商科essay/report/assignment/paper代写-Fast Food Restaurants Business Plan

商科essay/report/assignment/paper代写

Bites & Pieces

Fast Food Restaurants

Business Plan

Table of Contents :

• Executive Summary:
• The Opportunity
• The Industry
  • Economic Forecast
  • General Food Trends
• The Market
  • The Competition:
  • The Customers:
• The Product
  • The Uniqueness of the Business
  • The Customer Experience
• The Company
• The Strategy
  • SWOT Analysis
  • Goals
  • Strategies
  • Barriers to Entry:
• The Operation
  • The Central Kitchen
  • The Outlet
  • Administration Plans
  • Employment and Personnel Plans
  • Training
• The Marketing Aspects
  • Distribution: Selling Methods
  • Pricing
  • Advertising
• The Franchising Model
• The Financials
  • Assumptions, Definitions and Notes
  • Pro Forma Statement of Cash Flows
  • Pro-Forma Income Statement
  • Pro Forma Balance Sheet
• Risk Assessment
• Exit Strategy
• Appendix
  • Exhibit 1: Quick Serve Industry Figures
  • Exhibit 2: Customers Profile
  • Exhibit 3: Competitors Pricing
  • Exhibit 4: An example of our Menu
  • Exhibit 5: Bites Recipes An Example
  • Exhibit 6: Standard Set up Cost for 1 Central Kitchen (in US$)
  • Exhibit 7: Standard Set up Cost for 1 Outlet (in US$)

Executive Summary:

The Opportunity

BITES & PIECES is a new concept in the South African Fast Food Take-Away industry. It offers an attractive alternative to the existing Fast Food sector, and promises high quality, healthy and convenient-to-eat products. Essentially, it produces food in the format of the locally known fried fritters, but is uniquely re-engineered in that it is produced oil-free. It also has a menu that represents most food groups with virtually limitless possibilities.

The company originates from the idea that healthy food isnt catered for in the Fast Food industry. There are no Fast Food ventures supplying the public with balanced wholesome meals. This suggests that there is a lack of healthy Fast Food options that are presented in conveniently, easy consumable packages.

Our opportunity is mainly driven by the following trends:

• Fast Food Demand Increase : The pace of growth is better documented for the US market but other countries show similar tendencies. South Africa is not the exception. Over the last years the South African Fast Food Industry as a whole has experienced and average growth of 22%.

In our particular case two other circumstances made the opportunity unique:

• Healthy Trends : Individuals are paying increasing attention to their eating habits. Health and fitness are becoming part of everyones daily concerns. The South African Government is currently taking several steps towards educating the population about eating habits and healthy food options.
• Convenience Trends / Take-Away Trends : The increase in double income in families and the demands of business life are also fostering an increase in the demand for take-away food and convenient, easy to handle Fast Food options. We believe this issue is a great opportunity since serving take-away customers requires a reduced cost structure.

Combining these three factors we see a real opportunity in providing a Fast Food option that is healthy and convenient. By creating such a product we would be addressing three of the trends in the Fast Food and food industry and we will be creating an option that at this stage does not exist in the market.

We believe South Africa has a great potential for development since the country is experiencing a dramatic shift following the abolition of the apartheid regime. Based on this specific situation we can identify an additional opportunity in the market.

• The untapped potential of the emerging South African mass middle class: A group whose opportunities and living conditions were limited for several years, but a group that is currently starting to improve their lifestyle. Government policies and social development programs such as equal opportunity policies are providing the necessary legal framework for Black South African to improve their living conditions. This will mean stable employment, increasing salaries and therefore disposable income. Fast Food outlets are likely to be positively impacted by this initial increase in disposable income since prices are moderate and not appealing to a high-end customer.

The Product

So, how do we prepare vegetables, poultry, fish, pork, soy, beef, and even fruit in a take-away format? A format that is as tasty as it is convenient to eat, that is good to look at and served rapidly? Our proposal is The Bite. The original idea came from traditional pumpkin fritters, originally endowed in a syrup sauce, sometimes covered in cinnamon sugar. The fact that all food substances can be frittered, gave motion to the idea. We have decided that with a few modifications done to the age old recipes; these could be made fast, healthy, and presentable. Instead of traditional deep oil frying, new technology grilling is used. The fact that the ingredients and preparation thereof are low in cost and simple in processing makes for substantial profit margins. Interesting grilling shapes are used, and with the combination of delicious dip sauces, it compliments the array of colorful bites. They are specially developed and researched to satisfy the most demanding of tastes.

An in-house soft drink is also being developed to coincide with this new Fast Food culture. PieceT is iced herbal tea, artificially sweetened, and bottled in different flavors. Another product is JuiceE, various flavors of fruit juice pulp blended to a recipe, and sold fresh to the customer. Another additional side order is the unique GreenPiece, which is a delicious in-house green salad specially formulated to complement the bites.

On arrival, a healthy high tech culture awaits you. Service is friendly and efficient. After your order is taken, you observe a quick two minute preparation in the open plan kitchen. You see young, enthusiastic and energetic employees complete your order in a modern, clean and efficient environment.

The Company and the Team

The Bites & Pieces is a privately owned company made up of a team of 4 investors that will incrementally join the organization in executive functions as it grows throughout the first 5 years. For the period of the first year the Operations Director will lead the business, whilst the other investors will be available on a consulting/advisory level only. At the start of the second year the Financial Director will join to prepare and facilitate the increase of growth and implement the financial strategy forward. At the end of the second year the two remaining investors will fill their executive functions as Development Director and Marketing Director. They will be just in time to initiate and implement the anticipated business model change from a Fast Food owned chain to a mainly franchise system of operations.

The Industry

South Africa presents a unique opportunity to participate in the restructuring and resurge of a country with a great potential.

In general, economic growth is likely to strengthen in the coming years, given the current stable political situation, the fact that president Mbeki is very likely to be re-elected in the coming elections, and the positive ratings by financial institutions, South Africas economy is forecasted to grow over the coming 5 years. Basic economic figures estimate that GDP growth during 2003 will be 2.6%, 3.5% in 2004, and 3% on average per year over the period 2005-2007.

A slight but significant increase in disposable income is expected. This will greatly benefit the Fast Food industry.

The Market

The Competition: There are not many players in the healthy food segment. The healthier existing options are Juicy Lucy and Subway. Initially we will be competing with other existing Quick-Serve Concepts. The big players in the Quick-Serve Industry at this time are mainly: Kentucky Fried Chicken, Nandos Chicken, Something Fishy, Steers, Chess Pizza and London Pie Co.

The Customers: We have identified three market segments:

The Convenience Segment : Persons aged 25 to 45; the lifestyle is modern, busy and urban. They are career oriented and subsequently have limited time to prepare meals. This group focuses on the convenience of the product. Dominantly wants convenience from their Fast Food demands.

The health conscious segment : Persons aged 25 to 35; the lifestyles are active. They are health conscious, and watch what they eat. They could be vegetarian and most likely to do sports and gym. They focus on the health aspect of the product. They would demand food low in fat, and high in carbohydrates.

The emerging segment : Persons aged 25 to 45; predominantly black, and most likely to have a family. These are people that are changing their eating habits to westernized habits, culture and lifestyle. They are looking for mainly home-replacement meals. They focus on the value-for-money balanced aspect of the product. This is the most challenging target group. These are people that have to be convinced over to a new concept.

The Strategy

The strategy is to design a business model that seamlessly could convert into a Fast Food chain from the outset. Thus operations would not just be designed for a single standing outlet, although in the initial growth phase, it would be adapted accordingly. Clear incremental growth stages in the development of this business would be identified to facilitate the expected growth and strategic objectives.

Initially, the focus would be on the local market of Johannesburg, the largest business hub and most representative city of the South African culture. Then after the general benchmark of 3 successful outlets in a radius of 20km, the expansion strategy comprises regional and national areas by means of franchising.

After testing the concept with the 3 initial outlets along the first year, we plan to open 6 additional outlets over the second year of operations. This will give Bites & Pieces a total of 9 outlets at the end of year 2. The strategy is to franchise the concept at this stage. In order to have financial resources to inject into the franchising system, we will sell 6 of the existing outlets. We will still keep 3 owned outlets that we will mainly use to keep control of the concept and to do R&D.

The Operation

Operations are key to Bites & Pieces. The operations have been designed for a high level of automation and standardization. It has also been planned specifically for rapid growth and the subsequent adoption of a franchise system. The Central Kitchens, where the first stage of the processing is done, serves up to 15 outlets and is centrally situated within a radius of 20 km. The outlets are only used for the final processing (grilling), are conveniently situated, use a small floor space and are low in set up costs.

