Feasibility Study of Establishing a Soft Serve Ice Cream Shop in Hagerstowns North End

 A FE AS IB IL IT Y STUD ST UDY Y OF ES TA BL IS HI NG SOFT SERVE ICE CREAM SHOP IN HAGERSTO HAGERSTOWN'S WN'S NORT H END

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR  MB A

INDEPENDENT RESEARCH

EDWARD  AUGU  AU GUST ST 23,

 A

TABLE OF CONTENTS

. . . . . . . . . . . . . . . . . . . 1 3 ..................... P roduct .....................  M  arket a rket 5 . . . . . . . . . . . . . . . . . 9 B usiness Design .................... I nsurance 12 . . . . . . . . . . . . . . . . . . . 13 R  egulations e gulations . . . . . . . . . . . . . . . . . . . 15  A  dvertising d vertising 17 F inancial .................... C onclusions . . . . . . . . . . . . . . . . . . . 20 21 E xhibits . . . . . . . . . . . . . . . . . . . . . ...................... 38  No te s Bibliography . . . . . . . . . . . . . . . . . . . I ntroduction

i

TABLE OF CONTENTS

. . . . . . . . . . . . . . . . . . . 1 3 ..................... P roduct .....................  M  arket a rket 5 . . . . . . . . . . . . . . . . . 9 B usiness Design .................... I nsurance 12 . . . . . . . . . . . . . . . . . . . 13 R  egulations e gulations . . . . . . . . . . . . . . . . . . . 15  A  dvertising d vertising 17 F inancial .................... C onclusions . . . . . . . . . . . . . . . . . . . 20 21 E xhibits . . . . . . . . . . . . . . . . . . . . . ...................... 38  No te s Bibliography . . . . . . . . . . . . . . . . . . . I ntroduction

i

I NTRODUCTI ON  The peer peer l ess sensat i on of s omet hi ng i cy and f l avor f ul mel t i ng on

t ongu ongue e

not

t o t he wor l d' s f ood l over s.

A del i cacy cacy on once r eser ser ved ved f or nobi l i t y, Am Amer i can can' s eat mor e t han 800 mi l l i on

i ce cr eam each yea year .

Gour met cal cal l s i ce cr eam

f avor i t e

I t i s not di f f i cul cul t t o under st and the the f or i ce cr eam.

Mor eove eoverr ,

passi on

Asi de f r om t he obvi ous pl easu surr e of sat sat i s -

f yi ng on ones ow own t ast e bud buds, s, al most ever ever yon yone has has a f ond memor y of a Bi r t hday p par ar t y, pi cni cni c or r omance ance whi ch i ncl uded some f or m of i ce cr eam. Anot her Amer i can passi on i s t he dr dr eam of owni ng ones ones own busi ness.

Havi ng t he abi l i t y of of set set t i ng ones own pr i -

or i t i es i n l i f e, con cont r ol l i ng ones ow own dest i ny, be bei ng i nde pendent f r omdi r ect su sup per vi si on and r ecei cei vi ng pr of i t s f r om ones ones own l abor abor s ar e a f ew of t he r at i onal es f or t hi s dr dr eam.  Thi s r esear ch paper aper uni uni t es t hese t wo pas pas si ons; ons; t he l ove ove f or i ce cr eam eam and t he dr eam eam of owni ng ones ones own busi busi ness.

Mor eover , i t i s a f easi bi l i t y st udy f or op openi ng a

sof sof t ser ser ve i ce cr eam par l or near t he nor t h end of Hager ager s t own, Mar yl and and.  Thi s f easi bi l i t y st udy udy des des cr i bes bes t he pr oduct oduct whi ch t he i ce cream cream par l or wi wi l l of f er t o t he publ i c. 1

The st udy def i nes

'

I

2

the target market a n d describes the business design; presents insurance needs and. various regulations facing the business ; and describes an advertising plan and evaluates the potential  prof  pr ofit itab abil ilit ity y

of

the ice cream parlor.

PRODUCT

 The pr i mar y pr oduct of t he r est aur ant wi l l i ce cr eam of f er ed

sof t ser ve

t wo f l avor s: vani l l a and chocol at e.

How-

ever , t he pr i mar y pr oduct wi l l be of f er ed i n many var i at i ons. ( Exhi bi t 1). Fi r st , t he menu wi l l of f er t he t r adi t i onal i ce cream ser ved i n a cone or cup ei t her pl ai n or coat ed wi t h chocol at e. Al so, t he t r adi t i onal t hi ck shake wi l l be of f er ed i n t hr ee f l avor s: vani l l a, chocol at e and st r awber r y. Anot her f avor i t e t o be ser ved wi l l be t he ol d f ashi oned sundae wi t h a choi ce of chocol at e, hot f udge, pi neappl e, st r awber r y, mar shmal l ow or but t er scot ch t oppi ngs.

I n addi t i on, t he

par l or wi l l of f er i ce cr eam f l oat s . Mor eover , t he par l or wi l l pr esent an ost ent at i ous pr esent at i on of speci al t y desser t s.

The banana spl i t wi l l f eat ur e

t hr ee heapi ng mounds of i ce cr eam, t hr ee t oppi ngs, banana and whi pped cr eam, t opped wi t h a cher r y.

