ASSIGNMENT COVER SHEET

Student I.D: L0484LMLMM0212
Surname: Bessa
First Name: Wajdi
Module Code: 201202-MBA1-MSE
Module Name : Management skills and entrepreneurship
Programme: MBA intake 1
Submission Date : 20 April 2012

Business Plan | April 19
2012
| SANDWICH DELIVERY COMPANY | WB DELI |

Contents

1/ Executive summary: 4 2/ industry, customer and competitors’ analysis 5 2.1/ competitor analysis: Porter forces 6 3/ Company and production description 7 3.1 Company description: 7 3.2/ Strategy 7 3.3/ownership structure 8 4/ business opportunities 8 4.1/potential customer 8 4.2/geographical area 8 4.3/business competitors 8 5/Marketing plan: 9 5.1/ S W O T analysis 9 5.2/ Marketing mix 10 5.3 growth plan 10 6/ Operations: 11 6.1-Overview 11 6.2 facilities and equipment 11 6.3 employees 11 6.4/suppliers 11 7/technology 12 8/Financial plan 12 8.1/ assumptions (appendices 1) 12 8.2/profit and loss projection (appendices 2) 13 8.3/cash flows projection (appendices3) 13 8.4break even analysis (appendices 4) 13 8.5 ratios analysis 14 Appendices 14 1-assumptions 14 2/ profit and loss 15 3/ cash flow 15 4/ break-even point 16 References 17

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Formal Business Plan

1/ Executive summary:

W B deli is a new sandwich delivery company that serves different kinds of sandwiches and salads as well as drinks and snacks such as crisps and chocolate bars. Our company makes also a homemade and tasty soup.
Strategically located in Beddington lane, Croydon, a huge area which contains an industrial park formed of many companies. Croydon contains a big number of education institutions with more than twenty secondary schools, eight independent schools as well as other primary schools and further education schools (London borough of Croydon). There are also residential areas under construction, W B deli aims to become one of the most demanded food provider in the area.
Since there are no many fast food shops or restaurants in Beddington lane, it is difficult for people to get lunch there unless they prepare their own meal before leaving home which is a waste of time and energy, or going far away during the short break time to buy lunch. The main idea consists in approaching consumers and offering them food without being bothered to leave their offices, work places…
. We will count on deliverers to bring the food to our customers wherever they are ( offices , factories schools, building sites…) Our delivery team will be using bikes with trolleys containing coolers to keep the drinks and chocolate bars cold, as well as hot flasks to keep the soup warm.
The choice of this mean of delivery is due to two main reasons: first it helps to avoid the traffic congestion so we can reach our customers easily and in the shortest time, and second it will cost less than any other mean of transport as we won’t need petrol or high expenses for maintenance.
The company will be owned by two people:
- Wajdi Bessa: MBA from London school of commerce.
-Bertrand Marchand : master in finance from London school of business and finance
The initial investment will be 20000£ provided by the owners. We will also get a bank loan for 6548.72 £.
Furthermore, the company is planning to grow by increasing the number of rounds and then by setting up a new depot in a different area. To achieve this gaol, the company needs to invest for the communication and the promotion of its products.
2/ industry, customer and competitors’ analysis

The project is a part of food service industry. “it’s defined as the sale of food and drinks for immediate consumption either on the premises from which they were bought, or in designated eating areas shared with other foodservice operators”. (Marketline, january2012).
The industry contains different segments such as restaurants, fast food shops, takeaways and street and mobile vendors.
The foodservice industry depends on its macro environment which is composed of four main factors. (PEST) * Political factors: The foodservice market is under the control of numerous rules and legislations: * In October 2011, the national minimum wage rates have increased to 6.08£ for adults, 4.98£ for 18-20 year olds, 3.68£ for 16-17 year olds and 2.60£ for apprentices (key note2011). * Stricter hygiene legislations are made in order to keep high standards for health and safety. * Stricter rules for the immigration as non-European workers do not have flexible working allowance. (key note 2011)

* Economic factors * The demand may be affected by economic trends such as inflation: foodservice providers will be obliged to increase their prices in a period of inflation and consequently, the demand will decrease. * The VAT increase (20% in January 2011) had an effect on the demand as well. (key note 2011 ) * Investors are also affected by interest rate increase as some of them can’t afford a loan with high interests.

