11Executive SummaryGoal: to establish the first super premium ice cream franchise in SaskatoonWe have secured $100,000 in debt financingWe will be providing $50,000 in equity and are seeking an additional $150,000 in equity financing todayAnticipated IRR of 33%Anticipated ERR of 9.3%Preliminary discussions in place for location in downtown Saskatoon
12Why franchise? Proven business model Predictable growth Strong brand recognition in AlbertaSupplier contracts already in placeRecipes and branding have already been developedTraining providedFranchisee social network and national assistanceOnline advertising provided
13VisionMarble Slab Creamery is the ultimate gustatory experience. We cater to each customer’s unique tastes providing the perfect ice cream, just how they want it. Our ice creams are fresh, delicious, and of the highest quality. We don’t just make desserts, we create experiences.
14MissionOur mission is to be the pre-eminent distributor of quality ice creams in Saskatchewan. We will provide prompt service, a great experience, and the finest ice cream appealing to ice cream lovers of all ages.
15Present Locations557 stores in total located in 35 states, Puerto Rico, Canada, and in Dubai and Kuwait35 locations in Canada – No franchises currently located in Saskatchewan
16Demand for Ice CreamAccording to University of Guelph, annual consumption of ice cream is as follows:Country liters per capitaNew Zealand: 26.3 litersUnited States: 18.7 litersAustralia: 17.8 litersCanada: 9.5 litersItaly: 9.2 litersUnited Kingdom: 7.7 litersFinland: 3.9 litersChina: 1.9 litersJapan: 0.01 liters
17Marble Slab’s Competitive Advantage 50 flavors of ice cream in a freshly baked waffle cone made on site using proprietary recipes – “Bread and Butter” for Marble SlabSelect Mixins® such as berries, nuts, chocolate chips, Smarties, Gummy Bears etc.Marble Slab sells an experienceWhole process involved. You get more than just a ball of ice cream. All the ice cream is mixed, flavored and frozen at each outlet.
18Marketing Plan – Marketing Mix Product:Ice cream with Mixins®Specialty dipped conesFrozen yogurtSundaeIce cream cakes and piesPrice:From $4.95 for a regular ice cream cone$30.95 for an ice cream cake
19Marketing Plan – Marketing Mix Promotion:Printed adsLocal radio stationsFacebook®In-store discountCouponsPlace:1,500 sq ft. store located on 20th Street E and 2nd Avenue S.
22Marketing Plan Segmentation Target group Positioning Age Gender Household characteristicsIncome levelTarget groupFamilies with childrenHigh income individuals and familiesPositioningHigh-end segment
23Marketing Plan – Competitive Analysis Major high-end ice cream chainsCold Stone Creamery, Marble Slab Creamery and MaggieMoo’s InternationalGood newsNone of these chains are operating in SaskatoonBad newsIntense competition from Dairy Queen, Jerry’s and Homestead
25Marketing Plan Strengths Weaknesses Opportunities Threats Premium productsCustomized ice creamUniversal recipe and trainingWeaknessesLow brand awarenessLost control on choosing suppliersOpportunitiesFirst-mover advantageBooming economy and increased disposable incomeUnsaturated marketThreatsEntrance of rivalsRegulations on frozen dessert
26Human Resource Plan Manager Background Bachelor of Commerce2 Years Management Experience DQTraining – Management & EmployeesIn-HouseCorporateRoles – GenericDuties
27Human Resource Plan Motivational Incentives Compensation Work-Life BalanceEmployee of the MonthDiscountsFlexible HoursWork EnvironmentCompensation1 Full Time Manager = ~ $55,000 + Std BenefitsEquivalent of 4 Part Time Associates = ~$20,000/annum + Std Benefits
28Operations Plan – Hours of operation Daily hours of operationWinter hours (January – May, September- December)Daily 11:00am – 7:00pmSummer hours (June – August)Sunday – Thursday 11:00am – 10:00pmFriday – Saturday 11:00am – 11:00pm
29Operations Plan – Typical Day Manufacture ice cream and conesServe customersRestock goodsClean machines, floors and tablesMake ice cream cakesObserve inventory levelsReview sales reports and other financial data
30Operations Plan – Supply Analysis Designated, reputable suppliersBase mixFlavouringsOther IngredientsMenu boardEquipmentFixturesPricing negotiated by franchise
31Operations Plan – Service Providers Legal and AccountingLocal Law firm and Accounting firmBookkeepingAccountingLegal servicesComputer Hardware and Software SupportRestaurant Computer Solutions, Inc. (RCI)POS Computer System
32Operations Plan – Capital Budget Computer Hardware and SoftwarePOS SystemGranite SlabIce cream making machineIce cream cone baking ovenDisplay caseIce cream freezer
33Operations Plan – Technical processes Training program provided by the franchiseTraining program – Houston, Texas10 daysIn-depth review of Marble Slab’s Operations ManualOn the job training in proceduresStore operationsIce cream manufacturing
