CONTENTS 1 The Business 1a) The business idea 1b) The Product range 1c) Merits of the idea 1d) Business objectives 2 Market Analyses 2a) At the macro level 2b) At the micro level 2c) The market response to the idea 2d) Target market/ market opportunities 2e) The competition 3 Marketing 3a) Marketing policy 3b) Marketing policy 3c) Selling activities 4 Production 4a) The logistics 4b) Production capacity 4c) Suppliers 4d) Contingency 4e) Health regulations 5 Ownership 5a) Structure 5b) Employees 6 Finance a) Projected Profit and Loss account for the first two years 6b) Break Even Analysis 6c) Cash Flow forecast – Assumptions 6d) Cash flow forecast for the first year’s trading 7 Resourcing 7a) Resources Available 7b) Resources needed SUMMARY The Business – to deliver basically sandwiches and rolls directly to people at their workplace and to wholesale to outlets such as petrol stations. The proposal seeks to take advantage of an unexploited gap in the market with the relatively new concept of food delivery, which can be seen to work well elsewhere.
The business requires relatively little capital, overheads are minimal, and the margins and cash flow are good with increasing econonomies of scale. The market – generally more people are eating just a snack at lunch time and sandwiches fill this gap be being cheap and nutritious. The Bicester area is relatively prosperous and has a growing light industrial and service sector. Market response to the business idea was excellent and most potential was identified on the industrial estates and with the garages because of the lack of competition due to their geographic isolation and denser concentration of customers.
The main competition identified was home packed lunches and sandwich outlets in the town centre. Production – to maximise selling time, sandwiches will be prepared in the evening and delivery will commence at 8. 00am. Ownership – sole trader. Finance – a first year profit of ? 6,300 is projected, and ? 14,600 approximately in the second year. Break even is calculated at ? 91 daily sales on the basis of one van (which incorporates set up costs) but these drops to ? 65 with two vans, and to ? 46 ith two vans exclusive of set up costs. Resourcing – ? 1,700 owners capital available. Overdraft facility of ? 2,500 maximum required. 1 The Business 1a) The business idea To deliver food by van directly to people at their workplace in factories, offices and shops and to wholesale to retail outlets such as petrol filling stations in the Bicester area. 1b) The product range Basically sandwiches and rolls which I will make and package myself. The emphasis will be on good quality, natural ingredients.
The bread, both brown and white, will be supplied by a local bakery, which still uses traditional baking methods, and the meat will be provided by a reputable local butcher who will cook and slice the meat for us. 1c) Merits of the idea The idea of delivering sandwiches works very well in the Nottingham/Leicester area, where I know of at least two companies who are extremely successful. Other places near the Bicester city People always need to eat, they do so on a regular basis and with little seasonal fluctuation.
The business idea requires a relatively low capital input, overheads are kept to a minimum, the margins are good and there are definite economies of scale. I personally have the time and energy to build up the business, together with the advantages of a commercial qualification and background, and also the help of the Manpower Services Commission and the enterprise allowance. 1d) Business objectives Economically, I want to run a successful business that generates sufficient profit to be able, in three or four years time, to establish a cafe/restaurant in the Bicester area to complement my existing business.
Personally, establishing and building up a business will give me a great deal of satisfaction because of the independence and control I will have. I would also like to contribute in a small way to the economic activity in the area and create as many jobs as possible. 2 Market Analysis 2a) At the macro level The trend is today for more and more people to eat their main meal of the day in the evening and to have a snack at lunch time. Fast food naturally lends itself to this need, but compared with hamburgers and other forms of take away food, sandwiches compete easily on price and nutrition.
Although there is a general decline in the total household consumption of standard white loaves and brown bread, it is partly offset by a dramatic increase in the consumption of wholemeal and whole-wheat bread which went up over 30% between 1998 and 2001. At present, preferences are still very much for white bread, which accounts for 65% of total consumption, compared with only 25% for brown, whole-wheat and wholemeal breads. These figures give me an initial indicator as to the proportion of brown breads I ought to stock, although monitoring sales will eventually yield more accurate figures for my business.