Anot her t r eat f eat ur i ng

a moi st br owni e wi t h a gener ous por t i on of i ce cr eam and hot f udge wi l l al so be on t he menu. wi l l be an ol d f ashi oned

s on t he menu Two ot her i t em shor t cake desser t and t he

ever popul ar par f ai t .

advant age of seasonal i t ems,

speci al desser t s wi l l be f eat ur ed whi ch a par t i cul ar f r es h f r ui t . 3

w i l l

cent er ar ound

4

 The i nnovat i ve si de of t he menu wi l l

i ncl ude candi ed

shakes and s undaes whi ch combi ne t he cool cr eamy t ext ur e of i ce cr eamwi t h t he cust omer s f avor i t e candy bar or

candy.

I n addi t i on, t he par l or wi l l of f er t wo s i z es of

i ce cr eam cakes. Sof t dr i nks wi l l be t he par l or s secondar y pr oduct .  The dr i nk menu wi l l i ncl ude Coca Col a, Di et Coke, Spr i t e, and Root Beer . An i mpor t ant f act or i s t he at mospher e.

t he success of t he r est aur ant

 The at mospher e of t he par l or wi l l be

par t of t he pr oduct .

Cust omer s wi l l be gr eet ed wi t h

f r i endl y, cour t eous and ef f i ci ent empl oyees and t he physi cal bui l di ng i t sel f wi l l be kept cl ean and or der l y bot h i nsi de and out si de.

MARKET Mar ket s consi st of buyer s whi ch di f f er i n one or mor e r espect s.

They may di f f er i n t hei r

r esour ces, buy-

i ng pr act i ces, buyi ng at t i t udes or geogr aphi cal l ocat i on. Any of t hese var i abl es can be used t o segment an ent r epr eneur ' s mar ket . Si nce i ce cr eam

l i ked by al most al l

r egar dl ess of age, r ace or soci al st at us, t he most l ogi cal met hod of mar ket segment at i on i s by geogr aphi cal l ocat i on. For pr esent at i on pur poses, t he geogr aphi cal l ocat i on of t he t ar get mar ket f or t he pr oposed i ce cr eam r est aur ant can be def i ned as El ect i on Di st r i ct s

and 21 ( Exhi bi t

#2) or t he nor t h and nor t hwest er n sect i ons of Hager st own and t he nor t her n and nor t hwest er n par t s of Washi ngt on Count y whi ch ar e adj acent t o t he Ci t y of Hager st own.

Thi s geogr aph-

i cal ar ea has appr oxi mat el y 21, 000 r esi dent s of whi ch 26% ar e l ess t han 18 year s of age, 57% ar e bet ween t he ages of

18 and 62 and 17% ar e ol der t han 62 year s of  The pr oposed l ocat i on f or t he sof t ser ve i ce cr eam par l or i s i n a shoppi ng cent er cur r ent l y bei ng const r uct ed at a l ocat i on one hal f on Rout e 11 ( Exhi bi t

a mi l e Nor t h of Hager st own, Mar yl and Accor di ng t o t he devel oper , Of f i ce

Suppl i er s I nc. , t he shoppi ng cent er wi l l be compl et ed by ear l y 5

6

spr i ng and wi l l

i ncl ude a l ar ge super mar ket and ei ght r et ai l

spaces of appr oxi mat el y 750 squar e f eet each. t her e wi l l be ampl e par ki ng f or t he cent er .

I n addi t i on, Access i n

out of t he shoppi ng cent er i s al r eady cont r ol l ed by a t r af f i c l i ght .

Beyond t hi s, t he devel oper was unabl e t o gi ve any

addi t i onal i nf or mat i on.  The pr oj ect ed gr owt h of t he pr oposed mar ket pr omi si ng.

ext r emel y

Accor di ng t o r ecor ds at t he Washi ngt on Count y

Pl anni ng and Zoni ng Commi ss i on, t her e ar e s i x new housi ng

I n t he

devel opment s al r eady appr oved ( Exhi bi t

ar ea t her e ar e 2 3 si ngl e f ami l y homes and 40 mul t i f ami l y homes appr oved f or devel opment .

Sl i ght l y nor t heast

of t he pr oposed l ocat i on ar e t hr ee ar eas appr oved f or devel opment :

For est Hi l l s, Fai r gr een Acr es, and Fount ai n Head Meadows.

 The For est Hi l l and Fount ai n Head Meadows housi ng devel opment s have been appr oved f or 70 and 29 ( r es pec t i vel y) s i ngl e f ami l y homes.

Fai r gr een Acr es was appr oved t o cont ai n 20 s i ngl e

f ami l y and 29

housi ng uni t s.

mi l e sout heast of t hese devel opment s cal l ed Or char d

anot her mass of l and

Gr ove whi ch has been appr oved f or 255 si ngl e

f ami l y homes. I mmedi at el y Head

One hal f of a

of t hi s ar ea i s Fount ai n

whi ch was appr oved f or 18 si ngl e f ami l y housi ng

uni t s. Combi ned, t hese si x devel opment s i ncr ease t he housi ng uni t s of t he pr oposed mar ket by 415 si ngl e f ami l y and 69 mul t i -

7

f ami l y housi ng uni t s.

