MBA-Marketing Management Presentation

Group 5

Valerichelle Food Services Inc.

A Proposal to Operate an Orange Brutus Branch in Bugo, Cagayan de Oro City

Executive Summary

Executive Summary

Services o o o o

Great Food Clean and friendly environment Low prices Healthy Dishes

Customers o o o o

DMPI Workers includes Project Hires and Contractual Students Workers & Residents Travelers

Management o

Valer, Michelle, Richard

Objectives

a) Open an Orange Brutus outlet at Bugo, CdO on June 1, 2005 b) Sales of Ps 5.6 million the 1st year and Ps 6.2 million in Year 2. c) Keep Food cost below 45% of revenue d) Maintain control – costs & operations

Mission

Orange Brutus will strive to be a great place to eat combining highest quality food at unbelievably low prices in a clean and friendly environment. We want fair profit for the owners, and a rewarding place to work for the employees. We must deliver on this pledge 100% of the time without exception.

Keys to Success

a) Quality food, services and facilities b) Proper Pricing c) Product Lines d) Advertising and Promotion e) Availability of Raw Materials

Company Summary

Company Summary

Valerichelle Food Services, Inc. will apply for an Orange Brutus franchise for an outlet in Bugo, Cagayan de Oro City

Company Ownership

The company will be formed by three (3) XU MBA students: a) Bautista VP b) Comique MB c) Siwagan RR

Start-up Summary

Particulars Start-up Assets Franchise Fee Warranty Deposit Sub-total Leasehold Improvement Operating Equipment / Utensils Initial Inventory Sub-total Motorcycle - for delivery Total Start-up Assets

Amount in PhP

300,000 50,000 350,000 200,000 500,000 75,000 775,000 75,000 1,200,000

Start-up Expenses: Start up Cash on Opening day Building Rental – for 6 months Registrations, permits and licenses Store Launching/Opening Activities: Advertising - (see details in Exh ) Sub-total Grand Total – Requirements

42,000 300,000 1,500,000

Funding: Owners' Equity Bautista, Valeriana Comique, Michelle Siwagan, Richard Total Investment

800,000 400,000 300,000 1,500,000

108,000 90,000 60,000

Start-up Capital Start-up Capital Opening Cash Balance

Franchisee fee / Warranty Deposit

Expenses Initial Inventory

Capital Assets

Franchisee fee / Warranty Deposit

Capital Assets

Initial Inventory

Expenses

Opening Cash Balance

Company Location & Facilities

Plant Location

Butuan

International Port

Villa Trinitas Subdivision

Jeepney Station

CALTEX

Bukidnon, Davao To Puerto Barangay Hall

SHELL

PETRON Bus Station

Puerto Public Market

Cagayan de Oro

Floor Plan O RAN GE BRUTUS Bugo, Cagayan de Oro City

Group 5 ( name) PROPOSED FLOOR PLAN 18 m Male CR

7m

Working Area

Freezer

11 Seats

Female CR Condiments/ Aircon Garbage

Ref

Storage Kitchen

24 Seats

Grill

Supplies Working Area

Drinks

Fryer Ref

Counter

Garbage

5m

Microwv

Office

Aircon

Tools/Eqpts

30 Seats

Aircon Condiments/ Garbage

18 Seats

24 Seats

Summary of Section and Area Dimension Section/ Area

Dimension (m)

Size

Kitchen

3 1/2 x 7

24.5 m2

Food Service Area

1 1/2 x 7

10.5 m2

Eating Area

11 x 5

55 m2

TOTAL

18 x 5

90 m2

Seating Capacity Area Inside

Outside

TOTAL

Table & Chairs

Seating Capacity

Long side-table

11

6 tables for 4

24

6 tables for 4

24

3 tables for 2

6

10 tables for 4

18

6 umbrella-tables for 4

24 107

 High visibility  Easy access to all destinations – Bukidnon, CdO, Butuan, etc  Heavy blue-collar worker makeup in the community  No over abundance of competition in the area (same type)

Services

 Services – provide quality food 7 days a week  Competitive Comparison • • • •

Lower price point No tipping Speed of service Clean, aircon

 Future Services • • •

Slow and cautious growth during its initial start-up phase Franchiser continue its food technology and development and will share to all franchisee Target to introduce new product – 1 for each quarter

Market Analysis Summary

 Market Analysis Summary  Market Segmentation  Market Needs / market survey      

Wants Variety and flavor in its food Seeks strong value at low prices Looks for speed of service Wants a convenient location for dining Appreciates promotional items and activities Insists upon a clean, cool, friendly and attractive dining environment

 Market and Industry Analysis  Competition

Ave Annual Sales

Ave Sales/Mo.