An interesting point to note is that brown breads in fact cost more than white to make because more expensive imported ‘strong’ wheat is used, and also white bread benefits from production economies of scale and supermarket subsidies. Bread, because it is a staple food, is also very income elastic in terms of expenditure and quality purchased. In reality, the less people earn, the more bread they buy, and, more specifically, they buy more white sliced loaves and less brown bread. 2b) At the micro level The Becester area has a total population of around 65,000 people of whom approximately 60% are in employment.
The area is traditionally characterised by motor vehicle and component manufacturers, but there is a trend now to light industry and a growing service sector. 2c) Market response to the idea My research of potential customers took the form of an interviewer administered questionnaire. I took a random sample of each of three types of customer, namely petrol filling stations, industrial estates and offices/shops. Questions asked covered:- interest in the concept of sandwich delivery opinions of whether their particular establishment would be interested in the service and the reasons why where they currently buy snacks/lunches ctual facilities, number of employees and hours of work. Findings Petrol filling stations I covered a dozen garages locally and spoke to the manager in most cases. The response to the idea was very positive and over half the garages would be interested in the services, although some respondents felt their particular garage was not very well sited to sell sandwiches. None of the garages visited actually sold sandwiches, although one or two managers cited cases, where a garage was supplied by the manager’s wife. Some managers expressed concern about the perish ability of the product and would prefer to buy on a ‘sale or return’ basis.
I would not object to supply on this basis if I had control of the number delivered, since I think it would build confidence in the idea and would increase potential customers. When asked about profit margins, a 20-25% margin seemed to be quite acceptable. In fact, the margins on the range of products sold in some garages varied between 1-70%. One interesting point that emerged was that garages carrying out repairs employed a sizeable work force behind the scenes, which could also require sandwiches. Several garages were also part of chains and could put me in touch with other potential outlets. Incidentally, there are 40 petrol filling stations in the local yellow pages). In order to maximise sales, it would be important to deliver as early as possible in the morning, particularly on the main roads, to catch people requiring something for breakfast. Offices/Shops The potential sales in this sector seemed to be less than with the garages and factories because there was more competition. The best offices to go to would be those slightly away from the town centre. Carrying out a research survey has also enabled me to draw up a typical customer profile: Age/Sex/Social class he full spectrum, although more men probably on trading estates Buying habits regular, frequent, price aware, loyal (garage sales would be more impulse purchases from passing trade) Expectations value for money, attractive appearance, tasty and filling 2d) Target market/market opportunities Resulting from research findings, the most lucrative markets to aim for appear to be the garages and the industrial estates because of the relative lack of competition and the denser concentration of customers. Other opportunities which could be pursued as part of a growth strategy include: a wider geographic area pubs/coach companies uffet lunches for offices hot food/ice creams 2e) The competition Sandwich suppliers: These are concentrated in the town and are generally allied to bread shops and the chain stores (Woolworth’s, Sainsbury’s, etc). The prices are generally high, varying between 99p and ? 2 for sandwiches and 80p and ? 2 for rolls. Those operating of a similar nature to myself. Defence against competitors I am aware of my vulnerability to competition but hope to fend off any potential copycat rivals with the quality and image of my product, its value for money and the standard of service which will foster customer loyalty. Marketing 3a) Marketing Policy I feel that the marketing of my company is in the service itself. I aim to provide a quality product which is good value for money and sold on the strength of a strong image to the people who really need the service. 3b) The image I will make every effort to co-ordinate all aspects of my business, to project an image of quality, reliable service, hygiene and innovation. This will be achieved by having: a smart new van with an eye-catching motif on the side a colour scheme (bright red) which will be used for staff uniforms, letterheads, invoices a good point of sale display ygienic, attractive packaging availability using a 5 mile radius cordless telephone and back-up answer phone. 3c) Selling activities I intend to build up my sales round by personal selling. The benefits here are that I can demonstrate the service, keep the customers geographically as close as possible and control the rate of growth. Hopefully, growth will also come by word of mouth. If necessary, I could always do a local leaflet drop or advertise in the local paper. I intend to get an entry as soon as possible in the Yellow Pages (March 2002) and the local newspapers. 4 Production 4a) The logistics
The operation will be carried out thus: In order to maximise selling time, sandwiches will be prepared the evening before and stored in the fridge so that deliveries can commence at 8. 00am. In order to obtain fresh bread in the early evening it will be necessary to collect it since most bread deliveries are early in the morning. Deliveries to petrol filling station will be as soon as possible after the garages open in order to catch the breakfast traffic. I will then proceed to the industrial estates. Sales will finish at around 1. 30pm. This will give the afternoon to go to the bank, Cash and Carry, etc. b) Production capacity I have arranged to rent some premises in Bicester, which are suitable for conversion into a kitchen. The room has separate access, a large car park at the rear and a floor space of 18’x15’ with access to a toilet. On the basis of these premises I could supply at least four vans. The landlord has agreed that if he decides to vacate two adjoining offices, I would have first option on the lease. I have estimated a ratio of one sandwich maker to every van driver on the road. Initially I will supply and drive the first van, but at soon as I can afford it I will employ someone to help out.