The Marketing Aspects

Pricing Pricing is rather related to market expectation, than determined by the cost of the product. We perceive the market to demand a modest, but wholesome meal for around the R 20.00 (US$ 2.70) mark (include. VAT). By taking other Fast Foods in consideration, it seems as though you should have a distinct advantage by offering a balanced and filling meal at this price.

Our pricing will be therefore based on customers willingness to pay and competitors pricing.

Advertising Advertising will address two different objectives: Creating Awareness of the product and in second stage, also promoting the franchising system.

Target market will therefore be:

• Healthy Fast Food Consumers; and
• Potential Franchisees

Advertising to attract consumers to the outlets will be done through different media and promotions. Each of the three identified target segments require a different set of marketing strategies, being advertising one of these.

The Franchising Model

Our entire business model is planned and based upon the strategy of rapid franchise expansion. Within the third year of operation, we have decided not to set up further company owned outlets. Instead, we will market franchise operations to future franchisees and to provide them necessary service and business support. In an effort to raise capital at a strategic time, we will sell six of the nine existing company owned outlets to during the first part of the second year to preferential franchisees in order to accommodate future expansion plans.

As in the majority of the franchising models the sources of revenue will be: Initial Set-up Fee; Franchise Fee (comprising Royalty Fee and Marketing Fee) and the sale of the Bites Mix.

The Financials

Cost of kitchen appliances, fittings and fixtures at both the central kitchen and outlets are well below that needed for a full-service restaurant or hotel. Initial set up costs for the central kitchen are estimated at R 140,550.00 (US$18,740.00) while set up costs for the outlets are estimated at R 115,500.00 (US$ 15,400.00). Both the real estate for the central kitchen and the outlets will be rented.

An estimate of initial total investment for the central kitchen and 9 outlets is R 1,500, (US$ 200.000). This would include R&D, marketing and working capital for the first two years.

The money required to put the business into place will be provided by the founders of the company. Financing alternatives will be evaluated throughout the life of the project.

The Opportunity

BITES & PIECES is a new concept in the South African Fast Food take-away industry. It offers an attractive alternative to the existing Fast Food sector, and promises high quality, healthy and convenient-to-eat products. Essentially, it produces food in the format of the locally known fried fritters, but is uniquely re-engineered in that it is produced oil-free. It also has a menu that represents most food groups with virtually limitless possibilities.

The company originates from the idea that healthy food isnt catered for in the Fast Food industry. There are no Fast Food ventures supplying the public with balanced wholesome meals. This suggests that there is a lack of healthy Fast Food options that are presented in conveniently, easy consumable packages.

• Fast Food Demand Increase : Fast Food demand has been increasing significantly in recent years. The rhythm of growth is better documented for the US market. But other countries show similar tendencies. South Africa is not the exemption. Over the last years, the South African Fast Food Industry as a whole has experienced an average growth of 22%. The increase of disposable income, impacts Fast Food consumption and therefore revenue opportunities for Fast Food operators.

In our particular case two other circumstances made the opportunity unique:

• Healthy Trends : Individuals are paying increasing attention to their eating habits. Health and fitness are becoming part of everyones daily concerns. Existing players in the Restaurant and Fast Food industry are moving towards healthier options. Most of the Food and Beverage outlets are nowadays offering at least a reduced selection of healthy dishes or menus. The South African Government is currently taking several steps towards educating the population about eating habits and healthy food options. One of the main initiatives of the government is a campaign, addressed both to parents and children, through the schools and educational facilities.
• Convenience Trends / Take-Away Trends : The increase in double income families and the demands of business life are also fostering an increase in the demand for take-away food and convenient, easy to handle Fast Food options. Recent surveys show that take-aways account for the majority of the sales in Fast Food Outlets. We believe this issue is a great opportunity since serving take-away customers requires less real estate space than serving

Fast Food Growth
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in house customers. In this way, the fixed cost of the business can be diminished in
comparison with the generated revenues.

Combining these three factors, we see a real opportunity in providing a Fast Food option that is healthy and convenient. By creating such a product we would be addressing three of the trends in the Fast Food and Food Industry in general and we would be creating an option that does not presently exist in the market.

We believe that South Africa has a great potential for development since the country is experiencing a dramatic shift following the abolition of the apartheid regime. Based on this specific situation, we can identify an additional opportunity in the market.

• The untapped potential of the emerging South African mass middle class: A group whose opportunities and living conditions were limited for several years, but at the same time a group that is currently starting to improve their lifestyle. Government policies and social development programs such as equal opportunity policies are providing the necessary legal framework for Black South Africans to improve their living conditions. This will mean stable employment, increasing salaries and therefore disposable income. Fast Food outlets are likely to be positively impacted by this initial increase in disposable income since prices are moderate.

The Industry

Economic Forecast

In general, economic growth is likely to strengthen in the coming years, according to the Economist Intelligence Units EIU Country Forecasts published last July. Given the current stable political situation, the fact that president Mbeki is very likely to be re-elected in the coming elections, and the positive ratings by financial institutions, South Africas economy is forecasted to grow over the coming 5 years. Basic economic figures estimate that GDP growth during 2003 will be 2.6%, 3.5% in 2004, and 3% on average per year over the period 2005-2007.

A slight but significant increase in disposable income is expected. This will greatly benefit the fast food industry.

General Food Trends

Relevant averages in the Quick Service Industry: Quick Service Outlets account for approximately 76% of the 2950 food store outlets in South Africa. Bites & Pieces will be categorized and defined as a company with Quick Service Outlets without formal seating. Officially, approximately 31% of quick-service outlets do not offer any seating, but the rest offer an average of 39 seats.

The outlet sizes range from 50 to 140 m; average of 117 m. Average setting up costs of the quick- service outlet range between R 4,000 (US$ 533) to R 16,680 (US$ 2,224) per square meter. That averages R 7,136 per square meter (US$ 952).

Average set-up costs by Fast Food sector are: (per square meter)

Chicken R 11,542 (US$ 1,539) Pizza R 7,250 (US$ 967) Burgers R 7,830 (US$ 1,044) Fish R 4,200 (US$ 560) Sandwiches R 4,600 (US$ 613) Pies R 5,224 (US$ 697)

According to the Magazine Fast Food & Family Restaurant reviewing the coming food trends, it is expected that the food sector in the United States will grow by 7 % per annum, and the franchise market to top US$ 21 billion turnover by 2003. Of particular interest is the trend to Home-meal

replacement. This has been a buzzword in American franchise industry since families started to experience extreme time constraints over dinner times. This trend in America is expected to spill over in similar fashion to South Africa.

It is worth noting that in recent years steady trends have been identified at Anuga, the worlds showcase of food in Germany. The main trends are:

• The convenience sector is taking off.
• Products are distinguished in terms of their degree of healthy preparation.
• Vitamin enriched products such as juice, mineral water and herbal teas are gaining acceptance.
• There is a move away from preservatives and colorants, emphasizing naturalness.

Locally, according to the Business Guidebook:

There is a strong demand for low cost franchises which in the main allow for small infrastructures.

Most of the local Fast Food franchises cost over R 200 000 (US$ 26,700). There is lack of small square meter establishments that produce promising turnover and is also supported by a reputable franchisor. There seems to be a definite gap in the franchise market for this, especially for the black entrepreneur.

At the opening of the International Franchise Expo at Kyalami Exhibition Centre at Midrand, the Minister of Trade and Industry, Phumzile Mlambo-Ngcuka spoke about the future of the franchise industry. What was particularly interesting is governments request to…

…make low cost of entry franchise opportunities available. These will typically require investments between R 40 000 (US$ 5,333) and R 70 000 (US$ 9,333) and depending on the nature of the franchise, usually enjoy a 20% return on the investment. This implies that there is a 15% to 25% bottom line profit, depending on turnover. Phenomenal growth is projected in many of these types of franchises with the investment paid back within six months and growth doubled each year thereafter. This of course depends on the success of the franchise and the amount of work put into the venture by the parties.

With regards to future challenges of the food & beverages industry Business Guide quotes:

…to become relevant to the new South Africa by improving food security and providing low- priced, basic and nutritious food that is accessible to everyone through adequate distribution. Until recently the developed consumer drove food industry trends, which focused on niche marketing, added value, convenience, fresh / minimally processed foods, and increased variety. But the developing market – characterized by a move from traditional to westernized eating habits, from maize to bread and rice as cereal sources, greater red meat consumption, and high consumption of soft drinks and Fast Food – grew by 50% over the period 1997-2000. Awareness of such market changes will be vital for success….

The black market is indeed a powerful market to target. This would necessitate a separate strategy to effectively penetrate this competitive market. With some of our products we have specifically aimed to capture the black market.