* Social factors
The demand for food service industry depends on social trends and new consumption habits. * Increase in term of health awareness * Increase in the number of working women * Most people don’t have enough time to leave their work places during the lunch time * Technological factors

* Nowadays, internet is more abundant so the company can use it to promote the new products, get the consumers feedback. * Social networks may help with advertising without huge costs.
2.1/ competitor analysis: Porter forces

* Buyer’s power: buyers are individual consumers. As they are numerous, any single buyer doesn’t have a big influence on the revenues. (marketline,january2012). However, they have a large choice of suppliers so the quality and the prices will affect their decisions.

* Supplier’s power: food service industry is strongly dependent on suppliers. On the one hand, most companies are usually making low margins so they need to reduce the costs as much as possible. They are likely to select suppliers with low prices as well as good quality. On the other hand, most suppliers are big companies with an important negotiating power as the loss of any demander is unlikely to affect their revenues.

The supplier’s power remains moderate.(marketline january 2012)

* New entrants: the food service sector tends to offer some opportunities to new entrants. First, the cost of capital is relatively low compared to other industries. Second, there are numerous suppliers as well as large amounts of potential consumers. On the other hand, there are also some barriers deterring new entrants:
There is much strict legislation about hygiene, so any violation can lead to severe fines. There are also multinational competitors which dispose of scale economy and consequently better negotiation powers with the suppliers. (marketline 2012). All in all, we can say that the market is likely to attract new entrants.

* Threat of substitutes: homemade meals are threatening the market as they are healthier and they let people spend more time with family. In addition, cooking costs cheaper than having meals in a restaurant or buying sandwiches. However, nowadays most women are working so they don’t have as much time as some years ago, so food service industry is always the best solution. In addition, people tend to make plans in a restaurant or a sandwich shop or even ordering a delivery in order to socialize with friends or colleagues… Overall, the threat of substitutes tends to be moderate (marketline industry profile, January 2012) * Degree of rivalry: companies operating in the foodservice sector are numerous as there are many different segments offering varied kinds of products. Consequently, customers have large choice and they are able to switch easily from one supplier to another. Overall, rivalry tends to be strong in the foodservice sector.

3/ Company and production description
3.1 Company description:

Nowadays, most people haven’t got enough time to leave their offices or any work place in order to have lunch. W B deli will count on a team of five deliverers to operate in the busy area of south London. The main idea consists in covering five different rounds containing small businesses, schools, offices… our employees have to go to the same round every day from Monday to Friday so customers will be aware that someone is bringing them food at the same time and consequently they get used to our services.
For the menus, we will suggest different kinds of sandwiches such as meat, vegetarian, fish, and even halal sandwiches for Muslim community. We will also make different kinds of salads so we can satisfy most of the enquiries.
In addition, the menu will contain different kinds of homemade and tasty soup as well as soft drinks, chocolate bars and other sweets. Our team will be using bikes with trolleys to carry the food and this is due to cost reasons as bikes are cheaper than any other mean of transport and then it’s much better for the delivery as employees can avoid the traffic jam and be on time. We will also use coolers to keep the drinks cold and to keep the chocolate cool during the summer.
3.2/ Strategy

Our strategy will be as simple as offering a superior quality products at a low price, then we will work hard to create a certain customer loyalty via our sandwich men.
We will also promote our products by giving free samples and joining people in their work places in order to get new customers and then create new rounds and generate more sales.
In addition, our team will be ready to get feedback from our customers so we work on the improvement of our quality and we keep a good image. We will also engage our customers by involving them in the selection of new sandwiches and soups.
3.3/ownership structure

The company is owned by two people sharing the capital equally.
- Wajdi Bessa: MBA from London school of commerce.
-Bertrand Marchand : master in finance from London school of business and finance.
4/ business opportunities

W B deli is operating in an attractive market with some interesting opportunities: “The united kingdom foodservice market grew by 3.3% in 2011” (datamonitor 2012).
We are also covering an area with little catering facilities as most workers have to leave their offices during the lunch time to get food, so our services will let them save time and money as they avoid any journey to the supermarket or any sandwich shop or restaurant.
The company can also take advantage from massive word of mouth advertising: if our customers like the products and the quality of service, they will definitely recommend us to other customers in the neighbourhood and then we can create more rounds and consequently enlarge our business.
4.1/potential customer

