Power of Business (Step 4 minus 3) 39,563Step 6Value of Intangibles (Step 5 � 5) 197,815Step 7Value of Intangibles + Market Value $1,084,424

Total Valuation of Rockwood $1,084,424

19. Mark E. Battersby, Business Management: Putting a Value on the Business (April 7, 2002) http://www.dwcdesignet.com/DWC/Feb’99/bus.html.

Figure 3

Net Assets (Furniture, fixtures, and equipment; Inventory; Outfitting equipment) $ 309,509Add: Property (including buildings) 577,100Add: Two times Average Recast Earnings 296,448


Valuation Method #4: The Excess Earnings Method20

The excess earnings method is applied to Rockwood in Figure 4.


Figure 4

Representative Operating Profit $ 148,224Allocations:

Return on Working Capital($7,000 � 10%) (700)Return on Fixed Assets($879,609 � 15%) (131,941)

Excess Earnings $ 15,583Capitalization Rate (divided by) 13%

Intangible Value (Goodwill) $ 119,869Net Tangible Asset Value 886,609

Total Fair Market Value of Rockwood $1,006,478

Figure 5

Value of Capital Assets $ 879,609Value of Working Capital 7,000Value of Intangible Assets (taken from Figure 3) 296,448Less: Long-term and Contingent Liabilities 0

Going Concern Value of Rockwood $1,183,057

Valuation Method #5: The Sum of the Assets Approach to Value21

This method is very straightforward and is displayed in Figure 5.

Average of Valuation Methods

By averaging the valuations yielded, the CCC Group has been able to determine a fair offerfor Rockwood. The results of the previous five methods are summarized in Figure 6.

Figure 6

Method 1 (part 1) $ 1,111,680Method 1 (part 2) 1,140,185Method 2 1,084,424Method 3 1,183,057Method 4 1,006,478Method 5 1,183,057

Average Valuation $1,118,147

20. S. Chris Summers, The Excess Earnings Method (Toronto, Canada: John Wiley & Sons, Inc., 1992).

21. Lloyd R. Manning, What’s It Worth?: A Guide to Valuing a Small Business (Portland, Oregon: The Oasis Press, 2000).

As a result of the different valuation methods used and their average, the CCC Grouphas been able to determine that a fair offer for the business will be $1,118,147. However,this figure is almost $650,000 less than the asking price. It is expected that there will be agood amount of flex during the negotiations and therefore, the CCC Group has deter-mined that for the purposes of this plan, financing should be secured for $1,350,000, sincethat is the maximum value it is willing to pay.

In addition to the purchase price, the CCC Group will obtain a line of credit of$200,000, secured by Rockwood’s assets, to cover the cycles of cash flow that are inherentin this seasonal business.

To confirm the feasibility, Mr. Correll met with Steve Moore, the Senior Vice Presi-dent of Star Financial Bank, to go over ways to finance the business. Mr. Moore agreed thatthese methods would be excellent to argue the purchase price. Additionally, it was dis-cussed that the bank financing this purchase would have a market appraisal done and thatthe collateral considerations would be based off those figures. This way, it would benefitthe CCC Group since a market appraisal would most likely value the business at a higherprice.

IV. marketing

A. Research and Analysis

Target Markets

Rockwood will provide vacationers with cabin accommodations in the “North Country”destination known as the historic Gunflint Trail located in Northern Minnesota. The out-fitting part of the business will provide high-adventure wilderness excursions via canoesinto the legendary “Boundary Waters Canoe Area Wilderness” (BWCAW). The targetedmarkets here are not just tourists, but rather several categories of outdoor enthusiasts.More specifically, the target markets are tourists who are nature lovers, active outdoor ad-venturers, and traditionalists. Nature lovers are those who place heavy emphasis on thenatural environment. The activities they engage in include bird watching, hiking, scenicdrives, and relaxing in the great outdoors. Active outdoor adventurers consist of both sum-mer and winter outdoor recreation groups. Among their favorite activities, these folksenjoy fishing and boating in the summer and snowmobiling and cross-country skiing inthe winter. The third target market may comprise one or both of the previous two but isdifferentiated in one respect. Traditionalists are those who are “attracted to a specific placefor recreation (i.e., lake or stream) and accommodation. . . . They are repeat visitors with astrong affinity for a particular place to stay and participate in their recreation activity.”22

These target markets comprise a wide variety of age groups, mainly adults ages 18 to 55years old. According to the CCC Group’s survey, those most likely to stay in the cabins atRockwood are 25 to 54 years old and have incomes in excess of $30,000. The same surveyalso indicated that the strongest target market for those most likely to canoe into theBWCAW are 25 to 34 years of age and have incomes ranging from $20,000 to $60,000. Fur-thermore, the majority who indicated an interest in fishing ranged from 25 to 54 years oldwith the biggest proportion of these people having incomes of $100,000 or more. Addi-tionally, the strongest target market for the people indicating they would like to travel to


22. Visitor Profiles: Ely (Minneapolis/St. Paul: University of Minnesota, Extension Service, Tourism Center, 2001), 4.

Northern Minnesota were either 25 to 34 or 45 to 54 years old and on average had incomesof all levels. As far as outfitting goes, those most likely to use the services of an outfitterwere 25 to 34 years old and had incomes of all levels.

Market Size and Trends

Macro

“In 2000, the U.S. travel industry received $584.3 billion, including international passengerfares, from domestic and international travelers. These travel expenditures, in turn, gener-ated 7.8 million jobs for Americans, with $173.7 billion in payroll income, and $100 billiontax revenues for federal state and local government.”23 Over the past decade, this industryhas shown a positive growth rate of 62 percent as displayed in Chart 3. Travel Industry As-

7 6 9Marketing

23. TIA—Travel Statistics & Trends (February 28, 2002) http://www.tia.org/Travel/EconImpact.asp.


Chart 3

$359.8 $376.7$397.1 $414.8

$441.9$475.6

$500.1 $516.7$546.1

$584.3

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Travel Expenditures in the U.S. (in $ Billions)

Source: Travel Industry Association of America.

sociation of America forecasts that for the year 2001, total travel expenditures will dip to$520.7 billion before beginning to rise again. Forecasted for 2002 is a figure of $531.9 billion,and for the year 2003, an impressive $575.7 billion. Chart 4 shows the trend of total U.S. do-mestic travel volume from 1994 to 2000. Worth mentioning is that out of the 997.6 milliondomestic U.S. person-trips in 2000, 75 percent were for the purpose of leisure travel. Addi-tionally, 77 percent of these trips were taken via auto, truck, or RV. Furthermore, out of thetop activities for domestic travelers, outdoor activities were second behind that of shopping.

Micro

On a more local level, in 1999 there were an estimated 23.6 million person-trips to Min-nesota. Of these, 18.8 million, or 80 percent, were for the purpose of pleasure.24 In all, there

was total revenue of $8.3 billion resulting from the tourism industry. This in turn helpedmaintain 126,360 tourism jobs with a payroll of $3.3 billion and $939 million in state andlocal taxes. The trend in this industry, relative to Minnesota, is also showing positivegrowth. “Gross sales generated by the Minnesota tourism industry grew 21% from 1996 to1999. Adjusted for inflation, this represents a real average annual growth rate of 4.3%.”25

This trend is illustrated in Chart 5.


Chart 4

941

966 967

9991004

987

998

900

910

920

930

940

950

960

970

980

990

1000

1010

1994 1995 1996 1997 1998 1999 2000

Total U.S. Domestic Travel Volumein Millions of Person-Trips

Source: Travel Industry Association of America.


Chart 5

$6.9$7.2

$8.0$8.3

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

1996 1997 1998 1999

Tourism-Related Gross Receipts/Sales in Billions

Source: Minnesota DTED.

According to Tim Cambell of the Minnesota Office of Tourism, the following aresome predictions about future trends for Minnesota’s tourism industry.26

1. Memorial Day through Labor Day will continue to be the strongest months, deep win-ter the next strongest, and late fall and early spring will continue to be weak.

2. Growth will not come with more development, but with getting more out of each cus-tomer.

3. The BWCAW will take on more and more value to outfitters and the resorts on the edgeof the wilderness area.

4. As baby boomers age, they will look for less strenuous, but still interesting outdoor ac-tivities.

These predictions about future events for Minnesota’s tourism industry hold importantimplications for the CCC Group and Rockwood. The first statement indicates that thegroup’s main focus should be on the mid-summer season, but with consideration of thewinter business. The second statement supports the purpose of the group’s marketing planto grow the business, discussed later in this section, by the importance of getting more outof each customer rather than by physical expansion of the assets. The third statement sup-ports the uniqueness and value of Rockwood’s location and proximity to the BWCAW. Thelast statement is an important demographic consideration that the CCC Group must con-sider as the business grows along with the baby boomers.

The majority of those who travel to Minnesota for pleasure elect to drive. Looking atthe origin of pleasure travelers supports this fact. Of travelers from Minnesota, 43.8 per-cent travel for pleasure, while an additional 30.8 percent originate from Wisconsin, Iowa,Illinois, South Dakota, or North Dakota. This makes a combined total of 74.6 percent ofall pleasure travelers who will most likely drive due to their close proximity to the state. Ofthe top activities travelers to Minnesota partake in, behind shopping, outdoor activitiesrank second garnishing one-third of all activities. Additionally, national and state parksconsume another 7.7 percent.27 Outdoor activities and parks combined represent over 40percent of all pleasure trips in Minnesota.

Along the Gunflint Trail specifically, a trend can be seen from the results of the lodg-ing tax that is collected on all lodging provided by businesses located on the Gunflint Trail.Before 1998, the lodging tax was only 2 percent and from 1993 to 1997, the lodging tax rev-enues for this area grew 20.9 percent.28 After 1997 this tax went up to 3 percent and since1998, the lodging tax revenues for this area have grown 7.3 percent.29 This growth does notcome from the entry of new businesses, but rather represents how the businesses along theGunflint Trail have prospered over the last decade.

Boundary Waters Canoe Area Wilderness (BWCAW)

In order to analyze the picture for the outfitting business, it was important for the CCCGroup to investigate the number of people that travel into the BWCAW annually. To dothis, the most recent data compiled by the government was collected. This data is the 1998BWCAW Year End Report.30 During the summer season, the overnight use permits for

7 7 1Marketing

26. Personal communication with Tim Cambell, March 18, 2002.

27. Minnesota Department of Trade and Economic Development, OPCIT.

28. Cook County Lodging Tax Report (Cook County, MN: County Auditor-Treasurer, 2002).

29. Ibid.

30. 1998 BWCAW Year End Report.

1998 was 26,140. Chart 6 shows the trend in overnight permits issued from 1982 through1998. Over 90 percent of the time, the mode of travel in the BWCAW is by paddle versusonly 10 percent by motor. The residences of the group leaders for these trips were 61 per-cent of the time from Minnesota.


Chart 6

0

5,000

10,000

15,000

20,000

25,000

30,000

1982

1984

1986

1988

1990

1992

1994

1996

1998

Overnight BWCAW Permits

Source: 1998 BWCAW Year End Report.

Restaurant/Dining

According to the Minnesota Department of Trade and Economic Development, therewere a total of $8.3 billion dollars in gross receipts/sales for the tourism industry in1999.31 Out of this, the majority (30.4 percent) was spent on lodging. The next biggestchunk of money spent was toward food (21.4 percent). These figures indicate that in thetourism sector, $2,523,200,000 was spent on lodging and $1,776,200,000 was spent onfood during 1999.32

Summary of Primary Research

The CCC Group conducted a survey during the Indianapolis Boat, Sport, & Travel Show.The survey netted 112 successful respondents. Out of these, 69 percent were female and 31percent were male. The most common age group surveyed was between the ages of 25 and34, followed by 35 to 44. The rest of the age groups were evenly distributed. The mostcommon personal income range for those surveyed was $30,001 to $40,000. Approxi-mately 52 percent vacation one to two weeks a year. Additionally, 37 percent actually va-cation three to four weeks a year. Just over 97 percent of those surveyed take vacations tothe “great outdoors.” When asked about whom they vacation with, 76 percent responded


32. Tourism Expenditures (February 13, 2002) http://www.dted.state.mn.us/04x03x03.asp.

that they vacation with friends. A close second were those who vacation with relatives(64 percent). Finally, 46 percent indicated they vacation with children. Among recreationalactivities enjoyed while on vacation, the most popular were camping, fishing, swimming,boating, hiking/climbing, sunbathing, shopping, and canoeing. The majority (49 percent)of respondents indicated they get away to the “great outdoors” one to three times a year. Aclose second were those who get away 10 or more times (27 percent). The majority of thosesurveyed fish 10 or more times a year. When asked about canoeing, 43 percent indicatedone to three canoe trips a year.

The remainder of the survey questions reflected whether or not people agreed withcertain statements. This was based on a scale 1 to 5, with 5 being that they strongly agree.The majority (59 percent) indicated a 5 that they would enjoy staying in the “great out-doors.” Additionally, most (31 percent) responded with a 5 that they would be willing totravel to Northern Minnesota for this type of vacation. Further, 50 percent indicated a 5that they would stay in a modern, but rustic cabin. Also, 56 percent indicated a 5 that theywould go boating while staying there. Thirty-eight percent indicated a 5 that they were in-terested in exploring the BWCAW. Thirty percent of those asked indicated a 5 that theywould be interested in using an outfitting service for this. Most respondents (42 percent)indicated a 5 that they would be interested in driving up the North Shore Scenic Route thatruns along Lake Superior in order to get to this destination. The last question was openended and asked for additional thoughts about staying at a cabin resort on a lake in North-ern Minnesota. Some of their comments were: “it’s wonderful,” “I love Northern Min-nesota and Thunder Bay,” “owner’s personalities,” and “I have been, it’s wonderful.” Thesesurvey results are positive and indicate that the majority of those surveyed would in factlike to visit a resort like that of Rockwood.

Competition

Macro View

Rockwood is involved in the tourism industry and therefore competes with all forms oftourism choices that vacationers have to choose from. To spend their vacation, potentialcustomers have the option of choosing to go to the Gunflint Trail or to some other desti-nation. For example, Disneyland, Las Vegas, and cruise lines all compete with Rockwoodand the Gunflint Trail for the vacationer’s dollars. Therefore, Rockwood will compete withthese other destinations by advertising with a Web site, newsletters, and by attending sportshows. Additionally, the primary purpose of the Gunflint Trail Association is to use thelodging tax revenues to market the area as a major tourism destination. It advertises in nu-merous state and national travel and tourism outlets.

Lodging—Micro View

On a more local level, once a potential customer has chosen the Gunflint Trail as their des-tination, including Rockwood, there are a total of 23 lodging establishments along the 60-mile Gunflint Trail. Some of these businesses have as few as 1 cabin and one has as manyas 24. These businesses all work together as a network to build the area into a strong des-tination point. There are only so many cabins at this destination point, and if one resort isbooked, they send people to another resort that they recommend. This is one reason whyit is important for the CCC Group to build and maintain good relationships with thetourism industry there on the Gunflint Trail. The attitude and atmosphere that the CCCGroup has run into when talking with industry professionals and other resort owners isthat they don’t see one another as competition, but rather allies to create a better tourism

7 7 3Marketing

destination. Even with this mind-set, once tourists decide on the Gunflint area, these re-sorts do actually compete with each other for the money spent there.

As previously mentioned, there are a total of 23 resorts along the Gunflint Trail of-fering lodging accommodations. These resorts offer lodging accommodations in the formof cabins. Some important summary information about these competing resorts is locatedin Table 1.


34. Cook County Lodging Tax Report (Cook County, MN: County Auditor-Treasurer, 2002).

Table 1

Type of Amenity Number of Resorts That Offer It Does Rockwood Currently?

Housekeeping Cabins 23 Yes Bed & Breakfast Rooms 1 No Housekeeping Suites 2 No American Plan Cabins 6 No Private Docks with Cabins 8 Yes Private Decks on Cabins 15 Yes Private BBQ Grill with Cabins 7 Yes A Main Lodge 14 Yes Main Lodge Is a Historic One 5 Yes Free Boat with Cabin Rental 5 Yes Dining Facilities 9 Yes Fireplaces in Cabins 17 Yes Beach at the Resort 16 Yes Complete Outfitting 10 Yes Bunkhouses 11 Yes Resorts with Campsites 8 No Sauna/Spa 17 Yes

To estimate how these businesses have prospered over the last several years, the lodg-ing tax revenues are once again referenced. From 1993 to 1997, these revenues grew 20.9percent. Since 1998, the revenues have increased by 7.3 percent.34 This growth is a good in-dicator of how the lodging businesses along the Gunflint have been doing over the lastdecade.

Outfitting

Along the Gunflint Trail there are 10 different canoe-outfitting companies that active out-door adventurers have to choose from. All of these businesses offer different packages toentice the interested vacationer. All boast that they have top quality, lightweight equip-ment to make trips into the BWCAW more pleasant. Most offer lodging accommodationsin the form of bunkhouses the night before the departure into the BWCAW along with ahot breakfast the morning of departure. Additionally, most outfitters provide access toseveral entry points into the BWCAW. Table 2 provides information about each specificoutfitter.

Estimated Market Share

Lodging

In this micro picture of the competition facing Rockwood, there are 22 other resorts offer-ing cabin accommodations. The total number of cabins located along the Gunflint Trail is154. There are very few other lodging options other than cabins (3 B&B rooms), but thetargeted customers will be those that will stay in cabins since that is all Rockwood offers inthe form of lodging. Of these 154 cabins, Rockwood has 8 for rental, or roughly 5.2 per-cent of the entire lodging facilities. This is the estimated market share for Rockwood’slodging aspect of the business.