Cur r ent l y devel opment has begun

f our of t he si x pr oposed s i t es and devel opment of t he r emai ni ng t wo ar eas i s schedul ed t o begi n by t he end of t he 1988 cal endar year . I n Apr i l of 1988 a devel oper showed t he Pl anni ng and Zoni ng Commi ss i on of Hager st own hi s pl ans f or a 40 acr e t r act of l and on Rout e 11 wi t hi n c i t y l i mi t s .

Hi s pl ans

i ncl ude a massi ve devel opment of 280

and 80

apar t ment s. Accor di ng t o t he 1985 St at e of Mar yl and Tr af f i c Vol ume Map, t he pr oposed l ocat i on on Rout e 11 has a dai l y t r af f i c count of 16, 600 vehi cl es ( Exhi bi t

 Ther ef or e, t hi s

good t r af f i c count coupl ed wi t h any shoppi ng mal l t r af f i c shoul d make f or an excel l ent l ocat i on.

I n addi t i on, t he

pr oposed l ocat i on i s cent r al l y l ocat ed i n t he t ar get mar ket . Rout e 11 f r omMaugans Avenue i nt o t he Ci t y of Hager st own has var i ous s mal l busi nesses and i ndust r i es and a l ar ge Mack I nc. pl ant adj acent t o t he pr oposed l ocat i on whi ch empl oys appr oxi mat el y 2,200

Behi nd

var i ous

busi nesses on ei t her si de of Rout e 11 ar e housi ng devel opment s. Compet i t i on f or t he pr oposed i ce cr eam par l or i s n o t st r ong- ( Exhi bi t

On Rout e 11, adj acent t o t he pr oposed

l ocat i on i s Ol ympi a Candy Ki t chen whi ch ser ves a homemade st yl e hand- di pped i ce cr eam.

Thei r pr i ces t end t o be ver y

expensi ve wi t h one scoop of i ce cr eam cost i ng t he cust omer

8

$1. 25.

Anot her compet i t or

Long Meadow I ce Cr eamwhi ch

i s l ocat ed i n t he Long Meadow Shoppi ng Cent er , one and one hal f mi l es sout heast of t he pr oposed l ocat i on. Long Meadow I ce Cr eam' s concent r at i on

Al t hough

on i ce cr eam

al one, t hey ser ve onl y hand- di pped and ar e expensi ve. Fr anchi ses such as McDonal d' s and l ocat i on i n t he pr oposed mar ket . var i at i ons of sof t i ce cr eam.

each have a Bot h ser ve l i mi t ed

One quar t er of a mi l e

nor t h of t he shoppi ng cent er i s a smal l di ner whi ch al so s er ves s of t i ce cr eam wi t h l i t t l e di ver s i f i cat i on. Out si de t he pr oposed mar ket ar e t wo sof t i ce cr eam shops ver y si mi l ar t o t he pr oposed par l or . Dai r y Queen, an i nt er nat i onal f r anchi se, i s l ocat ed on Rout e 40, sout heast of Hager st own. Di pper Dr i ve- I n,

The ot her i ce cr eam r est aur ant , Bi g l ocat ed on Rout e 11 sout h of Hager st own.

Dai r y Queen wi l l pr obabl y be an i ndi r ect compet i t or because of adver t i si ng suppor t f r om t he compet i t or s ar e i nconveni ent l y l ocat ed.

BUSI NESS DESI GN Avai l abl e t o t he ent r epr eneur ar e t hr ee basi c f or ms of owner shi p:

Pr opr i et or shi p, Par t ner shi p and Cor por at i on.

The

appr opr i at e f or m of owner shi p i s det er mi ned by wei ghi ng t he advant ages and di sadvant ages of each t ype of owner shi p agai nst t he r equi r ement s of t he busi ness. A pr opr i et or shi p one i ndi vi dual

a busi ness owned and cont r ol l ed. by

t akes al l t he

and r ecei ves any pr of i t s

I t i s t he most popul ar busi ness f or m and i s commonl y f ound. i n r et ai l i ng and per sonal ser vi ces.

The advant ages of a pr opr i -

et or shi p i ncl ude ease of f or mat i on, f r eedom and cent i ve.

i n-

Di sadvant ages i ncl ude unl i mi t ed l i abi l i t y, l i mi t ed

l i f e and l i mi t ed f unds. Par t ner shi ps ar e t he l east f avor i t e f or m of busi ness or gani zat i ons.

As t he t i t l e i mpl i es, t hey ar e an associ at i on

of t wo or mor e per sons as co- owner s of a busi ness. shi ps ar e commonl y f ound

Par t ner -

r et ai l and per sonal ser vi ce

Si gni f i cant advant ages i ncl ude havi ng mor e f unds f or expansi on and i mpr oved cr edi t r at i ng. ar e unl i mi t ed l i abi l i t y, di vi ded aut hor i t y and f r ozen i nvest ment . Cor por at i ons ar e t he most compl i cat ed f or m of busi ness.