24,102,000

2,008,500

77,250

3,000,000

250,000

9,615

27,102,000

2,258,500

86,865

a) Grace Food house

4,200,000

350,000

13,462

b) JB Restaurant

2,400,000

200,000

7,692

c) Princess

1,800,000

150,000

5,769

900,000

75,000

2,885

3,075,600

256,300

9,858

4,500,000

375,000

14,423

16,875,600

1,406,300

54,088

Outlet /Restaurant

1) Consumers Coop – DMPI 2) BOEA Canteen Sub-total DMPI

Ave. Sales/Day

3) Outside carenderias:

d) Ayelet Bakeshop 4)“Lechon” manok/liempo - LD Cons 5 smaller stalls Sub-total outside DMPI Grand Total – market

43,977,600

3,664,800

140,954

Strategy & Implementation Summary

 Strategy and implementation strategy  Competitive Edge   

Popular prices No tipping Fast service

 Marketing strategy     

Pricing Positioning Marketing Tactics Promotion Marketing Program

 Sales Strategy Estd No. of Customers / Frequency Particulars

Annual Amount

Total patronage frequency

126,719

Average sales / transaction

45

Sub-total sales – regular Total seasonal demand Average sales /transaction Sub-total seasonal Estimated Gross Sales

5,702,374

Annual

126,719

Monthly

10,560

Daily

352

3,781 150 567,122

3,781

6,269,495

130,500

10,875

363

 Sales Programs Grand Opening Budget

Sticker design Orange Brutus Delivery

Bugo Highway 857-8888/74-8888

Poster & Flyer design Orange Brutus

Bugo Highway, Fronting Del Monte Cannery 857-8888/ 74-8888

Opens on June 1, 2005 With With Sheree Sheree of of Viva Viva Hotbabes Hotbabes

Free Free Ice Ice Tea Tea on on the the Opening Opening Day! Day! Try our Power P25 Snacks (with Iced Tea) Brutus Power Meals for as low as P29 only Brutus Budget Meals for P39.00 only (With Rice & Softdrink) •Vegetable Lumpia & BBQ •Vegetable Lumpia & Beefstew •Vegetable Lumpia & Pork Adobo •Vegetable Lumpia & Chicken Wings •Vegetable Lumpia & Ham Steak

Home Home of of the the Best Best Burgersteak Burgersteak & & Fresh Fresh Fruit Fruit Shakes Shakes

Streamer design Orange Brutus Bugo Highway, fronting Del Monte Cannery

Opens on June 1, 2005 With Sheree of Viva Hotbabes Free Ice Tea on the Opening Day!

Home of the Best Burgersteak & Fresh Fruit Shakes Try our Power 25 Snacks (with Iced Tea) Brutus Power Meals for as low as P29 only Brutus Budget Meals for P39.00 only (With Rice & Softdrink)

Advertising Media Exposures Advertising Media

Coverage

Airtime: 3 weeks before the opening Radio Schools, Offices, Posts at the three areas (Bugo, Puerto & Tagoloan) Posters

Streamers

Trees along Carmen Hill Highway Tagoloan Highway Agusan Highway Bugo Highway Proposed Site Motorellas, Jeepneys, Trisikads Schools, Offices, Terminals

Stickers

Flyers

Offices, Clinics, Banks, Hospital at the three areas  

Gantt Chart for the Activities on Each Stage Activities/ Month Radio Grand Opening Flyers Stickers

       

Activities/ Month Flyers Stickers

   

Activities/ Month Flyers Activities/ Month Flyers

   

1

1

1 1

Introduction Stage 2         Growth Stage 2     Maturity Stage 2   Decline Stage 2  

               

3

3

3 3

               

4

4

4 4

               

5

5

5 5

Advertising Budget Summary Stage

Promotional Activities

Estimated Cost

Introduction rand Opening Priest

500 1,000 500 1,150

Hotel Accommodation of Guest Balloons - 2 dozens Flowers - 2 toppery stand Radio – production Growth

Radio airtime Flyers –- 200 pcs3 weeks Streamers - 5 pcs Stickers - 200 pcs

1,000 33,600 1,800 400 1,250 800 42,000 400 500 900

Maturity

 Flyers -- 40 200pcs pcs Posters ubtotal Subtotal Stickers - 500 pcs

400 400

Decline

 Flyers Flyers - 200 pcs - 400 pcs Subtotal ubtotal

400 400

TOTAL

 

43,700

Management Summary

Organizational Structure O RANGE BRUTUS Bugo, Cagayan de Oro City

Valerichelle Food Services Inc. PROPOSED SET-UP

Franchise Owners

Counter Supervisor

Admin Staff

Cashiers 2

Cooks 4

Dining Crews 3

Management Team 1)

Bautista VP - CPA, will be responsible for all company finances and accounting as the Chief Financial Officer. She earned her Bachelors of Science in Commerce, major in Accounting from Polytechnic University of the Philippines. Her financial control skills will be invaluable in keeping Orange Brutus on track and profitable.

