FEASIBILITY STUDY
PIE FACE
Table of Contents
TITLE PAGE……………………………………………………………………………………………1
TABLE OF CONTENTS……………………………………………………………………………2
PART 1: INTRODUCTION………………………………………………………………………..3
1.1 Personal Details………………………………………………………………………..3
1.2 The Business Idea……………………………………………………………………3
PART 2: CRITICAL FACTORS…………………………………………………………………..5
2.1 Critical Factor #1……………………………………………………………………….5
2.2 Critical Factor #2……………………………………………………………………….5
2.3 Critical Factor #3……………………………………………………………………….6
2.4 Critical Factor #4……………………………………………………………………….6
PART 3: MARKET ANALYSIS……………………………………………………………………6
3.1 Market Size and Segments…………………………………………………………6
3.2 Market Trends…………………………………………………………………………..7
3.3 Life Cycle/Seasonality………………………………………………………………..7
3.4 Target Market Characteristics……………………………………………………..8
3.5 Competition………………………………………………………………………………8
3.6 Competitive Advantage………………………………………………………………9
3.7 Location and Distribution……………………………………………………………10
3.8 Product Mix……………………………………………………………………………..10
3.9 Pricing…………………………………………………………………………………….11
3.10 Promotion………………………………………………………………………………11
3.11 Contracts/Letters of Interest……………………………………………………..12
3.12 Preliminary Sales Projections………………………………………………….12
PART 4: RESOURCE REQUIREMENTS…………………………………………………..13
4.1 Business premises…………………………………………………………………..13
4.2 Plant and Equipment………………………………………………………………..13
4.3 Distribution Channels……………………………………………………………….14
4.4 Sources of Supply……………………………………………………………………14
4.5 Technical and Expertise required……………………………………………….15
4.5 Management Expertise required…………………………………………………15
4.6 Professional Advisers………………………………………………………………..16
PART 5: FINANCIAL VIABLITY…………………………………………………………………16
5.1 Sales Income…………………………………………………………………………..16
5.2 Financial Viability……………………………………………………………………..16
PART 6: CAPITAL REQUIREMENTS………………………………………………………..17
6.1 Summary of Capital Required…………………………………………………….17
6.1 Sources of Equity Capital/ Details of Ownership
Structure………………………………………………………………………………………17
6.3 Sources of Loan Capital…………………………………………………………….17
CONCLUSION……………………………………………………………………………………….18
APPENDIX…………………………………………………………………………………………….19
Part 1 Introduction
1.3 Personal Details
1.4 The Business Idea
The business is a Pie Face franchise that will operate in Chatswood. The food franchise industry has been the primary choice considering Australian’s love for food. This business includes an exciting gourmet pie concept that will surely click to customers of all ages. Pies are the third most popular food products in Australia next to sandwiches and hot chips. The annual consumption of this food product has been estimated to reach 260 million. The popularity of pies among Aussies indicates the future growth in this business sector. With this, I have decided to acquire a franchise at the Pie Face which provides superior franchising opportunities for its prospective franchisors.
The business has started its franchising since 2006. The present owners have been operating for the past four years and during this period they have managed to expand their shops. Today, Pie face is embarking on a national franchise program and is targeting to penetrate the rest of Australia. The shops are designed not to be too big and cater sufficiently to sales targets. If the shops are too big, the owner is likely to pay high for its rentals. The products are delivered from the Sydney factory which is then distributed to the shops. All of these will provide an opportunity to operate a small business. The products I could sell include:
· Specialized gourmet pies
· Freshly baked muffins, cookies, croissants and brownies
· Coffee and cold beverages
I would like to take advantage of Pie Face launching of its franchise program. Thus, I would commence the business as soon as possible.
To conclude this feasibility study, I want to prove that:
· The business is competitively positioned in the market and has potential for future growth
· The business franchise is financially viable and will give fulfilling returns
Part 2 Critical Factors
Critical Factor #1
The government has examined the dietary intervention methods to achieve better health outcomes and to contain the escalating health care costs. Internationally, the World Health Organization (WHO) has identified obesity epidemic among Australian children and adults. Thus, there is the need for food franchisers to include healthy foods in the products to be offered.
Critical Factor #2
The proposed National Food Safety Standards are aimed at reducing the incidence of food borne diseases in Australia. Many organizations has recognized the need for safe food and thus implemented preventive food safety management systems. However the proposed standards will cost the business of approximately 0 with an annual on going costs of ,080. Compliance for small business is estimated to reach ,071.
