Executive Summary Joes Enterprises for Fast Food, Inc.

is a small food service company incorporated in 1997 in Illinois that specializes in providing high-quality fast food via company-owned portable carts in high-density urban office locations. The business is operated under the name Joes Redhots. This plan recommends that the board of directors approve borrowing 1 million from three current ban!s to e"pand mar!eting and distribution of its current si"-cart operation in downtown #hicago. $et profit return on investment in three years is estimated at %&' percent for the 1 million in funding( after pay bac!. Joes Redhots estimates %))) sales to reach ' million( with net earnings of %1%(*)) +7.1 percent of sales,. -ales are e"pected to reach 1% million( with net earnings of 1(%.)(1)) +1).7 percent,( by the end of %))%. Joes has si" contracts and options for %& more contracts with office buildings on /ichigan 0venue and other locations in #hicago for indoor1outdoor year-around food service. These high-traffic locations generate an average of '))())) in annual sales per cart +i.e.( 1())) sales per wee! 2 3.)) average per sale,. Joes has grown to annual sales of 1.. million in three years with net earnings of 1%.(9)) +7.% percent,( from a single cart in 199*.
Sales Estimates (in $1,000s)
Year -ales #ost of 4oods 4ross sales revenues 5verhead /ar!eting 6arnings before interest and ta"es Ta"es and interest Net 1999 1(.)) *&) 1(%3) .3) 1.) %%) 91 $129 2000 '())) 9)) %(1)) 1(&%. ')) '7% 1*9 $213 2001 3())) 1(.)) &(%)) %(3&' 3)) 9*7 &&* $512 2002 9())) %(7)) 3(')) '(.&& 9)) 1(*** 33' $892 2003 1%())) '(3)) .(&)) *()'& 1(%)) %(133 ..3 $1,280

usiness !"siti"nin# Strate#y Joes Redhots sells premium-quality hot dogs and other ready-to-eat luncheon products to upscale business people in high-traffic urban locations. Joes Redhots is positioned versus other luncheon street vendors as the 7best place to have a quic! lunch.8 9easons why are that Joes Redhots have the cleanest carts( the most hygienic servers( the purest( freshest( products( and the best values. :rices are at a slight premium to reflect this superior vending service. Joes Redhots also is !nown for its fun and promotional personality( offering consumers something special every wee! for monetary savings and fun. 6ach of the carts carries a sign saying $%"es &e'("ts)Satis*y y"ursel* *"r $2+00, Y"u 'eserve it,- The message is targeted to all passing potential customers who want to indulge themselves ine"pensively with a hot dog. There also may be a subliminal message for sinful or forbidden indulgence( too( since most hot dogs are high in fat and unsaturated fats. This unique selling proposition is self-targeting since only consumers who li!e hot dogs and feel that they deserve an ine"pensive indulgence will believe this message is meaningful to them. The benefits of this message are relatively unique; 7ine"pensive satisfaction plus indulgence.8 Informal( qualitative research revealed that the target mar!et of busy office wor!ers are constantly in conflict with