To estimate the dollar value on the entire market size for the lodging businesses alongthe Gunflint Trail, the total lodging tax revenues for the most recent year with complete in-formation (2000) was taken and divided by 3 percent to arrive back at the total sales forlodging. To explain, the formula the lodging tax district uses to get the tax revenue figure is:

Total Lodging Sales � .03 = Lodging Tax Revenue

Therefore, the CCC Group reversed this tax revenue back into the total lodging sales withthe following formula:

Lodging Tax Revenue / .03 = Total Lodging Sales

This figure came to $2,954,781 for the entire Gunflint Trail lodging sales. However, this fig-ure includes businesses that are open year round. In order to figure the sales generatedfrom May through October, the revenues for these months for the year 2001 were addedand then divided by the 3 percent rate. This adjusted figure came to $2,222,396. Estimat-ing that the CCC Group can capture the above-mentioned 5.2 percent market share, thisrepresents $115,565 in projected lodging sales for Rockwood.

Dining

To estimate the market share for Rockwood’s dining sales, the CCC Group found that therewas a total of $8.3 billion in gross sales for the tourism industry in 1999.35 Out of this, the

7 7 5Marketing

Table 2

Cost of Bunk- Hot Multiple Kevlar Kevlar Packages

Name of Outfitter houses Breakfast Entry Points Canoes (7 Days)

Boundary Country Trekking No No Yes No N/AClearwater Yes Yes Yes Yes $565 Gunflint Northwoods Yes Yes Yes Yes $581 Hungry Jack Yes Yes Yes Yes $505 Nor’Wester Yes Yes Yes Yes $441 Old Northwoods No No Yes No N/ARockwood Yes Yes Yes Yes $555 Superior-North Yes Yes Yes Yes $484 Voyageur Yes Yes Yes Yes $390 Way of the Wilderness Yes No No Yes $399


majority (30.4 percent) was spent on lodging. The next biggest chunk of money spent was toward food (21.4 percent). These figures indicate that in the tourism sector,$2,523,200,000 was spent on lodging and $1,776,200,000 was spent on dining during1999.36 The CCC Group developed a formula to project annual sales for the dining aspectof Rockwood by taking the previously mentioned $115,565 in projected lodging sales forRockwood and dividing it into the total lodging for the state for a six-month period. Thisyielded the percentage of lodging out of the entire state that Rockwood actually capturesduring its open season:

$115,565 / ($2,523,200,000 / 2) = .000091601

Next, this percentage was applied to the six-month figure for statewide tourism diningmentioned above:

($1,776,200,000 / 2) � .000091601 = $81,351

This figure represents the total projected sales that the dining aspect will add to Rock-wood’s seasonal revenue.

Outfitting

For the outfitting aspect, there are a total of 10 outfitters offering pretty much the sameservices and will compete on the same level, distinguished only by marketing and adver-tising. This means that with equivalent marketing, Rockwood should be able to attain atleast 10 percent of the outfitting market along the Gunflint Trail. Historically, Rockwoodhas averaged $84,108 over the last three seasons. Assuming that is 10 percent of the outfit-ting market along the Gunflint Trail, the projected market size comes to $841,080.

B. Marketing Plan

Marketing Strategy

The Atmosphere

The marketing plan for Rockwood has been carefully thought out to target those specificcustomers who will be interested in pursuing a wilderness vacation. There are two cate-gories specifically, those interested in high adventure wilderness trips, such as canoe ex-cursions into the Boundary Waters, and those who enjoy the wilderness but prefer to stayin accommodations that offer the creature comforts of home.

The main focus for Rockwood’s marketing strategy will be to reach those potentialtargeted customers before they make their vacation decisions. This will allow Rockwood toinform them about a vacation on the Gunflint Trail and specifically at Rockwood. The goalis to persuade these potential customers to visit and stay at Rockwood versus going to someother wilderness destination or staying at another resort along the Gunflint Trail. This willbe accomplished by demonstrating through the Gunflint Trail Association’s advertisingthat the Gunflint Trail is one of the last remaining true wilderness areas that isn’t overrunwith tourists, pollution, or billboards. Also, this will be complemented by the fact thatRockwood is located in the heart of Superior National Forest and surrounded by the“Boundary Waters Canoe Area Wilderness” (BWCAW). Given this, Rockwood is the idealwilderness getaway along the Gunflint Trail, providing luxurious cabin rentals and offer-ing the finest canoe outfitting and access into the BWCAW.



Rockwood will inform potential customers of the relaxing atmosphere located there.Many vacationers who opt to stay in the great outdoors usually end up in crowded camp-grounds or state parks and have very close neighbors and a busy highway not too far away.Rockwood will be on the other end of the spectrum providing customers with true relax-ation in the great outdoors. This will be complemented by the plethora of activities to en-gage in while staying there. From hiking and bird watching to fishing and canoeing, visi-tors will find themselves having fun in the true great outdoors.

Rockwood is also very appealing due to its rich history in the northwoods. Estab-lished in 1926, Rockwood takes visitors back in time to when things were simpler and lesschaotic, escaping the hustle and bustle of today’s climate. The main lodge at Rockwood isone of only five remaining original hand-built log lodges located along the Gunflint Trail.Inside the lodge, visitors step into a relaxing atmosphere and will enjoy the original furni-ture and northwoods décor. This lodge is right on the water’s edge and has large windowsthat overlook Poplar Lake. The cabins at Rockwood provide customers with the creaturecomforts of home while staying in the great outdoors. These cabins are also furnished withnorthwoods décor providing an atmosphere that is appealing to guests.

The outfitting side of the business will provide the very best to those looking to ex-plore the BWCAW. Catering to both the experienced canoeist and the novice, Rockwoodwill accommodate wilderness adventurers with all their needs. From top-of-the-line gearto expert advice and training, Rockwood outfitters will provide its customers with friendlyservice that they can depend on.

The CCC Group will ensure its guests and outfitting customers of superior qualityaccommodations and services by providing the very best there is to offer and personal at-tention to all their needs. The CCC Group will live on the property and be available to itsguests at any time of the day for help, comments, questions, conversation, etc. The CCCGroup will also provide a survey in every cabin for customers to complete. These surveyswill be compiled and evaluated for any future changes in the business. Also, there will berepair cards located in each cabin in order to find out from customers if there are anyproblems that need attended to. The CCC Group will take pride in the location, activitiesto be enjoyed there, and the family business itself. These types of things will help the guestsfeel comfortable and enjoy their time spent at Rockwood.

Another advantage that Rockwood will promote through its various forms of adver-tising is that “half the fun is getting there.” This is because of the beautiful drive thattourists encounter on their way up the Scenic Route of the North Shore of Lake Superiorand then followed by the dense forest of the Gunflint Trail, where they will likely encountermoose and other wildlife.

The marketing approach the CCC Group will take comes from a careful analysis ofthe competition. After reviewing what the competition offers, it was concluded that veryfew resorts actually offer all-inclusive packages that include meals with their lodging. Theone resort that offers several packages of this type is the most successful along the GunflintTrail. Therefore, this approach was taken in order to get more out of each customer. This“getting more out of each customer” was explained earlier as the way that the CCC Groupwas going to grow Rockwood. By adding the dining aspect, which the current owners don’tprovide, it will increase the average customer’s inclination to stay at Rockwood. In fact, anarticle written by someone who stayed there indicated that because the resort didn’t servefood, they left to eat at another resort.37 With the CCC Group now offering dining, more

7 7 7Marketing

37. Daisann McLane, In Minnesota, Due North (September 6, 1998) http://www.nytimes.com/library/travel/frugal/ft980906.html.

guests will opt for the packages that follow or just enjoy the dining while passing through.As a result, they will spend their money on food at Rockwood, rather than at the compe-tition. This idea of providing everything the customer needs is the very basis for the pro-jected growth seen later in the financials.

To help exploit this dining aspect, Rockwood will provide several different packagestailored to different targeted customers. By offering different packages, customers will beable to choose the options they want while staying at Rockwood and/or using the canoeoutfitting services. These packages are explained in detail in the pricing subsection.

Pricing

Cabins

Careful consideration has been given to the pricing strategy that Rockwood will approach.After a diligent evaluation of the competition’s pricing, the CCC Group has determinedwhat they feel is a very competitive pricing strategy. After the acquisition of Rockwood, theCCC Group plans to honor the former owner’s pricing strategy for the first year for thosecustomers who have already made reservations at this price. This is because the CCCGroup does not want to come across as rate-raising new owners to any repeat customers.However, the previous owners did not offer the benefits of all-inclusive packages and itmay be appealing to these repeat customers to change their reservations to one of these.For any other customers who make reservations following the acquisition, they will havethe option to choose from any of the following packages. The prices for these packages arelocated in the Marketing Appendix.

American Plan (All Meals)

This plan includes a waterfront cabin of the customer’s choice (subject to availability),breakfasts, lunches (with the option of packed lunches to go), dinners, linen and maidservice on Wednesdays, boat or aluminum canoe, and use of all resort facilities. A boatmotor can be reserved for $25 per day. The pricing for this plan varies per amount of peo-ple and the particular cabin chosen. Please refer to the Marketing Appendix for completeinformation on pricing for this plan.

Modified Plan (with Dinners)

This plan includes a waterfront cabin of the customer’s choice (subject to availability), din-ners in the lodge, linen and maid service on Wednesdays, boat or aluminum canoe, and useof all resort facilities. A boat motor can be reserved for $25 per day. The pricing for thisplan varies per amount of people and the particular cabin chosen. Please refer to the Mar-keting Appendix for complete information on pricing for this plan.

Housekeeping Plan (No Meals)

This plan includes a waterfront cabin of the customer’s choice (subject to availability),linen and maid service on Wednesdays, boat or aluminum canoe, and use of all resort fa-cilities. A boat motor can be reserved for $25 per day. The pricing for this plan varies peramount of people and the particular cabin chosen. Please refer to the Marketing Appendixfor complete information on pricing for this plan.

Honeymoon Packages

A honeymoon at Rockwood is very special. The CCC Group will do everything within itsmeans to make this experience for newlyweds one to remember always. Rockwood will


provide lodging in the honeymoon cabin (subject to availability), breakfasts, lunches (withthe option of packed lunches to go), dinners, linen and maid service on Wednesdays, boator aluminum canoe, use of all resort facilities, and all the privacy the newlyweds need. Aboat motor can be reserved for $25 per day. Additionally, a complimentary bottle of cham-pagne will be provided for the first night at Rockwood. Instead of having to dine in thelodge for breakfast, the newlyweds will have the option to have it delivered to the cabin ina covered basket at a time they specify. There will also be wine and appetizers delivered tothe cabin before dinner. This package is offered in four- or seven-night versions. The four-night version includes the first night’s stay in a bed & breakfast located in either Duluth orthe Twin Cities followed by three nights at Rockwood. The seven-night version includesthe first night’s stay in a bed & breakfast located in either Duluth or the Twin Cities fol-lowed by five nights at Rockwood and then one more night at a bed & breakfast on yourway back south. The CCC Group has made arrangements with several B&Bs in Duluth andthe Twin Cities for this package. Information on these particular B&Bs is located in theMarketing Appendix. The pricing for this plan is subject to availability of the honeymooncabin. Please refer to the Marketing Appendix for complete information on pricing for thispackage.

Anniversary Package

Rockwood’s Anniversary Package offers couples the chance to get away from the distrac-tions of home and celebrate their anniversary, milestone, or other special accomplish-ments. This all-inclusive deal includes lodging in the honeymoon cabin (subject to avail-ability), breakfast delivered to the cabin (if they wish), lunches (with the option of packedlunches to go), dinners, linen and maid service on Wednesdays, boat or aluminum canoe,and use of all resort facilities. A boat motor can be reserved for $25 per day. Please refer tothe Marketing Appendix for complete information on pricing for this package.

Family Package

Rockwood’s Family Package offers the family a chance to get away to the wilderness andenjoy each other’s company. With the Family Package, the family cook gets a treat, as all themeals are included in this package. The family has their choice of cabin (subject to avail-ability), breakfasts, lunches (with the option of packed lunches to go), dinners, linen andmaid service on Wednesdays, boat or aluminum canoes, and use of all resort facilities. Aboat motor can be reserved for $25 per day. There is also a special guided fishing trip onWednesday, just for the kids, which allows some time for the parents to spend by themselves.The cost of this package varies per amount of people and the particular cabin chosen. Pleaserefer to the Marketing Appendix for complete information on pricing for this package.

Fishing Packages

There is excellent fishing on Poplar Lake. Guests can take advantage of this by selectingfrom one of Rockwood’s fishing packages. There are two different fishing packages avail-able, Deluxe and Standard.

The Deluxe Fishing Package includes a waterfront cabin of the customer’s choice(subject to availability), breakfasts, lunches (with the option of packed lunches to go), din-ners, linen and maid service on Wednesdays, aluminum canoe, and use of all resort facili-ties. In addition, a deluxe 16' fishing boat and motor (trolling motor, too) with upholsteredseats and live well will be provided. The cost of this package varies per amount of peopleand the particular cabin chosen. Please refer to the Marketing Appendix for complete in-formation on pricing for this package.

7 7 9Marketing

The Standard Fishing Package includes all of the same features as the Deluxe FishingPackage with the exception of meals. The cost of this package varies per amount of peopleand the particular cabin chosen. Please refer to the Marketing Appendix for complete in-formation on pricing for this package.

Seasonal Discounts

At Rockwood, there are seasonal discounts available on the American Plan, Modified Plan,and the Housekeeping Plan for those choosing to vacation in early spring or late fall. Forthe month of May, a 15 percent discount is applied, and for the month of October, a 10percent discount is applied. These discounts are figured in on the price sheets located inthe Marketing Appendix.

Deposit Policy

A deposit in the amount of 25 percent of the total cost of lodging package is required foreach reservation. Reservations may be made using a credit card to hold the reservation for10 days. If a personal check is preferred to hold the reservation, it must be received within10 days after a phone reservation has been made. If a customer must cancel and a 60-daynotice in writing is received prior to the scheduled arrival date, the deposit minus a $50service charge will be refunded. Otherwise a refund, minus the $50 service charge, will onlybe issued if Rockwood is able to fill the entire reservation with another guest.

Canoe Outfitting

In order for Rockwood to compete with the other nine canoe outfitters along the GunflintTrail, the CCC Group has carefully evaluated the services and prices of the competition inorder to arrive at a competitive pricing strategy for the outfitting side of the business.There are several packages to choose from including complete and partial outfitting. Forcomplete information about the pricing, please refer to the Marketing Appendix.

Rockwood Kevlar Plus Package

This is the finest equipment package available. This package includes:

• 38 lb. Wenonah Kevlar Canoe

• Bent shaft paddles

• Stearns vests

• Ultra-light Eureka nylon tent

• Wiggy’s Lamalite sleeping bags

• Ultra-light Therm-a-rest

• Nylon rain ponchos

• Granite Gear packs

• Cascade Designs baja bags

• Stainless cook kit

• Lexan utensils & utensil roll

• Folding saw, folding water jug

• Single burner stove and fuel

• Choice of meals from deluxe menu

• Tarp and rope

• First aid kit


• Showers and sauna after your trip

• One night’s stay in priv. bunkhouse

• Breakfast in lodge

• Free use of all facilities

• Personalized routing

• Complete orientation

• Transportation to and from any entry point along the Gunflint

• Canoe seat back rests

• Water purifier

• Canoe camping journal

Please see the Marketing Appendix for complete information about the pricing.

Complete Deluxe Outfitting Package

This is an excellent outfitting package—better than most ultra-light outfitting packages.This package includes:

• 55 lb. Wenonah Royalex canoe and paddles

• Stearns vests

• Ultra-light Eureka nylon tent

• Hollofill sleeping bags

• Therm-a-rest mattress

• Lightweight Cordura packs

• Waterproof bags

• Aluminum cook kit

• Utensils & utensil roll

• Folding saw, folding water jug

• Single burner stove and fuel

• Rain poncho

• Choice of meals from deluxe menu

• Tarp & rope

• First aid kit

• Showers and sauna after your trip

• One night’s stay in priv. bunkhouse

• Breakfast in lodge

• Free use of all facilities

• Personalized routing

• Complete orientation

• Transportation to and from any entry point along the Gunflint

Please see the Marketing Appendix for complete information about the pricing.

Kevlar Plus Equipment Package

This package is essentially the Rockwood Kevlar Plus Package with the exception of food andlodging. Please see the Marketing Appendix for complete information about the pricing.

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Deluxe Equipment Package

This package is essentially the Complete Deluxe Outfitting Package with the exception offood and lodging. Please see the Marketing Appendix for complete information about thepricing.

Food Package

This package includes food from the deluxe menu. This is an option for those enthusiastswho come prepared with their own equipment but need the lightweight freeze-dried foodfor their journey. Please see the Marketing Appendix for complete information about thepricing for this package.

Food and Canoe Packages

These packages offer only the canoe and food. This is a popular option for those who havetheir own equipment with the exception of the canoe and food. There are three differentpackages to choose from, specified by canoe type. They are aluminum, Royalex, and Kevlar.Please see the Marketing Appendix for complete information about the pricing for thesepackages.

Partial Outfitting

For those adventurers who only need a certain item(s). Any of Rockwood’s equipment maybe rented individually. For complete information on the rates for specific items, pleaserefer to the Marketing Appendix.

Lakeside Terrace Bunk Room

Rockwood offers accommodations for a good night’s sleep before or after canoe trips. Thiscomfortable, private room is fully carpeted with each room having its own bathroom andshower, and a great view of Poplar Lake. A deposit of $20 per night per room is applied.

Discounts and Other Points

All rates are based on calendar days. All rates are based on a minimum of two persons, andadditional persons are extra. There is a deduction of 20 percent for children 12 and under,accompanied by two adults. All packages do not include the cost of fishing licenses orBWCAW permits. There is a 15 percent discount for not-for-profit groups. Additionally,repeat guests are granted a 5 percent discount off their packages. Early reservations are en-couraged so Rockwood can make application for entry permits and have everythingpacked and ready for the departure. A deposit of $50 per person for complete outfittingand food packages is required. A deposit of $20 per person is required on partial outfittingpackages. These deposits will be refunded, minus a $20 service charge, if notice of cancel-lation is made 14 days prior to departure date.

