Smoothie_Shop_Business_Plan

Business Start-Up and Planning Course Business Brief I am looking to open a smoothie bar in Littlehampton, West Sussex. The Company will offer a wide menu of juices, smoothies and milkshakes as well as a small selection of food, including sandwiches, wraps and salads. All products will be organic where possible. Business Name The name of the business is of crucial importance. I felt it was important to have a name that was relatively unique, easy-to-remember, and have brand recognition. The name also needs to be fun and amusing, so that it encapsulates the personality of the brand. Therefore, I think it is best to have an amusing pun, such as “Smoothie Operators”. I have checked this name against Companies House (www.CompaniesHouse.gov.uk) and it is not currently taken. “Smoothie Operator Ltd” was a catering company in South-East London but has been dissolved since April 2009. Also, these names to not break any Companies House rules by being offensive, using terms that denotes a type of business set-up (e.g. ltd, plc, etc.), or using any prescribed or sensitive words and expressions. After further research it appears that ‘Smoothie Operator’ is also an iTunes App game (http://itunes.apple.com/us/app/smoothie-operator/id415452667'mt=8), and a smoothie bar resource firm (www.smoothieoperators.co.uk). It is probable that there would be no problems as we would not be competing directly with either of these companies, but it would need to be researched further. Target Client We have two main, and quite different, target clients for our smoothie bar. The profitability of the company could depend on our ability to successfully appeal to both markets. Research tends to suggest that younger people tend to drink more smoothies and that they’re often seen as a luxury, impulse purchase. Therefore, our target client would be a young adult or teenager wanting a quick treat. They would be impulsive and opportunistic in nature, and be willing to try something new and perhaps unusual. Their average spend would be relatively low, often just £2-3, but would return frequently with their friends, increasing their weekly spend to about £8-10 each. We would also be strongly targeting older people that work in the town of Littlehampton. They would be professional and health-minded, keen to take advantage of their lunch breaks in the middle of the day to have something wholly natural and organic. They would be willing to pay slightly more for this, having something to eat such as a sandwich or panini with a drink, at an average spend of approximately £8 per visit each. Again, they would return to our bar frequently, bring their colleagues and/or friends, and advertise the bar through word-of-mouth. As well as our target clients, we also have a bespoke ‘dream’ client. This is someone who, instead of concentrating our resources into attracting, we would try and satisfy on the chance that it materialises. An example of this would be an Ad Hoc event, such as a corporate function or celebratory party. All light refreshments could be prepared to order on the morning of the event and refrigerated until required. Market Analysis We all hear the statistics about business start-up successes, with estimates ranging from 50-95% of new SMBs (Small/Medium Businesses) failing within five years. However, the UK economy is built on the successes of SMBs, as some of following statistics highlight: • There are currently 4.5 million small businesses in the UK • These account for 99% of all enterprise within the UK, 58.8% of the private sector employment and 48.8% of private sector turnover. • UK SMBs employ an estimated 13.8million people and an estimated combined annual turnover of approximately £1,500 billion. (source: www.fsb.org.uk, November 2011) The UK Smoothie market is thought to be worth an estimated £271 million annually, and still growing year on year. Only once in the eleven-year forecast has the size of the market decreased from the year earlier, and that was in 2009, probably a symptom of the recessive UK economy. Whilst the revised figures (please see graph below) were more modest than originally hoped, it shows good sustainable growth in the next few years. [pic] (Mintel, 2008) The last few years has seen a major social and media push, as well as government campaigns, regarding the benefits derived from a healthy lifestyle. Consumers are becoming increasingly educated and demanding of healthy options, to which our products are well suited. Competitors The UK smoothie market is dominated by the company “Innocent”, who have a turnover of more than £100m and sells about two million smoothies per week (BBC News: “Coke buys into Innocent smoothies”). The formation of this company was also heavily inspired by the success story of this competitor: Innocent was founded by three Cambridge graduates - Richard Reed, Adam Balon and Jon Wright; at the time they were working in consulting and advertising. In 1998, after spending six months working on smoothie recipes and £500 on fruit, the trio sold their drinks from a stall at a music festival in London. People were asked to put their empty bottles in a 'yes' or 'no' bin depending on whether they thought the three should quit their jobs to make smoothies. At the end of the festival the 'YES' bin was full, with only three cups in the 'NO' bin, so