themselves about wanting a <uicy( delicious hot dog and trying to watch the fats and amount of meat in their diets. /oreover( the hot dogs that Joes Redhots serves arent high in fat. They are high quality( all natural products with no preservatives or harmful chemicals. Joes Redhots vendors ma!e it a point to let customers !now that indulging themselves is both ine"pensive and healthy. 0lthough the signs emphasize hot dogs( each of Joes carts offers an e"tensive menu of healthy and reasonably priced food. .ar/etin# Strate#y Joes Redhots was created to attain leadership of mobile( cart serving-units in large urban business centers. Joes targets upscale( urban office wor!ers see!ing fast( convenient( portable( brea!fast and lunch meals. 6ach cart( which costs about %)()))( is capable of housing enough food to serve about %)) to %*) meals per day. Joes differentiates and positions its business from the competitive fast food and other ta!e-out restaurants with its products +providing high-nutrition( 1)) percent all-natural( no artificial ingredients( colors( additives or preservatives convenience foods and snac!s,( its concern for the environment +biodegradable( recyclable containers1wrappers and :9 tie-ins,( and its service +a no-questionsas!ed money-bac! guarantee of all products sold and the best-trained company server personnel in the category,. Joes Redhots food products are priced at parity with( or at a slight premium over( competitive offerings( whether all-natural or not. 6"tensive promotional activity( including free samples and daily specials( help to ensure that Joes customers perceive that they are receiving higher quality products and prompt( courteous service in e"change for the slight premium in price. Joes Redhots has been successful in establishing contract alliances with real estate management companies for permanent lease sites inside and outside !ey office buildings( and for cooperative sale of beverages and minor snac! items through e"isting lobby shops. 0ll e"isting leases permit storage of the vending cart at a secure site within the building in which it operates. #ustomer loyalty is encouraged with development and promotion of new and revolving seasonal menu selections each quarter( daily customer sampling( and bonus specials. Training includes 7friendly personality8 recruiting( a minimum of si" hours of company training( mentoring( and apprentice management programs. 0'vertisin# an' !r"m"ti"n To support its e"pansion efforts( Joes Redhots considered using popular media( such as T=( radio( and newspapers to advertise( along with promotional free product samples and coupons. >owever( informal discussions with suppliers revealed that competitors in the downtown office area were spending little or no money to promote and advertise their cart luncheon business. It appears that the most successful hot dog cart operations spent about * percent of net sales revenue for promotion and advertising. ?ecause this business plan anticipates rapid growth through the addition of new carts( Joes Redhots plans to spend at least 1) percent of net sales during the first year. ?ased on this decision( advertising and promotional possibilities were prioritized in order of probable effectiveness( with estimated costs;
0'vertisin# T= + *))1')-second ad1station, 9adio + *)-1))13)-second ad1station, $ewspaper ads + *))1ad, #art signage + 1)), @lyers + 1)) 2 ).1) each, !r"m"ti"n @ree samples + %*1day 2 ).%* each, #oupons + *1day 2 .)%* each, @requent purchase boo! + 1*1day, -oft drin! premiums +supplied by drin! companies,