9

A cor por at i on

a l egal ent i t y cr eat ed by l aw whi ch exi st s

apar t f r om

 The maj or advant ages of cor por at i ons

ar e l i mi t ed l i abi l i t y, ease of t r ansf er r i ng owner shi p, cont i nuous l i f e and ease of r ai si ng f unds.

Di sadvant ages i n-

cl ude doubl e t axat i on, expense and di f f i cul t y of or gani zat i on and gover nment r egul at i ons. Pr obabl y t he best f or m of or gani zat i on f or t he smal l i ce cr eampar l or

a

pr opr i et or shi p.

Al t hough cor por at i ons

enj oy l i mi t ed l i abi l i t y, t he l engt hy and expensi ve pr ocess of i ncor por at i on

pr obabl y best sui t ed f or a l ar ger busi -

ness wi t h addi t i onal st ar t up cash.

Al so, t he ent r epr eneur

i n a smal l busi ness such as t he i ce cr eampar l or woul d pr obabl y want t o mai nt ai n t he aut hor i t y r at her t hat shar e i t wi t h a par t ner . Per sonnel needed f or t he i ce cr eam par l or woul d. var y accor di ng t o t he season.

Rest aur ant s t ypi cal l y ut i l i ze

bot h par t - t i me empl oyees and hi gh school st udent s because t hey wi l l

f or a l ower hour l y r at e.

Asi de f r om a f ul l -

t i me manager , year - r ound, t he par l or wi l l pr obabl y need a s t a f f of 13 empl oyees dur i ng t he

and 5 empl oyees

dur i ng t he wi nt er mont hs wor ki ng appr oxi mat el y 20 hour s per

( Exhi bi t Si nce st udent s can not wor k dayt i me hour s dur i ng t he

school year , t he ent r epr eneur shoul d t r y t o secur e appr oxi mat el y t hr ee empl oyees capabl e of wor ki ng dayt i me hour s dur i ng t he wi nt er mont hs.

A j ob t i t l e of " Seni or

l l

can be gi ven t o t hi s cat egor y of empl oyee t o j ust i f y t he hi gher r at e needed t o secur e t hese peopl e. wi l l pr obabl y need t o pay $3. 75 per hour .

The manager

Empl oyees " a r at e of

The ot her par t - t i me empl oyees can be

hi r ed at t he mi ni mumwage of $3. 35 per hour .

Rest aur ant s

t ypi cal l y have a hi gh empl oyee t ur nover , t her ef or e, t he manager shoul d mai nt ai n a good empl oyment appl i cat i on f i l e.

I NSURANCE By l aw,

a per son has empl oyees, t hey must car r y

Wor kmen' s Compensat i on i nsur ance.

Compensat i on

pr ovi des medi cal i nsur ance f or al l empl oyees whi l e t hey ar e on t he j ob.

I f an empl oyee i s i nj ur ed whi l e on t he

 j ob, al l medi cal cos t s wi l l be cover ed by t he empl oyer ' s Wor kmen' s Compensat i on i nsur ance.

The cost of t he i nsur -

ance i s det er mi ned by t he t ype of wor k.

The expense t o

t he empl oyer i s bet ween $ . 41 and $6. 00 per hundr ed  The r at es ar e r egul at ed by t he St at e,

dol l ar s of

t her ef or e, al l i nsur ance compani es wi l l char ge t he same. A compr ehensi ve i nsur ance pol i cy i s cal l ed a mul t i per i l pol i cy whi ch cont ai ns t wo par t s: l i abi l i t y.

pr oper t y and

The pr oper t y cover age wi l l expl ai n al l condi -

t i ons and st i pul at i ons i n t he event of physi cal damage t o t he busi ness.

The l i abi l i t y cover age wi l l i nsur e agai nst

t hr ee condi t i ons: ( not i ncl udi ng

cr i mi nal behavi or agai nst t he i nsur ed

cust omer and empl oyee t hef t ) , l egal r espons -

i bi l i t y by a cont r act whi ch har ms t he i nsur ed and t or t l i abi l i t y whi ch cover s har m due t o negl i gence.

An adequat e

mul t i - per i l pol i cy can be bought f or t he i ce cr eam par l or f or appr oxi mat el y

12

REGULATI ONS One of t he maj or obst acl es of openi ng t he i ce cr eam par l or i s get t i ng beyond t he r egul at i ons of t he Heal t h Depar t ment .

Two pamphl et s ar e publ i shed whi ch out l i ne

t he r equi r ement s f or t hi s t ype of busi ness:

10. 15. 03

Food Ser vi ce Faci l i t i es and 10. 15. 05 Manuf act ur e and Sal e of Fr ozen Dai r y Foods and I ces. Accor di ng t o Heal t h Depar t ment Regul at i ons, pr i or

t o openi ng, t he busi ness

submi t a

sched-

ul e whi ch out l i nes t he mat er i al s whi ch wi l l be used t o f i ni sh t he wal l s, cei l i ngs and f l oor s.

The mat er i al s

used must be smoot h and easy t o cl ean.

A l i s t of f ood

ser vi ce equi pment must be submi t t ed i ncl udi ng t he manuf act ur er , model number and a descr i pt i ve pamphl et f or each pi ece.