The Market

The Competition:

There are no major players in the healthy Fast Food segment. Initially we will be competing with other existing Quick-Serve Food Concepts. The big players are:

Company Description
Kentucky Fried Chicken American Quick Food Chain in the chicken segment. The company
has over 300 stores in South Africa. KFC has brought out the
innovative nuggets, which has proven popular with kids, and
targeting the no mess, no fuss consumers on the move. This nugget
concept in chicken is very close to our own in the form of Bites, but
covered in batter and deep-fried. Our advantage here is the
tremendous variation potential, in Bite flavors and sauces.

Nandos Chicken A popular South African based company in the chicken segment
with Portuguese specialties, totaling 180 outlets in South Africa, with
69 in Gauteng. The company grew internationally and has
subsidiaries in Australia, UK, and US. They have very few healthy
alternatives.

Something Fishy Quick Fish offers: They specialize in all types of seafood, and
combinations thereof with chips and South Salads. It is locally
perceived more healthy that the burger chains. They have seating
capacity similar to Mc Donalds.
Steers Steers has 302 outlets of which 144 are in Gauteng. It is similar to Mc
Donalds, almost exclusively have +/- 80% of their items on the menu
either as burgers, steak, ribs or other meat products. These are
combined with chips, bread rolls, or salad. This brand offers the meat
lover a good choice, but it lacks in providing any serious health food
alternatives such as vegetables.
Scooters Pizza It is an international chain that established 120 outlets in South Africa
in the last two years. They specialize in delivering pizza and related
foods to suburban homes and businesses within a certain guaranteed
time. Very few healthy alternatives, besides South Salads, have been
introduced.

London Pie Co This company was locally established in 1994, and has known
phenomenal growth. There are about 325 franchises in the country. It
is also currently represented in other countries such as England,
Canada, Australia and Taiwan. They are known for a relatively cheap
take-away snack at R 9.00 (US$ 1.20) per pie, irrespective of the
various fillings. Pies are very popular with the emerging previously
disadvantaged middle class. The pies are perceived as convenient,
filling and excellent value for money. However, they are not
perceived as healthy.

The Customers:

We have identified three market segments:

The Convenience
Segment

Persons aged 25 to 45; their lifestyle is modern, busy and urban. They are career
oriented and subsequently have limited time to prepare meals. This group
focuses on the convenience of the product. They dominantly want convenience
from their Fast Food demands.
The food should be easy to consume, with the least mess or fuss. The packaging
should be spill free and compact and thus easily transportable. The service
should be quick, clean and efficient. The customer should see this product as
modern as his / her modern lifestyle.
The outlet should preferably be on the way to work or home, easily visible and
accessible from the main roads. These are people that would look for the
occasional quick-serve take-away meal, either to consume on the move or at the
office. These should be no-drip / no-mess, and should be conveniently packaged.

The Health
Conscious Segment

Persons aged 25 to 35; their lifestyles are active. They are health conscious. They
could be vegetarian and most likely do sports and go to the gym. They focus on
the health aspect of the product.
They would demand food low in fat, and high in carbohydrates. If nutritional
values of the products are included as additional information, it should add to
satisfaction. The vegetarian range available should appeal to the alternative tastes
of customers. The wide range of basic food groups should appeal even to the
most discerning of appetites. The food should also look as good as it tastes, with
modern lines and bright natural colors.
For the sweet tooth, a healthy alternative to the candy bar or chocolate, would be
the fruit Bite with the optional complimentary sauce. Other products such as
soft drinks and salads should follow the same healthy theme.

The Emerging Mass
Middle-Class
Segment 

Persons aged 25 to 45; predominantly black, and most likely to have a family.
These are people that are changing their eating habits to westernized habits,
culture and lifestyle. They are mainly looking for home-replacement meals. They
focus on the value-for-money balanced aspect of the product. This is the most
challenging target group. These are people that have to be convinced over to a
new concept.
They are potentially also the largest consumer base available locally. The sales
growth could be phenomenal in this target sector. They would demand the basics
in the product line-up, especially the items that are high in carbohydrates and
protein. This would include potato, maize, and sweet corn Bites with various
sauces.
This supplements the meat, poultry and fish Bites. Here the person is
concerned of receiving a wholesome meal for his hard earned money. Feeding the
family also means that they want to buy more for less, and to bring in more
variety to suit every family members taste. To change traditional food habits is
difficult, but with the right promotional information given, they can be convinced
that the health aspect is worth it.

The complimentary sauces
available are:

Savoury :

1. Chilli
2. Pepper
3. Mustard
4. Tomato
5. Garlic
6. Monkeygland

Sweet :

1. Cinnamon & Sugar
2. Maple syrup
3. Honey
4. Custard

Meat, poultry and fish

1. Greek Fish bites
2. Chicken bites
3. Beef bites

Vegetables

1. Pumpkin bites
2. Spinach & Feta bites
3. Potato & Pea bites
4. Broccoli & Cheese bites
5. Sweet Corn bites
6. Mexican Cheese and Pepper bites
7. Carrot bites
8. Maize & Veg bites
9. Soya bites

Fruit

1. Banana bites
2. Apple bites
3. Pear bites

The Product

The Uniqueness of the Business

The original idea came from traditional pumpkin fritters, originally endowed in a syrup sauce, sometimes covered in cinnamon sugar. The fact that all food substances can be frittered gave motion to our idea. We believe that with a few modifications done to the age old recipes; these could be made fast, healthy, and presentable. Instead of traditional deep oil frying, new technology grilling is used. The fact that the ingredients and preparation thereof are low in cost and simple in processing makes for substantial profit margins. Interesting grilling shapes are used, and with the combination of delicious dip sauces, it compliments the array of colorful bites. They are specially developed and researched to satisfy the most demanding of tastes.

An in-house soft drink is also being developed to coincide with this new Fast Food culture. PieceT is iced herbal tea, artificially sweetened, and bottled in different flavors. Another product is JuiceE, various flavors of fruit juice pulp blended to a recipe, and sold fresh to the customer. Another additional side order is the unique GreenPiece, which is a delicious in-house green salad specially formulated to complement the fritters.

The recipes of the bites were developed by a local chef, head of the Sally Williams School of Cookery, based in Sandton, within 10km of the Head-office of Bites & Pieces.

The Customer Experience

Upon opening the door, a bright orange and green store greets you. The walls are decorated with framed vegetable, fruit, poultry, meat and fish posters that depict the bites ingredients which also serve as the menus. As you walk to the order counter, a fancy conveyor belt grill with glass panels is at work in the background. Everything looks so fresh and clean it makes ones mouth water; a must-order experience that just shouts out healthy. After you place your order, the cashier calls it out to the chef which then grabs the appropriate bite mix dispenser and squirts out the necessary mix with an attached pastry gun into cavities that are recessed into the conveyor belt. In the mean time, you pay your order at the cashier. Roughly two minutes later, the variety of bites get to the end of the belt where the chef then scoops them into a package. The package that includes a plastic fork and napkin is then handed to you. On the way out, a little counter awaits you with various types of sauces that allow you to be creative with taste and color to create your own combination.

The Company

The private company structure has been chosen to be the best alternative to accommodate the future growth potential, as well as having the investors assured that the companys financial affairs will be well documented and accounted for, as per local legal requirements.

The Bites & Pieces team will consist of four investors, which will incrementally join the organization in executive functions as it grows throughout the first five years. For the period of the first year the Operations Director will lead the business, whilst the other investors will be available on a consulting / advisory level only. At the start of the second year, the Financial Director will join to prepare and facilitate the increase of growth and implement the financial strategy forward. At the end of the second year, the two remaining investors will fill their executive functions as Development Director and Marketing Director. They will be just in time to initiate and implement the anticipated business model change from a Fast Food owned chain to a mainly franchise system of operations.

Organizational Chart - Year 5

Bites & Pieces

Franchising (^) Operations Finance Development Research & Development RDT (5 personnel) New Product Development Marketing Research Quality Control FDT (9 personnel) Business Development Marketing OPERATIONS (8 personnel) HR & Training Central Kitchen Controller Oper. Quality Control FINANCIAL ( personnel) Accounting Purchasing Auditing

The Strategy

SWOT Analysis

Strengths Weaknesses

• Simple operation.
• The production process is simple and can be automated.
• Small floor space needed for outlets.
• Low capital layout, especially for outlets.
• Low cost High Profit Margin.
• Flexible product. Many possibilities and new varieties of Bites are possible.
• Convenient and easy to consume.
• The fritters are very simple in concept and easy to produce.
• The products can be continuously developed. They should have less of a limited product life period, because of proactive R&D meeting the variety of demands.
• Products can be rapidly prepared, which improves customer service. – Unknown product. – Extensive Advertising required – high initial marketing expenses.

