Restaurant Franchise Business Plan
STEPHENSON'S, INC., dba REUBEN'S DELI
413 S. Kraut Ln.
Akron, OH 43905
Stephenson's, Inc. operates Reuben's Deli, a franchise delicatessen. This business plan features a discussion of factors unique to a franchise, such as the history of its performance in other areas, the applicability of the concept in the new area, special trademark and image issues, and the advantages of a franchise as opposed to an independently-owned restaurant.
- RISK FACTORS
- COMPANY STATUS
- PROPRIETARY FEATURES
- COMMUNITY BENEFITS
- THE PRODUCT
- PLANNED DEVELOPMENT
- SALES AND ADVERTISING PROGRAMS
- MANAGEMENT DUTIES AND RESPONSIBILITIES
- FINANCIAL ESTIMATES
Stephenson's, Inc. was formed as a Delaware Corporation in July of 1995. The Company was formed to establish operating Reuben's Deli restaurants in Akron, OH. The Company will develop this concept, which currently has a time-tested, proven market acceptance of its food and beverage group(s). In addition to other considerations, the Company in its evaluations elected to execute this concept based upon the simplicity of the concept overall, the training by the Franchisor, the support offered by the local area developer group, and the ease and costs of entry and the likelihood of success at the store level under the various market conditions and environments. Initial efforts in this development shall be primarily focused upon the commitment and execution of an initial Reuben's Restaurant located in the Akron, OH area. It is the intention of the company to establish its headquarters in Akron, OH during its first year of operation.
Stephenson's, Inc. was co-founded by Caren and Eddie Stephenson. Mrs. Stephenson acts as President and Mr. Stephenson acts as Executive Vice President. Both are Directors of the Company. The Company is a start-up situation, however, and it should be recognized that it also represents an extension of a successful 23 year-old chain of more than 400 operating restaurants. Further, the company will have very effective guidance provided by the local Area Developers who will be working day to day with the Company to help insure its success. The Area Developers are Mr. Wilson and Mr. Jones. Mr. Wilson has extensive experience in the food and beverage industry. Mr. Wilson was formerly with Wendy's International Inc. of Columbus, OH and worked for its chairman Mr. Dave Thomas for over five (5) years. He was also Co-Founder and President of Calibre Inc., a publicly held company in the business of building and operating various restaurant concepts. These concepts include Chuck E. Cheese Pizza Time Theaters, RAX Restaurants, and G.D. Ritzy's. In addition, Mr. Wilson began his restaurant career with his family as they owned and operated one of the first Kentucky Fried Chicken restaurants and a full-service family restaurant known as Wilson's Drive-In located in Lima, OH. Mr. Jones has over 15 years' experience in developing startup and ongoing businesses. Mr. Jones has worked closely with successful entrepreneurs, including the nationally recognized billionaire and insurance magnate Clement Stone; America's leading real estate educator and author, Dr. Albert J. Lowry; and others, including Charles J. Givens, ZigZiglar, and Mr. Bob Harrington (Chaplin of Bourbon Street). Mr. Jones spent six years doing national platform speaking engagements on investment strategies, business management, and motivational topics. He has extensive experience in formulating and executing start-up businesses for others as well as himself. He has spent the past eight years involved with law firms specializing in tax planning strategies to high net worth individuals and clients of these law firms. Additionally, Mr. Jones taught attorneys and CPAs methods of tax and estate planning with the use of both domestic and off-shore trusts.
The Company's first priority is to establish its first operating Reuben's Deli restaurant. Prior to opening the first restaurant, the principals shall obtain complete training from both the parent company, Reuben's Inc. of Boise, Idaho, and the local Area Developer, Yukon, Inc. Second, it will continue to pursue sites for the future development of subsequent restaurants. The Company has entered into an Agreement with Reuben's Inc. to build and develop additional franchise units.
It is the long-term objective of the Company to obtain adequate financing for the project, identify sites, and develop successful Reuben's Deli restaurants. The selection of this specific concept was made as a result of the likelihood of success in a new business venture of this type. Significant risks that are usually inherent in start-up businesses are reasonably mitigated as a result of Reuben's history and track record. Reuben's Inc. has developed a 24-year track record of success and profitability with over 400 operating franchises. The Company believes that the timing of this sector of the food market is most desirable. Food industry experts agree that a specialty sandwich with unique flavors offered at competitive prices will be the fastest growing segment for the next ten (10) years. However, in all events, there are certain risks that need to be addressed appropriately since the Company is directly competing for transactions with other existing restaurant chains as well as independent operations.
Stephenson's, Inc. is in its first year of operation. It has located and established its headquarters in Akron, OH. The Company has submitted a lease proposal on a site located at_____________________. Further consideration is under evaluation for a site in___________, OH. It is anticipated that construction and completion of the initial company store shall be not later than_______________. Stephenson's, Inc. will expedite additional efforts during 1995 and into 1996 to build and operate additional company-owned stores and increase the depth and strength of management of the company.
