Popeye S Canada Business Plan

Popeye`s Canada Business Plan

Prepared by

Tim Andrews

Nathan Ballantyne

Jason Jeffrey

1.0Introduction

1.2Mission Statement1

1.3 Goals and Objectives1

1.4 Financing2

2.0Operations Plan

2.1Location2

2.2Floor Plan3

2.3Organizational Structure3

2.4Supply Analysis4

2.5Business Cycles4

2.6Capacity Limits and Capital Budget5

2.7Working Capital5

2.8Cost of Sales6

2.9Cash Conversion Cycle6

3.0Human Resources

3.1Job Descriptions7

3.2Training8

4.0Scheduling

4.1Compensation9

5.0Marketing Plan

5.1Industry Overview and Current Markets11

5.2Competition11

5.2.1Direct Competition11

5.2.2Indirect Competition12

5.2.3Customers and Target Markets12

5.3Product and Service Features12

5.4Product Quality12

5.5Pricing Strategy13

5.6Promotion Strategy13

5.7Distribution14

5.8Sales Objectives15

5.8.1Sales Projections15

5.8.2Marketing Expenses15

5.8.3SWOT Analysis16

6.0Financial Plan

6.1Sales Revenue and Net Income17

6.2Total Operating Expenses17

6.3Working Capital17

6.4Cost of Capital18

6.5Debt Amortization18

6.6Risk Analysis18

6.7Financing Budget19

6.8Divided Policy19

6.9Ratio Analysis19

6.10Financial Analysis19

6.11Risk Analysis20

7.0Conclusion20

8.0 Appendices21

Executive Summary

This document contains a comprehensive business plan for a Popeye’s Canada supplements franchise located at Preston Crossing in Saskatoon Saskatchewan. Popeye’s specializes in selling health supplements in the form of protein powders and weight gains, fat burners and energy boosters, vitamins minerals and Herbal Remedies and other complimentary fitness products.

Financing

Estimated total start up costs for this business is $360 000. Investors, Tim Andrews, Jason Jeffery and Nathan Ballantyne will contribute $150 000 towards the business. Another $210 000 is required to cover the rest of the start-up costs.

Operations

Investor Tim Andrews has been designated as General Manager for this business. Popeye’s will purchase its products from Supplements Canada which is run by Popeye’s corporate office which will ship its products from a warehouse in Edmonton. This investment in inventory and other capital costs are estimated to be $80 000. Popeye’s will lease its property in Preston Crossing were it will be located.

Human Resources

Tim Andrews (GM) will be in-charge of hiring three part-time employees to assist in day to day operations of running the store. Popeye’s strives to provide the highest quality of customer service in order to meet customer needs therefore; Mr. Andrews will develop a comprehensive training program to continually be training part time staff. The store will be open on weekdays from 9pm-9am, Saturdays and Sundays from 9am-5pm. The store manager will have an annual salary of $50 000/year while part time staff will be paid $10/hr.

Marketing Plan

Popeye’s will offer an array of variously priced products based on quality. Its pricing strategy is based on a cost plus structure. Popeye’s will be vigilant in monitoring competitors pricing so it may adapt if need be. In order to promote the Popeye’s brand the store will rely on both corporate and in house marketing. This will include T-Shirt handouts, Shaker cup handouts, Popeye’s Dollars, promotional appearances, email subscriptions, direct mailers and radio spots. Popeye’s has a 3% sales revenue growth projection and estimates to spend $9 325 annually.

Finance

Financial highlights include:

• Profitability after only the second year of operations.
• Profit Margin of 44% after the second year
• Dividends of $190 000 by 2014
• NPV of $159 153 and IRR of 76%

Popeye’s Nutritional Supplements

1.0Introduction

This report presents a comprehensive business plan for a Popeye’s supplements Canada franchise to be located at Preston Crossing in Saskatoon, Saskatchewan. This is a relatively new high traffic area that is location is close to the University of Saskatchewan which harbours a population of young students to which Popeye’s supplements targets for sales. Popeye’s Supplements Canada was created in 1989 and is the first sports nutrition outlet in Canada. It has now grown to have over sixty locations across Canada. Popeye’s strives to provide excellent service by offering optimum results and solutions with real information and accurate knowledge of fitness supplements at the lowest prices possible. Popeye’s focuses on selling:

• Proteins Powders and Gainers
• Fat burners Energy boosters
• Vitamins Minerals and Herbal Remedies
• Complimentary products

Popeye’s has positioned itself to effectively take advantage of recent trends throughout Canada of getting active and living a healthy lifestyle.