37Financial Plan – Capital Structure $300,000 in funds required to commence operationsFinanced via Combination of Debt & EquityCorporate franchisor does not offer direct or indirect financing$100,000 in debt over 10 year periodTranslates to annual payments of $14,238$200,000 in equity financing requiredRaised $50,000 personally and are seeking $150,000Required return on equity = 20%
38Financial Plan – Sales & Growth First year sales revenue expectedIce Cream & Cake SalesYear 1 ~ $430,000 growing to ~ $545,000 in year 5GrowthIce Cream – ~10% in year 1, ~5% thereafterCakes – ~6% per year
39Financial Plan – Statement of Income and Retained Earnings Gross Profit Margin = Average 50%Net Profit Margin = Average 13.7%Operating costs/Gross Sales = Average 34%Composition of Cost of Goods SoldDirect Materials = 41% AverageDirect Labor Used = 41% AverageVariable Manufacturing Overhead = 18% Average
40Financial Plan – Cash Flow Initial Working Capital - $10,000Net Cash Flow from Operations~$57,000 in year 1 rising to $116,000 in year 5Net Cash Flow from Financing~$293,000 (net of year 1 interest) in year from initial equity offering and proceeds from long term debtNet Cash Flow from Investing~($264,000) in year 1 and ($30,000) resulting from capital expenditures
41Financial Plan – Investment Analysis Net Present Value of Investment = ~60,895Using required rate of return on equity of 20%IRR on equity = 33%Total Net Cash Flow to Equity~86K in Y1, 86K in Y2, 91K in Y3, 70K in Y4, 107K in Y5External Rate of Return on Equity Investment9.3%Estimated dividend payment schedule40K in Y2, 65K in Y3, 80K in Y4, 95K in Y5Undiscounted Pay Back Period5.1 Years (Dividends Received)
42Assumptions for Sensitivity: Scenario EstimatesVariableWorst CaseBase CaseBest CaseQuantity of Sales80%100%110%Labour Costs130%$10.15/hrMin wageLabour Hours150%75%Materials Costs125%90%
44Conclusion Saskatoon loves ice cream Established market exists Knowledge and expertise existsEstablished business model, brand, and trainingAsking for $150,000 in equity, IRR of 33%
45ConclusionMarble Slab has quickly expanded beyond its original Southeastern presence and become a fast-growing franchise.It is ranked in Entrepreneur Magazine's Franchise 500 (#93), Fastest-Growing Franchises (#72) and America's Top Global Franchises (#75)Don’t miss out on this excellent investment opportunity
47Market DriversHealth issues – both negative (obesity, diabetes) and positive (natural, organic) have continued to generate new productsConsumers crave indulging in richness and luxuryCarry super-premium image to healthier segments
48Market Drivers Market Challenges Trade-offs exist where popularity of new product detracts from sales of older oneIce cream and frozen novelty market has nearly completely penetrated among kidsIce cream and frozen novelty market has near penetration amongst kidsMature ice cream segmentContinuously develop products that consumers seek and react to call for healthier choice.
49Financial Plan - Assumptions In preparing estimates, we obtained actual sales figures for similar establishments located in Canada and the United States.In a sample of 68 stores, the range of actual sales was between a low of $258,711 to a high of $867,770.Corporate profit and loss statements obtained from similar establishments to assess whether our estimates were reasonable
50Risk Factors Why go Independent? Marble slab is easily imitable Marble slab does not yet have traction in Saskatoon; brand goodwill is trivialFlexibility to run the business how you chooseAbility to change store layoutCan offer products not offered by Marble SlabWorks in other citiesWhy go Independent?Business model of franchise is easily imitableMarble slab does not yet have traction in Saskatoon so the value of goodwill associated with the name is not knownFlexibility to run the business how you chooseAbility to change store layout to improve customer flowCan set pricesCan offer products not offered by Marble Slab but competitive with local market (eg Sundays, Floats, etc)Successful model as seen in Vancouver – namely Dolce Amore and Casa de Gelato, two local stores that are incredibly successful. Ditto for Mondo gelato.May be worth looking into how much startup and design costs would actually be as these could be commensurate with initial franchise feePotential for franchising the brand if it becomes popular! (Taco del Mar)Could just buy dairyland ice cream and sell
51Financial Plan - Assumptions The royalty fee as franchisee is equal to 6% of gross sales – Payable weeklyAn advertising fee is also assessed that is equal to 2% of gross salesInitial price for the standard seven ounce serving of ice cream will be $4.95Initial price for ice cream cake will be $30.95Expected real growthIce Cream Sales – 5% in yr 1 and 3% subsequentlyIce Cream Cake Sales – 5% in yr 1 and subsequentlyExpected rate of inflation = 3%