they went to their work the next day and resigned. The company now is thought to have a turnover of over £128 million and 220 employees. Location Traditionally, the first rule of a successful business start-up is “location, location, location”, and it is equally important now, especially when dealing with the retail sector. We have planned that our smoothie bar will be in the town of Littlehampton, on the main high street concourse. The town centre has a significant amount of footfall, and is a tourist/holiday town that would bring in a constant flow of potentially new customers. In February 2011, the Local Data Company (LDC) released a report showing that Littlehampton has the fifth largest percentage of empty shops of any town in the South of England, with 17.8% (behind only Havant, Camberley, Bracknall, and Aldershot). Furthermore, the Centre of Retail Research predicts that around 10,000 shops across the UK will close in 2011, as large retailers look to decrease the size of their chains. Bearing all this information in mind, I think we would be in a strong position to negotiate a cheaper deal with a property owner than initially advertised. I have found a commercial property that is sitting vacant in Littlehampton High Street. It is in a prime location (next-door to NatWest, opposite WH Smith, 0.2 miles from the station, etc.) and seems to fit the criteria that we require. It is available to rent at £1,060 pcm (£14,000 pa), but I feel that we would be able to negotiate a better deal than this, which may then lead to paying the full price once the business is profitable. [pic][pic][pic][pic] Property Business Rates of tax are currently at 0% as part of the UK Government’s stimulus package to encourage small and medium sized businesses to form in the country. Marketing The company will use a variety of different marketing techniques to promote the business and heighten awareness of the bar. We will try to use a combination of traditional marketing techniques, such as flyers and discounts, and a few other more modern approaches. Couponing We will use a series of flyers that will advertise the business, giving important information such as where we are, what we do, and how to get in touch, in an informal and engaging way. A large part of our flyer campaign will be the use of ‘couponing’, a discount attached to the flyer. Couponing, as a marketing tool, is a traditional approach and has a long and successful history. In 1887, the Coca-Cola Company was incorporated with Asa Candler as one of the partners. He transformed Coca-Cola from an insignificant tonic into a profitable business by using innovative advertising techniques. The key to this growth was Candler's ingenious marketing including having the company's employees and sales representatives distribute complimentary coupons for Coca-Cola. Coupons were mailed to potential customers and placed in magazines. The company gave soda fountains free syrup to cover the costs of the free drinks. It is estimated that between 1894 and 1913 one in nine Americans had received a free Coca-Cola, for a total of 8,500,000 free drinks. By 1895 Candler announced to shareholders that Coca-Cola was served in every state in the United States. It is also a vital part of introducing a new product or service to a market. One of the key barriers to new customers is that the product or service is a largely untried and, to the individual consumer at least, untested quantity. Because of this, we will be offering discounts with each flyer of one half-price smoothie, limited to one smoothie per person per flyer. Whilst we expect that to dent our initial turnover, such an investment should pay dividends in the longer term. We will distribute these flyers across Littlehampton, in places such as other businesses, libraries, supermarkets and in the street. Each different set of flyers will have a different coupon code on it, so that we can see which set of flyers are most efficient and concentrate our marketing resources more on the most efficient. The coupons and coupon codes will be also available online. Website E-marketing is an increasingly strong and influential source of marketing. Businesses, and especially B2C businesses, are increasingly using Social Networking websites to reach a younger audience. Facebook currently has over 900 million objects that people interact with (e.g. pages, groups, events and community pages), with the average person connected to 80 such objects (source: www.facebook.com/press/info.php'statistics). 57% of people talk more to people online via Facebook than they do in real life, so it makes sense to have an online persona (source: http://www.digitalbuzzblog.com/facebook-statistics-stats-facts-2011/). We would also look to have our own website for people to find out more information about us, such as menus, prices, special offers, where we are and how to contact us. The price of the domain name “www.Smoothie-Operators.com” is an annual cost of £5.49 (from http://www.domainexpress.co.uk/checker.php) and can be renewed if and when required. Legislation There are a few pieces of Government legislation that we shall need to be aware of and ensure that we comply with fully. This will include but are not limited by the following: • Equality Act 2010 In order to comply with this, we will need to reasonably demonstrate that we