Advertising and Promotion

State Help

Rockwood is in an ideal situation when it comes to advertising. In the tourism industry,Minnesota is one of the best states to be located in. The Minnesota Office of Tourism(MOT) spends a great deal of money each year in an effort to boost the tourism dollarsgenerated by the state. Currently, “the mission of the MOT is to market Minnesota as atravel destination, sustain and increase tourism revenues, and lead tourism policy and


product development. MOT markets Minnesota in North America and internationally asa travel destination to consumers, tour operators, and travel agents and promotes coverageof Minnesota by domestic and international trade media. The tourism industry is an ac-tive partner in the state’s tourism marketing initiatives and participates in marketing ef-forts through a variety of partnership activities.”38 The MOT’s strategies to increasetourism follow.

2001 Marketing Strategies

1. Leverage the celebrity and widespread recognition of Governor Ventura to promotetravel to and throughout the state.

2. Develop year-round tourism business by promoting Minnesota’s core travel activitiesthat keep the summer season strong, and by expanding promotion of activities in non-peak travel periods.

3. Provide high quality travel information and services that generate incremental sales andachieve a competitive advantage in the marketplace.

4. Develop initiatives to attract new travel audiences and assist the tourism industry inproduct development.

5. Increase international travel to Minnesota by broadcasting promotion in target mar-kets.

6. Develop public and private sector involvement in tourism marketing partnerships andcooperative opportunities to extend resources and to maximize impact.

7. Provide strategic leadership for tourism initiatives and related policy development.

As previously mentioned, the MOT utilizes partnerships to promote its tourism in-dustry. “Media used [to do so] include print, broadcast, direct mail and the Internet. Re-gional editions of magazines are selected based on reader demographics and activity in-terests. In-state broadcast, both television and radio, are available through a partnershipagreement with the Minnesota Broadcasters Association (MBA). Television ads are alsoplaced in selected out-of-state markets.”39 The partnership with the MBA allows the MOTto have access to $1 million in radio airtime and $180,000 in television airtime.

To help boost Minnesota’s popular fishing industry, the MOT has paired up with sev-eral media. This includes “TV advertising on In-Fisherman and Babe Winkleman’s GoodFishing; print ads in In-Fisherman and Walleye Insider, a postcard mailing in North Amer-ican Fisherman’s shared mailing program; and a targeted direct mailing. The 2001 Min-nesota Fishing Guide is published by Star Tribune. Plans for 2002 will be formulated inJuly–September 2001.”40 Similar efforts are made to promote cross-country skiing andsnowmobiling.

Advertising Opportunities provided by Minnesota. There are several advertising opportu-nities provided by the state of Minnesota to businesses in the tourism industry. First,there is the Explore Minnesota Travel Guide. This resource primarily targets out-of-statevisitors. It is a full-color guide promoting Minnesota’s diverse travel destinations and ac-tivities. There is a circulation of 350,000 copies. Second, there is the Minnesota ExplorerTravel Newspaper. This media is produced three times a year and each addition has over

7 8 3Marketing

38. Tourism—Marketing Goals and Strategies 1999 (February 13, 2002) http://www.dted.state.mn.us/04x04.asp.

39. http://www.dted.state.mn.us, opcit.

40. Ibid.

370,000 copies that are inserted into the Wednesday issue of the Star Tribune. Third,there is a “Minnesota Fishing” edition that is also done with the help of the Star Tribune.This edition includes 300,000 copies that go out in the Sunday, March 4 edition of thenewspaper. Additionally, 100,000 copies will be distributed to sport shows, travel infor-mation centers, and in response to general requests for fishing information. Third, thereis a “Minnesota Canoeing” edition published in partnership with Minnesota Monthly.This edition is inserted into the January issue of Minnesota Monthly with a circulationof about 70,000. Additionally, the MOT will distribute 35,000 copies at sport shows, etc.These three mentioned pertain specifically to Rockwood but are just some of the op-portunities that the state provides. All together, there are even more opportunities thanwhat is listed here that the state of Minnesota provides for tourism organizations andbusinesses.

The Gunflint Trail Association

The Gunflint Trail Association (GTA) plays a major role in the success of Rockwood’sbusiness. This association not only provides guidance to the tourism industry along theGunflint, but also plays a key role in advertising. The GTA is the one who puts up themoney to promote the Gunflint Trail in the aforementioned state opportunities for ad-vertising. This organization collects a 3 percent lodging tax from the sales of all lodgingalong the Gunflint Trail. This tax revenue goes directly to advertising and promotes theGunflint Trail as a major tourism destination for those looking for getaways to the greatoutdoors.

Rockwood’s Sign

At the turnoff for Rockwood, there is a very nice wooden sign. According to Bill Martin-son of the Minnesota Department of Transportation, there is an annual average daily traf-fic volume of 360 vehicles that pass by the sign for Rockwood.41 He stated that this figureis distorted because in winter there is much less traffic than summer, and this number isan annual average. He also stated that the figure might be as much as 50 percent higher inthe summer season. This figure expanded into a yearly total is 131,400 vehicles that passby Rockwood’s sign on the Gunflint Trail. Most people already have reservations at someresort by the time they pass this sign, but it will still be used to inform them of Rockwood’sexistence. More importantly, they may choose to look into staying there in the future. Ad-ditionally, the CCC Group has allowed a budget of $500 during the first season to modifythis sign to include advertising for the dining aspect. This way, even those who are stayingat other resorts that might not offer dining or all-inclusive packages, might be persuadedto stop at Rockwood and eat.

Rockwood’s Web site

In addition to the advertising accomplished by the GTA, Rockwood also has its own Website. Here in the twenty-first century, most people turn to the Internet to research their va-cation destinations. This is precisely why Rockwood has its own Web site. This Web site canbe viewed at http://www.rockwood-bwca.com. There, potential guests can peruse the Website to see pictures and details about what Rockwood has to offer, as well as contact infor-mation to make reservations or ask additional questions. Boreal Access will be the dial-up


41. Phone conversation with Bill Martinson, April 5, 2002.

provider as well as the Web host for the Web page. They have indicated that it will cost $80per month for a combination of their best packages.

Sport Shows

Another way the CCC Group plans to reach the target markets is to attend sport shows inthe Midwest. This is a good way to get out in the field and inform potential customersabout Rockwood and the Gunflint Trail. These sport shows are managed by Renfro Pro-ductions and are offered in several major metropolitan areas in the Midwest. Renfro wascontacted to inquire about the cost of booth space at these shows and they indicated thecosts would be between $500 and $750 depending on the show.42 The CCC Group will setup a booth at the most appropriate shows (three a year) to take reservations and build newrelationships with future customers. This will require an initial outlay of $800 to constructa booth display. After which, it is estimated that $5,850 will be needed each year to coversport show-related expenses including travel and lodging.

Color Brochures

The CCC Group will also have full-color brochures printed up and available at the sportshows, the lodge, and for general requests about information. These brochures will havedescriptions of the resort and services, prices, and contact information. It is estimated thatthis will cost $2,500 per year for printing services.

Newsletters to Previous Guests

Rockwood will keep a complete list of all customers who have stayed at the resort andthose who have inquired about the resort. Annual newsletters, including an email version,will be sent out to all of those in this database. This newsletter will keep guests updated onwhat is going on at Rockwood, upcoming events, and generally remind them to make theirreservation soon. The e-mail version will be utilized as much as possible to cut down onexpenses. However, an annual budget of $1,000 will be set aside for this communicationwith customers.

Advertising and Promotion Budget

The cost of advertising and promoting the business will be relatively inexpensive due to theamount of advertising done by the GTA. However, there will be a substantial amount ofmoney spent on other forms of advertising. An estimated annual budget of $10,850 will beset aside for the aforementioned forms of advertising. This allotment will be designated tothe following areas:

Web site $ 1,500 Sport show expenses 5,850 Newsletter expenses and mailings 1,000 Color brochures 2,500

Total for advertising $10,850

In addition to these figures, the 3 percent lodging tax will be put towards advertisingby the GTA.

7 8 5Marketing

42. Personal communication with Kevin Renfro, April 8, 2002.

V. location

A. Location

Located 30 miles north of Grand Marais, Minnesota, Rockwood is located right on theGunflint Trail in the heart of the Boundary Water Canoe Area Wilderness (BWCAW). Theexact address is:

Rockwood Lodge & Canoe Outfitters50 Rockwood RoadGrand Marais, MN 55604

Advantages

Rockwood is located inside Superior National Forest. Each year, there are approximately2.4 million visits to this forest.43 In addition, Rockwood is surrounded by the major touristdestination, the BWCAW. “National Geographic Traveler magazine named the BWCAW asone of the top 50 travel destinations in the world.”44 This is federally protected land wherevacationers retreat every year. This region yields some of the most dense wilderness andspectacular wildlife in the country. From bears to wolves to moose to bald eagles, this partof the country is known by many as “God’s Country.” This awe-inspiring area is a perfectlocation for a “northwoods” resort.

Another advantage of this location is that it is situated halfway up the Gunflint Trailwith easy access from the road. This aspect provides several benefits. First, this not onlymakes it easy to find, but also more visible to the general public. That is, those travelingalong the Gunflint Trail will most likely pass the Rockwood sign (and turnoff) on the wayto or from their destination. According to Bill Martinson of the Minnesota Department ofTransportation, there is an annual average daily traffic volume of 360 vehicles that pass bythe sign for Rockwood.45 He stated that this figure is distorted because in winter there ismuch less traffic than summer, and this number is an annual average. He also stated thatthe figure might be as much as 50 percent higher in the summer season. This figure ex-panded into a yearly total is 131,400 vehicles that pass by Rockwood’s sign on the GunflintTrail. Secondly, this location provides a strategic position for the outfitting business. Nes-tled into a cove on Poplar Lake, Rockwood has direct access into the BWCAW. Also, locatedwithin a half hour’s drive from any entry point from the Gunflint into the BWCAW, Rock-wood will be able to provide the option of a van shuttle for those who choose to use a dif-ferent entry point. Third, because this location is halfway up the Gunflint Trail, this will beideal for the expansion into both the restaurant and the winter business. Again, this is dueto the easy access from the road along with the fact that more people—potential cus-tomers—will pass by here than, for example, at the north end of the Gunflint Trail whereit is a dead end road. This will especially play a big part in the winter when catering to allof the people who pass along the trail on cross-country skis and snowmobiles, should theCCC Group decide to expand into winter operations.

Still one more advantage can be seen in this location and summed up by the phrase,“half the fun is getting there.” For most tourists visiting this area, they will find themselves


43. Dave Tucci, Summary of National Visitor Use Monitoring Results for the Superior National Forest (Minneapolis, MN:Forest Service, 2001).

44. Explore Minnesota 2002 Travel Guide, 49.

45. Phone conversation with Bill Martinson, April 5, 2002.

driving up the North Shore of Lake Superior. “The North Shore Scenic Drive along LakeSuperior has been named an All-American Road, one of only 15 in the U.S., for its spec-tacular views of this great lake, wooded hills and waterfalls.”46 Every year, approximately1.7 million passenger vehicles pass through Grand Marais, which is along this remote sce-nic route and is also the turnoff for the Gunflint Trail.47 From waterfalls and lighthousesto hiking and trout fishing, there is a whole range of things to visit and do on the journeyup the North Shore. With Superior National Forest on one side of the road and Lake Su-perior on the other, this scenic drive provides a wonderful journey for tourists on their wayto the Gunflint Trail and the BWCAW.

Zoning

Rockwood Lodge & Canoe Outfitters is located on parcel 51-401-4210, which is zoned asResort Commercial/Residential. “The principal purpose of the RC Resort CommercialDistrict is to provide for the specific commercial activity of resorts, lodges, and outfitters.Residential uses and limited service oriented commercial uses are also allowed.”48

Taxes

There are four applicable taxes to the location. In the State of Minnesota, there is a sales taxof 6.5 percent. Locally there is a county tax of 1 percent. Additionally, resorts operating onthe Gunflint Trail who collect income from room or cabin sales must pay a special tax to theLodging Tax District. This tax revenue gets collected by the county and channeled throughto the Gunflint Trail Association. This special lodging tax is 3 percent and the entire revenueis used by the Gunflint Trail Association to pay for marketing to promote business at theseresorts. Additionally, there is property tax. This figure is based on the assessed value of theproperty, which the county assessor does annually. According to Carol Pratt of the CookCounty Assessor’s Office, the assessed value currently is $577,100 and this will be used tocalculate taxes for 2003. Currently, there are taxes of $4,188 due for this year.49

B. Proximity to Supplies

With 20+ resorts on the 60-mile Gunflint Trail being serviced by suppliers, Rockwood willhave no trouble getting supplies. To better understand the makeup of Rockwood’s suppli-ers, the supplies are broken down into the following three categories: lodge and generalsupplies, outfitting, and gift shop. The lodging supplies will come from food and beveragedistributors that deliver to the Lodge. All of the supplies needed for the outfitting opera-tion will be available through mail order. The gift shop merchandise will also be orderedthrough mail order suppliers.

C. Access to Transportation

Rockwood is located right on the Gunflint Trail, the only road in this region that navigatesSuperior National Forest and the BWCAW. Rockwood has private parking at all of the cab-ins in addition to a small parking lot (12 spaces) at the Lodge. There is additional parkingon the premises just a couple hundred feet from the Lodge that serves as bunkhouse andoverflow parking.

7 8 7Location

46. Explore Minnesota 2002 Travel Guide, 10.

47. Minnesota Department of Transportation: Trunk Highway Traffic Volume Map, 2000.

48. Cook County Zoning Ordinance, Article 4.


The Gunflint Trail, a.k.a. County Road 12, is a designated Scenic Route in Minnesotaand is accessed by another Scenic Route, Highway 61, which travels along the North Shoreof Lake Superior. This highway starts in Duluth, Minnesota, and is accessed by the nation’sinterstate and highway networks. Following is a brief summary of approximate distancesfrom some major cities.

City Miles

Chicago 590Des Moines 500Duluth 113Fargo 420Grand Forks 375Indianapolis 760Kansas City 700Minneapolis/St. Paul 260Omaha 640St. Louis 865Winnipeg 530

Since the majority of tourists visiting this area of Minnesota come from other parts ofMinnesota or adjacent states, and air travel is less favored since 9-11-01, it is expected thatdriving to this destination will be the most popular choice of transportation. Althoughmany will make the drive, international travelers and those outside of what they considerto be an acceptable driving range will still have the option of air travel to shorten their trip.

For the tourists visiting the Gunflint Trail who must fly, the Minneapolis/St. Paul air-port is a major hub for air travel. In Minneapolis, travelers have their choice of major do-mestic airlines including Air Tran Airways, America West, American, American Trans Air,Continental, Delta, Frontier, Northwest, United, and US Airways. This will ensure a com-petitive price for their airfare. Currently, for the first week in June the round-trip airfarefrom Indianapolis to Minneapolis/St. Paul is quoted as $218.00 from Northwest Airlines.Some of the car rental companies located at the airport in Minneapolis include Alamo,Avis, Budget, Dollar, Hertz, and National. From the Twin Cities, the tourist will have a 260-mile drive, of which 113 miles are on scenic routes.

VI. management

A. Management Team—Key Personnel

All of the management team will live on the premises and therefore the salaries are low be-cause the cost of living will be included in employment at Rockwood. This cost of livingincludes shelter, utilities, etc. All members of the team are also provided with health in-surance through a comprehensive plan from Blue Cross & Blue Shield of Minnesota.

General Manager

The General Manager of Rockwood will be Mr. Jason B. Correll. Mr. J. B. Correll has aBachelor’s Degree from Ball State University in Entrepreneurship from the Department ofManagement. Ever since Mr. J. B. Correll was a young boy, he has always enjoyed the “greatoutdoors.” He is an avid camper, fisherman, canoeist, mountain biker, skier, and more. Mr.J. B. Correll will be responsible for all aspects of running the business. This will include,but not be limited to, the following.


General Duties

• Overseeing daily operations• Server (restaurant)• Backup outfitting manager• Housekeeping (Wednesday & Saturday)• General maintenance

Administrative

• Supplier/vendor relations• Marketing• Web site maintenance• Human resources

Mr. J. B. Correll will be compensated with an annual salary of $20,000.

Assistant Manager

As an equal partner, Mr. John R. Correll, with almost 30 years of business experience, willbring much wisdom and competence to the family business. Mr. J. R. Correll, like his twosons, is also an avid outdoorsman. He enjoys every aspect of being outdoors, especiallyboating and fishing. Mr. J. R. Correll will be responsible for strategic planning, but withspecial emphasis on community/public relations. This will include, but not be limited to,the following.

General Duties

• Overseeing daily operations• Fishing guide

Administrative

• Community/Public relations• Strategic management• Write newsletters• Safety manager

Mr. J. R. Correll will be compensated with an annual salary of $10,000.

Host and Gift Shop Manager

Providing an essential input into the family business, Mrs. Nancy Correll is an excellentchoice to be the host and gift shop manager at Rockwood. Mrs. Correll, wife of Mr. J. R. Cor-rell, has nearly 30 years of business experience to bring to Rockwood. With her warm-hearted personality, Mrs. Correll will provide unparalleled hospitality and is the perfect can-didate to be the host of the Lodge. Mrs. Correll will be responsible for the following duties.

General Duties

• Hostess/gift shop manager• Welcome and check-in• Reservations for the cabins

Administrative

• Accounting/payroll

Mrs. Nancy Correll will be compensated with an annual salary of $10,000.

7 8 9Management

Outfitting Manager

Heading up the outfitting aspect of the business is Mr. Tony Correll. Mr. T. Correll is theideal person to run the day-to-day operations of the outfitting business due to hischarisma and passion for the wilderness and outdoor activities. He possesses a love for theoutdoors that radiates onto others. This passion for his outdoor hobbies, along with hisexperience in sales and operations, qualifies Mr. T. Correll for the role of outfitting man-ager. As an equal partner, he will be responsible for helping with many aspects of runningthe business, but with primary emphasis on the outfitting business. In particular, this willinclude, but not be limited to, the following.

General Duties

• Trip scheduling/planning• Wilderness instruction• Shuttle to other entry points• Maintenance• Backup fishing guide

Administrative

• Outfitting marketing planning• Outfitter supplier relations

Mr. T. Correll will be compensated with an annual salary of $20,000.