Per t he r egul at i ons, t he busi ness must sub-

mi t a det ai l ed f l oor pl an showi ng wher e ever y i t em i s l ocat ed i n t he bui l di ng.

The pl umbi ng l ayout must be

i nspect ed and i f ci t y wat er and sewer ar e not used, t hen t her e must be appr oval .

A t hr ee compar t ment si nk

r i ns e, s ani t i z e) mus t be i ns t al l ed.

I n addi t i on, t he

busi ness must appl y f or a l i cense year l y and agr ee t o be i nspect ed by t he Heal t h Depar t ment t wi ce a year . 13

14 A

t r ader s l i cense must al so be bought on a year l y

basi s f r omt he Cl er k of t he Count y Cour t €or $25.007.  The Mi l k Cont r ol Boar d. must al so i ss ue a l i cense f or a f ee of $25.008 per year and must t est t he i ce cr eam machi ne once a mont h f or bact er i a l evel s.

The l ab f ee

f or t hi s t est i s $31. 009 mont hl y. I n or der t o col l ect r evenues, t he busi ness must r egi s t er t ax.

St at e of Mar yl and t o col l ect sal es

Af t er a si mpl e f or m

sent

t he oper at or wi l l r ecei ve a

a

f ee,

r egi s t r at i on cer t i f i -

cat e wi t h an i dent i f i cat i on number and f or ms t o i ncl ude wi t h sal es t ax col l ect i ons.

-

.

Sal es t ax i s payabl e mont hl y.

 The i ce cr eam par l or wi l l need t o r egi st er wi t h t he Ci t y and Count y i n whi ch i t r esi des i n or der t o r ecei ve an occupancy l i cense. newabl e year l y. needed t o compl y

The f ee i s $30. 0011

and i s r e-

A f eder al t ax i dent i f i cat i on number i s r egul at i ons i nvol vi ng F. I . C. A.

and f eder al i ncome t ax wi t hhol di ng pr ocedur es.

e

..-.

ADVERTI SI NG  The i ce cr eam par l or ' s most i mpor t ant adver t i si ng obj ect i ve

be t o i nf or m cust omer s of

exi st ence.

 Two t ypes of cust omer s must be i nf or med; t hose who l i ve i n t he t ar get mar ket and t hose who t hr ough t he t ar get mar ket .

be t r avel i ng

For t he money, t he best

met hod of r eachi ng bot h mar ket s

by

A newspaper i s t he pr i mar y adver t i si ng medi um i n

t er ms of dai l y r eader shi p, adver t i si ng r evenue and pr ef er ence as an adver t i si ng medi um by t he publ i c. Mor eover , newspaper r eader shi p i s a dai l y r i t ual i n most homes.

The newspaper of f er s ever yone somet hi ng:

whet her i t be cur r ent event s, spor t s, comi cs, ent er t ai nment , f i nanci al or shoppi ng i nf or mat i on.

One of t he

gr eat est advant ages of newspaper i s t hat al l of t hese can be descr i bed and i l l ust r at ed. t o t he r eader .

Fr om

l i ne ads i n cl assi f i ed t o f ul l page ads - t he r eader can f i nd i t al l i n one pl ace.  The Her al d- Mai l newspaper s ar e t he maj or newspaper s i n Washi ngt on Count y, publ i shi ng bot h a mor ni ng- and eveni ng edi t i on.

These newspaper s have a combi ned dai l y ci r cul a-

t i on of 44, 00012.  The ci r cul at i on ar ea i ncl udes Washi ngt on 15

16

and Fr eder i ck Count i es

Mar yl and,

and Ful t on

Count i es i n Pennsyl vani a, and J ef f er son, Ber kel ey and Mor gan Count i es

West Vi r gi ni a.

Adver t i si ng i n t he Hager st own newspaper s seems a l ogi cal choi ce because i t not onl y i s t he pr i mar y news paper f or t he cust omer s l i vi ng i n t he t ar get mar ket , i t al so r eaches many of t he pot ent i al cust omer s

who t r avel

t o and/ or by t he shoppi ng cent er .  The newspaper adver t i si ng budget f or t he f i r st year al l ocat es f unds f or pr omot i ng a gr and openi ng and f unds f or adver t i si ng t he busi ness cont i nuousl y t hr oughout t he year .

A di spl ay adver t i sement , 2 col umns by 7 i nches

( Exhi bi t

wi l l be publ i shed i n t he newspaper s on t he

Wednesday and Fr i day pr i or t o t he gr and openi ng and al so appear on t he Sunday of t he gr and openi ng.

Al so

budget ed f or t he gr and openi ng i s a 1 col umn by 3 i nch back page adver t i sement ( Exhi bi t #9) be publ i shed on t he Sunday, Wednesday and t he gr and openi ng.

schedul ed t o pr i or t o

These par t i cul ar days wer e chosen be-

cause t hey ar e pr omot ed by t he Her al d- Mai l as t he best adver t i si ng days.