I will be delivering six days a week (omitting Sundays). 4c) Suppliers My bread will be supplied by local bakery or partners, who have traditional style and produce superb bread. Because they do not normally wholesale, except to their own chain of shops, I hope to have a sales advantage in this respect. Their prices are very reasonable and they will also supply home-made style cakes. My meat will come from an excellent local butcher and, for convenience, he will cook and slice it for me. The two local Cash and Carries will supply pickles, butter, etc. A good local greengrocer will supply all the garnishes.
Costs are based on low volume discounts, but as my business builds up, discounts should increase. 4d) Contingency planning With reliability being an essential part of my service I will be vulnerable to breakdowns, etc. working alone initially. I have arranged a number of people I can call on at short notice to help out. Similarly with only a few employees it is crucial to have substitutes and for everyone to be able to do the other’s job. In the event of car failure, the garage has agreed to supply another vehicle at short notice. Alternatively, a van could also be hired. e) Health regulations I have had several discussions with the local environmental health department and am aware of the basic requirements. 5 Ownership 5a) I shall operate as a partnership. 5b) Employees I have attempted to identify the necessary characteristics of potential employees to make selection easier. It will be crucial to have the right employees because they are an integral part of the service. Essentially they must be presentable, enjoy contact with people and be able to work independently. It will probably be necessary to pay well above the legal minimum to get the right people.
Recruitment will be via local contacts, newspapers. No relevant experience would be necessary. I would send them on a short course to learn about hygiene requirements to increase their awareness of potential problems. I am aware of the requirements of the law concerning national insurance, statutory sick pay, taxation, etc. 6 Finance 6a) Profit and Loss account for the first two years See Note Year 1 Year 2 1Sales106,000200,000 2Less: Cost of Sales64,448114,000 Gross Profit41. 55286,000 Operating Expenses 3Rent3,1203,120 4Electricity/heating250250 5Van -purchase3,2753,275 – running expenses2,5822,582 7- depreciation1,1251,125 8Insurance300600 9Telephone -set up200200 -call and rent200300 10Stationery140140 11Advertising120250 12Cleaning materials100150 13Uniform100200 14Special Equipment600 – 15Wages10,13741,172 16Bank charges100200 17Bank interest130200 18Contingencies1,5001,500 Total Expenses23,97956,004 Profit before tax 17,57329,996 Estimated Profit for year one ? 24,000 Estimated Profit for year two ? 56,000 Profit & Loss Projections –Assumptions Year 1 Days SalesTotalTradingper DaySales ??? Van 1 January251002,500
Feb-Mar5020010,000 April-June 7520018,000 July-Dec15030043,000 30075,500 Van 2 July251002,500 Aug-Sep5020010,000 Oct-Dec7524018,000 30,500 Assume receipt of enterprise allowance from commencement of trading at ? 40 per week, less the Class II National Insurance contribution of ? 3. 50 per week, i. e. ?2,080 pa – ? 182 = ? 1,898 pa = ? 158 per month. (3)Cost of sales:Assume a ratio of sales 1 sandwich1 sandwich1 cake1 chocolate to a garageto a factorybar Unit cost40p40p36p36p= ? 1. 52 Mark-up30p50p14p4p= 98p Selling Price70p90p50p40p= ? 2. 50 Gross Margin45%55%28%10%= 39. 2% eighted average i. e. average gross, margin = 39. 2% cost of sales = 60. 8% For every $1. 25 sales, 4 units are sold. (4) Rent Assume take up of premises in Bicester at ? 60+ per week, inclusive of rates. (5) Electricity for lighting and electrical appliances estimated on basis on domestic consumption. Heating by calor gas portable heater. (6) Car purchase Both vans to be bought on a hire purchase basis. ? ?2 x deposit (20% of selling price of ? 3,400)1,360 Repayments at ? 90 per month for 13 mths (Van 1) and 6 mths (Van 2)1,710 2 x AA membership52 2 x signwritng150