1.1 Industry Overview

The health supplements industry has had consistent growth of around 8% for the past five years. Major players within the industry include Popeye’s and GNC however; major box stores such as Wal-Mart, Costco and many other major retail outlets have started selling health supplements within their stores. Additionally, the emergence of online distributors, such as bodybuilding.com has provided the customer with further choices in their nutritional supplement shopping. Competition has also further been increased with the opening of many herbal remedy stores specializing in health products which claim to be naturally based from plants and animals.

1.2 Mission Statement

Our company's commitment is to help you achieve your ultimate goals, whether it may be for personal satisfaction or to gain that competitive edge. We make it our job to provide you results and solutions by helping you find the right products, the best products, all at the lowest prices GUARANTEED or simply return the product!

1.3Goals and Objectives

• Break-even in the first year of operations.
• After the first year achieve a yearly rate of return no less than 15%.
• Effectively train employees so all are capable of providing in-depth knowledge to customers regarding all supplements sold within the store.

1.1Financing

Estimated total start-up costs are $360 000. Investors Tim Andrews, Jason Jeffery and Nathan Ballantyne will be contributing $150 000 towards the conception of this franchise. Therefore another $210 000 is required in financing in order to cover the start-up costs and basic inventory purchases, marketing and insurance which, is estimated to be $100 000.

2.0 Operations

The Popeye’s franchise that we are proposing to operate will be a health store merchandiser, in that our main business function is the sale of our products to customers. The products that we will sell will range from herbal remedies to protein powders, with emphasis on the latter. As a franchise, we will act as part of the franchisers distribution system, by selling the product line to customers. We represent the front end of this system and will enjoy the benefit of having an established procurement system in place, which we can rely on. The franchiser is responsible for maintaining warehouses that will store all the products that we will sell. A major obstacle of competing in this industry is to maintain relationships with suppliers. This is one aspect of the business that we be secure, by virtue of the franchiser. Our staff will be trained to not only understand and sell our products, but educate customers on what our products can do for them.

2.1Location

Located in Saskatoon, Saskatchewan, Preston Crossing is a popular shopping destination for the people of Saskatoon. Conveniently located near the University of Saskatchewan, with easy access to Circle Drive, Preston Crossing is accessible to a wide array of shoppers.

2.2 Floor Plan

The majority of our leased space will be for shelf space of our many products. Unlike most retailers we operate with our entire inventory on the store-front shelves. This limits our need to carry large quantities of inventory and gives the customers a view of all we have to offer. The space that we will lease will suffice in terms of our planned short-term and long-term needs.

2.3Organizational Structure

Our business will operate as a corporation with three shareholders, one of whom will act as the general manager, and the two other will be silent shareholders. The organizational structure will be quite simple, and will be structured as follows: Shareholders, General Manager, and Staff.

The reason we chose to operate as a corporation is mainly because of the limited liability and ease of transfer of ownership. We are also obligated to incorporate under of franchise agreement. In terms of our organizational structure, we felt that simplicity was paramount. There is no need for assistant manager or specialized staff positions, which would only add extra costs and complexities to our business model. The board of directors is comprised of the three shareholders and their wives. These individuals are: Timothy Andrews, Jason Jeffery, Nathan Ballantyne, Carmen Electra, Rosie O’Donnell, and Meghan Fox. The board brings a wealth of experience, knowledge, and education to the table and will be a great asset to this organization. Of particular importance, is the General Manager’s experience as an amateur bodybuilder and part-time power-lifter. Mr Andrews has been immersed in this culture for many years and has intimate knowledge of the industry. Besides his wealth of knowledge of the industry, the GM also has an MBA from the esteemed Edwards School of Business.

2.4 Supply Analysis

The franchiser has a supply chain in place and we, the franchisee will act as part of that supply chain by managing the retailing of the products. We will not directly deal with the suppliers of products, but rather with intermediary, which is the franchiser. This allows us to focus on the operation of our business.