The money budget ed f or t he r est of t he

year i s f or one back page adver t i sement per week. Si nce Wednesday i s t he l ar gest adver t i si ng day of t he week and t he ci r c ul at i on

t he gr eat est , near l y

be t he best day of t he week f or t he gr eat est

woul d

FI NANCI AL I NFORMATI ON  The sal es f or ecast i s compr i sed of an est i mat e f or t he summer season ( J une t hr ough August ) ( Exhi bi t and an est i mat e f or t he wi nt er season ( Sept ember t hr ough May) ( Exhi bi t

Wi t hi n each season a pr oj ec t i on i s

some f or pur chasi ng ser vi ce mi nut es ( P S M ) .

 The PSM ar e

di vi ded by an est i mat ed t i me i t t akes t o wai t on a cust omer ( t wo and one hal f mi nut es) t o pr oduce t he number of pur chasi ng cust omer s di st i ngui shed by pur chasi ng t ype ( A = smal l pur chase; B = l ar ge pur chases) . An i ce cr eam sal e pr oj ect i on i s cal cul at ed by mul t i pl yi ng t he est i mat ed by t he aver age sal e

of pur chasi ng cust omer s

per cust omer f or each cust omer t ype.

 The soda pr oj ect i on i s based on an ass umpt i on t hat one out of ever y t en cust omer s wi l l pur chase a soda.

Cake

sal es ar e est i mat ed at t wo per day i n t he wi nt er and t en per day i n t he summer . Sal es ar e al l ocat ed t o each i t em on t he menu t o der i ve an est i mat ed number of sal es uni t s f o r ( Exhi bi t 12) .

i t em

A cost of goods sol d est i mat e was t hen

der i ved by mul t i pl yi ng t he sal es uni t s t i mes t he medi um cos t ( Exhi bi t 17

Accor di ng t o t he pr oj ect ed I ncome St at ement , ( Exhi bi t t he i ce cr eam par l or wi l l l ose mor e t han $34, 000. 00 t he f i r st year .

Revi ewi ng t he oper at i ng expenses ( Exhi bi t

an obvi ous pr obl em i s t he r ent al expense and t he associ at ed f ees of t he shoppi ng cent er .

Combi ned, t hese

expenses account f or 64% of t he oper at i ng expenses. Mor eover , t he I ncome St at ement pr esent s an opt i mi st i c pr esent at i on.

Negat i ve var i at i ons i n t he sal es f or ecast

woul d i ncr ease t he l oss t o even gr eat er pr opor t i ons.

Al so,

t he cost of goods sol d est i mat es ass ume t he i ce cr eam machi ne can pr oduce t he pr oduct f or $

per ounce.

Sal esman f or

t he machi nes est i mat es a r ange of $ . 07 t o $

per ounce.

Cur r ent l y t he pr i ces ar e i dent i cal t o t he compet i t or s out si de t he mar ket .

Pr i ci ng f or t he sof t i ce cr eam t ends

t o be ver y el ast i c, t her ef or e, i ncreasi ng pr i ces wi l l sacr i f i ce sal es on an al r eady mar gi nal gr oss pr of i t mar gi n.

In

or der f or t he r est aur ant t o br eak even usi ng t he cur r ent f i nanci al est i mat es, t he ent r epr eneur woul d need. t o i ncr ease t he pr i ce of each i ce cr eam pr oduct by $  The Bal ance Sheet ( Exhi bi t

f or t he i ce cr eam

par l or assumes t he ent r epr eneur has wor ki ng capi t al of appr oxi mat el y $77, 000. 00 t o pur chase equi pment , l easehol d i mpr ovement s and t o cont r i but e t o

capi t al .

ar e pl aces i n t he equi pment pur chases ( Exhi bi t money can be saved.

Ther e wher e

El i mi nat i ng seat i ng i n t he i ce cr eam

par l or woul d save $1000. 00.  Ther e ar e l ess expensi ve model s

-

-I--

---

-

19 of ice cream makers which could save as much as however, they ability

do

not have the same cost of goods profit -

.

 A current ratio of

 parlor. tion

.

$3,000.00,

very good for an ice cream

Ho we ve r, th is good ratio is caused by the assump entrepreneur needed no financing for t he endeavor.

CONCLUSI ONS  The i ce cr eampar l or i s not f easi bl e as pr oposed. An opt i mi st i c pr oj ect i on of r evenues net s t o a l oss of al most $31, 000. 00 on t he I ncome St at ement .

Mor eover ,

cos t of goods sol d may be under st at ed by as much as

$ . 03 on 242, 220 i ce cr eam

or possi bl y $22, 000.

Al so, t he depr eci at i on on t he equi pment was cal cul at ed on a 10 year st r ai ght l i ne met hod t o pr oduce a mor e pr of i t abl e number .

The depr eci at i on shoul d pr obabl y

be cal cul at ed on a f i ve year accel er at ed met hod whi ch woul d i ncr ease t he net l oss. An al t er nat i ve f or t he r est aur ant woul d be t o of f er f ood i t ems.

Cur r ent l y, Dai r y Queen does not

of f er st or es t o pr ospect i ve f r anchi sees whi ch f eat ur e onl y i ce cr eam.

I nst ead, t hey of f er t he f r anchi see a pl an whi ch i s a t ot al f ood ser vi ce

Dai r y

pr ogr amwi t h a l i ne of sof t ser ve dai r y pr oduct s and f ast f oods.