Total3,272 (7) Car Running Expenses/Diesel Estimated annual mileage of 30,000 (3 times national average) @ 35 mpg @ ? 1. 90 per gallon ?? net of vat Van 1 (12 months)16281388 Van 2 (6 months)814694 2082 Assume servicing every 6,000 miles (first service free of charge) at ? 100 each ? Van 1400 Van 2100 (8) Depreciation: Assume value of ? 3,000 written off over 4 years Year 1? Van 1750 Van 2375 1125 (9a) Insurance ?115 per van (fully comprehensive, any driver) (10) Telephone ? a. Set up costs – Line reconnection25 Phone purchase25 Answer-phone90 Mobile60 200 b. Calls – line rental at ? 7. 50 pa Telephone calls will be mostly local. (12) Stationery Based on requirements for 1 year business cards letterheads invoices sandwich labels (13) Advertising Yellow Pages ? 80 Local Newspapers? 40 (14) Cleaning Materials To include dishcloths, bleach, etc. (15) Uniforms ? 10 sales tabards @ ? 5 50 10 preparation overalls @ 550 100 (16) Equipment In order to convert the premises to be suitable for food preparation, it will be necessary to buy a lino floor covering, a double sink, hand basin, water heater, room heater fridges, decoration materials, etc. (17) Wages
For the first six months casual labour will be employed. Thereafter a driver will be employed for the second van together with one sandwich maker (from 2002). ? Casual – 5hrs per wkx24 wksx? 6. 60 hr792 Driver – 35hrs per wkx24 wksx? 6. 60 hr5,544 Sandwich maker -24 hrs per wkx24 wksx? 6. 60 hr3,801 10,137 N. B. Figures are inclusive of employers national insurance contributions. (18) Accountants fees Accountants fees are to cover end of year accounts and 2 consultations. I will do all my own routine bookwork. (19) Bank Interest Bank interest is estimated on the basis of a ? ,000 overdraft over 5 months at 1. 3% per month. Year 2 Sales figures are based on 4 vans at twice year 1 figures. Cost of sales @ 57% (assuming increased discounts) (4-19) All figures are based on a reasonable multiple of the Year 1 costs. 6 b) Break Even Analysis Break even analysis based on the ratio of sales explained previously. i. e. ? 2. 50 sales = 4 units At a cost of 152p (60. 8%) And margin of 98 (39. 2%) Break even daily sales Total expenses x selling price of 4 units/ 300 trading days Contribution per 4 units (1) On the basis of 1 van (excluding costs of second van i. . purchases, running expenses, insurance and wages) 23,979 x ? 2. 50 / 313days = ? 245 78 (2) On the basis of 2 vans 29,996 x ? 2. 50 / 313 = ? 307 78 i. e. 154 per van, (It may be wise to introduce second van earlier than year two) 6c) Cash flow Forecast – Assumptions (1) Assume opening balance ? 1700 of owner capital. (2) Cash sales – to factories etc -72% of sales (3) Debtors sales to garages 30% of sales (invoice weekly of 50% assumed by the end of month) (4) Purchases = 60. 85 of sales (5) Rent payable quarterly in advance (6) Electricity payable quarterly 7) 1ST van purchased pre trading, second van beginning of July 2002 (8) Car running expenses Servicing every 3 months for each van @? 100 a time Van1 – 4 times Van2 – once (9) Insurance paid every year (10) Telephone bills paid quarterly (11) Purchased in advance of trading (12) Advertising Yellow pages and local newspapers (13) Bank interest charges are higher at the start of the year. (14) Drawing on a monthly basis (15) Contingency – Unexpected expenses or events For the Cash Flow table please see the next page. 7 Resourcing 7a) Capital ? 1,700 7b) Resources needed Overdraft facility with maximum ? 2,500