Opportunities Threats

• Increasing Health Awareness and customer demand for healthy food.
• Unexplored market segment (Healthy Fast Food).
• Increasing take-away demand.
• Increasing Franchising interest and opportunities.
• Fulfilling the local demand for low cost / high profit franchises.
• Tapping the potentially massive black market.
• International trade and foreign currency.
  • Copying of this unique concept by competitors (Barrier of entry is low).
  • General acceptability of the new product without effective advertising.
  • Possible obstacles to the black markets acceptance.

Goals

Schedule of openings

Goal 1. The initial phase of 6 months, we will have the central kitchen and one pilot outlet (Fourways) established, without any external financing. Upon the assessment of its performance, we will establish two more outlets (Rivonia & Blackheath) by the end of the 6th month. Thereafter, we will be opening two more outlets in designated areas by the first year. By the end of the first year, there will be a total of five (5) outlets within a 20 kilometer radius. They will be situated in the region of Northern Gauteng, served by one central kitchen (Maximum serving capacity: 15 outlets).

During the course of the second year four (4) additional outlets are to be established in the same region, served by the same central kitchen, two by the 16th month and two by the 21st month.

Outlet growth projected in the first 2 years *Outlets 1, 2 & 3 are marked for reference.

Goal 2. During the first part of the third year we plan to become established changing our business model to function as a franchisor only, and raise capital by selling six of our nine pilot outlets to the best available franchisees. The business functions will change from mainly operational to franchise-based marketing, development and support to drive the franchise business forward to

Months of Operation

0 6 12 18 24

1 3 5 7 9

Accumulated # Outlets

rapid growth in the Gauteng province, but also incorporate the Western Cape and Kwazulu Natal for the next two years. Please see our section on The Franchising Model for more detail. The projected establishment of the additional 16 franchisees for the third year would be provide the company with a total of 25 outlets as follows: 15 in Gauteng; 6 in Western Cape and 4 in Kwazulu Natal.

Goal 3. Within the fourth year the marketing drive will be stepped up to accommodate a further 50 franchisees within the same 3 regions, served by 5 central kitchens within the prescribed limit of a 20 kilometer radius. In this period, we would want this company and its trademarks to be well known in the main urban areas of our country for providing quality fast and healthy food. In the food industry it must be regarded as a well sought after franchise opportunity.

Goal 4. The fifth year should yield another 100 additional franchisees, bringing a total of 172 franchisee outlets and 3 owned outlets, served by a total of 15 central kitchens in 6 regions. Strategies should be developed and systems put in place for an international franchising plan as well as going public with the company. After this initial 5 year period we envision the company to become publicly traded and gradually start to expand to international markets such as Africa, then the UK and parts of Europe, Asia and Australia.

Outlet growth projected by the 5th year

• 175 Outlets & 15 Central Kitchens are marked for reference.

Years of Operation

0 1 2 3 4

1 5 9 2
7

Accumulated # Outlets (Owned + Franchised)

5

175

Strategies

Strategies to reach Goal no. 1:

• The head office would remain in Johannesburg, Gauteng, the business and economic hub of South Africa.
• It would be in this time to extensively train and develop key personnel so as to provide future investment for the company. By the same token these key people will receive profit share and /or share incentives and /or preferential franchisee agreements, for them to feel that they share in the progress of the company.
• Effective and liberal promotion is necessary to capture and inform the intended target markets.
• With assessing the performance of operations of the initial 3 pilot outlets after 11 months, further outlets that are planned should be opened as soon as the commercial demand of the concept takes off. This is best decided when we see that budget projections for the first year are on track and expected growth is realized.

Strategies to reach Goals no. 2 & 3:

• Constant research & development of new improved menus to meet our customers needs, with additional side foods, and promotions and specials will contribute towards becoming locally known. A special research & development team (RDT) will be structured at head office for this function.
• Promotion of the concept through business media will by now have identified a business opportunity within the franchisee market to build upon. The expectations of the market at this stage will become more demanding, and a special head office franchise development team (FDT) will be formed to market, consult, develop, research, implement, assist and monitor the sales of franchises. They will train and effectively manage franchisees to keep to the original and the subsequently improved standards that will contribute towards local growth and an improved reputation of quality and consistency.
• A head office central kitchen committee (CKC) will develop the overall infrastructure of central kitchens in the designated areas, ensure the logistics and delivery of product mix, and strategically plan ahead for future expansions in the regions of opportunity.
• Additional regional FDTs and CKCs will be decentralized for effectiveness in dealing with the direct needs and requirements of franchisees in their regions.

Strategies to reach Goal no. 4:

• Establishing international credibility is dependent on local success. Franchisees must be doing well to provide the necessary references of credibility needed abroad.
• Need to go public to finance the planned expansion globally.
• By then the formal organizational corporate structure should be established and geared towards incorporating the growing business demands of anticipated growth. We will need the support of a highly skilled and accomplished corporate team to realize the goals of international trading.

Barriers to Entry:

Given the characteristics of the Quick Food Service, Ex-ante Barriers of entry are not high. Since we plan to start our business with a limited amount of outlets, capital requirements are not high enough to be considered a barrier to entry.

Customers preferences might be a barrier to entry for some concepts but we think that this is not the case since eating habits are shifting in the direction of healthy offers and concepts.

We do have to consider ex-post barriers of entry. The easiness of entering the market is there for any entrepreneur willing to explore the opportunities of the Quick Food Service. In order to make an impact on the market, promotion and advertising is of utmost importance, especially in regards to a brand new concept. This requires a lot of exposure in the media, which it turn, requires substantive revenue. More information must be fed to the target market, explaining and justifying the new concept. Thus, financially, it could be a barrier.

Trade Marks, Patents and Licenses

Intellectual property is an important consideration for any start-up business, as they frequently make up a substantial proportion of the capital value of an established organization. They also create useful barriers to entry for potential competitors.

The Bites & Pieces trademark has already been registered to protect the name and logo during trade. The products named PieceT, JuiceE and GreenPiece still have to be registered under trademark legislation before the introduction of the business. We have the possible option in patenting the business methods of the unique production process. In the USA, this has been a growing method of process protection that large franchising companies in the industry have successfully utilized. The production process has to be considered unique, and then described and diagramed in detail to be patentable. Since we cannot patent the recipes, they would qualify as registered trade secrets, such as the 11 spice ingredients of KFC.

The Operation

Stage 1 (HQ Store)

• Receipt of raw materials, ingredients and packaging. Storage.

Stage 2 (HQ Kitchen)

• Order processing and planning.

Stage 3 (HQ Kitchen)

• Ingredient collection and preparation.

Stage 4 (HQ Kitchen)

• Food preparation and storage.

Stage 5 (Refrigerated compartment: Light delivery vehicle)

• Delivery.

Stage 6 (Micro-outlet)

• Storage and re-processing of mix.

Stage 7 (Outlet dispensing area)

• Final preparation and packaging.

Stage 8 (Outlet packaging and dispensing area)

• Order delivery and payment.

Stage 6,7 & 8

Stage 5

Central Kitchen
Bulk production
& Distribution

Outlet
Final
processing& sales

Outlet
Final processing
& sales

Outlet
Final
processing& sales

Stage 1

Stage 2,3 & 4

Basic floor plans
Headquarters: +/- 200 m

OFFICE 1

OFFICE 2

K

T

LOAD
AREA

FREEZER

FREEZER

STORE

FRIDGES

PROCESSING TABLES

ENTRANCE

HALL

CENTRAL
KITCHEN

W/BASI
N

The Central Kitchen

Advantages of the Central Kitchen

1. The HQ kitchen is responsible for the first stage of processing.
2. By removing the kitchen from the outlets, they require minimum space.
3. A central kitchen requires less capital layout for equipment, than would be the case for each individual outlet.
4. A consistent quality standard can effectively be maintained.
5. The bulk purchasing and centralized delivery ensures keen discounts.
6. Effective and accurate inventory control.
7. The process control is managed more efficiently.
8. The mix is sold to the franchisee, rendering an interactive dependence.
9. The quality of distribution of stock, packaging, and promotional materials to the outlets are effectively monitored and recorded.
10. Research and development is localized to advance products throughout the chain.
11. Better control is achieved with centrally located administration and accounting functions.
12. A central kitchen can instantly adapt to varying market demands; the response time is less.
13. A central kitchen ensures that outlets have only the minimum necessary stock on hand; it ensures effective stock turnover and cash flow.

Stock Plans Raw materials received are to be stored at the stores area at central kitchen. Durable ingredients will be shelved and non-durable ingredients and foodstuffs will either be refrigerated or sometimes frozen. An inventory will be updated by the Supervisor whenever the store area operates. This keeps a tight control on FIFO stock control, security and monitoring of the freshness quality.