Critical Factor #3
The Trade Practices (Industry Codes-Franchising) Regulations 1998 made under the Trade Practices Act 1974 provides a set of guidelines for franchising practices that must be complied with by both he franchisor and franchisee.
Critical Factor #4
Prior to the final meeting with the franchisor, further issues will have to be discussed in regards to the pie franchise which will include the franchise code of conduct, disclosure of documents and the franchise agreement. All of which will be discussed and an independent legal and financial advice should be sought out to examine the agreement. The franchise agreement will serve as the basis of the relationship with the franchisor.
Part 3 Market Analysis
3.1 Market Size and Segments
The intended market area is in Chatswood, a suburb in North Shore Sydney, New South Wales Australia. The area is located 10 km north of downtown Sydney and is considered to be the major commercial and retail hub of the north Shire district. It has two major shopping centers and several high rise offices and apartment towers and is close to the Lane Cone National Park.
The population of Chatswood is 18,190. The age group of 20 to 39 constitutes the largest proportion (49%) of the total population. Chatswood is a relatively affluent area with 40.1 5 of the population earning over AU,724 in 2001. This has been the highest Australian quartile of income earners.
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3.2 Market Trends
The food franchise industry is a seemingly daunting market to invest in. The competition is becoming more intensive as pie franchise seeks to offer the best quality pies to the consumers. The Australian pie franchise market is dominated by three big names: Jesters Franchise, the Big Dad’s franchise and Pie Face franchise. The fast food franchise industry is strife and is characterized by intense competition. Even so, the pie franchise industry is becoming more and more homogenous with the giants getting what is left of the fast food industry. In such case there is the need to offer something really different and unique in the fast food franchises.
3.3 Life Cycle/Seasonality
All the products will be available all throughout the year. There appears to be no seasonal variation at least one that will greatly impact the franchise since pies are one of the staple foods in Australia. Also, the wide range of product selection will mitigate any seasonal effects on other products. The sales are expected to become stable until the several few months.
3.4 Target Market Characteristics
Pie face is designed to appear youthful and irreverent so that it could appeal to consumers of all ages. In so far as its present operation is concerned, Pie Face has been attracting a wide range of consumers from young and old, men and women. Surprisingly, at least fifty percent of its customers are women. The customers include a lot of mothers and children and couples on the way home on Friday and Saturday night who want something to eat. Many of the women also purchased healthy wraps and mini pies. Kids will also love the stickers that come with the pies.
The primary target market will be families specifically mothers and their children. As evidenced by the present Pie Face operations, a large proportion of consumers are mothers and women who seek healthy and convenient foods. This target market is viable since majority of the population within the geographic area comprised of women (54%) and families (49%). This would mean that the target market is largely available within the chosen area.
3.5 Competition
There are three major names in the pie franchise industry throughout Australia. The main competitors would be Jesters franchise and Big Dad’s franchise.
Jesters is a 100 percent Australian owned pie franchise which resulted from the merger of Shakespeare’s Pie and Jesters Jaffle pie company. This fast food has been a result of 20 years of experience in gourmet, manufacturing, retailing, and marketing and small business management. It offers a strong brand strategy that sells quality products backed by an experienced team. Big Dad’s is also a 100 percent Australian owned company which sells pies containing 95% fat free beef. Its main stay is its steak pies complemented by a variety of pie, sausage rolls, pastries and a selection of cakes.
3.6 Competitive Advantage
The Pie Face franchise is the most exciting gourmet concept in Australia. Compared to its competitors, the Pie Face is a young and dynamic concept in the pie franchise industry. It set out to make quality gourmet pies with a gimmick. The products are unique that each of the delicious pies has its own face that denotes the flavor of the pie inside. A smiley mouth indicates chicken, S on the side is for steak and V is for vegetable. Aside from the faces, there is also a unique brand logo created for each item.
Pie Face stand out from the other fast food franchise pack with its specialty in gourmet pies well complemented by other delightful selection such as muffins, cookies, brownies, croissants, wraps, sandwiches and freshly brewed coffee. The pies are prepared fresh daily in the pie factory and the franchise owner will only have to worry of popping them in the oven. In addition to this, Pie Face offers a business format that can be availed of easily by anyone who intends starting up a small business.
· the set up cost is low as fit outs are simple
· the start times are not demanding
· the product is made fresh daily in front of customers
· the product is of premium quality and healthy
· the product lines are focused, making operations simple
· the staff costs/requirements are low due to low labor at store
· the brand is well recognized and has strong retail appeal
The franchise can also be expected to have a higher success rate than a start up business. Customers are already familiar with the brand and instant sales and credibility can be expected.