do not discriminate in any way against gender, race, sexual orientation, disability, or anything other ‘protected characteristic’. This includes having disabled access, not advising people based on perception of health and applies to customers and staff alike. • Copyright Design and Patents Act 1988 Essentially, the 1988 Act and amendment establishes that copyright in most works lasts until 70 years after the death of the creator if known, otherwise 70 years after the work was created or published (fifty years for computer-generated works). This may apply to our company name, logo, unique products or any other defining characteristics of our business that defines us as a business. • Trade Descriptions Act 1968 This act serves to prevent manufacturers, retailers or service industry providers from misleading consumers as to what they are spending their money on. This law empowers the judiciary to punish companies or individuals who make false claims about the products or services that they sell. Each product we sell must be as described, of satisfactory quality, and fit for purpose. o "As described" refers to any advert or verbal description made by the trader. o "Satisfactory quality" covers minor and cosmetic defects as well as substantial deficiencies and means that products must last a reasonable time but does not give any rights if a fault was obvious or pointed out at the point of sale. o "Fit for purpose" covers not only the obvious purpose of an item but also any purpose determined at the point of sale as a result of queries by the customer and assurances given by the trader. • Health and Safety at Work Act 1974 The Act defines general duties on employers, employees, contractors, suppliers of goods and substances for use at work, persons in control of work premises, and those who manage and maintain them, and persons in general. There are extensive powers to ensure that this is enforced, including unlimited fines and even imprisonment for up to two years. • Weights and Measures Act 1985 This Act refers to where the weight or size of the goods being traded are important. It basically means that any reference to a weight or measurement must coincide with the weight or measurement featured in the product. This could be important if we are advertising our drinks and snacks as having a precise amount of a particular ingredient or if a customer orders a product by quantity (e.g. “Can I have a pint of Orange Juice please'”). • National Minimum Wage Act 1998 This Act states the minimum hourly wage for each employee. This amount typically rises each year, and up-to-date figures can be found at http://www.direct.gov.uk/en/Employment/Employees/TheNationalMinimumWage/DG_10027201. The current rates are as follows: o £6.08 - the main rate for workers aged 21 and over  o £4.98 - the 18-20 rate o £3.68 - the 16-17 rate o £2.60 - the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship • Employers’ Liability (Compulsory Insurance) Act 1969 This Act refers to a type of insurance that is required by law if you have any employees, to cover any accidents, illness, etc. For further information, please see the part on ‘Insurance’. There may be some Codes of Practice that are relevant to our business. Guidance on issues such as Service Charges, Tips, Gradtuities and Cover Charges is supplied by the Deparment for Business Innovation and Skills (BIS) and can be found at http://www.bis.gov.uk/files/file52948.pdf. Insurance Insurance is of absolute importance to any company, and it is crucial to get the right type of insurance for us. The only piece of insurance required by law (that is appicable to the company) is Employers Liability Insurance. As we will be looking, in time, to take on further staff, we will be required to protect ourselves against accidents or illnesses that our employees may suffer as a result of their working at our bar. More information can be found about this from the Health and Safety Executive at http://www.hse.gov.uk/pubns/hse40.pdf. We have no plans as part of the business to purchase a vehicle but, if we change our mind or plans progress, then we would require Third Party Motor Insurance. This would be required even if we used a private vehicle for business purposes (most conventional motor insurance would not cover business use). All other insurance would be optional but, given the current economic turbulence and the recent bout of rioting, further insurance is certainly worth considering. The company does not want to be in a disadvantaged position through behaviour that it cannot control. Types of insurance to consider are: • Buildings and Contents Insurance This will ensure that all the equipment and supplies are fully covered, as is the permanent fittings and fixtures of the building. • Key Person Insurance This will ensure that the company is supported in the event of any absense of a key individual within the business due to illness, injury or even death. • Business Interruption Insurance This will ensure that the company is protected if the premises are not able to be used. This would include anything that prevents you from accessing the premises, even if the problem is with a different building. SWOT ANALYSIS SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieve that objective. The technique is credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies. [pic] Equipment