In performing the research into advertising and promotions( it was determined that any broadcast option involved additional production costs that were at least as much as the cost of running a single ad. In addition( at least four or five ads had to be run per station to be effective. ?rea!even cost coverage would be e"orbitant( with over a yearAs estimated sales needed <ust to pay for a small T= and radio campaign. 0nd it would be difficult to advertise with available media <ust to the target group of office wor!ers within a radius of si" city bloc!s. 0ll electronic and print media e"penses were also well over the 1) percent budget limit. ?ased on this analysis( Joes Redhots decided to have each cart painted + 1)), with a clever message( hand out 1())) flyers + 1)), over three months to offices( and do the soft drin! premium program +collect can tabs for free gifts provided by local soft drin! distributors,. ?eyond that( efforts would be made to get free :9 coverage through local newspapers and downtown T= and radio stations by sending free samples to editorial staff before lunch. Joes Redhots can afford to hand out flyers and samples all year long and stay within the 1) percent budget limit. If business is better than e"pected( the e"tra income will be used to accelerate the purchase of additional carts. :romotions that will be underta!en to support the business e"pansion will consist of free samples of prepac!aged brea!fast and lunch items( bonus days +e.g.( free salad days with meal purchase,. 5ther mar!eting e"penditures will be for items such as coupons and frequent buyer card promotions. These activities will help establish Joes Redhots as the only fast food operator in the greater #hicago area that gives out free samples continuously throughout the year( and provides a bonus day free side dish program. In the past( this program has been instrumental in growing the business and maintaining loyal customers despite lower price 7value meal8 promotions with other area fast food restaurants +e.g.( /cBonaldAs( ?urger Cing( Centuc!y @ried #hic!en( Dhite >en :antry( etc.,. .ar/et an' 'istri1uti"n situati"n The company has a unique advantage in the food service mar!et when compared to regular restaurants and other cart vendor operators. Indoor1outdoor location mobility( efficiency in size( significantly lower overhead( pre-pac!ed portion control products( elimination of coo!s or chefs( lower cost-of-goods( elimination of coo!ing and accompanying equipment and elimination of wait1bus staff provide an overall savings in basic cost of goods and services estimated at *) percent when compared to ordinary restaurants offering similar pricing per meal. Joes Redhots is also protected from e"isting and new competitors via an aggressive space lease contract and option program in !ey high-traffic office buildings in #hicago. The company is also the only food cart operation with a company-owned mobile cold-storage vehicle to supply company carts as needed. The company is also e"ploring the possibility of starting its own canteen warehouse to prepare and supply food items( to further lower the cost of goods and e"pand new menu selections as new cart locations are achieved. !r"'uct a'vanta#e Joes Redhots has the highest quality of product image for any cart vendor or fast-food operation in the #hicago area( evidenced by numerous media editorials( customer surveys( and the companyAs own competitive menu surveys of ad<acent area competitive food service outlets. The companyAs products are 1)) percent all-natural( with ') percent of meal items and snac!s qualifying as 7low fat(8 at less than four grams fat per serving. $utritional product information on all products is also available on request from consumers. Joes Redhots varies menu items wee!ly( with three 7specials8 per day at a discounted price. -easonal menu variations include more soups( chili( stews( and hot drin!s during winter months( and more salads and frozen1cold items +e.g.( Italian ices, during summer months. Joes Redhots specializes in pre-pac!aged( all-natural brea!fast and lunch sandwiches( salads( soups( and snac!s. Eow-fat mayonnaise( fresh vegetable toppings and fruits( low-sodium meats( fresh-ba!ed whole-grain breads( and hand-made soups( stews and side dishes provide a unique menu selection for customers. 0ll ingredients are made without artificial colors( additives( or

preservatives( another source of product uniqueness when compared to the competition. Joes Redhots co-ops sales of all-natural beverages from e"isting office tobacco1candy shops in each building( increasing sales for both businesses. 0ll Joes Redhots employees and cart operators are screened for scholastic achievement +i.e.( top ') percent of students, and receive si" hours of entry-level customer service training. #art managers must have a minimum of one year of e"perience and training with the company. 2ey 3ers"nnel Joe Hirasawa( company founder and president( graduated from the Fniversity of Disconsin and has several years of food service e"perience as a chef and restaurant manager( in several of the #hicago areaAs top restaurants. >is family owns a convenience food products company that sells primarily to distributors( and utilizes sales bro!ers. Goe grew up with wor! e"perience in almost every phase of the family business. >e has traveled the world e"tensively( studying food service techniques and food nutrition as practiced by restaurants worldwide. >e is fluent in -panish and Italian( and is an active member of the @ood Industry 0dvisory ?oard for the :an-0merican 9estaurant 0ssociation. In 199*( he was the recipient of the 6ntrepreneur-of-the-Hear award from the #hicago 9estaurant 5wners 0ssociation. 4"m3any valuati"n an' return "n investment (&56) Joes Redhots is committed to increasing shareholder valuation by increasing sales and net profits( along with consideration of sale( merger( <oint-ventures and possible issuance of stoc! in public mar!ets at a future date. #ompany valuation is estimated conservatively at 7.7 million to 1%.. million +i.e.( si" to 1) times net earnings, in five years. 95I for the original 199% paid-in common stoc!holders +i.e.( 1 million shares 2 ).*) I *))()))( or %) percent of outstanding company shares at the time of the original investment in Hear 1, is estimated to be ')) percent to over *)) percent by 1999( based upon a si" to ten times :16 ratio +e.g.( %) percent of 7.7J 1%.. million,( and a conservative valuation for similar food companies. Bividend issuance is another means of increasing stoc!holder 95I that the company may consider as early as 1993.