After processing the mix, sauces, salads and beverages have to be stored before being dispatched to the outlets. The bite mix in container is chilled to 5C, or, depending on the demand at that time for

COUNTER

PAY

FREEZ
ER

FRIDGE

M
W

FRONT OF STORE
OFENTRANCE

MIXES

CONVEYOR

BELT

GRILL

ORDER

DELIVERY

Outlet Basic Floor Plan
Micro-outllet : +/- 40 m

the specific bite, it may be frozen. Sauces are refrigerated in sealed buckets. Salads are sealed in ready to sell /serve containers. Beverages are bottled in disposable plastic bottles.

Bulk purchases of packaging, i.e. boxes, bottles, plastic liners, bite forks, and buckets are stored at Headquarters. They are then dispatched as required to the outlets, as to keep the limited stock area under control.

When stock runs low at an outlet, a request is transferred to Headquarters. When the assignment arrives, it would be stored in similar condition as HQ, or otherwise prepared for final processing.

The Outlet

Advantages to the Outlets / Franchisees

1. Only grilling processing done; the second stage processing.
2. Small floor area needed. (4 0 m)
3. The set-up cost of the total franchise will be low. (R 115 500)
4. There is low capital expenditure on catering equipment and shop fitting.
5. Few personnel (5) are needed to run this high profitable operation.
6. The cost of the mix is low, the production cycle is fast, turnover high = large profit margins.
7. The stock control is simplified. (Mix received = stock in process / on hand + mix sold)
8. Procedures and practices are simple to implement, train and maintain. (Required franchise training minimal)
9. Less process / product management required thus increased emphasis on customer service.
10. Demand for mixes is instantaneously responded to on a daily basis; no danger of short runs on ingredients.

Daily Anticipated Serving Trends per Check : Estimated at 400 per day

The Conveyor
Belt Grill

20

65 65

35

20

(^1010) 55 55 30 20 15 0 10 20 30 40 50 60 70 Number of Orders 11:00 h12:00 h13:00 h14:00 h15:00 h16:00 h17:00 h18:00 h19:00 h20:00 h21:00 h22:00 h Hour of the Day Daily Demand by Hour *Capacity is easily possible for up to 800 per day We have identified two peak periods along the day. The first will be lunch, between 12 and 14 h, and the second one diner, between 18 and 20h. WE estimate that more than 50% of our sales will occur in those two periods.

Administration Plans

At the Head Quarters :

The companys main administration and accounting functions will be based at these premises. All documentation and control will also be located here. The director, bookkeeper and the Supervisor will be the people handling most of the administration.

Communications are via two lines, i.e. phone & fax. There will also be three cellular phones for mobile calls; one each for the director, Supervisor, and the driver.

At the Outlets :

Each outlet will be equipped with a wide angle video camera that is linked via internet to the two computers at Headquarters, one of which is mobile. This assures constant control of activities of the staff, as well as the monitoring of customers during the course of the day. This would considerably cut the time and frequency of visits to the outlets.

Cash sales are all recorded and facilitated by cash registers with cash drawers. The items sold will reflect on each cash slip issued. Each outlet will also feature a speed point credit card pay method for such purchases.

• Manager / Chef gross salary: R 4 092.00 ; R 882.77 per week
• Supervisor gross salary: R 2 217.00 ; R 480.85 per week
• Management Trainee gross salary: R 2014.00 ; R 434.00 per week
• Cook gross salary: R 1664.00 ; R 299.38 per week
• Light Motor Vehicle driver gross salary: R 1664.00 ; R 299.38 per week
• Counter Assistant gross salary: R 1664.00 ; R 299.38 per week

Employment and Personnel Plans

Organizational Structure

The company will initially employ a total of sixteen (16) employees, 11 at the Central Kitchen, and 5 at the Outlet.

Based at the Central Kitchen:

• Operational Director
• Personal Assistant
• Bookkeeper
• Production Supervisor
• 6 X Kitchen Staff
• Driver Based at each of the micro outlets:
• Manager
• 4 X Kitchen Staff

Salaries and Wages

Starting salaries will be:

• Directors drawings : R 15 000 ($2000) per month
• Personal assistant : R 6 000 ($800) per month
• Outlet managers: R 6 000 ($800) per month, plus monthly profit share. (see section Profit Share) All other positions will receive wages by an hourly rate. The various rates per hour are:
• Production Supervisor : R 20.00 ($2.66)
• Driver : R 16.00 ($2.13)
• Central Kitchen staff : R 14.00 ($1.86)
• Outlet Kitchen staff : R 16.00 ($2.13)

Currently, 9 hours a day for 5 days a week apply at normal rates, thereafter, overtime is normal rate plus a half, and on Sundays the rate is double.

The current minimum salary scales for the catering industry according to the CADRA report are applicable from 1st March 2001 to 28th February 2002.

As can be calculated, our salaries and wages are substantially higher than the above mentioned averages.

Share Incentives

Share options will be allocated to the Supervisor and to each of the nine eventual Outlet Managers. These have conditions according to an agreement.

Profit Share

Profit share is an important consideration in establishing effective outlet management. For the nine managers, it would be important to them to relate their significant input with the equivalent output reward. Because the outlets management team should remain personally concerned and responsible for their respective outlets, it is the companys view to have these key people share in the success rate of their businesses. The most effective method of doing this is by having a regular (monthly) tangible incentive, such as a month-end gross operating profit bonus.

This will be a calculated percentage of the gross operating profit figures drawn up at the end of every month. Each and every outlet will have individual Income statements (Profit & Loss) to be completed and analyzed at the HQ Accounting Department. This also ensures that managers are aware of the impact of Cost of Sales and expenses on their profits.

Benefits

A standard benefit available to all employees is a pension fund. Managerial staff will also benefit from a company medical plan.

Working Hours and Shifts

Depending on alternative service methods, we can forecast outlet opening hours to be from 11h00 until 23h00 initially. This would constitute one shift of 11 hours, thus 9 hours normal time, with an additional 2 hours overtime. Otherwise this could be arranged by two shifts per day for 6 hours at a time. This would include Saturdays and Sundays, as well as Public Holidays.

Saturdays would be paid 11 hours at 1.5 times the normal rate, and on Sundays twice the normal rate, so also on the Public Holidays. Occasionally casual staff would be employed in busy or high season situations.

Training

All staff training initially will be done in-house. The concept, operations and products have been developed and researched by our team. The director and supervisor are most qualified to develop training and develop the preferred culture within the organization.

All training will be done at Headquarters/Central Kitchen and at the owned outlets. This will be used on a regular basis for training purposes and development, as well as future franchisee training.

Three extensive training manuals will be written for this purpose:

1. Central Kitchen Staff Training – processing of foodstuff, hygiene, preparation, packaging, storing and logistics.
2. Managers / Franchisees Training – the control of outlets, staff, finances, business skills, customer relations, and company practices and policies.
3. Outlet Kitchen Staff Training – preparation of bites, processing, stock control, packaging, billing, customer service, and hygiene. These manuals will be finalized within the first year. Training thereafter will be completed with a test and an internal certificate will be issued.

Consistency is vital in every outlet around the world. The store must be clean, service must be
friendly and fast, the product must be good and, depending on the countrys economy, must
offer good value...

Training initially will continue on a regular basis at the weekly meeting which will take place at Headquarters. All company employees shall be required to attend this meeting. This ensures that we remain proactive on business issues, customer trends and complaints, product and service improvements, and using all our employees ideas and inputs in improving business. This empowers all involved and maintains a high level of motivation.

Other regular meetings include a managers / future franchisees meeting once a month to discuss various issues of interest. The idea is to keep an open avenue of communication between all parties concerned.

Outlet in-house training for the kitchen staff is done by the outlet managers. They are precisely instructed on how to handle this by qualifying in the managerial training. Applicable training will also be implemented out-of-house for certain specialized subjects. When we are not qualified to handle this, outsourced training will be arranged as the demand arises. The company regards ongoing training as an investment for its future.

The training area in Headquarters/Central Kitchen will have a multi-functional purpose, thus being used as: training room, boardroom, social area and research and development laboratory.