I t appear s t he gr oss pr of i t mar gi n f or sof t

ser ve dai r y pr oduct s i s not suf f i ci ent t o cover t he cost of l easi ng space.

20

21

EXHIBIT  ME NU Customer Type  A B

.13

.12

.16

Item Cones Cones Dipped Sundae Shakes Floats Banana Split Brownie Dessert Strawberry Shortcake O l d Fashion Soda Parfait Candy Shake Candy Sundae Cakes Soft Drinks

I

Price

.70 .85 1.15 1.20 1.20 1.70 1.70 1.70 1.70 1.50 2.25 1.85 11.50 70

.60 1.05 1.05 1.05

.45 .60 .80 .95 .95

1.50

1.35 1.25

8.50 .60

.50

.75

22

'..-

23

EXHIBIT 3 Proposed Location

24 EXHIBIT 4  A d d i t i o n a l Housing

Planned  Approved

26 EXHIBIT 6 COMPETITION

27

EXHIBIT 7 Hours Paid.

 Wi nt er Time

D A

1 1

1 1

1 1

1 1

1 1

1 1

1 1

1 1

1 1

1 1

1 1 1 1 1

1 1 1 2 2

1 1 1 2 2

1 1 1 2 2

1 1 1 2 2

1 1 1 2 2

1 1 2 2 2

1 1 2 2 2

1 1 2 2 2

1 1 1 1 1

Total Hrs. 10 10

10 10 13 18 18 89 5 Employees

Summer Time

 T

D  W  A

T F S S

2 2

2 3

3 3

3 3

2 3

2 3

3 3

3 3

3 3

4 5

4 5

4 5

3 3

13 Employees

 Winter: 3 2

Summer: 3 10

$3.75 x 2280 hrs = $ 8550 3 . 3 5 x 1102 3692 = $12242 $ 3 . 7 5 x 840 h r s = $ 3150 3 . 3 5 x 2730 h r s = 9146 $12296

Total 31 31 31 31 38 44 49 255

28

EXHIBIT 8

. . . .%” ... ...

deep

Insertior

2”

deep

-

Summit Avenue

 MI). 2 I

I

2

1

Sunday, 10

10

XXXX Pennsylvania Avenue Stop By

Taste!

29

EXHIBIT 9

I

Ice Cream Shoppe invites you to our

Grand Opening Celebration

Sunday, Xxxxxxx XX 10 A.M. - 10 at XXXX Penna. Ave. this ad to purchase a large

3

I

the price of a medium

3"

30

EXHI BI T 10 Summer Sal es  A

B A A B B B B A B B B B B

Per i od Mon- Fr i Mon- Fr i Mon- Fr i Mon- Fr i Mon- Fr i Mon- Thu Fr i - Sat Fr i - Sat Sat - Sun Sat - Sun Sat Sat Sun Sun

Days 5 5 5 5 5 4 2 2 2 2 1 1 1 1

 Ti me Li nes 10- 12am 1 12- 2pm 2 2- 4pm 2 2 4- 6pm 2 61

10- l l pm 10- l l am 112- 7pm 729- Opm

3 2 1 2 2 3 3 2

SM 600 1200 1200 1200 2700 240 360 240 120 720 600 360 1260 120

14

Wks

SM

8400 16800 16800 16800 37800 3360 5040 3360 1680 10080 8400 5040 17640

1680 152880

= 17472 cust omer s x $2. 00 = $ 34944 = 43680 cust omer s x $4. 00 = 174720  Tot al I ce Cr eam Sal es $209664

A:

Soda Sal es Cake Sal es

61152 cust omer s x

x

980 x

= $3669

31

EXHI BI T 11 Wi nt er Sal es A B

Per i od Mon- Thu Mon- Thu

A

B B B B

Fr i - Sun Fr i - Sun Sat - Sun Sat - Sun

Days 4 4 1

3 3 2 2

Ti me Li nes 11- 6pm 6 

-

11- 6pm

6- 8pm 8-

12-

SM 420 180 105 180 45 360 30

38 SM 15960 6840 3990 6840 1710 13680 1140

50160 A: = 7980 cust omer s x $2. 00 = B: 12084 cust omer s x =  Tot al I ce Cr eam Sal es

Soda: 20064 cust omer s x Cakes:

$15960 $48336 $64296

= 2006 x $ . 60 = $ 1204 532 x $ 5320

32

EXHIBIT 1 2 Cost O f Goods  A

Sales

Units

CGS

Item

10182 5090 10182 5090 5090 2036 2036 2036 1527 2036 4072 1527  Winter

16968 6787 9697 4848 4848 1198 1198 1198 898 1357 2262 1018

6477 3256 5366 3352 2684 1253 963 1022 483

Cones .13 Dip Cone Sundae Shakes .12 Floats B. Split Brownie Stwb Short Soda Parfait Can Shake .16 Can Sundae