2)

Comique MB – will act as HR Manager and will focus on the personnel issues. She has earned her Bachelors of Science in Industrial Engineering from the University of San Carlos. She has three (3) years experience as HR specialist at Del Monte Philippines, Inc.

3)

Siwagan RR - CPA, will be the Operations Manager. Richard has extensive experience of organizations ranging from six to 12 people. He earned his undergraduate course from Cagayan de Oro College. He has extensive Audit experience and currently working as Accountant of PANTEL 10FAB for three (3) years already.

Management Team Gaps

Personnel Plan

Financial Plan

Financial Assumptions

Financial Assumptions 1) Patronage frequency is computed based on the target population and average sales at Ps 45. This is also near the per capita consumption of P541.17 a year.

INCOME BRACKET

Total CDO (Puerto/Bugo)

# of Household Population INCOME Total income (in '000 pesos)

Total Misor (Tagoloan)

Total Combined

98,937

122,070

221,007

461,877

664,338

1,126,215

18,069,999

10,942,328

29,012,327

13,083,099

8,665,676

21,748,775

EXPENDITURE TOTAL (in '000 pesos) Expenditure on certain items: in % Total Food Food Consumed at Home Food regularly Consumed outside the Home Other expenditures Total Expenditures (in '000) Total Food (42.6%) Food consumed at home (39.2%) Food consumed outside the home (3.3%) Per capita - food consumed outside the home Average per month

%

% 42.6

50.7

39.2

48.8

3.3

1.9

57.4

49.3

13,083,099 5,573,400 5,128,575 444,825

8,665,676 4,393,498 4,228,850 164,648

21,748,775 9,966,898 9,357,425 609,473

963.08 80.26

247.84 20.65

541.17 45.10

2) Initial franchise fee is Ps 300,000 plus a security deposit of Ps 50,000. The term is 5 years renewable with a 20% renewal fee based on the latest franchise fee.

3) The franchise fee includes the following:  Equipment – stainless cooking wares, kitchen/utensils  Furniture & Fixtures – tables, chairs, air conditioners etc  Training – management and store staff  Store Launching/Opening – provision of an “Opening Team” for 7 days after opening  Marketing Support

4) Royalty fee is 5% of sales and 2% for Marketing Support Fund

5) CAPITALIZATION. Start-up capital is around Ph P 1.5 million, which will be financed by equity as follows: Investors

Capitalization

Siwagan, Richard 20%

Bautista, Valeriana 53% Comique, M ichelle 27%

Amount in Pesos

Bautista, Valeriana

800,000

 

Comique, Michelle

400,000

 

Siwagan, Richard

300,000

 

6) PROFIT MARGIN.  During the first year, gross profit margin is estimated to be 55% of sales.  In the succeeding years, although gross profit will be the same at 55% of sales, but an increase in net from 11.9% to 12..6% of sales

7) GROWTH IN SALES. Sales is estimated to increase by 10% in the second year and by 20% in succeeding years. This is due to expected increase in customers’ patronage.

8) PERSONNEL PLAN. The following is the ideal number of staff and crew for our type and size of outlet:  Supervisor – 1  Cook – 2 to 4  Admin staff – 1  Cashier – 2  Dining Crew - 3

The owners will be hands-on franchisees and each would be assigned to personally oversee the outlet’s operations.

8) Salaries & Wages The following shall be the planned salaries of the outlet’s staff and crew Position

Monthly Rate

Supervisor

10,000

Cook

8,000

Cashier

7,000

Admin Clerk/Clerk

6,000

Crew

5,000

An annual increase in salary at 8% annually will be provided.

8) Fringe Benefits – SSS, Compensation insurance and Philhealth premiums shall be provided by the company. Refer to Schedule 2 for details of Employees Salaries and Wages and benefits.