Training in short will concentrate on:

• Company culture and teamwork
• Multi-skilling all staff for all different jobs
• The principles of business, especially the difference between turnover and profit and how to maximize it. Our general philosophy of training is based on the published standards of McDonalds:

The Marketing Aspects

Distribution: Selling Methods

Directly over the counter:
This is the standard method done at our take-away outlet. Upon ordering
items, the customer is immediately billed for the items. Once the order is
produced, it is then packed and handed to the customer. Forks and
napkins are provided.
Delivery service:
Standard third party delivery services could be used. Initially there is no
formal in-house delivery service required. In due course, these options will
be fully explored and a feasibility study made to determine the viability
thereof.
Corporate luncheon
contracts:

Initially this will not be considered before the outlets are established and
running. This requires a different marketing strategy and a separate plan
will have to precede this venture. By gaining experience and success in the
Fast Food industry, it would be a viable alternative market to explore.
Selling to convenience
food stores:

This would only be considered on the medium to long term, where the
company, its products and reputation will be well known and proven. This
would be the full processing of products until the serving stage,
packaging, and freezing. This would appeal to consumers that buy food
from convenience stores, which has proven to be an emerging market.

Pricing

Pricing is rather related to market expectation, than determined by the cost of the product. We perceive the market to demand a modest, but wholesome meal for around R 20.00 (US$ 2.70) (including VAT). By taking other Fast Foods in consideration, it seems as though a distinct advantage exists by offering a balanced and filling meal at this price.

The information provided for the competitors is our framework for dealing with pricing issues. Taking these figures into account, we would base our pricing in such a way:

A typical combination of meat Bites, vegetable Bites and sweet fruit Bites.

Example:

2 X meat Bites @ R 2.80 (US$ 0.37) = R 5.60 (US$ 0.74) 4 X vegetable Bites @ R 2.00 (US$ 0.27) = R 8.00 (US$ 1.07) 2 X fruit Bites @ R 1.60 (US$ 0.21) = R 3.20 (US$ 0.42) 3 X sauces @ R 1.00 = R 3.00 (US$ 0.40) Total meal is R 19.80 (US$ 2.64) including VAT

A recent Food Service Survey found that:

The customer spends an average of R 50.56 (US$ 6.74) (including VAT) at a quick-service outlet at a time. Average product expenditure is:

• Chicken – R 39.00 (US$ 5.20)
• Pizza – R 54.66 (US$ 7.29)
• Burger – R 30.40 (US$ 4.05)
• Fish – R 43.50 (US$ 5.80)
• Sandwiches – R 27.00 (US$ 3.33)
• Pies – R 14.30 (US$ 1.90)
• Doughnuts – R 24.00 (US$ 3.20)

Advertising

Advertising will address two different objectives:

• Creating Awareness of the product
• And in second stage, also promoting the franchising system

Target market will therefore be:

• Healthy Fast Food Consumers; and
• Potential Franchisees Advertising to attract consumers to the outlets will be done through different media and promotions. Each of the three identified target segments requires a different set of marketing strategies, advertising being one of these.

The Bites & Pieces Franchising Model

Initial Set-Up Fee: 50% of set-up cost (50.000 R$)
Standard set-up cost: R$ 100.000
Franchise Fees:
Royalty Fee: 5%
Marketing Fee: 8%
Exclusive Supplier for Bites Mix:
Typical Term of the Agreement: 5  15 years
Exclusivity Area: to be determined according to the area
Services provided to the franchisee: Marketing, R&D, Operational Support,
Training and Supplying.

The Franchising Model

Our entire business model is planned and based upon the strategy of rapid franchise expansion. Within the third year of operation, we have decided not to set up further company owned outlets. Instead, we will market franchise operations to future franchisees and to provide them necessary service and business support. In an effort to raise capital at a strategic time, we will sell six of the nine existing company owned outlets during the first part of the second year to preferential franchisees in order to accommodate future expansion plans.

Three major revenue sources:

• Initial Set-Up Fee
• Franchise Fee o Royalty Fee o Marketing Fee
• Selling 1st stage mixes, to franchisees, which were produced in our central kitchen

The Financials

During the first two years, the pilot period, our focus will be based on the following: 1) Test the concept; 2) identify the potential market demand; 3) build up an efficient management team; and 4) prepare for the future expansion via franchising. According to such a strategy, the project during the pilot period will be financed by so called blood money, from the core entrepreneur team itself.

Assumptions, Definitions and Notes

*All figures are stated in US$.

Property Plan and Equipment

We will lease our office and outlet space. For cost saving reasons, we will locate our headquarter office (include the first central kitchen) in a less expensive industrial area and our outlets in more expensive commercial areas like in business district or near large shopping centers.

Location Floor Space
(sq/m)

Rent (per
sq/m)

Preferred Region

Strijidompark, Randburg (CK) 200 3.00 Industrial
Fourways Area (Outlet 1 ) 40 13.00 Shopping Centre
Blackheath Area (Outlet 2 ) 40 13.00 Shopping Centre
Rivonia Area (Outlet 3 ) 40 13.00 Business District

1) Space Rental Plan

• A separate corporate Office will only be set-up in the beginning of the third year when we reach to the franchising stage;
• The standard floor space plan and design is assumed for all subsequent central kitchens and outlets.

2) Equipment Plan

• Standard Capital Investment for each central kitchen = US$ 45,410 (See Appendix for details)
• No extra equipment cost for Corporate Office since we assume Corporate Office is combined with the Central Kitchen.
• Standard Capital Investment for each company outlet= US$ 15,400

Revenue & Growth Our financial plan is based on the following two stages of growth to determine the revenue potential:

Estimated Revenue and Sales

• The revenue source will be the operating result from daily outlet operations;
• Since the opening of the outlet, the daily sales will be 50 checks per day for the first month, and an incremental 30 checks per day for the every following month;
• The above sales assumption is applied to every company owned outlet, without considering economies of scale;
• Average check revenue is R20, which is equal to US$2.67. This is also a standard check that we assume to all company owned outlets. Franchising Stage Our entire business model is based on franchise expansion. Starting at the third years operation, we will market our business model to future franchisees and provide them necessary service and business support. Moreover, we will sell 6 of the 9 company owned outlets in the third year to potential franchisees for the purpose of accumulating necessary capital for future expansion. Additional details were provided under the Franchising Model Section.

Cost & Expenses Operational Stage (Year 1 to 2)

• Operating cost is lower than industry standard due to: o bulk purchasing, lower food cost, central production, effective & accurate inventory control o Standardized service delivery and lower labor cost o Minimum production space required in outlets
• Less initial capital investment in equipment and facility due to: o Less equipment required in outlet since the centralized food production o Industrial strength equipment can be replaced by domestic equipment
• Given the nature of our business model, most of profit generated from operation will be reinvested on rapid expansion. In the first two years, nine outlets will be set up and operated in Johannesburg. Since the start of third year, nation-wide franchise expansion campaign will be launched.

Operational Stage – Cost & Expenses Breakdown Item F&B G&A Packaging Repair & Maintenance

Utility Laundry Distribution M&A
Outlet % of turnover 25 2 1 2 4.5 0.1 - -
C. Kitchen % of turnover - - - 2 7 0.2 3.5 -
C. Office % of turnover - 2 - - - - - Fixed

Franchise Stage – Cost & Expenses Breakdown Item F&B G&A Packaging Repair & Maintenance

Utility Laundry Distribution Franchise
Outlet % of
turnover

30 2 1 2 4.5 0.1 - 8
C.
Kitchen

% of
turnover

• • • 2 7 0.2 3.5 – C. Office % of turnover
• 2 – – – – – –

Receivables & Payables

The following assumptions have been made for the collection and payment period

• Given the nature of the fast food industry, we never sell for credit, thus no collect period need to be considered
• We estimate an 30 days payment period according to industry standard and according to local business convention
• Space rent is estimated to be paid in advance 30 days

Taxes & Exchange Rate

• Taxes estimates are based on a 30% tax rate and assume that losses can be carried over;
• The average exchange rate from South African Rand to US Dollar is US$ 1.00 equal to R 7.50. Projected Financial Figures: Attached in following Pages
• Pro Forma Income Statement
• Pro Forma Cash Flow Statement
• Pro Forma Balance Sheet

Also see Appendix for Standard P&L for a typical outlet.