1107 2084 869

B

Sales

Units

CGS

28998 11153 11153 26768 11153 17844 17844 17844 13383 17844 35689 13383

48330 14871 10622 25493 10622 10496 10496 10496 7872 11896 19827 8922

18448 7134 5878 17626 5880 10974 8432 8957 4230 9701 18269 7614

Summer

34

EXHIBIT 1 3 Income Statement For Twelve Months Sales Ice Cream Soft Drinks Cakes Total Sales

$273,960 4,873

Cost Of Goods Sold Ice Cream Soft Drinks Cakes Total Cost of Goods

$152,059 650 5,232

Gross Profit

$136,012

Operating Expenses (Stmt A ) Before Tax

35

EXHIBIT 14 Statement  A Salaries

- Operating

- Manage r - Hourly

Rent Employer Payroll Taxes  Ad ve rt is in g Legal Depreciation  Ac co un ti ng Repairs Supplies Insurance License Real Estate Taxes  Workmen's Co mp  As so ci at io n Fe es Common Area Total Operating Expenses

$ 24,538 000 2 2 ,646

1,000 1,000 1,000 600 447 400 215

200 200 3,480 084

36

EXHIBIT 15 Balance Sheet Current Assets Cash Inventory Total Current Assets

$ 2,000

3 ,0 0 0

5,000

Fixed Assets Equipment Leasehold Improvements Total Fixed Assets

$18,125

25 000 $43 125

Total Assets

$48,125

Current Liabilities  Ac co un ts Pa ya bl e

$ 5,000

Owners Equity Paid in Capital  Ne t Loss Total Equity

$73,997 872) $ 4 3 125

Total Liabilities

Equity

$48,125

38

NOTES Mi l l s, Scoop on I ce Cr eam" , Haqer st ovn ( Mar yl and) The Dai l y Mai l , 13 J ul y 1988, C,  p. 1. and Chr i st opher Dueker , The Ol d Fashi oned I ce Cr eam Cookbook  Yor k: The Company, I nc. , 11. Popul at i on and Housi nq 1980. DC, 1980) Summar y Tape Fi l e 3A. Count y Economi c Devel opment Commi ssi on , Busi ness and I ndust r y Di r ect or y ( Hager st own, Mar yl and: 20. Gui de t o W. Hal l or an, The St ar t i ng a Successf ul Busi ness. ( Bl ue Ri dge Summi t , Pennsyl vani a: TAB BOOKS I nc. , 153. Mar yl and, 8 J ul y 1988.

aut hor , Fr eder i ck,

f or Count y Cour t House, i nt er vi ewed by aut hor , Hager st own, Mar yl and, 12 J ul y 1988. Hummer , i nt er vi ewed by aut hor , Gr eencast l e Pennsyl vani a, 14  J ul y 1988.

f or t he Compt r ol l er of t he Tr easur y, i nt er vi ewed by aut hor , Hager st own, Mar yl and, 19  J ul y 1988. f or t he Count y Cour t House, i nt er vi ewed by aut hor , Hager st own, Mar yl and, 12 J ul y Bur eau of Ci r cul at i ons, ABC  J anuar y 1988.

Audi t Repor t :

39

BI BLI OGRAPHY

 J anuar y 1988. Housi nq, 1980,  Tape Fi l e 3A. Of

t he Tr easur y,

aut hor , 1 9  J ul y 1988. Cl er k f or t he Count y Cour t House, I nt er vi ewed by aut hor , 1 2  J ul y 1988. Mi chael M. , St ar t and Run a Pr of i t abl e Rest aur ant . Vancouver , Canada: Sel f Counsel Pr ess, 1983. Cor l ey, Rober t and Wi l l i am Rober t . Pr i nci pl es of Busi ness Law. Cl i f f s, NJ : Pr ent i ce Hal l , 1985.  J oyce and Chr i st opher . The Ol d Fashi oned Homemade I ce Cr eam Cool cbook. New Yorl c: The Bobbs- Mer r i l l Company, I nc. , 1974. Hol l or an, W. Ent r epr eneur ' s Gui de t o A Successf ul Busi ness. Bl ue Ri dge Summi t , Pennsyl vani a;  TAB BOOKS I nc. , 1987. Hummer , Donal d, pr opr i et or , House Rest aur ant . I nt er vi ewed by aut hor , 14  J ul y 1988. Kot l er , Phi l i p. Manaqement . Engl ewood Cl i f f s, NJ : Pr ent i ce Hal l , 1984. Mi l l s , Ci ndy. Scoop on I ce Cr eam. " Haqer st own ( Mar yl and)  The Dai l y Mai l , 13  J ul y 1988. Cl i f f . The Smal l Busi ness Tax Advi sor . Bl ue Ri dge Summi t , Pennsyl vani a: TAB BOOKS I nc. , 1987. Rusel l , Thomas and Gl enn Ot t o Pr ocedur e. Engl ewood Cl i f f s, NJ : Pr ent i ce Hal l , 1986. Wal t hal l , I

I nt o Busi ness. San Fr anci sco, CA:

Pr es s , 1975.

Washi ngt on Count y Economi c Devel opment Commi ssi on. Busi ness and I ndust r y Di r ect or y. Hager st own, Mar yl and. 1988.

\

25

EXHIBIT

5

State Of Maryland Traffic Volume Map

I