Our potential customers are different professionals working or living in the area of Croydon.
We also sell to the people living or working in the neighbourhood as after the delivery we also sell the items left inside the depot so we make the minimum of waste.
4.2/geographical area

The company will set a depot in Beddington lane, Croydon in south London. This area contains an industrial park with many businesses and a lack of restaurants, shops and fast foods. Furthermore we will operate in different areas of Croydon as we will have 5 big rounds to cover.
4.3/business competitors

As we are operating as a part of foodservice market which is much diversified, we have many competitors.
-corner shops
-fast food
-Coffee shops
-sandwich bars
-supermarkets
5/Marketing plan:
5.1/ S W O T analysis

* Strengths * The sandwich delivery is perceived as a low cost meal which most customers tend to consume regularly. ( market summaries 2006 ) * The number of working women is increasing day by day. This fact is encouraging family members to use foodservice as a substitute to homemade meals. (Key note 2010). * W B deli is able to reach the customers and offer them food so they don’t have to leave the work premises. * It’s easy to create a certain amount of customers’ loyalty due to the fact that our deliverers meet every day the same people so they can have a kind of social relations which helps to increase the sales. * Most time London’s weather is cold with rain or snow so people would avoid leaving their work places to get food.

* Weaknesses * Food standards can vary from a consumer to another and it will be a bit difficult to satisfy all the enquiries. * We can’t expect the customers’ behaviour so there is a risk of waste while ordering a big quantity of perishable food. * Sandwich deliverers might not be good sellers or good communicators. As a result we won’t be able to reach an important volume of sales. * Opportunities * The United Kingdom’s economy remains strong with low unemployment and a high purchase power. * The concept of sandwich delivery hasn’t been extended to many small towns which means there is an opportunity of growth across the UK. * By the development of healthier food, we can get more consumers as people are more aware of the problem of health and safety. * W B deli can have the advantage of word of mouth advertising.

* Threats * Increase in term of price competition ( market summaries, 2006) * The operating costs are increasing and consequently the selling price will be affected. * Existence of many substitutes such as fast food company which have the advantage of scale economy and a stronger negotiating power with the suppliers. 5.2/ Marketing mix

* Product
W B deli offers different kinds of sandwiches (meat, vegetarian, fish) as well as salads and pasta.
We also make daily homemade soup. In addition, our company sells soft drinks, salty and sweet snacks (crisps, chocolate bars, muffins) * Price
The sandwich delivery service is a business generating low margins so W B deli will opt for a low price strategy and then work on high volume sales.
The strategy of penetration price will help us to be competitive and then attract more potential consumers.
5.3 growth plan

We intend to increase our sales by creating regularly new rounds starting from the 3rd year. By that time we will get all the necessary experience and the required funds for the investment. Starting from the 5th year, we intend to open a new depot in a different area.
To achieve this objective we will approach some potential customers and offer them free samples and give them a clear idea about the concept of our company and the products we are offering.
We will also promote our products on internet so we can be more visible and we grow geographically by exploring new areas and setting up other depots.
6/ Operations:
6.1-Overview

W B deli will be selling sandwiches, drinks and snacks in the busy area of Croydon, south London. We will use a depot in Beddington lane, where we stock our products.
Our deliverers will work from 9am to 2pm as this is a busy time for having breakfast or buying lunch or snacks. At this time, most workers are available as well.
By the end of the day, the deliverers calculate the daily revenue and then make the next day’s order depending on some facts such as the previous sales, the size of the round, the availability of the customers for the next day…
6.2 facilities and equipment

To start the business we will need the following items: * 2 computers * 6 electric bikes: as every round covers a quiet big area, we will need to use electric bikes to work efficiently. These bikes will let us save money and time as we won’t need petrol and we will avoid the traffic congestion. Our deliverers will use 5 bikes and the other one will be spare. * 6trolleys to carry the products * A big fridge * Cool bags: to keep the drinks cold * Flasks: to keep the soup warm. * Tables and chairs to let the staff doing the daily operations of packing the food and counting the money easily.
6.3 employees