9) DEPRECIATION CHARGES Leasehold improvements shall be depreciated over 10 years as the term of the lease will be short-term only.  Equipments, furniture and fixtures are to be provided by the franchiser. Due to absence of breakdown, the total package shall be depreciated over 10 years.  A motorcycle to be used for delivery shall be purchased and to be depreciated over 4 years.  Repairs and Maintenance of the equipments and Motorcycle is also provided at 2% cost when not yet fully depreciated and 5% of cost after fully depreciation. 

10) OTHER EXPENSES. 

SPOILAGE AND WASTAGES. This represents spoiled food, estimated at 0.01% of sales.



MISCELLANEOUS EXPENSE. This represents cleaning materials for sanitation and disposal of garbage, estimated at 0.08% of sales.

Break-even Analysis

 

 

Fixed Costs

Annual Costs  

 

 

 

 

 

 

Building Rental

 

216,000

 

 

 

Salaries & Wages

 

924,000

 

 

 

Employee Benefits

 

154,440

 

 

 

Depreciation/Amort of Preoptng Costs

 

169,150

 

 

 

Business Tax and licenses

 

15,000

 

 

 

Utilities

 

180,000

 

 

 

Repairs & Maintenance

 

15,500

 

 

 

Others

 

50,783

 

 

 

1,724,873

 

 

 

Total Fixed Costs

 

Estimated Fixed Costs per Month

 

143,739

 

 

 

 

 

 

 

 

Break-even Analysis:

 

 

 

 

 

Monthly Units Break-even

 

6,655

 

 

 

Monthly Revenue Break-even

 

299,457

 

 

 

 

 

 

 

 

Assumptions:

 

 

 

 

 

Average selling price per unit

 

45.00

 

100 %

 

Cost of Sales - 45%

 

20.25

 

45%

 

Royalty fees - (5% + 2% MSF)

 

3.15

 

7%

 

Gross Margin / Unit

 

21.60

 

48%

Break Even Chart 400,000 350,000 250,000

Profit

200,000 150,000 100,000

Break-even point

Units Sales

Total Cost

8,100

7,500

6,900

6,300

Loss 5,100

4,500

3,900

3,300

2,700

2,100

1,500

900

0

5,700

50,000 300

Sales

300,000

Projected Profit & Loss

Projected Cash Flow

DESCRIPTION OPERATING ACTIVITIES Net income after tax Depreciation Amortization - Franchise fee Increase in inventories Increase in prepayments Increase in tax payable Increase in VAT payable Sub-total INVESTING ACTIVITIES Payment to Franchiser/Assets

YEAR 1 668,813 88,750 60,000 (10,580) (81,600) 314,736 373,035 1,413,154

NET CASH INFLOW Cash, beginning CASH, END

784,783 88,750 60,000 (1,058) 20,400 54,574 37,303 1,044,753

YEAR 3 1,107,569 88,750 60,000 (2,328) 20,400 151,899 82,068 1,508,358

YEAR 4 1,509,960 88,750 60,000 (2,793) 20,400 189,361 98,481 1,964,159

YEAR 5 2,024,572 70,000 60,000 (3,352) 20,400 242,170 118,177 2,531,968

(1,125,000) (1,125,000)

FINANCING ACTIVITIES Bank loan Owner's Equity Decrease in Loans Payable Withdrawals

YEAR 2

-

-

-

-

1,500,000 1,500,000 1,788,154 1,788,154

1,044,753 1,788,154 2,832,907

1,508,358 2,832,907 4,341,265

1,964,159 4,341,265 6,305,425

2,531,968 6,305,425 8,837,392

Projected Balance Sheet

DESCRIPTION ASSETS: CURRENT ASSETS Cash Inventories Total Current Assets FIXED ASSETS Leasehold improvements Equipment/fixtures/Tables/Chairs Motorcyle Total Less: Accumulated depreciation Total Fixed Assets OTHER ASSETS Secuirty Deposit Preoperating Cost - net Franchise fee, net Total Other Assets

YEAR 1

TOTAL ASSETS LIABILITIES Income tax payable VAT Payable Loans payable Total Liabilities OWNER'S EQUITY Owner's Equity Net income Total Equity LIABILITIES & OWNER'S EQUITY