Restaurant/Kitchen Manager

Filling the position of restaurant manager is Mr. Jason Partin. Now at age 30, he has 14years’ experience working in the food industry. His expertise in the kitchen will provideRockwood with consistently good quality food. He is practically family and will fit rightinto this family business. He will be responsible for, but not be limited to, the following.

General Duties

• Food preparation and presentation• Backup server

Administrative

• Developing the menu• Food inventory/ordering

Mr. Partin will be compensated with an annual salary of $15,000.

B. Legal Structure

The legal structure of CCC Group will be a Limited Liability Corporation. This structurewill provide the CCC Group with the limited liability of a corporation and the tax advan-tages of a partnership.

Rockwood Lodge & Canoe Outfitters is a family owned and operated business. Mr.Jason B. Correll is the General Manager, but an equal partner in the business. The nameCCC Group comes from first letter of the last names of the three main partners, Jason,John, and Tony. These three partners all have an equal share in the business. Together theywill devote their expertise full-time to the business as owners and operators.


C. Board of Advisors

An informal board of advisors will be assembled in order for the CCC Group to draw onoutside expertise for consultation and advice. This board will include the former ownerswho operated the resort for 30 years, a seasoned entrepreneur restaurant owner, an ac-countant, a lawyer, and an Internet Web site designer. The CCC Group will also work withthe Gunflint Trail Association and the Congress of Minnesota Resorters, which makethemselves available to the owner-operators of resorts in the area and offer many servicesfrom marketing to business development.

The Austins, the couple who formerly owned and operated Rockwood, live on thesame lake and will make themselves available to the CCC Group for advice and generalknowledge about the business. They have a vested interest in seeing Rockwood succeed.This will be a casual arrangement not having any costs.

Dave Sumpter, a relative and retired entrepreneur who owned and operated severalrestaurants and inns throughout his career, will sit on the board as an advisor. Since he isfamily, he will not charge anything for his contributions. His knowledge of the businesswill provide the CCC Group with guidance in the development of the business as a pre-mier place to stay and eat on the Gunflint Trail.

The services of Robert E. Spry, a CPA based in Grand Marais, will be called on in thebeginning months of operation to make sure that the CCC Group has a proper account-ing system in place. This accounting service will also be used every year to file tax docu-ments with the government.

Richard Johnson, an attorney in Grand Marais, will also be included on the board ofadvisors for any legal matters that come into question. He will provide consultation for theCCC Group in the beginning of its ownership to ensure that all aspects of the business arelegal and any propriety rights are protected.

Judy Johnson, of the Gunflint Trail Association, will also be on the advisory board forthe CCC Group. This association provides assistance to individuals in this business andcan be very helpful to promote the business.

Chad Jones, a Web designer and manager, will sit on Rockwood’s board of advisorsto provide suggestions for the company’s Web site. Mr. Jones will provide essential help inmarketing the business through the increasingly important advertising medium known asthe Internet.

And finally, the broker selling the business, who has owned several resorts and out-fitting businesses, will continue to work with the CCC Group after the acquisition.

VII. financial

A. Financial Assumptions and Methodology

In order to provide a better understanding of how the CCC Group arrived at the financialprojections that are in this section, this detailed list of assumptions has been provided. Fol-lowing these assumptions, financial ratios and a break-even analysis are presented.

Income Statement Assumptions

Sales

In order to allocate the projected sales appropriately for this seasonal business, the occu-pancy rates from the last three years were calculated and averaged together to determine

7 9 1Financial

what percentage each month actually contributes to the total sales for the season. The fol-lowing three-year averages are listed and were applied to all projected seasonal sales inorder to arrive at an accurate estimate for monthly sales figures.

May 4.37%June 19.54%July 24.99%August 27.7%September 19.54%October 3.86%

Cabin Rental.50 In order to arrive at the projected annual sales from cabin rental, the CookCounty Lodging Tax Report was used. More specifically, the revenues generated by the 3percent Gunflint Trail Lodging Tax between May and October were taken and then dividedby 3 percent in order to arrive back at the total revenue generated by lodging along theGunflint Trail. This figure came to be $2,222,396, which was multiplied by Rockwood’sprojected market share of 5.2 percent. This yielded a projected market share of $115,565for Rockwood during the first year.

Deposits. Deposits are made to hold the reservation of cabins. These deposits are appliedto the cost of the cabin rental. Therefore, customers have paid a portion of their stay upfront in order to hold their reservation. The deposit policy requires 25 percent of thecabin rental cost to be put down. It is assumed that deposits will be made two months inadvance. The total for both deposits and cabin rental equals the projected cabin rentalsales.

Outfitting. In order to project the sales from outfitting, the average sales figure was takenfrom the last three years. This average came to $84,108 and this is the figure that the CCCGroup believes it can easily obtain during the first year, considering the business generatedover $92,000 in 2001. A copy of the last three years of income statements is located in theAcquisition Appendix.

Dining. For this new aspect of the business, projections were obtained by a formula de-veloped by the CCC Group. This formula uses the most recent figure available for totalsales in Minnesota’s tourism industry. This figure was $8.3 billion in 1999.51 Additionally,according to the Minnesota Department of Trade and Economic Development, 30.4 per-cent of this was spent on lodging and 21.4 percent was spent on food.52 Therefore, therewas a total of $2,523,200,000 in lodging sales and $1,776,200,000 in food sales. Since Rock-wood is only open six months of the year, these annual figures were divided by two to ar-rive at a six-month representative. From there, Rockwood’s projected six-month cabinsales were divided into the state’s figure to determine its share of the entire state’s lodgingmarket for a six-month period. The resulting percentage was then applied to the state’s six-


50. The projected sales for cabin rental and dining actually mesh together due to the methods of calculation. This is be-cause of the all-inclusive packages that offer food and lodging as one package. In other words, for the sake of simplic-ity, these projections are kept separate, but actually, much of the dining figure represents sales from all-inclusivepackages.



month food sales in order to project Rockwood’s sales for food. This figure came to$81,352. The following formula illustrates this:

Rockwood’s $ Lodging / State’s Six-Month $ Lodging = Rockwood’s Share$115,565 / $1,261,600,000 = .000091601

Rockwood’s Share � State’s Six-Month Food Sales = Rockwood’s Food Sales.000091601 � $888,100,000.20 = $81,352

Next, beer sales needed to be added into this food sales figure. In order to do this, the in-dustry averages for beer consumption were used to arrive at a formula to project the salesfrom beer at Rockwood. According to T. J. Elbert, who has done lots of research on the beerindustry for his business plan, restaurants do 17 percent of all on-premise sales, and 52.5percent of all on-premise sales are from beer. The CCC Group came up with the followingformula:

17% � 52.5% = 8.93% of restaurant sales come from beer, on averageGiven that total dining comes from beer and food, then:

Total Dining � .9107 = Food Sales, andTotal Dining � .0893 = Beer Sales

Therefore, Total Dining = Food Sales / .9107, orTotal Dining for Rockwood = $81,352 / .9107

Total Dining for Rockwood = $89,329

This figure of $89,329 is what the CCC Group projects for the first year.

Gift Shop Sales. To calculate the first year’s sales for the gift shop, the average sales from thelast three years were figured. It is assumed that the CCC Group will be able to obtain thisfigure of $25,345 during the first year.

Store Sales. Again, it is assumed that the CCC Group will be able to attain the first year’ssales that are equivalent to the average from the last three years. This average figure cameto $9,928.

ELS Commissions from License Sales. This small profit center is a result from the sales ofDNR permits through the Electronic Licensing System. For this projection, Drew, from theMinnesota Department of Natural Resources, was contacted. He informed the CCC Groupthat the commissions earned last year were $231.50. Assuming that the CCC Group will becreating more business due to its aggressive marketing plan and general expansion of thebusiness, it is projected that a slight increase in these sales will be feasible. The assumedsales figure is $250 for the first year.

Years 2 and 3. After the first year, sales are projected to increase due to the CCC Group’saggressive marketing and new services such as dining. As these business improvementstake hold, it is reflected in the projected sales. In the following table, are the projected in-creases in each of the described profit centers.

Profit Center Year 2 Year 3

Cabin rental 6% 8% Outfitting 6% 8% Dining 6% 8% Gift shop 3% 3% Store 10% 10% ELS 6% 8%

7 9 3Financial

Cost of Goods Sold

For the cost of goods sold, the following methods were used for each of the different categories.

Outfitting. To calculate the average cost of goods sold for this profit center, the incomestatement for the 2001 season was used.53 According to the books, the total outfitting ex-penses were $7,005.61 and the total sales generated by outfitting were $92,907.43. This re-sults in a cost of goods sold of 7.54 percent.

Dining. To calculate the cost of goods sold for this area of the business, the industry aver-age for eating and drinking places was used. Specifically, bizstats.com indicated that forproprietorships, the average cost of goods sold was 41.9 percent.54 It is assumed that thisfigure is a good representative for Rockwood’s dining function.

Gift Shop Merchandise. Here again, the 2001 income statement was used to arrive at a per-centage for the cost of goods sold. In 2001, there was a total gift shop merchandise expenseof $10,331.58 and a sales figure of $16,944.39. This results in a cost of goods sold of 60.97percent. It was assumed that the level of inventory was kept constant.

Store. For this figure, the CCC Group compiled the entire inventory it will carry. The costand selling price of each product was then calculated and averaged as a whole. This re-sulted in an average cost of goods sold of 63 percent. For a list of inventory with costs andselling prices, please reference the Financial Appendix.

Other (Honeymoon Packages). For this, the cost of one night’s room for all of the partici-pating B&Bs were averaged together to figure the expense involved with the honeymoonpackage. This came to $149. Additionally, $20 was added for additional expenses involvedwith the package. Since there is a seven-night option that involves two nights in a B&B, anadditional amount of 1/2 of a night’s stay was added into this figure to account for half ofthe packages being the seven-night version. It was assumed that 1/2 of these packages wouldbe the seven-night version. This resulted in a total cost of $244 per honeymoon package.

Operating Expenses

Presented next is a list of expense items and a brief description of how the costs were calculated.

Advertising. For advertising, a total of $10,850 will be budgeted for each year. This is allo-cated as follows:

Web site $1,500Sport shows $5,850Newsletters and mailings $1,000Color brochures $2,500

Accounting Services. During the first month as owners, the CCC Group will spend $500 tobriefly consult with an accountant. After that, the CCC Group will budget $2,500 everyMarch for professional tax filing.


53. 2001 income statement for Rockwood.

54. Food Service and Restaurant Business Statistics 2002 (April 11, 2002) http://www.bizstats.com/restaurants.htm.

Credit Card Fees. Here, the average credit card fees were taken from the last three years offinancials and averaged. The same was done with the total sales. Then, the average creditcard fees were divided by the average credit card service charge of 2.5 percent. This resultedin the average sales on credit cards. This figure came to $56,640 and was divided by the av-erage amount of sales. Therefore, $56,640 was divided by the average total sales of$241,358 and this resulted in a value of 23.47 percent. However, this value seemed to below, so to make it more realistic, the figure was doubled to 47 percent. Therefore, 47 per-cent of all sales are subject to an average credit card fee of 2.5 percent.

Depreciation. This figure is best explained by the depreciation schedule located in the Fi-nancial Appendix.

Fuel for Boats. For this expense, an average was taken from the last three years and then in-creased by 10 percent to account for increased business and the increased cost of fuel.

Health Insurance. The value here was quoted for a group policy from Blue Cross & BlueShield of Minnesota.

Insurance (Property/GL/Etc.). This expense is based off a quote given by the independentinsurance agent that currently handles the resort.

Insurance (Liquor Liability and Workers’ Compensation). The same agent who quoted theprevious insurance amount also quoted this expense. It was estimated to be $1,000 per yearfor liquor liability and $4 to every $100 of payroll for workers’ compensation insurance.

Legal Services. During the first year as owners, the CCC Group has budgeted $2,500 forbusiness incorporation and legal consulting.

Licenses. There are several licenses that apply to this business. The following table illus-trates the costs associated with each license and when it is due.

License Fee Due

Cigarettes retail $50/season April

Food, beverage, and lodging $413/season April

Liquor license (county) $60/season April

Liquor license (state) $20/year April

Federal tax stamp (liquor) $250/year June

Federal tax stamp (first two One-time in April months of first year) $41.67 during the first year

Outfitter guide permit $75/season April

Cooperators agreement to issue BWCAW permits Free April

Office Supplies. This expense covers paper, forms, print cartridges, software, and othermiscellaneous items. This is assumed to be $800 each year and is expensed in quarterly dis-bursements.

Other. This figure was added to the financials as a buffer in case of unexpected expenses.The amount budgeted is $200 per month during the off season and $500 per month dur-ing the open season.

7 9 5Financial

Social Security Tax. This figure is 7.65 percent of salaries every month.

State Unemployment Tax. In Minnesota, the state unemployment tax is 1.29 percent ofeach employee’s payroll for the first $21,000.

Federal Unemployment Tax. This tax rate is 0.8 percent of the first $7,000 per employee.

Phone. For this expense, an average was taken from the last three years, and this is esti-mated to be $415 per month for all phone charges.

Property Tax. Carol Pratt from the Cook County Assessor’s office was contacted for thisinformation.55 The tax for 2002 is $4,188, or $349 per month. For 2003 and beyond, thisfigure is calculated to be $5,542, or $462 per month.

Repairs and Maintenance. This expense was figured by taking an average of the last threeyears. This figure came to $4,422. However, to cover any additional unexpected repairs, thiswas rounded to $4,500 and expensed as $750 per month during the six months of the openseason. Additionally, during the first year there is $800 budgeted in January for the build-ing of the sport show booth and materials. Also, during the first year there is $500 bud-geted to modify the sign located by the edge of the road.

Salaries. All of the salaries add up to $75,000 per year or $6,250 per month.

Supplies. Included in this expense is the cost of detergent, soap, paper towels, napkins, toi-let paper, cleaning chemicals, rags, scrub pads, etc. This is estimated to be $628 per monthduring the open season.

Trash Service. For this expense, the costs over the last three years were averaged and thiscame to $86. Therefore, a budget of $90 per month has been accounted for.

Utilities. Again, an average was taken from the last three years and this came to $6,940.However, with the increased use of the kitchen for the dining aspect, this value was in-creased by 8 percent to arrive at $7,495. For simplicity, this amount was rounded to $7,500.It is assumed that 60 percent of this figure will be during the open season and 40 percentduring the closed season.

Vehicle Gas. The company vehicle will only be used during the open season and will beused to transport canoeists and canoes, as well as occasional trips to Duluth for supplies.This is an assumed amount of $2,400 per year or $400 per month.

Vehicle Insurance. This expense was quoted through Progressive Insurance for a commer-cial vehicle. The cost of this is $884 annually and paid in three installments.

Operating Expenses in Years 2 and 3. As the CCC Group increases the business at Rockwood,some expenses will rise as the level of business rises. These are summarized as follows.

Expense Year 1 Year 2 Year 3

Fuel for boats $788/mo 6% to $835/mo 8% to $902/mo Phone $415/mo 2% to 423/mo 2% to $432/mo Supplies $628/mo 5% to 660/mo 5% to $693/mo Utilities $7,500/yr 5% to $7,875/yr 5% to $8,269/yr Vehicle gas $400/mo $450/mo $500/mo



Interest Payments. There are three different balances that Rockwood will pay interest on.First, there is the real estate loan. This loan has an APR of 7.5 percent. Second, the equip-ment loan has an APR of 6.0 percent. Third, there is a line of credit up to $200,000 and thishas an APR of 6.5 percent. Steve Moore, the Senior Vice President of Star Financial Bank,indicated these values.

Cash Flow Assumptions

Cash Receipts

These values represent net sales from the income statement. Bank borrowings are usedfrom the company’s line of credit to cover the expenses during the seasonal fluctuations.

Cash Disbursements

This section includes the total cost of goods sold, changes in inventory levels other thanthose held constant, all operating expenses (less depreciation), principle and line of creditpayments made, interest payments, tax payments, and any dividends paid.

Balance Sheet Assumptions

Cash

Cash is taken from the ending cash balance on the cash flow statement.

Inventory

It is assumed that all inventory will remain constant with the exception of the dining(food) inventory, which is depleted at the end of the season. This is reflected in the changein inventory subsection to the disbursements section, located on the cash flow statement.

Goodwill

The value of goodwill represents the difference between the purchase price of $1,350,000,and the estimated value of the business, including inventory that came with it.

Other Assets

These other long-term assets are recorded down at their book value estimated by the CCCGroup in the Acquisition Section.

Computer

This asset was contributed by the CCC Group and has a book value of $1,500.

Loan and Line of Credit

These values represent the outstanding balances on both loans and the line of credit.

Contributed Capital

The CCC Group contributed 20 percent of the purchase price, which came to $270,000. Inaddition, the above-mentioned computer was contributed. Therefore, the CCC Groupcontributed a total of $271,500.

Retained Earnings

This value reflects the accumulated net income from the income statement.

7 9 7Financial

B. Ratios

Ratio* Year 1 Year 2 Year 3

Profitability Ratios

Profit Margin Ratio –5.4% –1.3% 4.1% Return on Assets –1.3% –.3% 1.2% Return on Equity –6.9% –1.8% 5.7%

Liquidity Ratios**

Current Ratio .32 .33 .32 Quick Ratio .005 .02 .02

Debt Utilization Ratios

Debt to Total Assets 80.7% 80.6% 78.8% Times Interest Earned .76 .94 1.23

* Balance sheet formulas use the month of October, the end of the open season.** Snapshot of the end of October—figure does not include bank borrowings thathelp with seasonal cash flow. Therefore, the figure appears distorted.

C. Break-Even Analysis

The break-even analysis was performed using the combination of sales, total cost, and fixedcost. Variable costs included were cost of goods sold, credit card fees, and fuel for boats. Allother operating expenses plus interest were considered to be fixed. Total cost was the sum ofboth these types of costs. The chart below illustrates these three factors over the first threeyears. The break-even point was reached in the third year after sales surpassed $348,155.