Pro Forma Statement of Cash Flows

(in $000) (^) Year 1 Year 2 Year 3 Year 4 Year 5 Cash Flow From Operating Activities: Net Income – 47.11 315.63 411.03 943.4 2030.6 Depreciation 14.92 31.86 27.74 54.03 141.65 Amortization 0 0 0 0 0 Changes on Sale of Equipment 0 0 0 0 0 Changes on Sale of Investment 0 0 0 0 0 Changes in Account Receivable 0 0 0 0 0 Changes in Account Payable 25.24 232.77 25.24 25.24 0 Increase in Inventory – 25.24 – 185.66 – 473.6 – 514.96 – 943.94 Increase in Pre-paid Expenses – 2.19 0 2.8 0 0 Net Operating Cash Flow – 34.38 394.6 – 6.79 507.71 1228.31 Cash Flow From Investment Activity: Proceed from Sale of Equipment 0 0 0 0 0 Purchase of Equipment – 90.01 – 92.4 0 – 87.62 – 438.1 Proceed from Sale of Investment 0 0 210.6 0 0 Purchase of Investment 0 0 0 0 0 Net Investment Cash Flow – 90.01 – 92.4 210.6 – 87.62 – 438.1 Cash Flow From Financial Activity: Changes in Long-term Debt 0 0 0 0 0 Net Financial Cash Flow 0 0 0 0 0 Changes In Cash – 124.39 302.2 203.81 420.09 790.21 Increase/Decrease In Cash Cash at the Beginning of Financial Period 200 75.61 377.81 581.62 1001.71 Cash at the End of Financial Period 75.61 377.81 581.62 1001.71 1791.92 Difference – 124.39 302.2 203.81 420.09 790.21

Pro-Forma Income Statement

(in $’000) (^) Year One Year Two Year Three Year Four Year Five REVENUE $ 296.37 $ 1,346.48 $ 1,339.03 $ 2,954.32 $ 6,040.90 Food $ 222.28 $ 1,009.86 $ 464.99 $ 464.99 $ 464.99 Beverage $ 74.09 $ 336.62 $ 155.00 $ 155.00 $ 155.00 Total Sales Revenue $ 296.37 $ 1,346.48 $ 619.98 $ 619.98 $ 619.98 Franchisee Fee $ – $ – $ 719.05 $ 2,334.34 $ 5,420.92 Total Revenue $ 296.37 $ 1,346.48 $ 1,339.03 $ 2,954.32 $ 6,040.90 COST OF SALES Cost of Food $ 55.57 $ 252.47 $ 116.25 $ 116.25 $ 116.25 Cost of Beverage $ 18.52 $ 84.16 $ 38.75 $ 38.75 $ 38.75 Total Cost of Sales $ 74.09 $ 336.62 $ 155.00 $ 155.00 $ 155.00 Gross P/L on Sales $ 222.28 $ 1,009.86 $ 464.99 $ 464.99 $ 464.99 OUTLET EXPENSES Payroll & Related $ 84.24 $ 315.90 $ 126.36 $ 126.36 $ 126.36 Total Payroll & Related $ 84.24 $ 315.90 $ 126.36 $ 126.36 $ 126.36 Other Expenses Rental $ 12.72 $ 47.70 $ 19.08 $ 19.08 $ 19.08 General & Administration $ 5.93 $ 26.93 $ – $ – $ – Packaging $ 2.96 $ 13.46 $ 6.20 $ 6.20 $ 6.20 Repair & Maintenance $ 5.93 $ 26.93 $ 12.40 $ 12.40 $ 12.40 Utility Service $ 13.34 $ 60.59 $ 27.90 $ 27.90 $ 27.90 Laundry & Dry Cleaning $ 0.30 $ 1.35 $ 0.62 $ 0.62 $ 0.62 Depreciation $ 6.16 $ 23.10 $ 9.24 $ 9.24 $ 9.24 Total Other Expenses $ 47.33 $ 200.06 $ 75.44 $ 75.44 $ 75.44 Total Outlet Expenses $ 131.57 $ 515.96 $ 201.80 $ 201.80 $ 201.80 Total P/L Before Corporate & Kitchen Expenses $ 164.80 $ 830.52 $ 1,137.23 $ 2,752.52 $ 5,839.10 CORPERATE EXPENSES Corporate Payroll & Related $ 69.60 $ 69.60 $ 28.85 $ 86.55 $ 201.96 Rental $ 7.20 $ 7.20 $ 40.80 $ 40.80 $ 40.80 General & Administration $ 5.93 $ 26.93 $ 26.78 $ 59.09 $ 120.82 Marketing & Sales $ 27.00 $ 27.00 $ 40.17 $ 88.63 $ 181.23 Depreciation $ – $ – $ 0.98 $ 0.98 $ 0.98 Total Corporate Expenses $ 109.73 $ 130.73 $ 137.58 $ 276.05 $ 545.78 Central Kitchen Payroll & Related $ 69.12 $ 69.12 $ 207.36 $ 552.96 $ 1,036.80 Distribution Expenses $ 4.45 $ 47.13 $ 37.05 $ 111.14 $ 259.32 Repair & Maintenance $ 4.45 $ 26.93 $ 13.34 $ 35.56 $ 66.68 Utility Service $ 14.82 $ 94.25 $ 123.49 $ 370.46 $ 864.41 Laundry & Dry Cleaning $ 0.59 $ 2.69 $ 4.94 $ 14.82 $ 34.58 Depreciation $ 8.76 $ 8.76 $ 26.29 $ 43.81 $ 131.43 Total Central Kitchen Expenses $ 102.18 $ 248.89 $ 412.46 $ 1,128.75 $ 2,393.23 Total Income Before Tax Expenses $ -47.11 $ 450.90 $ 587.19 $ 1,347.71 $ 2,900.09 Provision for Income Taxes 0 $ 135.27 $ 176.16 $ 404.31 $ 870.03 NET INCOME $ -47.11 $ 315.63 $ 411.03 $ 943.40 $ 2,030.06

Pro Forma Balance Sheet

(in $'000)
Year One Year Two Year Three Year Four Year Five
ASSETS
Current Assets
Cash & Equivalents
House Bank $ 3.00 $ 3.00 $ 5.00 $ 10.00 $ 15.00
Demand Deposit $ 72.61 $ 374.81 $ 576.62 $ 991.71 $ 1,776.92
Total Cash $ 75.61 $ 377.81 $ 581.62 $ 1,001.71 $ 1,791.92
Inventory $ 25.24 $ 210.90 $ 632.70 $ 1,476.30 $ 1,476.30
Prepaid Expenses $ 2.19 $ 2.19 $ 4.99 $ 4.99 $ 4.99
Total Current Assets $ 103.04 $ 590.90 $ 1,219.31 $ 2,483.00 $ 3,273.21
Property & Equipment
Furnishing & Equipment $ 90.01 $ 182.41 $ 177.63 $ 265.25 $ 703.35
Less: Accumulated Depreciation $ 14.92 $ 46.78 $ 74.52 $ 128.55 $ 270.20
Net Property & Equipment $ 75.09 $ 135.63 $ 103.11 $ 136.70 $ 433.15
Total Assets $ 178.13 $ 726.53 $ 1,322.42 $ 2,619.70 $ 3,706.36

LIABILITIES & OWNER'S
EQUITY
Current Liabilities
Account Payable $ 25.24 $ 210.90 $ 632.70 $ 1,476.30 $ 1,476.30
Salary Payable $ - $ - $ - $ - $ -
Accrued Interest Expenses $ - $ - $ - $ - $ -
Total Current Liabilities $ 25.24 $ 210.90 $ 632.70 $ 1,476.30 $ 1,476.30
Long-Term Liabilities
Mortgage Payable $ - $ - $ - $ - $ -
Total Long-Term Liabilities $ - $ - $ - $ - $ -
Total Liabilities $ 25.24 $ 210.90 $ 632.70 $ 1,476.30 $ 1,476.30
Owner's Equity
Capital $ 200.00 $ 200.00 $ 200.00 $ 200.00 $ 200.00
Retained (deficit) Earnings $ -47.11 $ 315.63 $ 679.26 $ 943.40 $ 2,030.06
Total Owner's Equity $ 152.89 $ 515.63 $ 879.26 $ 1,143.40 $ 2,230.06
Total Liabilities & Owner's
Equity $ 178.13 $ 726.53 $ 1,511.96 $ 2,619.70 $ 3,706.36

Risk Assessment

We recognize the existence of the following potential risks that might threaten our growth. Based on those we came up with different strategies to face the situations that may arise.

Low Barriers to Entry

Our business model is neither capital intensive nor technical intensive. It makes it easier for others to imitate our business model and force Bites & Pieces to lose its competitive advantage as first mover. To cope with this potential risk, we have the following strategies:

• Grow fast and gain significant market share
• Create brand awareness

• Patent our business method (production process) to protect our intellectual property Untested Business Concept

Our business model faces another potential risk which is related to the market acceptance of our new food concept. To mitigate this risk, we will first launch efficient market research to detect customer preferences and tastes. On the other hand, we will invest very few at the early stage of our business, and we will strengthen our investment only after we have identified a significant potential market demand.

Substitute Products

Driven by the publics increasing health awareness and changing life style, more and more companies are planning to create new business models to fulfill this soaring demand. Similar food concepts or business models might emerge in our market; we view this as one of the potential risks. To mitigate it, we need to conduct R&D to produce varieties of new products and stay at the top.