1,788,154 10,580 1,798,734

YEAR 2

2,832,907 11,638 2,844,545

YEAR 3

4,341,265 13,965 4,355,231

YEAR 4

6,305,425 16,758 6,322,183

YEAR 5

8,837,392 20,110 8,857,502

200,000 500,000 75,000 775,000 88,750 686,250

200,000 500,000 75,000 775,000 177,500 597,500

200,000 500,000 75,000 775,000 266,250 508,750

200,000 500,000 75,000 775,000 355,000 420,000

200,000 500,000 75,000 775,000 425,000 350,000

50,000 81,600 240,000 371,600

50,000 61,200 180,000 291,200

50,000 40,800 120,000 210,800

50,000 20,400 60,000 130,400

50,000 50,000

2,856,584

3,733,245

5,074,781

6,872,583

9,257,502

314,736 373,035

369,310 410,338

521,209 492,406

710,570 590,887

952,740 709,065

687,771

779,648

1,013,615

1,301,457

1,661,804

1,500,000 668,813 2,168,813

2,168,813 784,783 2,953,597

2,953,597 1,107,569 4,061,166

4,061,166 1,509,960 5,571,126

5,571,126 2,024,572 7,595,698

2,856,584

3,733,245

5,074,781

6,872,583

9,257,502

Business Ratios

ACCOUNTS Sales Revenue Less: Cost of sales

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

5,642,546 2,539,146

6,206,800 2,793,060

7,448,160 3,351,672

8,937,793 4,022,007

10,725,351 4,826,408

GROSS PROFIT Operating expenses: Royalty fees Franchise fee - Amortization Building rental Salaries & wages SSS, ECC and Philhealth Depreciation expense Amortization - preoperating expenses Business tax Utilities expense Repairs and maintenance Spoilage and wastages Miscellaneous expenses

3,103,400

3,413,740

4,096,488

4,915,786

5,898,943

394,978 60,000 216,000 924,000 154,440 88,750 20,400 15,000 180,000 15,500 5,643 45,140

434,476 60,000 226,800 997,920 154,440 88,750 20,400 16,500 189,000 15,500 6,207 49,654

521,371 60,000 238,140 1,077,754 162,162 88,750 20,400 18,150 198,450 15,500 7,448 59,585

625,645 60,000 250,047 1,163,974 162,162 88,750 20,400 19,965 208,373 15,500 8,938 71,502

750,775 60,000 262,549 1,257,092 170,270 70,000 20,400 21,962 193,056 19,000 10,725 85,803

TOTAL EXPENSES BEFORE INTEREST

2,119,851

2,259,647

2,467,710

2,695,256

2,921,632

INCOME BEFORE INTEREST Interest expense

983,549 -

1,154,093 -

1,628,778 -

2,220,530 -

2,977,311 -

INCOME BEFORE TAX INCOME TAX

983,549 314,736

1,154,093 369,310

1,628,778 521,209

2,220,530 710,570

2,977,311 952,740

NET INCOME AFTER TAX

668,813

784,783

1,107,569

1,509,960

2,024,572

Marketing Research

120 Respondents

Methods of Research  Data Analysis  Survey Questionnaire  Traffic Count

Occupation of All the Respondents 4% Bugo Residents

4% Tagoloan Residents

4% Puerto Residents

Travelers 20%

Del Monte 63% Other Co. Workers 5%

Del Monte

Other Co. Workers

Travelers

Puerto Residents

Bugo Residents

Tagoloan Residents

Age of All the Respondents 16-20years old (8)

More than 30years old (45)

21-25years old (30)

26-30years old (37)

Analysis & Interpretation of Data

Traffic Count West to CdO = 329 350

338

300

318

CdO to West = 296

332 331

250

285

272

200 150 100

8/31/2004 5:00 PM

50

8/21/2004 3:00 PM

0

8/21/2004 10:30 AM

West to CDO CDO to West

8/21/2004 10:30 AM

8/21/2004 3:00 PM

8/31/2004 5:00 PM

Occupation – Will Patronize/ Will Not 80

74

70

DM

60

Travelers

50

Other Co. Workers

0

Will Not Patroni ze

Travelers

Will Patroni ze

DM

1

0

4 1

Puerto Residents

1 0 Bugo Residents

5

10

5

Tagoloan Residents

6

20

4

Puerto Residents

19

30

Other Co. Workers

40

Bugo Residents Tagoloan Residents

Reasons for Preference – Will Patronize 120 97

100 80

67

60 40 20

P r ic e 45

40 36

29 58 3

42 37

40

18 17

19

1

4

Food S e r v ic e

24 4

2

7

8 3 0 4

0 Ra nk 1 Rank 2 Rank 3 Rank 4 Rank 5

L o c a tio n W ith p r o m o

Respondents: Will Patronize/ Will Not Will Not Patronize 7%

Will Patronize 93%