Break-Even Analysis

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

0 1 2 3

SalesTotal costFixed cost

Year 0 1 2 3

Sales — 324,525 343,633 370,036 Total cost 270,596 342,139 348,155 352,170 Fixed cost 270,596 270,596 272,625 271,386 Variable cost — 71,543 75,530 80,784

7 9 9Financial

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9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

36,2

28

Fuel

for

Boa

ts—

——

——

—35

15

4 19

7 21

8 15

4 30

78

8 Hea

lth

Ben

efits

873

873

873

873

873

873

873

873

873

873

873

873

10,4

76

Insu

ranc

e: P

rope

rty/

Liab

ility

/etc

.—

—2,

500

——

2,50

0 —

—2,

500

——

2,50

0 10

,000

In

sura

nce:

Liq

uor

Liab

ility

——

250

——

250

——

250

——

250

1,00

0 In

sura

nce:

Wor

kers

’Co

mpe

nsat

ion

250

250

250

250

250

250

250

250

250

250

250

250

3,00

0 Le

gal Se

rvic

es2,

500

——

——

——

——

——

—2,

500

Lice

nses

(liq

uor,

reso

rt, ci

gare

tte,

etc

.)—

——

——

660

—25

0 —

——

—91

0 Offi

ce S

uppl

ies

200

——

200

——

200

——

200

——

800

Oth

er20

0 20

0 20

0 20

0 20

0 20

0 50

0 50

0 50

0 50

0 50

0 50

0 4,

200

Soci

al S

ecur

ity

Tax

478

478

478

478

478

478

478

478

478

478

478

478

5,73

6 St

ate

Une

mpl

oym

ent

Tax

81

81

81

81

81

81

81

81

81

81

81

81

972

Fede

ral Une

mpl

oym

ent

Tax

50

50

50

50

29

19

13

13

5 —

——

279

Phon

e41

5 41

5 41

5 41

5 41

5 41

5 41

5 41

5 41

5 41

5 41

5 41

5 4,

980

Prop

erty

Tax

349

349

462

462

462

462

462

462

462

462

462

462

5,31

8 Re

pairs

and

Mai

nten

ance

——

800

——

500

750

750

750

750

750

750

5,80

0 Sa

laries

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

75,0

00

Supp

lies

(cle

anin

g an

d la

undr

y, p

aper

pro

duct

s, e

tc.)

——

——

—62

8 62

8 62

8 62

8 62

8 63

0 —

3,77

0 Tr

ash

Serv

ice

90

90

90

90

90

90

90

90

90

90

90

90

1,08

0 Utilit

ies

500

500

500

500

500

500

750

750

750

750

750

750

7,50

0 Ve

hicl

e Gas

——

——

——

400

400

400

400

400

400

2,40

0 Ve

hicl

e In

sura

nce

346

——

—26

9 —

——

269

——

—88

4 To

tal Ope

ratin

g Ex

pens

es16

,226

12

,680

19

,268

15

,918

16

,556

19

,866

15

,556

16

,261

19

,226

16

,464

15

,906

17

,357

20

1,28

4

Ope

ratin

g Pr

ofit

(Los

s)(1

6,22

6)(1

2,68

0)(1

9,26

8)(1

5,91

8)(1

5,29

3)(1

4,22

1)1,

478

36,2

27

43,4

46

48,1

59

29,0

67

(8,4

72)

56,2

99

Less

: Re

al E

stat

e Lo

an Int

eres

t—

5,31

0 5,

300

5,29

1 5,

281

5,27

1 5,

261

5,25

2 5,

242

5,23

2 5,

222

5,21

1 57

,873

Le

ss:

Equi

pmen

t Lo

an Int

eres

t—

1,15

2 1,

139

1,12

5 1,

112

1,09

8 1,

085

1,07

1 1,

057

1,04

3 1,

030

1,01

6 11

,928

Le

ss:

Line

of Cr

edit Int

eres

t 76

16

3 28

7 39

5 49

8 61

8 67

7 54

8 38

0 18

5 93

19

7 4,

117

Tota

l In

tere

st76

6,

625

6,72

6 6,

811

6,89

1 6,

987

7,02

3 6,

871

6,67

9 6,

460

6,34

5 6,

424

73,9

18

Net

Inc

ome

Bef

ore

Taxe

s(1

6,30

2)(1

9,30

5)(2

5,99

4)(2

2,72

9)(2

2,18

4)(2

1,20

8)(5

,545

)29

,356

36

,767

41

,699

22

,722

(1

4,89

6)(1

7,61

9)St

ate

Inco

me

Tax

——

——

——

——

——

——

—Fe

dera

l In

com

e Ta

x—

——

——

——

——

——

——

Net

Inc

ome

(Los

s)$(

16,3

02)

$(19

,305

)$(

25,9

94)

$(22

,729

)$(

22,1

84)

$(21

,208

)$(

5,54

5)$2

9,35

6 $3

6,76

7 $4

1,69

9 $2

2,72

2 $(

14,8

96)

$(17

,619

)

8 0 1Financial

Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsSt

atem

ent

of C

ash

Flow

sNov

embe

r 20

02–O

ctob

er 2

003

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Beg

inni

ng C

ash

Bal

ance

$—

$71

7 $

431

$45

6 $

746

$58

1 $

83

$13

4 $

92

$26

8 $

283

$27

9 Ad

d: R

ecei

pts:

Period

Rev

enue

s—

——

—1,

263

5,64

5 20

,140

65

,770

79

,523

83

,006

57

,767

11

,412

32

4,52

6 Ban

k Bor

row

ings

14,0

00

16,0

0023

,000

20

,000

19

,000

22

,000

11

,000

—

——

—19

,200

14

4,20

0 To

tal Ca

sh A

vaila

ble

14,0

00

16,7

17

23,4

31

20,4

56

21,0

09

28,2

26

31,2

23

65,9

04

79,6

15

83,2

74

58,0

50

30,8

91

—

Less

: D

isbu

rsem

ents

Cost

of Goo

ds S

old

(Inv

.)—

——

——

—3,

106

13,2

82

16,8

51

18,3

82

12,7

94

2,52

7 66

,942

Ch

ange

in

Inve

ntor

y—

——

——

4,30

9 —

——

——

—2,

809

Ope

rating

Exp

ense

16,2

26

12,6

80

19,2

68

15,9

18

16,5

56

19,8

66

15,5

55

16,2

61

19,2

26

16,4

64

15,9

06

17,3

57

201,

283

Less

: Dep

reci

atio

nRe

al E

stat

e Pr

inci

pal Pa

ymen

t—

——

——

—3,

078

3,11

7 3,

156

3,19

5 3,

236

3,27

6 19

,058

Eq

uipm

ent

Prin

cipa

l Pa

ymen

t—

——

——

—5,

346

5,40

0 5,

454

5,50

9 5,

564

5,62

0 32

,893

Li

ne o

f Cr

edit P

aym

ent

——

——

——

—23

,900

31

,000

36

,000

17

,000

—

107,

900

Tota

l In

tere

st76

6,

625

6,72

6 6,

811

6,89

1 6,

987

7,02

3 6,

871

6,67

9 6,

460

6,34

5 6,

424

73,9

18

Tota

l Ta

xes

——

——

——

——

——

——

—Div

iden

ds P

aid

——

——

——

——

——

——

—To

tal Ca

sh O

utflo

ws

13,2

83

16,2

86

22,9

75

19,7

10

20,4

28

28,1

43

31,0

89

65,8

12

79,3

47

82,9

91

57,7

71

30,7

40

468,

575

Cash

Bal

ance

, En

ding

$71

7 $

431

$45

6 $

746

$58

1 $

83

$13

4 $

92

$26

8 $

283

$27

9 $

151

$15

4

Accu

mul

ated

Lin

e of

Cre

dit

14,0

00

30,0

00

53,0

00

73,0

00

92,0

00

114,

000

125,

000

101,

100

70,1

00

34,1

00

17,1

00

36,3

00

36,3

00


Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsBal

ance

She

etNov

embe

r 20

02–O

ctob

er 2

003

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Asse

tsCu

rren

t Ass

ets:

Cash

$71

7 $

432

$45

7 $

747

$58

2 $

84

$13

5 $

93

$26

9 $

285

$28

2 $

154

Gift

Sho

p In

vent

ory

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

Out

fitting

Inv

ento

ry2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 St

ore

Inve

ntor

y—

——

——

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 Din

ing

Inve

ntor

y (foo

d)—

——

——

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

445

—To

tal Cu

rren

t As

sets

7,71

7 7,

432

7,45

7 7,

747

7,58

2 11

,393

11

,444

11

,402

11

,578

11

,594

11

,536

9,

963

Long

-Ter

m A

sset

s:Goo

dwill

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

Prop

erty

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

Bui

ldin

gs32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 Fu

rnitur

e, F

ixtu

res,

and

Equ

ipm

ent

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

Out

fitting

Equ

ipm

ent

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

Com

pute

r1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 Le

ss: Ac

cum

ulat

ed D

epre

ciat

ion

(3,0

19)

(6,0

38)

(9,0

57)

(12,

076)

(15,

095)

(18,

114)

(21,

133)

(24,

152)

(27,

171)

(30,

190)

(33,

209)

(36,

228)

Tota

l Lo

ng-T

erm

Ass

ets

1,34

1,48

1 1,

338,

462

1,33

5,44

3 1,

332,

424

1,32

9,40

5 1,

326,

386

1,32

3,36

7 1,

320,

348

1,31

7,32

9 1,

314,

310

1,31

1,29

1 1,

308,

272

Tota

l As

sets

1,34

9,19

8 1,

345,

894

1,34

2,90

0 1,

340,

171

1,33

6,98

7 1,

337,

779

1,33

4,81

1 1,

331,

750

1,32

8,90

7 1,

325,

904

1,32

2,82

7 1,

318,

235

Liab

ilitie

s an

d Eq

uity

Loan

1,08

0,00

0 1,

080,

000

1,08

0,00

0 1,

080,

000

1,08

0,00

0 1,

080,

000

1,07

1,57

6 1,

063,

059

1,05

4,44

9 1,

045,

745

1,03

6,94

5 1,

028,

049

Line

of Cr

edit

14,0

00

30,0

00

53,0

00

73,0

00

92,0

00

114,

000

125,

000

101,

100

70,1

00

34,1

00

17,1

00

36,3

00

Tota

l Li

abili

ties

1,09

4,00

0 1,

110,

000

1,13

3,00

0 1,

153,

000

1,17

2,00

0 1,

194,

000

1,19

6,57

6 1,

164,

159

1,12

4,54

9 1,

079,

845

1,05

4,04

5 1,

064,

349

Stoc

khol

der's

Equi

tyCo

ntribu

ted

Capi

tal

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

Reta

ined

Ear

ning

s(1

6,30

2)(3

5,60

6)(6

1,60

0)(8

4,32

9)(1

06,5

13)

(127

,721

)(1

33,2

65)

(103

,909

)(6

7,14

2)(2

5,44

1)(2

,718

)(1

7,61

4)Div

iden

ds P

aid

——

——

——

——

——

——

Tota

l Eq

uity

255,

198

235,

894

209,

900

187,

171

164,

987

143,

779

138,

235

167,

591

204,

358

246,

059

268,

782

253,

886

Tota

l Li

abili

ties

and

Equi

ty$1,

349,

198

$1,

345,

894

$1,

342,

900

$1,3

40,1

71

$1,

336,

987

$1,3

37,7

79

$1,3

34,8

11

$1,3

31,7

50

$1,3

28,9

07

$1,

325,

904

$1,3

22,8

27

$1,3

18,2

35

Diff

eren

ce—

——

——

——

——

——

—

8 0 3Financial

Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsIn

com

e St

atem

ent

Nov

embe

r 20

03–O

ctob

er 2

004

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Sale

s: Cabi

n Re

ntal

$—

$—

$—

$—

$—

$—

$4,

016

$17,

952

$22,

960

$25,

449

$17

,952

$3,

546

$91

,874

Dep

osits

——

——

1,33

9 5,

984

7,65

3 8,

483

5,98

4 1,

182

——

30,6

25

Out

fitting

——

——

——

3,89

6 17

,421

22

,280

24

,696

17

,421

3,

440

89,1

54

Din

ing

——

——

——

4,13

8 18

,502

23

,663

26

,229

18

,502

3,

655

94,6

89

Gift

Sho

p—

——

——

—1,

141

5,10

1 6,

524

7,23

1 5,

101

1,00

7 26

,105

St

ore

(Bai

t, T

ackl

e, C

igar

ette

s, e

tc.)

——

——

——

477

2,13

4 2,

729

3,02

5 2,

134

422

10,9

21

ELS

Com

mis

sion

s from

Lic

ense

Sal

es—

——

——

—12

52

66

73

52

10

26

5 Net

Sal

es—

——

—1,

339

5,98

421

,333

69

,645

84

,206

87

,885

61,1

6212

,080

$34

3,63

3

Cost

of Goo

ds S

old:

Out

fitting

(Fo

od a

nd F

uel)

——

——

——

294

1,31

4 1,

680

1,86

2 1,

314

259

6,72

2 Din

ing

(Foo

d an

d Bev

erag

e)—

——

——

—1,

734

7,75

2 9,

915

10,9

90

7,75

2 1,

531

39,6

75

Gift

Sho

p M

erch

andi

se—

——

——

—69

6 3,

110

3,97

8 4,

409

3,11

0 61

4 15

,916

St

ore

(Bai

t, T

ackl

e, a

nd C

onve

nien

ce G

oods

)—

——

——

—30

1 1,

344

1,71

9 1,

906

1,34

4 26

6 6,

880

Oth

er (

Hon

eym

oon

Pack

ages

)

——

——

——

244

488

488

244

——

1,46

4 To

tal Co

st o

f Goo

ds S

old

——

——

——

3,26

9 14

,008

17

,780

19

,411

13

,520

2,

670

70,6

57

Gro

ss M

argi

n—

——

—1,

339

5,98

4 18

,064

55

,637

66

,426

68

,474

47

,642

9,

410

272,

977

(con

tinu

ed)


Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsIn

com

e St

atem

ent

Nov

embe

r 20

03–O

ctob

er 2

004

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Ope

ratin

g Ex

pens

es:

Adve

rtis

ing

125

125

3,05

03,

050

1,12

52,

625

125

125

125

125

125

125

10,8

50Ac

coun

ting

Ser

vice

s—

——

—2,

500

——

——

——

—2,

500

Cred

it C

ard

Fees

——

——

16

70

251

818

989

1,03

3 71

9 14

2 4,

038

Dep

reci

atio

n

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

36,2

28

Fuel

for

Boa

ts—

——

——

—37

16

3 20

9 23

1 16

3 32

83

5 Hea

lth

Ben

efits

873

873

873

873

873

873

873

873

873

873

873

873

10,4

76

Insu

ranc

e: P

rope

rty/

Liab

ility

/etc

.—

—2,

500

——

2,50

0 —

—2,

500

——

2,50

0 10

,000

In

sura

nce:

Liq

uor

Liab

ility

——

250

——

250

——

250

——

250

1,00

0 In

sura

nce:

Wor

kers

’Co

mpe

nsat

ion

250

250

250

250

250

250

250

250

250

250

250

250

3,00

0 Le

gal Se

rvic

es—

——

——

——

——

——

——

Lice

nses

(liq

uor,

reso

rt, ci

gare

tte,

etc

.)—

——

——

618

—25

0 —

——

—86

8 Offi

ce S

uppl

ies

200

——

200

——

200

——

200

——

800

Oth

er20

0 20

0 20

0 20

0 20

0 20

0 50

0 50

0 50

0 50

0 50

0 50

0 4,

200

Soci

al S

ecur

ity

Tax

478

478

478

478

478

478

478

478

478

478

478

478

5,73

8 St

ate

Une

mpl

oym

ent

Tax

81

81

81

81

81

81

81

81

81

81

81

81

968

Fede

ral Une

mpl

oym

ent

Tax

50

50

50

50

29

19

13

13

5 0

0 0

279

Phon

e42

3 42

3 42

3 42

3 42

3 42

3 42

3 42

3 42

3 42

3 42

3 42

3 5,

076

Prop

erty

Tax

462

462

462

462

462

462

462

462

462

462

462

462

5,54

4 Re

pairs

and

Mai

nten

ance

——

——

——

750

750

750

750

750

750

4,50

0 Sa

laries

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

75,0

00

Supp

lies

(cle

anin

g an

d la

undr

y, p

aper

pro

duct

s, e

tc.)