* 2 Sandwich makers: they have an experience of 2 years in a sandwich bar. They will get paid 7£/hour and they work 6 hours a day * 5 deliverers: they are with experience in sales. They work 6 hours a day and they are paid 7£/hour * Manager: 1year of experience as a manager in a sandwich shop. He is paid 18000£ a year 6.4/suppliers

For our activity, we will buy from 2 different suppliers: we have chosen these suppliers after a comparison between 5 others in term of prices and delivery conditions. -supplier for non-perishables items: this supplier sells drinks, crisps, chocolate bars, sweets. We get a delivery once a week. -supplier for perishable items: he’s providing salads, bread, meat, cheese and vegetables… our purchases are delivered twice a week.
7/technology

For this project, the technology will be our main tool of promotion, as we will create our web site to advertise and especially to communicate with our customers by getting their feedback.
We will also focus on social networks to advertise and get new potential customers.
8/Financial plan

8.1/ assumptions (appendices 1) * General assumptions
-The rate of inflation was 4.1% in the end of 2011 and decreased slightly at the start of 2012. (Bank of England 2012). For this project, we assumed that the inflation is 3.5%
-we assume that the tax rate is 28%.
We assume that the interest rate for the loan is 4% per year.

* Employees | year1 | year2 | year3 | year4 | sandwich makers | 2 | 2 | 4 | 4 | Deliverers | 5 | 5 | 7 | 10 | Manager | 1 | 1 | 1 | 1 |

-The sandwich makers and the deliverers are paid 7£/hour, and they work 6hours a day.
-The manager is paid 18000£ a year
-The company is working 260 days a year
-At the end of each year we will distribute 10% of dividends.

We assume that every person spends an average of 2.5 £ whatever he consumes (sandwich, drinks, chocolate bars…) * Sales forecast | year1 | year2 | year3 | year4 | average price per person | 2.5 | 2.71 | 2.75 | 3.27 | annual sales | 78000 | 78000 | 104000 | 106600 | annual revenue | 195000 | 211380 | 286000 | 348582 |

* Investment
The project will be financed by 2 shareholders with 10000 £ each. We will also have a bank loan for 6548.72 £ with an interest rate of 4% per annum.
8.2/profit and loss projection (appendices 2)

total operating expenses | | 130103 | 134656.6 | 181809.3 | 219310.2 | operating profit | | 6397 | 13309.4 | 18390.65 | 24697.16 | INTEREST EXPENSES | | 261.9488 | 196.4616 | 130.9744 | 65.4872 | pre-tax income | | 6135.051 | 13112.93 | 18259.68 | 24631.68 | Taxes | 28% | 1717.814 | 3671.621 | 5112.71 | 6896.87 | net income | | 4417.237 | 9441.312 | 13146.97 | 17734.81 |

8.3/cash flows projection (appendices3)

| initial investment | year1 | year2 | year3 | year4 | cash beginning of year | | 13451.28 | 21756.52 | 41215.23 | 65486.39 | cash end of year | 20000 | 21756.52 | 32112.99 | 34080.1 | 37290.8 |

8.4break even analysis (appendices 4)

net sales | 188864.9 | 211380 | 286000 | 348582 | pre-tax income | 0 | 13112.93 | 182259.7 | 24631.68 |

When we reach the level of 188864.9 £ of annual sales, we will start making profit. This will happen during the second part of the first year.
This means that we start making profit after having 290 customers a day, spending 2.5 £ each

8.5 ratios analysis | year1 | year2 | year3 | year4 | gross profit | 70% | 70% | 70% | 70% | net profit | 3.28% | 6.30% | 6.43% | 7.09% | administrative expenses | 66.7% | 63.7% | 63.6% | 62.9% | current ratio | 3.15 | 2.67 | 2.64 | 2.76 | quick ratio | 2.48 | 2.23 | 2.11 | 2.15 | sales/net worth | 7.99 | 7.18 | 8.63 | 9.24 | stock holding turnover | 10% | 10% | 10% | 10% |

-The direct costs over the 4 years are estimated at 30%.
-The net profit will increase in the second year by 3.02%. However it will rise slightly in the third year. The small increase is due to the new investments during the 3rd year.