2.5 An Average Business Day, Week, Month, Year

Our store would typically open at 9:00am and close at 9:00pm from Monday to Friday. Our weekend hours will be Saturday and Sunday from 9:00am to 5:00pm. The General Manager would open the store from Monday to Friday and staff member would open on the weekends. Part-time workers would work the remaining hours of the weeknights and all hours on the weekends. The types of activities that would take place on a typical day include: inventory management, helping customers, general cleaning duties, explaining products to customers, etc.

The General Manger will be responsible for compiling year-end financial statements, filing income taxes, placing product orders, maintaining relationship with franchiser.

2.6 Capacity Limits and Planned Capital Budget

The capital assets that are needed for this business are minimal. We are planning on leasing the space for our business site and do not need to invest in any major capital assets. The bulk of our start-up investments will come from the following: lease hold improvements, inventory, and franchise fees, and inventory management system.

In terms of working capital, significant investment in inventory is required. This will require approximately $80,000 to start. The following is a table of estimated start-up costs:

Building Costs

- Lease hold improvements - $25,000

Equipment Costs

- Inventory Management System - $5,000

Working Capital

- Cash - $30,000

- Inventory - $80,000

- Accounts Payable – ($10,000)

Capital Budget Summary

Building - $25,000

Equipment - $5,000

Working Capital - $90,000

2.7 Working Capital Plan

The following is a description of how working capital will be monitored and managed:

1. Liquidity Management – use of liquidity ratios and cash flow to manage liquidity. We will not require a great deal of cash on hand.
2. Inventory Management – we will need to carry a minimum amount of inventory as set out in out franchise agreement. A major part of our management will be adhering to these stipulations.
3. Accounts Receivable – We will not offer credit to our customers, but rather function as a cash only business.
4. Accounts Payable – This will also require little in terms of management. Our supplier is the franchiser, with whom we will work very closely and maintain good relationships. The timely payment to this party is of paramount importance to our success.
5. Retailing – Again, this aspect of our business will be dependant on our franchiser and the market price for our products. We do not have much control over either of these aspects of our business. We will, however, use industry standards as benchmarks against which to gauge our success.

2.8 Cost of Sales for Retailing

The Gross Profit Margins for Popeye’s vary depending on product. The following is a description costs and sales for each product category.

1. Proteins, Powders and Gainers – average cost= $35 average selling price=$60 (average GPM=$25)

2. Fat burners, energy boosters – average cost=$22 average selling price=$45 (average GPM=$23)

3. Vitamins, minerals and herbal remedies–average cost=$15 average selling price=$25 (average GPM=$10)

4. Complimentary products – average cost=$4 average selling price=$6 (average GPM=$2)

2.9 Cash Conversion Cycle

The CCC for Popeye’s represents the amount of days that cash is tied-up in the process of purchasing inventory from the franchiser, until cash is collected from the customer. Popeye’s does not manufacture its own product and does not offer credit to customers, so the CCC is greatly reduced. However, the amount of time that inventory sits on shelves does tie up a significant amount of cash. This is a reality of the business and cannot be reduced. The detail of Popeye’s Cash Conversion Cycle is as follows:

Average Days of Inventory=38

Average Days Payables=10

Cash Conversion Cycle=28

Summary of Operations Plan

The operations of Popeye’s Supplements is unique, in that it relies on an outside part for its supply chain, does not require a great deal of capital assets, leases the physical location, and does not offer credit to its customers. The challenge, in terms of managing operations, lies in customer service, relationship management with franchiser, and inventory management.

3.0 Human Resources Plan

Human Resource Strategy

The HR strategy for this franchise will be rooted in hiring people with a passion for physical activity, helping people, and the industry. There is a great deal of young people who are becoming more-and-more interested in physical activity. We will seek to hire individuals that fit these criteria. In terms of motivation, our staff will be given discounts on all purchases of products. We will also offer them the opportunity to move to a wage and commission form of compensation, once we become more established.

Additionally, the human resources plan focuses on simplicity as there will only be one manager and several other staff members who will run the till and provide in-depth knowledge to customers who enter the store and require assistance.

3.1 Job Descriptions

General Manager

9:00 – 5:00 (1 hr lunch) Monday – Friday

The General Manager (Tim Andrews) will be in-charge of the hiring and firing aspects of the business. He will also have the duty of developing weekly shift schedules for employees, basic accounting activities, marketing, employee training and providing quarterly reports regarding financial and overall performance to angel investors Jason Jeffery and Nathan Ballantyne.