——

——

——

660

660

660

660

660

660

3,96

0 Tr

ash

Serv

ice

90

90

90

90

90

90

90

90

90

90

90

90

1,08

0 Utilit

ies

525

525

525

525

525

525

788

788

788

788

788

788

7,87

8 Ve

hicl

e Gas

——

——

——

450

450

450

450

450

450

2,70

0 Ve

hicl

e In

sura

nce

346

——

—26

9 —

——

269

——

—88

4 To

tal Ope

ratin

g Ex

pens

es13

,372

12

,826

18

,501

15

,951

16

,590

18

,733

15

,699

16

,443

19

,421

16

,663

16

,081

18

,123

19

8,40

1

Ope

ratin

g Pr

ofit

(Los

s)(1

3,37

2)(1

2,82

6)(1

8,50

1)(1

5,95

1)(1

5,25

1)(1

2,74

9)2,

365

39,1

94

47,0

05

51,8

11

31,5

61

(8,7

13)

74,5

73

Less

: R

eal Es

tate

Loa

n In

tere

st5,

201

5,19

1 5,

181

5,17

0 5,

160

5,14

9 5,

139

5,12

8 5,

117

5,10

6 5,

096

5,08

5 61

,723

Le

ss:

Equi

pmen

t Lo

an Int

eres

t1,

002

988

973

959

945

931

916

902

887

872

858

843

11,0

76

Less

: L

ine

of C

redi

t In

tere

st

287

379

498

607

710

810

869

729

539

328

219

328

6,30

3 To

tal In

tere

st6,

490

6,55

8 6,

652

6,73

6 6,

815

6,89

0 6,

924

6,75

9 6,

543

6,30

6 6,

173

6,25

6 79

,102

Net

Inc

ome

Bef

ore

Taxe

s(1

9,86

2)(1

9,38

4)(2

5,15

3)(2

2,68

7)(2

2,06

6)(1

9,63

9)(4

,559

)32

,435

40

,462

45

,505

25

,388

(1

4,96

9)(4

,529

)St

ate

Inco

me

Tax

——

——

——

——

——

——

—Fe

dera

l In

com

e Ta

x—

——

——

——

——

——

——

Net

Inc

ome

(Los

s)$

(19,

862)

$(1

9,38

4)$(2

5,15

3)$

(22,

687)

$(2

2,06

6)$(

19,6

39)

$(4

,559

)$32

,435

$40

,462

$

45,5

05

$25

,388

$(1

4,96

9)$

(4,5

29)

8 0 5Financial

Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsSt

atem

ent

of C

ash

Flow

sNov

embe

r 20

03–O

ctob

er 2

004

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Beg

inni

ng C

ash

Bal

ance

$15

4 $

11

$64

6 $

512

$84

4 $

798

$67

8 $

396

$75

8 $

48

$28

1 $

514

Add:

Rec

eipt

s:Pe

riod

Rev

enue

s—

——

—1,

339

5,98

4 21

,333

69

,645

84

,206

87

,885

61

,162

12

,080

34

3,63

4 Ban

k Bor

row

ings

16,7

00

17,0

00

22,0

00

20,0

00

19,0

00

18,5

00

11,0

00

——

——

20,0

00

144,

200

Tota

l Ca

sh A

vaila

ble

16,8

54

17,0

11

22,6

46

20,5

12

21,1

83

25,2

82

33,0

11

70,0

41

84,9

64

87,9

33

61,4

43

32,5

94

—

Less

: D

isbu

rsem

ents

Cost

of Goo

ds S

old

(Inv

.)—

——

——

—3,

268

14,0

08

17,7

80

19,4

11

13,5

20

2,67

1 70

,658

Ch

ange

in

Inve

ntor

y—

——

——

2,00

0 75

0 —

——

(1,2

19)

(1,5

31)

—Ope

rating

Exp

ense

13,3

72

12,8

26

18,5

01

15,9

51

16,5

89

18,7

33

15,6

99

16,4

43

19,4

21

16,6

62

16,0

80

18,1

23

198,

400

Less

: Dep

reci

atio

n(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

6,22

8)Re

al E

stat

e Pr

inci

pal Pa

ymen

t—

——

——

—3,

317

3,35

9 3,

401

3,44

4 3,

487

3,53

0 20

,538

Eq

uipm

ent

Prin

cipa

l Pa

ymen

t—

——

——

—5,

676

5,73

3 5,

790

5,84

8 5,

907

5,96

6 34

,920

Li

ne o

f Cr

edit P

aym

ent

——

——

——

—26

,000

35

,000

39

,000

20

,000

—

120,

000

Tota

l In

tere

st6,

490

6,55

8 6,

652

6,73

6 6,

815

6,89

0 6,

924

6,75

9 6,

543

6,30

6 6,

173

6,25

6 79

,102

To

tal Ta

xes

——

——

——

——

——

——

—Div

iden

ds P

aid

——

——

——

——

——

——

—To

tal Ca

sh O

utflo

ws

16,8

43

16,3

65

22,1

34

19,6

68

20,3

85

24,6

04

32,6

15

69,2

83

84,9

16

87,6

52

60,9

29

31,9

96

487,

390

Cash

Bal

ance

, En

ding

$11

$64

6$

512

$84

4$

798

$67

8$

396

$75

8$

48$

281

$51

4$

598

$59

8

Accu

mul

ated

Lin

e of

Cre

dit

53,0

0070

,000

92,0

00

112,

000

131,

000

149,

500

160,

500

134,

500

99,5

00

60,5

00

40,5

0060

,500

60

,500


Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsBal

ance

She

etNov

embe

r 20

03–O

ctob

er 2

004

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Asse

tsCu

rren

t Ass

ets:

Cash

$11

$

646

$51

2$

844

$79

8$

678

$39

5$

757

$47

$28

1$

512

$59

7Gift

Sho

p In

vent

ory

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

Out

fitting

Inv

ento

ry2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 St

ore

Inve

ntor

y2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 Din

ing

Inve

ntor

y (foo

d)—

——

——

2,00

0 2,

750

2,75

0 2,

750

2,75

0 1,

531

—To

tal Cu

rren

t As

sets

9,82

0 10

,455

10

,321

10

,653

10

,607

12

,487

12

,954

13

,316

12

,606

12

,840

11

,852

10

,406

Long

-Ter

m A

sset

s:Goo

dwill

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

Prop

erty

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

Bui

ldin

gs32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 Fu

rnitur

e, F

ixtu

res,

and

Equ

ipm

ent

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

Out

fitting

Equ

ipm

ent

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

Com

pute

r1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 Le

ss: Ac

cum

ulat

ed D

epre

ciat

ion

(39,

247)

(42,

266)

(45,

285)

(48,

304)

(51,

323)

(54,

342)

(57,

361)

(60,

380)

(63,

399)

(66,

418)

(69,

437)

(72,

456)

Tota

l Lo

ng-T

erm

Ass

ets

1,30

5,25

3 1,

302,

234

1,29

9,21

5 1,

296,

196

1,29

3,17

7 1,

290,

158

1,28

7,13

9 1,

284,

120

1,28

1,10

1 1,

278,

082

1,27

5,06

3 1,

272,

044

Tota

l As

sets

1,31

5,07

3 1,

312,

689

1,30

9,53

6 1,

306,

849

1,30

3,78

4 1,

302,

645

1,30

0,09

3 1,

297,

436

1,29

3,70

7 1,

290,

922

1,28

6,91

5 1,

282,

450

Liab

ilitie

s an

d Eq

uity

Loan

1,02

8,04

9 1,

028,

049

1,02

8,04

9 1,

028,

049

1,02

8,04

9 1,

028,

049

1,01

9,05

6 1,

009,

964

1,00

0,77

3 99

1,48

1 98

2,08

7 97

2,59

1 Li

ne o

f Cr

edit

53,0

00

70,0

00

92,0

00

112,

000

131,

000

149,

500

160,

500

134,

500

99,5

00

60,5

00

40,5

00

60,5

00

Tota

l Li

abili

ties

1,08

1,04

9 1,

098,

049

1,12

0,04

9 1,

140,

049

1,15

9,04

9 1,

177,

549

1,17

9,55

6 1,

144,

464

1,10

0,27

3 1,

051,

981

1,02

2,58

7 1,

033,

091

Stoc

khol

der's

Equi

tyCo

ntribu

ted

Capi

tal

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

Reta

ined

Ear

ning

s(3

7,47

6)(5

6,86

0)(8

2,01

3)(1

04,7

00)

(126

,765

)(1

46,4

04)

(150

,963

)(1

18,5

28)

(78,

066)

(32,

559)

(7,1

72)

(22,

141)

Div

iden

ds P

aid

——

——

——

——

——

——

Tota

l Eq

uity

234,

024

214,

640

189,

487

166,

800

144,

735

125,

096

120,

537

152,

972

193,

434

238,

941

264,

328

249,

359

Tota

l Li

abili

ties

and

Equi

ty$1

,315

,073

$1,3

12,6

89$1

,309

,536

$1,3

06,8

49$1

,303

,784

$1,3

02,6

45$1

,300

,093

$1,2

97,4

36$1

,293

,707

$1,2

90,9

22$1

,286

,915

$1,2

82,4

50

Diff

eren

ce—

——

——

——

——

——

—

8 0 7Financial

Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsIn

com

e St

atem

ent

Nov

embe

r 20

04–O

ctob

er 2

005

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Sale

s: Cabi

n Re

ntal

$—

$—

$—

$—

$—

$—

$4,

336

$19

,388

$24

,797

$27

,485

$

19,3

88

$3,

830

$99

,224

Dep

osits

——

——

1,44

5 6,

463

8,26

6 9,

162

6,46

3 1,

277

——

33,0

76

Out

fitting

——

——

——

4,20

8 18

,814

24

,062

26

,671

18

,814

3,

717

96,2

86

Din

ing

——

——

——

4,47

0 19

,982

25

,556

28

,327

19

,982

3,

947

102,

264

Gift

Sho

p—

——

——

—1,

175

5,25

4 6,

719

7,44

8 5,

254

1,03

8 26

,888

St

ore

(Bai

t, T

ackl

e, C

igar

ette

s, e

tc.)

——

——

——

525

2,34

7 3,

002

3,32

8 2,

347

464

12,0

13

ELS

Com

mis

sion

s from

Lic

ense

Sal

es—

——

——

—13

56

71

79

56

11

28

6 Net

Sal

es—

——

—1,

445

6,46

3 22

,993

75

,003

90

,670

94

,615

65

,841

13

,007

37

0,03

7

Cost

of Goo

ds S

old:

Out

fitting

(Fo

od a

nd F

uel)

——

——

——

317

1,41

9 1,

814

2,01

1 1,

419

280

7,26

0 Din

ing

(Foo

d an

d Bev

erag

e)—

——

——

—1,

873

8,37

2 10

,708

11

,869

8,

372

1,65

4 42

,848

Gift

Sho

p M

erch

andi

se—

——

——

—71

6 3,

203

4,09

7 4,

541

3,20

3 63

3 16

,393

St

ore

(Bai

t, T

ackl

e, a

nd C

onve

nien

ce G

oods

)—

——

——

—33

1 1,

479

1,89

1 2,

097

1,47

9 29

2 7,

569

Oth

er (

Hon

eym

oon

Pack

ages

)

——

——

——

244

488

488

244

——

1,46

4 To

tal Co

st o

f Goo

ds S

old

——

——

——

3,48

1 14

,961

18

,998

20

,762

14

,473

2,

859

75,5

34

Gro

ss M

argi

n—

——

—1,

445

6,46

319

,512

60,0

4271

,672

73,8

5351

,368

10,1

4829

4,50

3

(con

tinu

ed)


Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsIn

com

e St

atem

ent

Nov

embe

r 20

04–O

ctob

er 2

005

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Ope

ratin

g Ex

pens

es:

Adve

rtis

ing

125

125

3,05

03,

050

1,12

52,

625

125

125

125

125

125

125

10,8

50Ac

coun

ting

Ser

vice

s—

——

—2,

500

——

——

——

—2,

500

Cred

it C

ard

Fees

——

——

17

76

270

881

1,06

5 1,

112

774

153

4,34

8 Dep

reci

atio

n

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

3,01

9 3,

019

36,2

28

Fuel

for

Boa

ts—

——

——

—40

17

6 22

5 25

0 17

6 35

90

2 Hea

lth

Ben

efits

873

873

873

873

873

873

873

873

873

873

873

873

10,4

76

Insu

ranc

e: P

rope

rty/

Liab

ility

/etc

.—

—2,

500

——

2,50

0 —

—2,

500

——

2,50

0 10

,000

In

sura

nce:

Liq

uor

Liab

ility

——

250

——

250

——

250

——

250

1,00

0 In

sura

nce:

Wor

kers

’Co

mpe

nsat

ion

250

250

250

250

250

250

250

250

250

250

250

250

3,00

0 Le

gal Se

rvic

es—

——

——

——

——

——

——

Lice

nses

(liq

uor,

reso

rt, ci

gare

tte,

etc

.)—

——

——

618

—25

0 —

——

—86

8 Offi

ce S

uppl

ies

200

——

200

——

200

——

200

——

800

Oth

er20

0 20

0 20

0 20

0 20

0 20

0 50

0 50

0 50

0 50

0 50

0 50

0 4,

200

Soci

al S

ecur

ity

Tax

478

478

478

478

478

478

478

478

478

478

478

478

5,73

6 St

ate

Une

mpl

oym

ent

Tax

81

81

81

81

81

81

81

81

81

81

81

81

972

Fede

ral Une

mpl

oym

ent

Tax

50

50

50

50

50

50

50

50

50

50

50

50

600

Phon

e43

1 43

2 43

2 43

2 43

2 43

2 43

2 43

2 43

2 43

2 43

2 43

1 5,

182

Prop

erty

Tax

462

462

462

462

462

462

462

462

462

462

462

462

5,54

4 Re

pairs

and

Mai

nten

ance

——

——

——

750

750

750

750

750

750

4,50

0 Sa

laries

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

6,25

0 6,

250

75,0

00

Supp

lies

(cle

anin

g an

d la

undr

y, p

aper

pro

duct

s, e

tc.)

——

——

——

693

693

693

693

693

692

4,15

7 Tr

ash

Serv

ice

90

90

90

90

90

90

90

90

90

90

90

90

1,08

0 Utilit

ies

552

551

551

551

551

551

827

827

827

827

827

827

8,26

9 Ve

hicl

e Gas

——

——

——

500

500

500

500

500

500

3,00

0 Ve

hicl

e In

sura

nce

346

——

—26

9 —

——

269

——

—88

4 To

tal Ope

ratin

g Ex

pens

es13

,407

12

,861

18

,536

15

,986

16

,647

18

,805

15

,890

16

,687

19

,689

16

,942

16

,330

18

,316

20

0,09

6

Ope

ratin

g Pr

ofit

(Los

s)(1

3,40

7)(1

2,86

1)(1

8,53

6)(1

5,98

6)(1

5,20

2)(1

2,34

2)3,

622

43,3

55

51,9

83

56,9

11

35,0

38

(8,1

68)

94,4

07

Less

: R

eal Es

tate

Loa

n In

tere

st5,

074

5,06

3 5,

051

5,04

0 5,

029

5,01

8 5,

006

4,99

5 4,

983

4,97

1 4,

960

4,94

8 60

,138

Le

ss:

Equi

pmen

t Lo

an Int

eres

t82

8 81

3 79

8 78

3 76

8 75

2 73

7 72

2 70

6 69

1 67

5 65

9 8,

932

Less

: L

ine

of C

redi

t In

tere

st

417

505

624

730

833

930

982

825

614

375

262

370

7,46

7 To

tal In

tere

st6,

319

6,38

1 6,

473

6,55

3 6,

630

6,70

0 6,

725

6,54

2 6,

303

6,03

7 5,

897

5,97

7 76

,537

Net

Inc

ome

Bef

ore

Taxe

s(1

9,72

6)(1

9,24

2)(2

5,00

9)(2

2,53

9)(2

1,83

2)(1

9,04

2)(3

,103

)36

,813

45

,680

50

,874

29

,141

(1

4,14

5)17

,870

St

ate

Inco

me

Tax

——

——

——

——

—53

053

0—

530

Fede

ral In

com

e Ta

x—

——

——

——

——

—2,

343

—2,

343

Net

Inc

ome

(Los

s)$

(19,

726)

$(1

9,24

2)$

(25,

009)

$(2

2,53

9)$(

21,8

32)

$(19

,042

)$

(3,1

03)

$36

,813

$

45,6

80

$50

,874

$

26,2

68

$(1

4,14

5)$

14,9

97

8 0 9Financial

Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsSt

atem

ent

of C

ash

Flow

sNov

embe

r 20

04–O

ctob

er 2

005

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Year

End

Beg

inni

ng C

ash

Bal

ance

$59

7$

390

$36

7$

377

$35

7$

544

$52

1$

435

$56

1$

447

$42

1$

27

Add:

Rec

eipt

s:Pe

riod

Rev

enue

s—

——

—1,

445

6,46

3 22

,992

75

,003

90

,669

94

,615

65

,841

13

,007

37

0,03

5 Ban

k Bor

row

ings

16,5

00

16,2

00

22,0

00

19,5

00

19,0

00

18,0

00

9,60

0 —

——

—20

,000

14

0,80

0 To

tal Ca

sh A

vaila

ble

17,0

97

16,5

90

22,3

67

19,8

77

20,8

02

25,0

07

33,1

13

75,4

38

91,2

30

95,0

62

66,2

62

33,0

34

—

Less

: D

isbu

rsem

ents

Cost

of Goo

ds S

old

(Inv

.)—

——

——

—3,

481

14,9

61

18,9

98

20,7

62

14,4

73

2,85

9 75

,534

Ch

ange

in

Inve

ntor

y—

——

——

2,00

0 —

1,00

0 —

—(1

,346

)(1

,654

)3,

308

Ope

rating

Exp

ense

13,4

07

12,8

61

18,5

36

15,9

86

16,6

47

18,8

05

15,8

90

16,6

87

19,6

89

16,9

41

16,3

29

18,3

16

200,

094

Less

: Dep

reci

atio

n(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

,019

)(3

6,22

8)Re

al E

stat

e Pr

inci

pal Pa

ymen

t—

——

——

—3,

575

3,62

0 3,

665

3,71

1 3,

757

3,80

5 22

,133

Eq

uipm

ent

Prin

cipa

l Pa

ymen

t—

——

——

—6,

026

6,08

6 6,

147

6,20

9 6,

271

6,33

4 37

,073

Li

ne o

f Cr

edit P

aym

ent

——

——

——

—29

,000

39

,000

44

,000

21

,000

—

133,

000

Tota

l In

tere

st6,

319

6,38

1 6,

473

6,55

3 6,

630

6,70

0 6,

725

6,54

2 6,

303

6,03

7 5,

897

5,97

7 76

,537

To

tal Ta

xes

——

——

——

——

——

2,87

3—

2,87

3 Div

iden

ds P

aid

——

——

——

——

——

——

—To

tal Ca

sh O

utflo

ws

16,7

07

16,2

23

21,9

90

19,5

20

20,2

58

24,4

86

32,6

78

74,8

77

90,7

83

94,6

41

66,2

35

32,6

18

514,

324

Cash

Bal

ance

, En

ding

$39

0$

367

$37

7$

357

$54

4$

521

$43

5$

561

$44

7$

421

$27

$41

6$

416

Accu

mul

ated

Lin

e of

Cre

dit

77,0

0093

,200

115,

200

134,

700

153,

700

171,

700

181,

300

152,

300

113,

300

69,3

00

48,3

0068

,300

68

,300


Rock

woo

d Lo

dge

& C

anoe

Out

fitte

rsBal

ance

She

etNov

embe

r 20

04–O

ctob

er 2

005

Nov

embe

rDec

embe

rJa

nuar

yFe

brua

ryM

arch

April

May

June

July

Augu

stSe

ptem

ber

Oct

ober

Asse

tsCu

rren

t Ass

ets:

Cash

$39

1$

368

$37

8$

359

$54

7$

524

$43

8$

564

$45

0$

424

$30

$41

9 Gift

Sho

p In

vent

ory

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

5,00

0 5,

000

Out

fitting

Inv

ento

ry2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 2,

000

2,00

0 St

ore

Inve

ntor

y2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 2,

809

2,80

9 Din

ing

Inve

ntor

y (foo

d)—

——

——

2,00

0 2,

000

3,00

0 3,

000

3,00

0 1,

654

-

Tota

l Cu

rren

t As

sets

10,2

00

10,1

77

10,1

87

10,1

68

10,3

56

12,3

33

12,2

47

13,3

73

13,2

59

13,2

33

11,4

93

10,2

28

Long

-Ter

m A

sset

s:Goo

dwill

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

463,

391

Prop

erty

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

254,

476

Bui

ldin

gs32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 32

2,62

4 Fu

rnitur

e, F

ixtu

res,

and

Equ

ipm

ent

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

202,

350

Out

fitting

Equ

ipm

ent

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

100,

159

Com

pute

r1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 1,

500

1,50

0 Le

ss: Ac

cum

ulat

ed D

epre

ciat

ion

(75,

475)

(78,

494)

(81,

513)

(84,

532)

(87,

551)

(90,

570)

(93,

589)

(96,

608)

(99,

627)

(102

,646

)(1

05,6

65)

(108

,684

)To

tal Lo

ng-T

erm

Ass

ets

1,26

9,02

5 1,

266,

006

1,26

2,98

7 1,

259,

968

1,25

6,94

9 1,

253,

930

1,25

0,91

1 1,

247,

892

1,24

4,87

3 1,

241,

854

1,23

8,83

5 1,

235,

816

Tota

l As

sets

1,27

9,22

5 1,

276,

183

1,27

3,17

4 1,

270,

136

1,26

7,30

5 1,

266,

263

1,26

3,15

8 1,

261,

265

1,25

8,13

2 1,

255,

087

1,25

0,32

8 1,

246,

044

Liab

ilitie

s an

d Eq

uity

Loan

972,

591

972,

591

972,

591

972,

591

972,

591

972,

591

962,

990

953,

284

943,

472

933,

552

923,

524

913,

385

Line

of Cr

edit

77,0

00

93,2

00

115,

200

134,

700

153,

700

171,

700

181,

300

152,

300

113,

300

69,3

00

48,3

00

68,3

00

Tota

l Li

abili

ties

1,04

9,59

1 1,

065,

791

1,08

7,79

1 1,

107,

291

1,12

6,29

1 1,

144,

291

1,14

4,29

0 1,

105,

584

1,05

6,77

2 1,

002,

852

971,

824

981,

685

Stoc

khol

der's

Equi

tyCo

ntribu

ted

Capi

tal

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

271,

500

Reta

ined

Ear

ning

s(4

1,86

6)(6

1,10

8)(8

6,11

7)(1

08,6

55)

(130

,486

)(1

49,5

28)

(152

,632

)(1

15,8

19)

(70,

140)

(19,

265)

7,00

4 (7

,141

)Div

iden

ds P

aid

——

——

——

——

——

——

Tota

l Eq

uity

229,

634

210,

392

185,

383

162,

845

141,

014

121,

972

118,

868

155,

681

201,

360

252,

235

278,

504

264,

359

Tota

l Li

abili

ties

and

Equi

ty$1

,279

,225

$1

,276

,183

$1,2

73,1

74$1

,270

,136

$1,2

67,3

05$1,

266,

263

$1,

263,

158

$1,

261,

265

$1,2

58,1

32$1

,255

,087

$1

,250

,328

$1,2

46,0

44

Diff

eren

ce—

——

——

——

——

——

—

VIII. critical risks

A. Forest Fires

In 1999, a phenomenon known as a “blow-down” occurred where Rockwood is located. Thisleft thousands of trees on the ground, which increases the threat of forest fires to this region.The effects of a forest fire on wooden structures surrounded by forest could be devastating.

• Along with the necessary insurance, steps have already been taken by the Minnesota De-partment of Natural Resources and the former owners to develop the “wildfire sprinklersystem.” This system uses pumps and sprinklers to completely saturate the property withlake water in a matter of minutes in order to protect all the assets on the property.

• Additionally, Rockwood has $100,000 loss of income insurance.

B. Weather

Since the weather is out of human control and unpredictable, this poses a threat for Rock-wood. For example, there was a phenomenon known as a blow-down a few years back.This is basically a wind that is as strong as that of a tornado. This could cause loss of busi-ness due to customers avoiding the area for a period following an event of this nature. Also,this could cause damage to the buildings/property. There is also the chance of having noor little snow or warm weather during the winter months; winter recreation in the areawould be affected and fewer people would travel to this area for winter vacations.

• Alternatively, Rockwood has $100,000 loss of income insurance in case of such perilousevents as that of storm damage.

• Additionally, Rockwood will not be open for the winter season for the first three years,but after that, incentives and discounts could be offered to fill vacancies caused by suchwinter weather problems.

C. Cancellations

One of the most important considerations regarding critical risks is cancellations. Out ofcontrol from the CCC Group, vacationers who hold reservations for cabins may decide tocancel those reservations at the last minute. The effect of this could be devastating on rev-enue. While there is a cancellation policy to help combat this, the CCC Group does notwant to settle for just the deposit.

• An alternative to the cancellation threat is to have a cancellation policy in place to retainthe deposit.

• Additionally, Rockwood will be aggressively marketing the business, and this will keepvacancies to a minimum.

• Furthermore, the Gunflint Trail Association is very helpful in these situations. When theyare notified of a new vacancy, they can usually fill it with ease during the busy season.

D. The Boundary Waters Canoe Area Wilderness (BWCAW)

Although unlikely, future expansion of the BWCAW may pose a threat to the Rockwoodproperty. That is, the government may acquire the property in order to increase the size ofthe wilderness preserve. The effects of this would be that Rockwood would be bought bythe government and put out of business.

• An alternative here is for the CCC Group to build a relationship and work with the gov-ernment to preserve the right to operate the business on the current property that it hasoperated on since 1926.

8 1 1Critical Risks

E. Environmental and Ecological

There is also a potential risk of unforeseeable environmental and ecological problems. Forexample, there could be some type of chemical dumped in the lake Rockwood is locatedon. Although highly unlikely that this type of disaster could actually happen in the feder-ally protected wilderness, the effect could be devastating on the business.

• This is highly unlikely, but to prevent it within their control, the CCC Group will do itsshare to educate visitors about pollution and spills in the natural environment.

• Additionally, Rockwood has $100,000 loss of income insurance in case of such drasticevents.

IX. milestone scheduleJuly 2002 Sign purchase agreement and begin due diligence period

October 2002 Conclude due diligence period

Start the negotiations with current owners

November 2002 Close on the loan and purchase of Rockwood

Establish a line of credit of $200,000

Begin transition of ownership

Pay first salaries ($6,250 per month)

Develop new accounting system for business

Begin aggressively implementing new marketing plan

Begin building relationships with the local industry, the pre-vious owners, suppliers, and possible new suppliers

December 2002 Make first interest payment

April 2003 Receive and pay for first supplies from vendors (dining)

Renew and apply for all applicable licenses

May 2003 Open for first season as new owners/management

All-inclusive packages are offered for first time at Rockwood

Restaurant opens with family style dining and limited hours

Beer is available in the lodge for the first time since 1997

Pay first double payment of principle

October 2003 Conclude first season as new owners/management andreach sales of $324,525

Compile customer survey and financial performance data todetermine any new business strategies for the next season

May 2004 Open for second season

October 2004 Conclude second season and reach sales of $343,633


May 2005 Open for third season

October 2005 Conclude third season and reach sales of $370,036



appendices

Acquisition Appendix

Subj: Rockwood Lodge

Date: 3/13/2002 9:24:57 AM US Eastern Standard Time

From: [email protected]

To: [email protected]

Sent from the Internet (Details)

Jason—

I am sending you a copy of the field card today on Rockwood Lodge. We do not use thefield cards to record values any longer but the building information, a map, etc. are on thefield card.

The current estimated market value on Rockwood Lodge is $577,100 for assessment year2002, taxes payable in 2003. The taxes due this year are based on the 2001 value and are$4,188 for the year.

8 1 3Appendices

NORDIC APPRAISAL SERVICE, INC. REAL ESTATE APPRAISAL

SELF-CONTAINED COMPLETE APPRAISAL ROCKWOOD LODGE

November 18, 1998

Mr. Gordon Winzenburg, Senior Credit UnderwriterCreditAmerica SavingsP.O. Box 1330Walker, Minnesota 58484

RE: Rockwood Lodge

825 Gunflint Trail

Grand Marais, Minnesota 55604

Our File #N8026

Dear Mr. Winzenburg

In accordance with your request, an inspection and self-contained appraisal has been made of the above-referenced property for the purpose of estimating the market value of the fee simple interest. Based uponan inspection of the property and the factors influencing value, and in consideration of the special condi-tions and extraordinary assumptions listed below and on page #10, it is our opinion that the subjectproperty has market values as follows:

MARKET VALUE TABLE

VALUE TYPE EFFECTIVE DATE MARKET VALUE

“As Is” July 1, 1998 $1,670,000

“As Completed” July 1, 1999 $1,750,000

MARKET VALUE (BREAKDOWN)

Land $425,000

Buildings $637,000

Furniture, Fixtures & Equipment (FF & E – RND) $213,000

Outfitting Operation $475,000

TOTAL MARKET VALUE $1,750,000


Outfitting Equipment Values

Item Quantity New $ Adjusted $ Total Adjusted Value

Kevlar Wenonah Canoes Valued At: 65%MN III 1 $2,295 $1,492 $1,491.75MN II 4 $2,095 $1,362 $5,447.00Champlain 2 $2,095 $1,362 $2,723.50Spirit II 2 $1,945 $1,264 $2,528.50Sundowners 3 $2,095 $1,362 $4,085.25Advantage (solo) 1 $1,595 $1,037 $1,036.75Prism (solo) 1 $1,595 $1,037 $1,036.75Itasca 1 $2,295 $1,492 $1,491.75

Royalex Wenonah Valued At: 65%Adirondace 6 $945 $614 $3,685.50Spirit II 7 $1,095 $712 $4,982.25Sundowner 1 $1,045 $679 $679.25Old Town Campers 2 $699 $454 $908.70

Aluminum Canoes 15 $499 $324 $4,865.25Aluminum V-Bottom 14' Boats 7 $699 $454 $3,180.4516' Deluxe Lund Fishing Boats 2 $6,930 $7,000 $14,000.00

MotorsEvinrude 6 H.P. 4 $1,074 $300 $1,200.00Johnson 7.5 H.P. 1 $1,499 $500 $500.00Johnson 4 H.P. 1 $999 $350 $350.00Min Kota Trolling Motors 2 $199 $199 $398.00

Paddles Valued At: 85%Bentshaft 20 $120 $102 $2,040.00Kayak 2 $150 $128 $255.00Regular 100 $50 $43 $4,250.00

Stearns Life Vests 85 $50 $43 $3,612.50Canoe Seat Backs 12 $50 $43 $510.00Tents 35 $100 $85 $2,975.00Cots 4 $35 $30 $119.00Tarps 23 $15 $13 $293.25Waterjugs 12 $10 $9 $102.00Stoves 20 $40 $34 $680.00Saws 16 $25 $21 $340.00First Aid Kits 9 $25 $21 $191.25Map Cases 11 $15 $13 $140.25Collapsable Water Buckets 5 $20 $17 $85.00Water Filters 6 $60 $51 $306.00Journals 100 $8 $7 $680.00Compasses 4 $10 $9 $34.00Thermal Bags 4 $15 $13 $51.00Cook Kits 18 $20 $17 $306.00Griddles 10 $15 $13 $127.50Therm-A-Rest Pads 29 $35 $30 $862.75

8 1 5Appendices

(continued)

Outfitting Equipment Values Continued

Sleeping Bags Valued At: 85%K-Plus Package 21 $150 $127.50 $2,677.50Deluxe Package 52 $75 $63.75 $3,315.00Group 20 $50 $42.50 $850.00

Packs Valued At: 85%Duluth Packs 37 $100 $85 $3,145.00Granite Gear Packs 30 $150 $128 $3,825.00

Canoe Trailers 2 $1,500 $800 $1,600.001995 Chevy Suburban 1 N/A $12,195 $12,195.00

Totals:Total Adjusted Value of Outfitting Equipment $100,159.00

Rockwood Lodge & Canoe OutfittersIncome Statement Data

From January 1 through December 31, 1999–2001

Vertical Vertical Horizontal Horizontal Analysis Analysis Analysis Analysis

2000 2001 1999–2000 2000–2001 Account 1999 2000 2001 (%) (%) (%) (%)

Sales:

Cabin Rental $119,231 $112,776 $112,574 52.32 47.92 (5.41) (0.18)Fishing License 3,534 4,750 6,109 2.20 2.60 34.41 28.61 Gift Shop 34,539 24,553 16,944 11.39 7.21 (28.91) (30.99)Store/Lodge 14,088 8,179 6,093 3.79 2.59 (41.94) (25.50)Outfitting 97,343 62,073 92,907 28.80 39.55 (36.23) 49.67 Reimbursed Expense 4,878 3,225 279 1.50 0.12 (33.89) (91.35)

Net Sales 273,613 215,556 234,906 100.00 100.00 (21.22) 8.98

Cost of Goods Sold 45,161 22,945 38,087 10.64 16.21 (49.19) 65.99 Other 1,056 0 0 0.00 0.00 (100.00) 0.00

Total Cost of Sales 46,217 22,945 38,087 10.64 16.21 (50.35) 65.99

Gross Margin $227,396 $192,611 $196,819 89.36 83.79 (15.30) 2.18

Operating Expenses:Selling Expenses:Advertising 6,500 8,222 8,732 3.81 3.72 26.49 6.20 Car and Truck 8,600 8,700 8,169 4.04 3.48 1.16 (6.10)Commissions and Fees 0 0 1,593 0.00 0.68 0.00 0.00 Rent of Vehicles, Machines 0 0 107 0.00 0.05 0.00 0.00 Supplies 4,655 2,770 0 1.29 0.00 (40.49) (100.00)Wages 17,746 21,543 8,498 9.99 3.62 21.40 (60.55)

Total Selling Expenses 37,501 41,235 27,099 19.13 11.54 9.96 (34.28)


Rockwood Lodge & Canoe OutfittersIncome Statement Data (continued)

From January 1 through December 31, 1999–2001

Vertical Vertical Horizontal Horizontal Analysis Analysis Analysis Analysis

2000 2001 1999–2000 2000–2001 Account 1999 2000 2001 (%) (%) (%) (%)

General and Administrative Expenses:Depreciation 0 0 0 0.00 0.00 0.00 0.00 Employee Benefits 319 396 1,509 0.18 0.64 24.14 281.06 Insurance 4,706 9,994 9,696 4.64 4.13 112.37 (2.98)Office 0 0 1,243 0.00 0.53 0.00 0.00 Repairs and Maintenance 1,080 2,048 9,884 0.95 4.21 89.63 382.62 Mortgage Interest 83,138 126,398 124,296 58.64 52.91 52.03 (1.66)Legal Services 0 0 0 0.00 0.00 0.00 0.00 Travel 0 0 45 0.00 0.02 0.00 0.00 Meals and Entertainment 0 0 0 0.00 0.00 0.00 0.00 Utilities 12,179 11,427 12,188 5.30 5.19 (6.17) 6.66 Taxes and Licenses 6,930 7,883 4,640 3.66 1.98 13.75 (41.14)Other 26,336 17,183 9,109 7.97 3.88 (34.75) (46.99)

Total General and Administrative Expenses 134,688 175,329 172,610 81.34 73.48 30.17 (1.55)

Total Operating Expenses 172,189 216,564 199,709 100.47 85.02 25.77 (7.78)

Net Income (Loss) $ 55,207 $(23,953) $ (2,890) (11.11) (1.23) (143.39) 87.93

EBIT $145,275 $110,328 $126,046 51.18 53.66 (24.06) (14.25)Recast Income = EBIT + Wages + Repair & Main. + Emp. Benefits $164,420 $134,315 $145,937 62.31 62.13 (18.31) (8.65)Average Recast Income $148,224

8 1 7Appendices

Amer

ican

Pla

n Ra

tes

#3—

log

#4—

loft

#1—

loft

#2—

loft

cabi

n be

droo

m,

#6—

loft

bedr

oom

, be

droo

m,

skyl

ight

s,

mai

n le

vel

bedr

oom

, #7

—2

#8

—1

mai

n le

vel

mai

n le

vel

bedr

oom

be

droo

m,

#5—

log

m

ain

leve

l be

droo

m,

bedr

oom

, be

droo

m,

bedr

oom

, fa

ces

lake

tim

ber

cabi

n, 1

be

droo

m,

log

and

knot

ty p

ine,

Ca

bin

Des

crip

tion

knot

ty p

ine*

*kn

otty

pin

e**

with

slid

ing

door

fram

e**

room

, co

zylo

g be

am**

knot

ty p

ine

very

priva

te

Bed

s2

doub

les

in2

doub

les

in1

quee

n,

2 do

uble

s in

1 qu

een

2 do

uble

s in

1 qu

een,

2

2 do

uble

s,

loft, 1

doub

le,

loft, 1

doub

le,

sofa

sle

eper

loft, 1

doub

le,

loft, 2

twin

s, d

aybe

dso

fa s

leep

er1

twin

in

mai

n,

1 tw

in in

mai

n,1

twin

in

doub

les

in

sofa

sle

eper

sofa

sle

eper

mai

n, s

ofa

mai

n, s

ofa

slee

per

slee

per

Slee

ps9

94

92

105

5

Fire

plac

ega

sga

sno

gas

now

ood

woo

dga

s

May

1st

—M

ay 3

1st

$174

.25/

day*

$174

.25/

day*

$157

.25/

day*

$174

.25/

day*

$144

.50/

day*

$182

.75/

day*

$169

.15/

day*

$169

.15/

day*

June

1st

—Se

pt 3

0th*

*$2

05/d

ay*

$205

/day

*$1

85/d

ay*

$205

/day

*$1

70/d

ay*

$215

/day

*$1

99/d

ay*

$199

/day

*

Oct

1st

—Oct

31s

t$1

84.5

0/da

y*$1

84.5

0/da

y*$1

66.5

0/da

y*$1

84.5

0/da

y*$1

53/d

ay*

193.