Dependence on Management
The success of the Company will depend on the ability of management to operate daily. The Company plans upon growing its base of management as needed and when it becomes financially feasible. There is no assurance that management can do this in a timely or profitable manner.
All aspects of the retail food industry are highly competitive, but the competition in the quick serve food segment is particularly intense. The Company will be competing with a large number of other quick serve food stores. Some of the competitors have greater financial resources and more established reputations that this company. However, the Reuben's chain does have a 24-year successful operating history.
Dependence on Company Support Personnel
The Company's ability to develop and manage franchises will require significant time commitments from management. The Company intends upon staffing two persons by the end of the second year to manage the franchise with its owners. The placement of these persons will be difficult in light of the competition. Therefore, no assurance can be given that the Company will attract or be able to retain qualified individuals to satisfy the Company's requirements for such personnel. In such an event, the management may need to continue to maintain and operate the stores and their growth.
Dependence on Manufacturers and Suppliers
The Company has no production facilities for food and equipment and is dependent upon obtaining the services of outside manufacturers. Although the Company anticipates that it will be able to purchase sufficient products, equipment, and agreements with approved manufacturers, no assurance can be given that the Company will be able to always obtain such products, equipment, or agreements.
The Company has entered its first full year of operations and has started to develop relationships with area professionals to advise the Company in the areas of Real Estate, Banking, Accounting, and Legal needs. Its activities include the establishment of initial store financing. The Company has also recently submitted a proposal to acquire a lease in Akron, OH. Upon obtaining a commitment for financing for its first store, the Company will then execute a Franchise Unit Development Agreement with Reuben's, Inc. Currently, the Company has executed a Unit Development Agreement with Reuben's and has paid $_____.00 in franchise fees to the franchisor. The Company anticipates building a minimum of_____units.
The Company is currently seeking to obtain a loan of $ 170,000 to develop the first store. The terms of that loan shall be determined when management has negotiated what is going to be realistic to offer based upon projected earnings. Further, the Company anticipates providing an additional amount of cash between $75,000 and $90,000 towards its first store development.
Use of Proceeds
The amounts set forth in this business plan represent the Company's present intentions with respect to promised expenditures. Actual expenditures may vary substantially, depending upon future developments such as marketing, sales activity, corporate opportunities, and certain other recognized or unforeseen factors. Any change either in the allocation of funds or in the order of priority will be at the discretion of the Company's Board of Directors.
The Company may utilize trade and other commercial credit, if available. Working capital, lines of credit, secured by orders and accounts receivable, will likely be used during the routine course of its business.
The Company and Reuben's Inc. intend to mutually protect all patents, trademarks and other proprietary rights to the extent such action is feasible. The packaged goods, advertising, logos, recipes, local promotions, and any other product, service or idea deemed proprietary will also be protected appropriately. The intent is to preserve the integrity of the concept and to hold the protected property to certain standards and monitor use of these trademarks as they are supposed to apply to certain promotions and products as directed by the parent company. The Company and Reuben's Inc. rely upon certain recipes and proprietary products to present a unique atmosphere, ambiance, aroma, food taste, and overall consistent presentation to the customer. Any representation of these items or trademarks should only be as directed by Reuben's Inc. and the Company as an area developer. The Company primarily relies upon the laws of unfair competition and confidentiality agreements to protect its designs and other proprietary information.
The Company believes it will be an asset within its development area as it will generate new job opportunities for the residents of the respective communities in which it builds stores. The Company plans to hire as many employees as possible from the local community residents for each store. It will also give the cities increased revenues through payroll and sales taxes and increased consumer spending by employing the local residents. The Company believes that as a franchise owner for Reuben's Inc., that Reuben's Deli will become a well-known brand name nationwide and create a company that the local communities will be proud to have. Further, Reuben's has established a tradition that the Company plans on supporting along with other area franchise owners and the Area Developers for the benefit of local charities. For the past several years Reuben's Inc. has sponsored a 5K race to benefit various charities by raising significant dollars through the participation of the public. It is noted to be one of the most successful 5K races in the U.S. Stephenson's Inc., in cooperation with other franchise owners plans on co-sponsoring this race in the greater Akron market.
The Company together with Reuben's Inc. is providing an opportunity designed to fulfill the needs of an active population who find themselves in a busy working environment with schedules that are pressing because of circumstances which cause them to have their time restrained for various reasons. Therefore, this population who appreciates a quality product at a fair price will use their disposable income to eat at a quick service restaurant offering outstanding customer service in an effort to obtain both convenience and entertainment. Reuben's Deli enjoys a base of customers that have traditionally developed during the past 24 years, into a heavy user profile (more than 4 visits per month). This allows for a solid customer base. Therefore a Reuben's franchise fulfills a need for a small business owner of a single unit or a larger business organization which would include multi-unit operations. The franchise provides a time-tested business opportunity with a successful track record and products proven to be widely accepted.