Day

-Oversee all operations

-Manage Inventories

-Help customers

Month

- Recruit new staff

-Schedule staff hours

-Analyze key financial ratios

-Manage Inventories (place orders, etc.)

Year

-Compile Financials

-Ensure taxes are completed and filed

- Analyze past year and set strategy for upcoming year

- Evaluate Staff

- Firing of staff when needed

Till and Floor Staff

Till and Floor staff will be in-charge of assisting customers in finding supplements that meet the customers needs. They will also be in charge of cash transactions at the cash register and keeping the store neat and orderly.

3.2Training Programs

Popeye’s prides itself on the high quality of service and in-depth knowledge its employees have to offer customers who enter their stores. Therefore extensive and regular training will be a big part of being an employee within a Popeye’s franchise. The General Manager, Tim Andrews has extensive knowledge regarding supplement usage and living a healthy lifestyle and will undertake developing a training program for floor and till employees when they are hired. Mr. Andrews will provide employees with literature as well as recent research and studies regarding all types of supplements that are sold in Popeye’s stores. He will also train employees on how to identify customers supplement needs from their current workout goals and lifestyles. Mr. Andrews will focus on gathering literature regarding new supplements that are being sold within Popeye’s and will give quarterly information packages so employees can keep up to date with new information and products.

4.0 Scheduling

Total Planned Hours of Work at Popeye’s

Total Hours of Work
Manager / Part time 1 / Part time 2 / Part time 3 / Daily Total
Monday / 8 / 7.5 / 7 / 22.5
Tuesday / 8 / 7.5 / 7 / 22.5
Wednesday / 8 / 7 / 15
Thursday / 8 / 7 / 15
Friday / 8 / 7 / 15
Saturday / 2 / 7 / 9
Sunday / 2 / 7 / 9
Total Hours / 44 / 15 / 21 / 28 / 108
Store Hours / Mon-Fri 9-9 / Weekends 9-5
Total Part-Time Hours / 64
Total Full-Time Hours / 44
Total Hours / 108

4.1 Compensation

Table 2.2.1
Employee / Salary / FT/PT
General Manager / $50 000/year / Full- Time
Staff Member #1 / $10/hour / Part-Time
Staff Member #2 / $10/hour / Part-Time
Staff Member #3 / $10/hour / Part-Time
Five Year Labour Projection
Labour / 2009 / 2010 / 2011 / 2012 / 2013
Manager (Salary) / $50000 / $51500 / $53045 / $54636 / $56275
Benefits for Manager / $3000 / $3090 / $3182.7 / $3278 / $3377
Wage Employees (hourly wage) / $10 / $10.3 / $10.609 / $10.9 / $11.3
Hours / 64 / 64 / 64 / 64 / 64
Total Wage Employees (Year) / $33280 / $34278.4 / $35306.75 / $36275.2 / $37606.4
Total Labour Cost / $83280 / $85778.4 / $88351.75 / $90911.2 / $93881.4

5. Marketing Plan

5.1 Industry Overview and Current Markets

The supplement industry is one which has encountered a tremendous amount of growth in recent years culminating in sales throughout the United States of $23.7 billion in 2007. In addition to such continual sales growth, the supplement industry has proven itself to be relatively unaffected by the recent downturn in the economy, posting sales in US of $25 billion for the year ending December 31, 2008; up nearly 7% from 2007.

The industry is comprised of a variety of firms who produce products fitting into two specific categories, sports nutrition and physical health. Industry leaders such as EAS, Muscle-Tech, IsoFlex and Biotest each manufacture and market a variety of protein powders, weight gainers, fat burners and nutritional powders to an ever growing and expanding consumer base.

Sales of such products are conducted primarily through two separate channels; online ordering and in store purchase. Not only do firms in the industry provide their consumer base the opportunity to shop on their individual, customized website, but also on shared distribution websites, most notably bodybuilding.com.

However, online shopping offers a variety of disadvantages. Wait times for product delivery, delays at the US border, shipping costs and the inability for prospective customer to sample potential product are all challenges facing online based distributors.

Conversely, in store shopping address each of these challenges faced by online distributors. Franchises such as Popeye’s and GNC offer a wide array of product offerings in a one stop environment. Consumers are able to sample product prior to purchase, while inquiring to knowledgeable staff the benefits of any particular product line.