50/d

ay*

$179

.10/

day*

$179

.10/

day*

*M

inim

um p

rice

is

for

first

tw

o ad

ults

Child

ren

3 an

d un

der

are

free

Child

ren

4—12

are

hal

f pr

ice

Taxe

s: S

tate

7.5

%, Lo

dgin

g 3%

Addi

tion

al P

erso

ns:

Mon

th o

f M

ay$8

7/da

y$8

7/da

y$7

8/da

y$8

7/da

y$7

2/da

y$9

1/da

y$8

4/da

y$8

4/da

y

June

1st

—Se

pt 3

0th

$102

/day

$102

/day

$92/

day

$102

/day

$85/

day

$107

/day

$99/

day

$99/

day

Mon

th o

f Oct

ober

$92/

day

$92/

day

$83/

day

$92/

day

$76/

day

$96/

day

$89/

day

$89/

day

**Ca

bins

1, 2,

4, an

d 6

have

a

four

-per

son

min

imum

cha

rge

July

an

d Au

gust

July

and

Aug

ust

$409

/day

$409

/day

$409

/day

$429

/day


Mod

ifie

d Pl

an R

ates

#3—

log

#4—

loft

#1—

loft

#2—

loft

cabi

n be

droo

m,

#6—

loft

bedr

oom

, be

droo

m,

skyl

ight

s,

mai

n le

vel

bedr

oom

, #7

—2

#8

—1

mai

n le

vel

mai

n le

vel

bedr

oom

be

droo

m,

#5—

log

m

ain

leve

l be

droo

m,

bedr

oom

, be

droo

m,

bedr

oom

, fa

ces

lake

tim

ber

cabi

n, 1

be

droo

m,

log

and

knot

ty p

ine,

Ca

bin

Des

crip

tion

knot

ty p

ine*

*kn

otty

pin

e**

with

slid

ing

door

fram

e**

room

, co

zylo

g be

am**

knot

ty p

ine

very

priva

te

Bed

s2

doub

les

in2

doub

les

in1

quee

n,

2 do

uble

s in

1 qu

een

2 do

uble

s in

1 qu

een,

2

2 do

uble

s,

loft, 1

doub

le,

loft, 1

doub

le,

sofa

sle

eper

loft, 1

doub

le,

loft, 2

twin

s, d

aybe

dso

fa s

leep

er1

twin

in

mai

n,

1 tw

in in

mai

n,1

twin

in

doub

les

in

sofa

sle

eper

sofa

sle

eper

mai

n, s

ofa

mai

n, s

ofa

slee

per

slee

per

Slee

ps9

94

92

105

5

Fire

plac

ega

sga

sno

gas

now

ood

woo

dga

s

May

1st

—M

ay 3

1st

$158

.50/

day*

$158

.50/

day*

$142

.50/

day*

$158

.50/

day*

$131

/day

*$1

66/d

ay*

$153

.50/

day*

153.

50/d

ay*

June

1st

—Se

pt 3

0th*

*$1

86.5

0/da

y*$1

86.5

0/da

y*$1

68/d

ay*

$186

.50/

day*

$154

.50/

day*

$195

.50/

day*

$181

/day

*$1

81/d

ay*

Oct

1st

—Oct

31s

t$1

67.5

0/da

y*$1

67.5

0/da

y*$1

51/d

ay*

$167

.50/

day*

$139

/day

*$1

75.5

0/da

y*$1

62.5

0/da

y*16

2.50

/day

*

*M

inim

um p

rice

is

for

first

tw

o ad

ults

Child

ren

3 an

d un

der

are

free

Child

ren

4—12

are

hal

f pr

ice

Taxe

s: S

tate

7.5

%, Lo

dgin

g 3%

Addi

tion

al P

erso

ns:

Mon

th o

f M

ay$7

9/da

y$7

9/da

y$7

1/da

y$7

9/da

y$6

5/da

y$8

3/da

y$7

6/da

y$7

6/da

y

June

1st

—Se

pt 3

0th

$93/

day

$93/

day

$84/

day

$93/

day

$77/

day

$97/

day

$90/

day

$90/

day

Mon

th o

f Oct

ober

$83/

day

$83/

day

$75/

day

$83/

day

$69/

day

$87/

day

$81/

day

$81/

day

**Ca

bins

1, 2,

4, an

d 6

have

a

four

-per

son

min

imum

cha

rge

July

an

d Au

gust

July

and

Aug

ust

$372

.50/

day

$372

.50/

day

$372

.50/

day

$389

.50/

day

8 1 9Appendices

Hou

seke

epin

g Pl

an R

ates

#3—

log

#4—

loft

#1—

loft

#2—

loft

cabi

n be

droo

m,

#6—

loft

bedr

oom

, be

droo

m,

skyl

ight

s,

mai

n le

vel

bedr

oom

, #7

—2

#8

—1

mai

n le

vel

mai

n le

vel

bedr

oom

be

droo

m,

#5—

log

m

ain

leve

l be

droo

m,

bedr

oom

, be

droo

m,

bedr

oom

, fa

ces

lake

tim

ber

cabi

n, 1

be

droo

m,

log

and

knot

ty p

ine,

Ca

bin

Des

crip

tion

knot

ty p

ine*

*kn

otty

pin

e**

with

slid

ing

door

fram

e**

room

, co

zylo

g be

am**

knot

ty p

ine

very

priva

te

Bed

s2

doub

les

in2

doub

les

in1

quee

n,

2 do

uble

s in

1 qu

een

2 do

uble

s in

1 qu

een,

2

2 do

uble

s,

loft, 1

doub

le,

loft, 1

doub

le,

sofa

sle

eper

loft, 1

doub

le,

loft, 2

twin

s, d

aybe

dso

fa s

leep

er1

twin

in

mai

n,

1 tw

in in

mai

n,1

twin

in

doub

les

in

sofa

sle

eper

sofa

sle

eper

mai

n, s

ofa

mai

n, s

ofa

slee

per

slee

per

Slee

ps9

94

92

105

5

Fire

plac

ega

sga

sno

gas

now

ood

woo

dga

s

May

1st

—M

ay 3

1st

$141

/day

*$1

41/d

ay*

$114

/day

*$1

41/d

ay*

$106

/day

*$1

47.5

0/da

y*$1

36.5

0/da

y*13

6.50

/day

*

June

1st

—Se

pt 3

0th*

*$1

66/d

ay*

$166

/day

*$1

34.5

0/da

y*$1

66/d

ay*

$125

/day

*$1

74/d

ay*

$161

/day

*$1

61/d

ay*

Oct

1st

—Oct

31s

t$1

49/d

ay*

$149

/day

*$1

21/d

ay*

$149

/day

*$1

12.5

0/da

y*$1

56.5

0/da

y*$1

44.5

0/da

y*14

4.50

/day

*

*M

inim

um p

rice

is

for

first

tw

o ad

ults

Child

ren

3 an

d un

der

are

free

Child

ren

4—12

are

hal

f pr

ice

Taxe

s: S

tate

7.5

%, Lo

dgin

g 3%

Addi

tion

al P

erso

ns:

Mon

th o

f M

ay$5

5/da

y$5

5/da

y$5

5/da

y$5

5/da

y$5

5/da

y$5

5/da

y$5

5/da

y$5

5/da

y

June

1st

—Se

pt 3

0th

$65/

day

$65/

day

$65/

day

$65/

day

$65/

day

$65/

day

$65/

day

$65/

day

Mon

th o

f Oct

ober

$60/

day

$60/

day

$60/

day

$60/

day

$60/

day

$60/

day

$60/

day

$60/

day

**Ca

bins

1, 2,

4, an

d 6

have

a

four

-per

son

min

imum

cha

rge

July

an

d Au

gust

July

and

Aug

ust

$296

/day

$296

/day

$296

/day

$296

/day


Honeymoon Packages

4-Night Package Spend first night at a B&B

in Duluth or Twin Citiesfollowed by next three nights at Rockwood.$1,570 per couple

7-Night Package Spend first and last night at a B&B in Duluth or Twin Cities with the middle five nights

spent at Rockwood$2,390 per couple

Taxes: State 7.5%, Lodging 3%

Anniversary Packages

2-Night Package$549.00 per couple

4-Night Package$1,049 per couple

Taxes: State 7.5%, Lodging 3%

8 2 1Appendices

Fam

ily

Pack

ages

#3—

log

#4—

loft

#1—

loft

#2—

loft

cabi

n be

droo

m,

#6—

loft

bedr

oom

, be

droo

m,

skyl

ight

s,

mai

n le

vel

bedr

oom

, #7

—2

#8

—1

mai

n le

vel

mai

n le

vel

bedr

oom

be

droo

m,

#5—

log

m

ain

leve

l be

droo

m,

bedr

oom

, be

droo

m,

bedr

oom

, fa

ces

lake

tim

ber

cabi

n, 1

be

droo

m,

log

and

knot

ty p

ine,

Ca

bin

Des

crip

tion

knot

ty p

ine

knot

ty p

ine

with

slid

ing

door

fram

ero

om, co

zylo

g be

amkn

otty

pin

eve

ry p

riva

te

Bed

s2

doub

les

in2

doub

les

in1

quee

n,

2 do

uble

s in

1 qu

een

2 do

uble

s in

1 qu

een,

2

2 do

uble

s,

loft, 1

doub

le,

loft, 1

doub

le,

sofa

sle

eper

loft, 1

doub

le,

loft, 2

twin

s, d

aybe

dso

fa s

leep

er1

twin

in

mai

n,

1 tw

in in

mai

n,1

twin

in

doub

les

in

sofa

sle

eper

sofa

sle

eper

mai

n, s

ofa

mai

n, s

ofa

slee

per

slee

per

Slee

ps9

94

92

105

5

Fire

plac

ega

sga

sno

gas

now

ood

woo

dga

s

May

1st

—M

ay 3

1st*

$239

$2

39

$219

$2

39

N/A

$245

$2

25

$225

June

1st

—Se

pt 3

0th*

$249

$2

49

$229

$2

49

N/A

$255

$2

35

$235

Oct

1st

—Oct

31s

t*$2

39

$239

$2

19

$239

N/A

$245

$2

25

$225

*Price

is

per

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ght

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imum

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inim

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Taxe

s: S

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39/d

ay*

$239

/day

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$239

/day

*$1

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$249

/day

*$2

19/d

ay*

$219

/day

*

Addi

tion

al P

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ns$6

5/da

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5/da

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5/da

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5/da

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5/da

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5/da

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5/da

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uxe

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ing

Pack

age

Rat

es$2

80/d

ay*

$280

/day

*$2

60/d

ay*

$280

/day

*$2

45/d

ay*

$290

/day

*$2

74/d

ay*

$274

/day

*

Addi

tion

al P

erso

ns$1

02/d

ay$1

02/d

ay$9

2/da

y$1

02/d

ay$8

5/da

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07/d

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9/da

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9/da

y

Child

ren

4—12

are

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f pr

ice

Child

ren

3 an

d un

der

are

free

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for

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ly

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st

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tate

7.5

%, Lo

dgin

g 3%

8 2 3Appendices

Outfitting Packages

Rockwood Kevlar Plus Complete Deluxe Outfitting*

3 days $285 3 days $2454 days $365 4 days $3005 days $445 5 days $3506 days $505 6 days $4057 days $555 7 days $4508 days $595 8 days $4959 days $635 9 days $54010 days $675 10 days $585Solo package $120/day *Deluxe outfitting w/ Kevlar canoes,

Add $5 per person per day

K-Plus Equipment Package $55 per person per dayDeluxe Equipment Package $45 per person per dayFood Package $30 per person per day

Food and Canoe Package Aluminum Canoes $38 per person per dayRoyalex Canoes $43 per person per dayKevlar Canoes $48 per person per day(5% discount available for repeat guests)

Lakeside Terrace Bunk RoomRate for two persons $40 per nightEach additional person $15 per night($20 deposit per night per room)

Partial Outfitting:(canoes include youke, paddles, and life vests)Aluminum Canoes $22/dayWenonah Royalex (55-lb. Adirondac) $27/dayWenonah Kevlar Canoe (38-lb. Adirondac or 40-lb. Sundowner) $37/dayWenonah MN II, MN III, Itasca $43/dayWenonah Solo Canoe $32/dayTents with follor, netting, and zippered front (Eureka nylon)

two-person $13.00 four-person $15.00 six-person $17.00

Duluth Packs $5.00 Water Jug $1.00 Sleeping Bag $4.00 Rain Poncho $2.00 Single Burner Stove $3.00 Granite Gear Packs $6.00 Therm-A-Rest $3.00 Stearns Vest $2.00


Camp Saw $2.00 Tarp $2.50 Cook Kit with Utensils (return in clean condition) $5.00 Parking $5/day/vehicleLaunch $5/canoeShower and Towel $5/personBoats $25/dayMotors $30/dayFishing Licenses (available in lodge)

8 2 5Appendices

Rockwood Lodge & OutfittersProfit and Loss

January 1–December 31, 2001

Income

Cabin rentals $ 112,573.82Fishing licenses sold 6,108.75Gift shop 16,944.39Store/lodge 6,092.52

OutfittingBunkhouse $ 9,826.01Canoe rentals 34,496.39Deluxe packages 10,330.00K-plus packages 11,407.00Miscellaneous 99.00Pack food 2,600.81Park and launch 697.00Showers 875.00Transportation 842.25Outfitting—other 21,733.97

Total outfitting 92,907.43

Reimbursed expense and services 279.03

Total income $234,905.94

ExpenseSoda $ 866.25Bait and tackle 437.00Gift shop merchandise 10,331.58Fishing licenses 4,488.00Advertising

Sport shows $ 850.00Other 4,697.16

Total advertising 5,547.16

Total automobile expense 2,723.33

Bank service charges 108.87Cabin furnishings 2,023.13Credit card fees 1,230.87Dues and subscriptions 2,478.00Equipment 1,431.51

(Laptop and printer)Equipment rental 106.88Fees 1,592.75Food 202.17Gasoline equipment 463.05


Rockwood Lodge & OutfittersProfit and Loss (continued)


ImprovementsBuilding cabin renovation $ 2,600.00Equipment: Wildfire sprinkler

Upgrade 1,411.00Icemaker service 300.00Inventory

Three pumps 1,000.00One water system solenoid 300.00

Other: Deck for tenthouse, etc. 900.00Total improvements 6,511.00

InsuranceHealth $ 1,509.00Property—other 9,696.07

Total insurance 11,205.07

InternetBoreal (monthly ISP) $ 182.30Web site 2,761.56Internet—other 240.65

Total Internet 3,184.51

License and permits 169.00

Lodge suppliesGroceries $ 8,772.74Outdoor maintenance 458.79Other 5,524.40Total lodge supplies $ 14,755.93

Miscellaneous 949.74

Office supplies 293.08

Outfitting expenseOutfitting equipment $ 2,127.19Outfitting food 3,869.91Outfitting supplies 409.73Outfitting—other 598.78Total Outfitting 7,005.61

Payroll expensesCasual labor $ 784.00Payroll wages 7,714.29Total payroll 8,498.29

8 2 7Appendices

(continued)

Rockwood Lodge & OutfittersProfit and Loss (continued)


Postage 1,440.08

Printing (brochures, rate sheets) 3,851.11

RepairsBuilding repairs $ 2,583.10Equipment repairs 2,143.20Repairs—other 634.99Total repairs 5,361.29

TaxesProperty $ 4,410.00State sales 42.32Other 18.59Total taxes 4,470.91

TelephoneCell phone $ 791.64Local 1,756.63Long distance 2,125.36Total telephone 4,673.63

Trash 1,000.90

Travel and entertainment 45.00

Truck lease 4,982.80


Rockwood Lodge & OutfittersDepreciation Schedule

Total Total Residual Depreciation Depreciation/ Depreciation/ Depreciation/ Depreciation/

Quantity Item Book Value Value Life—Years Year Year Month/Item Month

Several Buildings $ 322,624 $75,000 30 $ 8,254 $ 8,254 $ 688 $ 688

1 MN III $ 1,492 $ 300 5 $ 238 238 $ 20 20

4 MN II $ 1,362 $ 275 5 $ 217 870 $ 18 72

2 Champlain $ 1,362 $ 275 5 $ 217 435 $ 18 36

2 Spirit II $ 1,264 $ 250 5 $ 203 406 $ 17 34

3 Sundowners $ 1,362 $ 275 5 $ 217 652 $ 18 54

1 Advantage (solo) $ 1,037 $ 200 5 $ 167 167 $ 14 14

1 Prism (solo) $ 1,037 $ 200 5 $ 167 167 $ 14 14

1 Itasca $ 1,492 $ 300 5 $ 238 238 $ 20 20

2 16' Deluxe Lund Fishing

Boats $ 7,000 $ 3,000 5 $ 800 1,600 $ 67 133

1 1995 Chevy Suburban $ 12,195 $ 6,000 5 $ 1,239 1,239 $ 103 103

1 Computer $ 1,500 $ 100 5 $ 280 280 $ 23 23

$1 Furniture, Fixtures, and Equipment $ 202,350 $50,588 7 $21,680 21,680 $1,807 1,807

Total Depreciation

per Year $36,226

Total Depreciation per Month $3,018

8 2 9Appendices

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