Ingredients I sourced a few different suppliers for disposable equipment, such as ingredients, cups, straws, etc., and some for the least disposable things like blenders. We will use two main types of ingredients in all of our smoothies: Fruit, and Fruit Juice. For these, I found www.lovesmoothies.com to be the cheapest and relevant to exactly what we are looking for. These were the prices of their fruit in bulk: |FRUIT |£ per Kilo |  |FRUIT |£ per Kilo | |Apples Diced 10mm |£3.47 |  |Melon Balls Green |£3.43 | |Banana Slices |£2.60 |  |Mandarins |£3.75 | |Blackberries Whole |£2.81 |  |Orange Segments |£3.86 | |Blackcurrants Whole |£3.20 |  |Papaya Diced 15mm |£3.77 | |Blueberries Wild |£6.05 |  |Peach Diced |£3.20 | |Cherries Black Sweet |£4.60  |  |Pears Diced |£3.08 | |Sour Cherries |£2.60 |  |Raspberry Crumb |£4.55 | |Cranberries Whole |£6.07 |  |Raspberries Whole |£7.68 | |Grapes Blue |£3.20 |  |Raspberries Broken |£5.41 | |Gooseberries |£3.47 |  |Redcurrants |£2.83 | |Kiwi Sliced |£3.50 |  |Strawberries Camarossa |£3.22 | |Mango 10mm |£3.63 |  |Strawberries Senga |£2.97 | For the sakes of calculation later, I have presumed an average of £3.00 per kilo of fruit. Whilst this may seem cheap, we will have no use for the more expensive items. They also sold Fruit Juice (Apple Juice or Orange Juice) in bulk at a price of eight litres for £12.40. As for requirements such as cups, lids, straws, napkips, etc., I have found the bulk catering suppliers, www.cater4you.co.uk. I will have two sizes of smoothie, 8fl oz (0.5 pint/227ml) and 12fl oz (0.75 pint/355ml). |Item |Quantity | Total Cost | Cost Per Unit | |8oz ("Small") Smoothie Cup |1000 | £ 44.40 | £ 0.0444 | |12oz ("Large") Smoothie Cup |1250 | £ 63.50 | £ 0.0508 | |Domed Lids (can fit both cups) |2000 | £ 86.00 | £ 0.0430 | |Straws |2000 | £ 17.40 | £ 0.0087 | As for the blenders themselves, I found that a low quantity of industrial blenders resulted in a very high cost. One website had a special offer of two for £500! Therefore, I felt it would be best to buy this equipment at a domestic level from a high street store, such as Argos. Finances This has led me to calculate the exact cost of each smoothie that is sold. The calculations are below: |SMALL |Price (pence) | |LARGE |Price (pence) | |8oz Cup |4.44 |  |12oz Cup |5.06 | |Lid |4.30 |  |Lid |4.30 | |Straw |0.87 |  |Straw |0.87 | |80g Fruit |24.00 |  |120g Fruit |36.00 | | @ £3 p/kilo |  |  | @ £3 p/kilo |  | |160ml Juice |24.80 |  |200ml Juice |31.00 | | @ £1.55 p/litre |  |  | @ £1.55 p/litre |  | |VAT (0%) |0.00 |  |VAT (0%) |0.00 | |Subtotal |58.41 |  |Subtotal |77.25 | |Price To Consumer |150.00 |  |Price To Consumer |200.00 | |PROFIT |91.59 |  |PROFIT |122.75 | As you can see, the profit margin is very generous on these orders, at over 100% for each size. However, I still believe that this price to the consumer is very competitive when compared to other local sellers (e.g. Costa Coffee) and is certainly cheaper than if the consumer tried to reproduce the smoothie themselves domestically. VAT There is a question mark over whether VAT would apply to the sale of smoothies. Whilst there is a 0% VAT on healthy, essential food and drinks (in which I feel we would be categorised), ‘Innocent Smoothies’ recently lost a High Court case with HM Revenue and Customs regarding VAT, as the judge considered the smoothies a luxury, rather than an essential, product (which is taxed at 20%). We would have to enquire about this, as the judgement is likely to be on a case-by-case basis. Cost of Start-Up |  |Property |Per Month |  |  |Marketing |Per Month | |1.2 |Business Rates (0%) |£0.00 |  |3.2 |Website Domain Name |£5.49 | |1.3 |Overheads |£600.00 |  |3.3 |Social Networking |£0.00 | |  |  |£1,660.00 |  |  |  |£55.49 | |  |Equipment |Per Month |  |  |Misc |Per Month | |2.2 |Juice |£500.00 |  |4.2 |Cash Flow |£1,000.00 | |2.3 |Blenders |£100.00 |  |4.3 |Salary |£1,000.00 | |2.4 |Fridges |£400.00 |  |  |  |£2,250.00 | |2.5 |12oz Smoothie Cups |£63.50 |  |  |  |  | |2.6 |Domed Lids |£86.00 |  |  |TOTAL |£5,676.79 | |  |  |£1,711.30 |  |  |  |  | Growth Premature growth is one of the top-10 reasons for businesses failure in the UK. However, whilst the UK economy grows annually with inflation, businesses should be looking to grow at the same rate or quicker. We have some ideas for business expansion going forward: • Sell unique smoothie flavour exclusively to local branches of supermarket. • For older people' Create “traditional” range. • Non-Alcoholic Cocktails' Potentially damage associations with ethic and health focus' ----------------------- Weaknesses Typically viewed as a luxury item, rather than an essential. Threats Opportunities Increased competition Own-label brands such as Tesco and Asda have their own ranges. Economic Factors Due to recession and declining consumer confidence, disposable income has greatly decreased. Smoothie Operators will have to promote ‘value for money’ strongly. Aging UK population Older generation has lowest smoothie usage. Friendly and ethical brand image Growth stage of product lifecycle • Good scope for growth • Line extension possible – cocktails' Government Policy Increased publicity for the “5-a-day” campaign. Smoothie can be promoted as healthy alternative. Growing market UK smoothie market projected to continue to rise. Strengths