3.7 Location and Distribution
The business will be operated in Chatswood. The products will be prepared in the pie face factory in Sydney and delivered fresh each morning in the shop. As a franchisee, I would be responsible for baking the pies, cookies, muffins and croissants fresh everyday in front of the customers. All the hard works are done in the factory and pie dealers are left to bake and merchandise the products and cater to the needs of the customers.
3.8 Product Mix
The products to be offered are the following:
Party Tray: Mini savory pies, mini sausage rolls, sausage rolls, regular savory pies, assorted mini sweet pies
Pie Flavors: chunky steak injected with cheese, chunky steak, mince beef with tomato chutney, spinach sundried tomato and ricotta, bacon and egg, chicken mushroom, Mexican vegetable, Mexican vegetables injected with cheese, Thai chicken curry
Other Selections: muffins, cookies, brownies, croissants, wraps and sandwiches
Beverages: freshly brewed coffee and cold drinks and juices including Pepsi, fruit juice and sports drinks
3.9 Pricing
Party time
3
6
12
30+
Mini savory pies
.75
.25
.95
.65*
Mini sausage rolls
.75
.25
.95
.65*
Sausage rolls
.95
.95
.95
.00*
Regular savory pies
.95
.95
.95
.00*
Assorted mini sweet pies
.50
.50
.50
.25*
3.10 Promotion
Advertising and promotions will be essential part of the marketing strategy. Highly visible and strong advertising will enable to develop a strong position in the market. The marketing activities are to be carried out by the mother company through the Sydney Local Promotions and are included in the establishment costs. Also, there is a required payment for ongoing royalty and marketing levy which will be used to create greater awareness of Face Pie products to drive further growth.
3.11 Contracts/Letters of Interest
Not Applicable
3.12 Preliminary Sales Projections
The initial customer base is expected to reach 25-35 (including take home and dine-in) on a daily basis. The average number of customers is 30 and the average amount spend by each customer is to reach . Assuming such projection is met, the monthly sales (for 30 working days) for the initial operation will reach 000. For the succeeding years, the number of customers is expected to grow and the sales to increase.
Preliminary Sales Projection Year 1 (based on gaining 5 customers monthly)
Month
No. of customers
Sales
1
30
000
2
35
500
3
40
000
4
45
500
5
50
000
6
55
500
7
60
000
8
65
500
9
70
950
10
75
450
11
80
950
12
85
450
Total for the end year
4800
3.13 Future Opportunities
In the future, the franchise can expand by introducing new products. Pie Face will continually develop its current product line and research opportunities for other products. While most of the pies are intended for take home, the dine-in part of the business would eventually be expanded to attract more customers and add to the sales.
Part 4 Resource Requirements
4.1 Business premises
The business will be operated in Chatswood in New South Wales Australia. This area is major commercial district in the north. It is home to major shopping centers and other business establishments.
4.2 Plant and Equipment
The store fit put will be handled by the Pie Face main office. The design and lay out will be developed based on the new premise and the experience with previous stores. The best available equipments will be selected designed to the company’s specifications and requirements. Experienced shop fitters will supervise the construction of the store. The basic equipments needed include the following:
· Tables and chairs
· Point of Sales equipment
· Signage
· Business cards, marketing aids and uniforms
· Pie warmers
· Hot pie display
· Pie heaters
· Food warmers
· Drink mixer and coffee dispenser
4.3 Distribution Channels
Finished products will be delivered every morning from the central kitchen. After which, the freshly baked products are delivered at the store level. The primary concern of the franchise is to order, bake, merchandise and sell the products. All other works are done within the pie face factory.
4.4 Sources of Supply
Ready-to-bake goods are manufactured in the central kitchen and supplied to the franchise on a daily basis. The pie face factory ensures that quality ingredients are used from the point of production and that freshness and value are maintained. All of these products are made by the central kitchen and are merely delivered to the franchisee for baking and selling. This will enable the franchisee to focus on the selling the pies and serving the customers. The retail system including operations manual, site selection and least negotiation as well as ongoing training and support will be provided by the company to help establish and operate the food franchise. Other ingredients and supplies will be delivered by local suppliers organized by Pie face. Such arrangements are made to guarantee the continuing supply of quality ingredients. Also, the best quality ingredients offered at the lower prices can be acquired through arrangements with the suppliers.