The Company has observed and spoken with customers of other Reuben's Deli franchise units who have indicated their overwhelming acceptance of the products in this market. Indications are strong that as the Reuben's system grows nationally and internationally, the recognition will continue to cause further interest in the concept. Many studies point out that if you' re interested in operating a restaurant your odds of success are greatly enhanced with a concept that has been in business for at least 10 years and offers a unique product. In fact, it has been statistically shown that the odds are that if you start your own restaurant without any history, it will fail 85% of the time, while if you develop afranchise with a proven track record, like Reuben's Deli, you will be successful 85% or more of the time. Reuben's Deli certainly is a proven entity. The customer responds for the following reasons:
The wide appeal and the quality of Reuben's Deli products. Reuben's enjoys one of the highest customer responses in the food industry today. The average customer visits a Reuben's Deli 4-6 times per month.
- The universal acceptance of the old and especially new restaurant designs.
- The affordable price of the products as compared to other competitive food operations.
- The cleanliness of the overall operation.
Any restaurant is certainly considered competition in this industry. However, the food segment that we are in, the specialty deli type sandwich is rapidly becoming the fastest growing segment in the food industry. Reuben's Deli and similar food operators in this category are showing impressive results as featured in various industry publications like "Restaurant News."
The Reuben's restaurant concept has a 24-year operating history which gives it a vast amount of past operating history and proven stability. The products in a Reuben's Deli have stood the test of time. The quality is unequaled and truly unique and that is why so many franchise owners already operating in this system have experienced success. The new updated building layouts and designs, together with the quality of the product and expanded menu is encouraging a very high level of repeat business. The addition of many new store, approximately 15-20 per month, is creating an awareness of Reuben's Deli nationwide and will fuelits popularity through this growth. In 1993, system-widesalesexceeded$71,000,000.00, an increase of over 20% from the previous year. In 1994, sales reached in excess of $100,000,000.00 system-wide. Itis anticipated that by 1999, there will be in excess of 3800 stores producing almost two (2) billion in annual sales. The Area Developer program has further enhanced this growth and success of the nationwide development of the Reuben's Deli system due to the increase in support to the local franchise owners by their area developers.
Industry and Market Overview
The Reuben's Deli restaurant concept is involved in one of the largest dollar volume industries in the world. However, those who excel in this category are generously rewarded both personally and financially. The largest cross section of population in the world spends money daily in this industry and those trends are continuing to increase rapidly. Reuben's Deli has a 24-year operating history and has now entered the mature growth stage of their development. This is the time in the development history when restaurant chains historically experience explosive growth and effective market penetration. The markets are growing nationally and internationally, and the specialty sandwich segment is viewed by experts in the industry as the segment clearly offering the most dynamic opportunities. The blended flavors of the sandwich menu and the popular gourmet pizza products, together with the new flavored coffee program, have combined to attract industry attention. "Entrepreneur Magazine" again recently named the Reuben's Deli concept as the Number 1 franchise in the sandwiches, soups, and salads category, representing the second consecutive year that award has been won by Reuben's. This is an impressive list to be on at any level and to be named Number lisa tribute to the concept. Reuben's Inc. and Yukon, Inc. (Area Developers) have been the focus of several national and local periodicals.
Yukon, Inc., Area Developer, anticipates and estimates that the territories under their control for development will support over 667 Reuben's Deli restaurants. The minimum development contract demands that at least 317 stores be developed over the next five years. This growth is affected by seasonality, market share achieved, market trends, pricing strategies, and product line strategies. Management has determined that after evaluating all of these criteria and spending valuable due diligence time, that the growth in our respective areas will significantly enhance the credibility and visibility of Stephenson's, Inc. in its efforts to develop.
SALES AND ADVERTISING PROGRAMS
Stephenson's, Inc. plans on using several methods of local store marketing as suggested by the Reuben's, Inc. marketing department and the area developer. The primary method for obtaining sales is initially contacting surrounding businesses and residents and inviting them to visit the store through special local store promotions. Coupons, radio, and frequency cards will be utilized early as pre-opening sales tools. Reuben's has also contracted a number of national magazines and/or newspapers to continuously prepare and run advertising for exposure of the concept. Stephenson's, Inc. will contribute 1% of total gross store sales to the national marketing fund for the overall corporate wide system marketing program. Additionally, the Company will spend at least 3% annually of its gross revenues of Companyowned stores on local advertising and promotions and will participate with these funds in the area co-op programs. The Company will develop working relationships with various advertising agency's and will receive quality guidance from the co-op members and its area development company, Yukon, Inc., in choosing the most effective advertising.