%"es &e'("ts 57Year 8"recast ( in $1,000s)

YE0& SA ES #ost of 4oods 495-- /094I$ !"ERA#I$% E&"E$SES 0ds1:romotion 9KB Bues1-ubscriptions @reight Insurance /aintenance /aterials /iscellaneous

999 '() )) 9)) %(1 ))

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900 3() )) 1.)) &(% ))

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901 9() )) %7)) 3(' ))

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5ffice -upplies 5utside -ervices 0ccounting1Eegal Eease 6quipment Eease @acilities Telephone Travel16ntertainme nt Ftilities -ales #ommissions Dages and -alaries Total 6"penses 6?BITL Bepreciation 6?ITLL Interest 6"pense :reta" 6arnings Income Ta"es Net 6nc"me (;"ss)

9) ') ') &* &* 1* 1* 1* 1*) 3)) 1(3 ). &9 % 1%) '7% &* '% 7 11& $21 3

'.) 1.) 1.) 1.* 1.* ).* ).* ).* *.) %). ) *'. 3 13. & &.) 1%. & 1.* 1). 9 '.. <+1

1%) 3) &* 9) 9) ') ') ') ')) 1%)) '() 3' 1(1 '7 1.) 9* 7 37 .9 ) '7. $51 2

%.) 1.) ).. 1.* 1.* ).* ).* ).* *.) %). ) *1. 1 19. ) '.) 13. ) 1.1 1&. . 3.' 8+5

1'* 9) 37 1'* 1'* &* &* &* &*) 1.)) &(* )& 1(7 93 %&) 1(** 3 9) 1(& 33 *7' $89 3

1.* 1.) ).. 1.* 1.* ).* ).* ).* *.) %). ) *). 1 %). ) %.7 17. ' 1.) 13. ' 3.& 9+9

1*) 1%) 7% 1.) 1.) 3) 3) 3) 3)) %&)) *(9 '& %(& 33 ')) %(1 33 11' %() *' 77' $1,2 80

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1*) 1*) 7* %%* %%* 7* 7* 7* 7*) '))) 7(' *7 '(1 &' '3) %(7 .' 1'* %(3 &. 97* $1,= <3

1.) 1.) ).* 1.* 1.* ).* ).* ).* *.) %). ) &9. 1 %1. ) %.& 1.. 3 ).9 17. 7 3.* 11+ 1

L6arnings before depreciation( interest( and ta"es LL6arnings before interest and ta"es

alance S(eet as "* =>30>99 0ssets 'urrent assets #ash 0ccounts receivable Inventory :repaid e"penses Temporary investments ?"tal current assets ong)term assets *())) ) 1)(&)) '(3)) ) $19,00 0 ;ia1ilities 'urrent lia(ilities 0ccounts payable -hort-term notes payable Eong-term notes payable #urrent site leases payable -ales ta"es payable 6mployment ta"es payable 0ccrued payroll

11(3*) ) 7(&*) 1(%)) %*)) %1*) &(&))

real property vehicles vending carts food preparation equipment food storage equipment furniture and equipment +less depreciation, ?"tal l"n#7term assets Total assets

1.*() )) '.())) 1%)()) ) %&('*) 1'(*)) 7(&))

?"tal current lia1ilities ong)term lia(ilities =ending cart loans /obile storage vehicle loan /ortgage

$29,35 0 '%()) ) %3(7*) 1&&(7) ) $203,@ 50 $232,8 00 $1@1,5 <5 $3<@,3 <5

?"tal l"n#7term lia1ilities +'%(.7* #otal lia(ilities , $355,3 !wners e*uit+ <5 $3<@,3 Total liabilities & owners <5 equity