Capital Shortage to support Fast Growth Requirements

Since the future success of our business model is largely depends on the speed of expansion, thus the ability to raise sufficient capital to support this expansion becomes critical. We will actively cooperate with potential investors including both private and institutional investors. Moreover, we have planned to sell the 6 out of 9 of our own operated outlets in the third year to franchisees to raise necessary capital for future franchise expansion.

Exit Strategy

Following exit options will product the greatest return to our shareholder:

• Initial Public Offering (IPO)
• Position for an acquisition by a major international player in fast food industry.

Business Valuation Under our exit strategy, we assume the best possible solution would be that we position our business for a future acquisition to a major international player in fast food industry. The table below outlines our business valuation. Figures are in $000.

Year Year 1 Year 2 Year 3 Year 4 Year 5
Operating Profit $ -47.11 $ 450.0 0 $ 587.19 $ 1347.00 $ 2900.09
Taxation 0 $135.27 $ 176.16 $ 404.31 $ 870 .03
Net Profit $ -47.11 $ 315.63 $ 411.03 $943.40 $ 2030.06
Tax Rate 30% 30% 30% 30% 30%

Estimated Future Cash Flows: Year 6 Year 7 Year 8 Year 9 Year 10 $ 2,537.58 $ 3,171.97 $ 3,964.97 $ 4,956.21 $ 6,195.26 Estimated Stabilized Net Profit: $3,399.92 Cap Rate: 15% Company Value: $ 22,666.14

Bites & Pieces

Business Plan

Appendix

Exhibit 1: Quick Serve Industry Figures

Quick-Serve Food Market Share
by Type

Chicken (36%) Burgers (27%) Pies (20%)
Fish (5%) Pizza (4%) Ic e c ream (4%)
Sandwiches (2%) Doughnuts (1%) Others (1%)

12%

80%

14%

27%

0%

58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Chicken Pizza Burgers Fish Sandwiches Pies

Annual Growth
per Quick-Serve Food Segment

Exhibit 2: Customers Profile

Quick Food
Customers' Age Profile

17%

52%

22%

9%

Under 20 Between 20-34 Between 35-50 Over 50

Quick-Seve Food
Group Size Profile

20%

13%

35%

32%

Pairs Non-family groups Families Singles

Quick-Serve Food
Customers' Age Profile

20%

13%

35%

32%

Pairs Non-family groups Families Singles

Exhibit 3: Competitors Pricing

Company Pricing Kentucky Fried Chicken KFC currently offers at R 20.00 (US$ 2.7):

• Nuggets combo (6 nuggets, chips & 1 dip) – R 19.00 (US$ 2.53)
• 9 nuggets & 2 dips – R 19.80 (US$ 2.64)
• 10 nuggets & 2 dips – R 22.00 ( US$ 2.93) (available as 20 nuggets & 4 dips)
• Dips each – R 0.60 (US$ 0.08)
• Snack box (2 pieces, mash & gravy & roll) – R 21.00 (US$ 2.80)
• The chicken burger combos range from R 17.00 to R 23.00.(US$ 3.07) This seems to be all that KFC can offer in this range, as substantial meals start at +/- R 32.00 (US$ 4.27).

Nandos Chicken There are no items on the menu for R 20.00 (US$ 2.70) that are a threat to the value of what can deliver in the market. You can get for +/- R 20.00 (US$ 2.70):

• Single chicken burger – R 23.90 (US$ 3.19)
• 1/4 chicken – R 17.90 (US$ 2.40) (add R 8.00 (US$ 1.07)for chips; R 1.60 (US$ 0.21) for roll)
• Prego steak roll – R 24.00 (US$ 3.20) Most of the more substantial meals start at R 34.00 (US$ 4.53) to R 40.00 (US$ 5.33) per person.

Something Fishy Here we also see that all meals around R 20.00 (US$ 2.70) are usually a piece of fish, or fish / bread or chips combination. Here are some examples:

• Fillet of fish (large) – R 13.50 (US$ 1.80); (2 x small) – R 20.60 (US$ 2.74)
• 1 piece pack (1 fillet and chips) – R 23.90 (US$ 3.2)(large fillet) R 19.90 (US$ 2.65) (small fillet)
• Slimmers pack (large fillet & french salad) – R27.90 (US$ 3.72)
• Fishburger (large fillet) – R 25.90 (US$ 3.45); (small fillet) – R 17.90 (US$ 2.40)
• Kiddies nuggets & chips – R 25.90 (US$ 3.45) Most of the substantial meals start around R 30.00 (US$ 4.00) per person. Their portions are generous and very filling. The perception of this type of food is that it is somewhat healthier than the traditional fast foods, although the fish and chips are deep fried. There is also a good selection of salads as side orders.

Steers These are combined with chips, bread rolls, or salad. However, there are numerous burgers available for around R 20.00 (US$ 2.70):

• Most of the normal sized sauce burgers are between R 6.40 (US$ 0.85) and R 21.00 (US$ 2.80). Chips are excluded, and would cost R 11.00 (US$ 1.47) for a regular sized portion.
• Most of the other meals and combinations start at the R 25.00 (US$ 3.33) mark. This menu offers the meat lover a good choice, but it lacks in providing any serious health food alternatives, such as vegetables.

Chess Pizza Most of Chesss meals i.e. Pizza and pasta, start at around R 32.00, (US$ 4.27) depending on toppings and size. They have, however, introduced the pizzarola with fillings in a light pizza pastry. They sell for R 19.90 (US$ 2.65). The newest product is the Toastee for R 17.90 (US$ 2.39), which is 2 slices of Italian toast, a choice of topping, covered in mozzarella and herbs. Interesting toppings are chicken

peri-peri, bacon & onion, garlic & chilli, vegetarian medley, spinach
& ricotta, and cheese & mushroom. This would qualify as a snack,
and wouldnt be perceived as a substantive meal.

London Pie Co. This company was locally established in 1994, and has known phenomenal growth. There are about 100 franchises in this country. Its also currently represented in other countries such as England, Canada, Australia and Taiwan. They are known for a relatively cheap take-away snack at R 9.00 (US$ 1.20) per pie, irrespective of the various fillings. Fillings also include spinach & feta, bacon & egg, vegetable curry and apple & spice amongst the traditional fillings. Pies are very popular, and are probably the closest in concept to Bites. They are perceived as convenient, filling and value for money. They, however, are not perceived as healthy.

Exhibit 4: An example of our Menu

Exhibit 5: Bites Recipes An Example

1. PUMPKIN BITES

Ingredients : pumpkin – 300g flour – 0.5 cup butter – 0.5 TBS brown sugar – 2 TBS cinnamon – 0.5 t/spn salt – 0.5 t/spn eggs 2 milk – 25ml sultanas (optional) – 35g Method : Use 300g pumpkin flesh without pips. Cut pumpkin into 2.5 cm blocks. Put into a deep microwave container with a capacity of 4 cups. Rinse in cold water and drain. Cover the pumpkin, and microwave on 100% power (high) for 12 minutes, or until soft, stirring after about 6 minutes. Drain if necessary. Add the brown sugar, butter, and cinnamon to the pumpkin and mash finely, or puree in food processor. Add self raising flour and mix well. Beat the eggs, milk and salt together, and add to the pumpkin mixture. If using sultanas, they would be added at this stage. Put into containers.

eggs
flour
milk
cheddar cheese
green chillies
green peppers
red peppers
green olives
(pimento stuffed)
salt
pepper

MEXICAN CHEESE AND
PEPPER BITES

Energy 760 kJ Protein 8.0 g
Carbohydrates 55 g Fat 9.9 g
Dietary Fibre 3.2 g Sodium 278.7 g

Exhibit 6: Standard Set up Cost for 1 Central Kitchen (in US$)

Item Amount Unit Price Sub Total
Refrigerator 3 670.00 2,010.00
Freezer 3 600.00 1,800.00
Microwave 4 1,350.00 7,000.00
Food Processor 6 270.00 1,620.00
Misc. Kitchen Utensils 1,350.00
Weighing Scale 7 800.00
Fixtures & Fittings 2,000.00
Trolleys 3 140.00 420.00
Electronic Equipment 1,740.00
Car 1 26,670.00 26,670.00
45,410.00

Exhibit 7: Standard Set up Cost for 1 Outlet (in US$)

Item Amount Unit Price Sub Total
Refrigerator 1 670.00 670.00
Freezer 1 600 600.00
Food Processor 1 270.00 270.00
Conveyor Belt Grill 1 4,000.00 4,000.00
Microwave 1 1,350.00 1,350.00
Dispense Gun 15 80.00 1,200.00
Misc. Kitchen Utensils 700.00
Weighing Scale 2 450.00
Fixtures & Fittings 1,750.00
Trolleys 1 140.00 140.00
Electronic Equipment 1,270.00
Fitment 3,000 3,000.00
15,400.00