MANAGEMENT DUTIES AND RESPONSIBILITIES
The Company consists of a Board of Directors and two (2) full-time management employees including Mr. Eddie Stephenson and Mrs. Caren Stephenson who are also officers of the Company. The principals will be managers in these stores. The functions of managements are structured according to the operating requirements for the successful execution of the business. These functions include but are not limited to corporate strategic planning, sales and marketing, implementation and updates of operations, advertising and promotions. Additionally, management currently is responsible for the daily operations of Companyowned stores. Outside professional services will support the needs for legal and accounting functions. Also, the Company will utilize the services of a life insurance professional and an advertising and public relations firm based in the greater Akron, OH area.
Major Management Objectives
The Company has outlined as its 1995 major management objectives the following points in order to continue to successfully execute its business plan:
- Complete the Company's need for financing
- Locate, negotiate, obtain, develop, and open store #1
- Complete training in operations at Boise, Idaho, per Reuben's, Inc. requirement
- Increase the depth of knowledge in management of the Company organization
- Participate closely with Reuben's Inc. to further enhance the overall improvement of the Reuben's Deli concept
- Promote awareness of the Reuben's Deli in the local trade area through in-store promotions
- Select and hire quality employees who appropriately represent the image of the success of Reuben's Deli
- Operate a clean profitable store
Projected Statement of Earnings
For years ending December 31, 1996-1998
|Year 1||Year 2||Year 3|
|Less: Emp. disc/meals||5840||1.45||5570||1.46||7300||1.45|
|Cost of Sales|
|Food & Bev||111,000||27.75||124,875||27.75||138,750||27.75|
|Paper & Plastic||9000||2.25||10,125||2.25||11,250||2.25|
|Total Cost of Sales||120,000||30.00||135,000||30.00||150,000||30.00|
|Total Emp. Exp.||97,532||24.38||110,140||24.48||111,456||22.29|
|Year End Rev & Taxes||5000||1.25||5000||1.11||6000||1.20|
|Cash Over/Short & Theft||320||.08||360||.08||400||.08|
|Laundry & Uniforms||1800||.45||1800||.4||1800||.36|
|Lies. & Permits||600||.15||600||.13||600||.12|
|Repairs & Maint|
|Total Other Expenses||145,860||36.46||157,744||35.05||168,378||33.75|
|Earnings from Ops||26,758||6.69||36,046||8.01||57,508||11.50|
|Other (Income) Expenses|
|Total Other (Income)|
Projected Balance Sheet
|Total Current Assets||11,683|
|Property & Equipment|
|Less: Accumulated Depreciation—Leaseholds||(12,500)|
|Less: Accumulated Depreciation-Equipment||(18,800)|
|Total property and equipment||187,700|
|Less: Accumulated Amortization—Franchise Fees||(2750)|
|Less: Accumulated Amortization-Org. Cost, Accounting||(500)|
|Less: Accumulated Amortization—Org. Cost, Legal||(520)|
|Less: Accumulated Amortization—Training Costs||(900)|
|Total Other Assets||36,930|
|Liabilities and Stockholders9 Equity|
|Current Maturities of Long-term debt||11,045|
|Accrued Rent Concessions|
|Total Current Liabilities||11,045|
|Less: Current Maturities of Long-term Debt||(11,045)|
|Total Long-term Debt||131,807|
|Total Stockholders' Equity||93,461|
|Total Liabilities & Stockholders' Equity||236,313|
|Common Stock Purchase||1000|
|Less Loan Proceeds||(153,000)|
|Net Cash Requirements||120,283|
Adjusted Projections: Cash Flow Only
|Sales Per Month||33333||41666||50000||58333|
|Less: Employee Meals||4000||5000||6000||7000||1|
|Cost of Sales|
|Food & Beverage||111000||138750||166500||194250||27.75|
|Paper & Plastic||9000||11250||13500||15750||2.25|
|Total Cost of Sales||120000||150000||180000||210000||30|
|Payroll & P. Tax/Owner||5979||5979||5979||5979|
|Payroll & P. Tax/Manager||28118||28118||28118||28118|
|Total Employee Expenses||120697||141747||162797||183847||45.95|
|Accounting Year End - Taxes||' 1500||1500||1500||1500|
|Accounting - Payroll||360||360||360||360|
|Cash Over/Short - Theft||320||400||480||560||0.08|
|Licenses & Permits||600||600||600||600|
|Repairs & Maint. - Bldg.||1000||1000||1000||1000|
|Repairs & Maint. - Equip.||500||500||500||500|
|Telephone & Postage||1200||1200||1200||1200|
|Net Earnings from Operations||14443||49083||83723||118363|