4.5 Technical and Expertise required
In terms of skills, Pie Face will need to employ staff with strong customer service and good merchandising skills. They must be customer oriented, friendly and enjoy serving people. Employees must work in a team environment and undertake customer service and barista duties which involve preparation and service of food and hot and cold beverages. The focus on merchandising must be reflected through the variety of products on display and their good appearance. On the other hand, the baking process is not very difficult. Rather it is a simple process that can be learned in just an hour.
4.5 Management Expertise required
The daily responsibility of the manager is to manage the operation of the store. This will include the estimation of food supplies, placing orders with the suppliers and scheduling the delivery of fresh food and beverages. The efficient use of food and supplies must also be ensured to avoid wastages. The quality of food and services will also depend on the manager’s ability to hire, train and supervise competent staff.
4.6 Professional Advisers
As a franchisee, I am entitled to seek an independent legal and financial advice outside. Such help will provide a greater understanding of the prevailing franchise regulations and my rights as a franchisee. In addition to this, I could acquire an expert opinion as to the financial prospects of the business.
Part 5 Financial Viability
5.1 Sales income
5.2 Financial viability
The figures show that the invested capital can be regained during the first year if the preliminary sales projections are to be met. To earn the target annual sales the store needs to earn 56.98 daily. That is:
Desired income 4,800 = 56.98/day
No. of Days 365
Part 6 Capital Requirements
6.1 Summary of Capital Required
The investment amount required to establish the Pie Face store in Chatswood ranges from 0,000.00-0,000.00 including the initial franchise fee.
Total Capital Required
Sources of Capital
Franchise fee 0,000
Non Current Assets ,000
Equity Capital
Personal Savings 0,000
Capital Loan 0,000
6.2 Sources of Equity Capital/Details of
Ownership Structure
The business will be operated solely by me. This ownership structure is less complicated since minimal risks are involved. It will also serve as a method for self employment. Some of its advantages include: (1) a great degree of independence and autonomy (2) tax for such business are less than those in partnerships (3) business losses can be offset through other tax returns and business profits need not be shared with other owners
6.3 Sources of Loan Capital
The capital will be obtained from a lending institution where minimum collateral is required. Fix rate loans can be sought that will require a fixed interest rate for a set term. After which the agreement will be renegotiated with the lending institution. This way I would know the monthly loan repayments during the period of the loan. It will also provide an option of repaying interest only or the interest and the capital.
Conclusion
There are numerous lists of franchising opportunities throughout Australia although the food franchise can be considered to be the most viable option. Food is an indispensable part of everyday life and the love of Australians for it leaves no doubt that the business will click. Aside from this, pies are increasingly becoming favorite food products in Australia.
The market trends in the pie franchising industry signify the potential of doing business in this sector. For franchisees, the first thing to be considered is the established mark of the franchise in the market. In this regard, I have chosen the Pie Face franchise which is considered to be one of the three giants in the pie franchising industry in Australia.
In terms of finances, the capital requirements are relatively high but can be acquired through lending institutions. Lenders are aware of the costs associated with food franchise. They become more willing to provide funds due to the fact that food franchise generates high revenues. Thus, the capital can be acquired without so many difficulties.
The set up and initial operation is not a very difficult task since the company will guide the new franchise. In terms of labor costs, employees are paid at minimum although the turnover ratio is extremely high in this business. The projected sales are likely to be met since the food franchise will operate on long hours.
Appendix A
Costs
Name of Expense
Amount per year
Continuing royalty payments, marketing levy
50 (9% of monthly sales of 000. 3% for Royalty and 6% for the marketing levy)
Business or operating licenses
Rentals
0,000
Real estate and leasehold improvements
Discretionary equipment such as a computer system or business alarm system
00
Training
(provided by company)
Legal fees
0
Financial and accounting advice
0
Insurance
0
Compliance with local ordinances, such as zoning, waste removal, and fire and other safety codes
00
Employee salaries and benefits
With an hourly rate of .28/hour x 5460 annual working hours = ,968.80 (each employee)
For 3 employees= 3906.4
Total
9595.80
Appendix B
Productivity Calculations
The store will be open on Monday to Sundays. Working hours will start from 7am to 10pm.
Appendix C Capital Requirements
List of Non current assets
Appendix D SWOT ANALYSIS
Strengths
- Relatively higher success rate than business starts up
- Name/Brand Recognition of Franchise
- Existing Customer Base
- Instant Sales
- Uniqueness of the Product Concept
Weaknesses
- Lack of experience in the industry
- Higher prices compared to other pie franchise
Opportunities
- Increasing demand for the products in the market
- Expansion through product innovation
Threats
- Competition with well established franchise such as Jesters and Big Dads
- Health and Food safety Regulations
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