Appendices

1-assumptions

* Equipment | number | price per unit | total | electric bikes | 6 | 400 | 2400 | Trolleys | 6 | 150 | 900 | Tables | 6 | 45.03 | 270.18 | Fridge | 1 | 1329.99 | 1329.99 | Flasks | 20 | 13.99 | 279.8 | cool bags | 15 | 24.99 | 374.85 | Chairs | 10 | 23.99 | 239.9 | trolleys year3 | 2 | 160.7 | 321.4 | trolleys year 4 | 3 | 166.3245 | 498.9735 | bike year3 | 2 | 443.5 | 887 | bike year4 | 3 | 459.0225 | 1377.068 | Computer | 2 | 377 | 754 | Total | | | 9633.161 |

* Expenses | year 1 | year2 | year3 | year4 | Utilities | 3600 | 3726 | 3856.41 | 3991.384 | accounting and legal | 2100 | 2173.5 | 2249.573 | 2328.308 | repair and maintenance | 1000 | 1035 | 1071.225 | 1108.718 | Advertising | 1000 | 1035 | 1071.225 | 1108.718 | Depreciation | 963 | 996.705 | 1031.59 | 1067.695 | Rent | 12000 | 12420 | 12854.7 | 13304.61 | Insurance | 15000 | 15525 | 16068.38 | 16630.77 | Total | 35663 | 36911.205 | 38203.1 | 39540.21 |

* Salaries salaries per year | year1 | year2 | year3 | year4 | sandwich makers | 21840 | 22604.4 | 45208.8 | 46791.11 | Deliverers | 54600 | 56511 | 79115.4 | 113022 | Manager | 18000 | 18630 | 19282.05 | 19956.92 | Total | 94440 | 97745.4 | 143606.3 | 179770 |

2/ profit and loss

| | year1 | year2 | year3 | year4 | net sales | 100% | 195000 | 211380 | 286000 | 348582 | cost of sales | 30% | 58500 | 63414 | 85800 | 104574.6 | gross profit | 70% | 136500 | 147966 | 200200 | 244007.4 | Salaries | 48% | 94440 | 97745.4 | 143606.3 | 179770 | Rent | 6% | 12000 | 12420 | 12854.7 | 13304.61 | Insurance | 8% | 15000 | 15525 | 16068.38 | 16630.77 | Utilities | 2% | 3600 | 3726 | 3856.41 | 3991.384 | accounting and legal | 1% | 2100 | 2173.5 | 2249.573 | 2328.308 | repair and maintenance | 1% | 1000 | 1035 | 1071.225 | 1108.718 | Advertising | 1% | 1000 | 1035 | 1071.225 | 1108.718 | Depreciation | 0.50% | 963 | 996.705 | 1031.59 | 1067.695 | total operating expenses | | 130103 | 134656.6 | 181809.3 | 219310.2 | operating profit | | 6397 | 13309.4 | 18390.65 | 24697.16 | INTEREST EXPENSES | | 261.9488 | 196.4616 | 130.9744 | 65.4872 | pre-tax income | | 6135.051 | 13112.93 | 18259.68 | 24631.68 | Taxes | 28% | 1717.814 | 3671.621 | 5112.71 | 6896.87 | net income | | 4417.237 | 9441.312 | 13146.97 | 17734.81 |

3/ cash flow

| initial invest | year 1 | year2 | year3 | year4 | cash flow operating activities | | | | | | net income | | 4417.237 | 9441.312 | 13146.97 | 17734.81 | Depreciation | | 963 | 996.705 | 1031.59 | 1067.695 | increase in inventory | | -5850 | -491.4 | -2238.6 | -1877.46 | increase in payable and accurate | | 8775 | 9512.1 | 13899.6 | 16451.37 | net case from operating activities | | 8305.237 | 19458.72 | 25839.56 | 33376.41 | cash flow from investment activities | | | | | | purchase /sale of equipment | -6548.72 | 0 | 0 | -1208.4 | -1876.04 | net cash from investment activities | -6548.72 | | | -1208.4 | -1876.04 | cash flow from financing activities | 0 | 0 | 0 | 0 | 0 | increase/decrease in CPLTD | 0 | 0 | 0 | 0 | 0 | increase/decrease in long term debts | 0 | 0 | 0 | 0 | 0 | increase in additional paid in capital | 20000 | 0 | 0 | 0 | 0 | dividend payment | | -441.723 | -944.131 | -1314.7 | -1773.48 | net cash from financing activities | 20000 | 0 | 0 | 0 | 0 | net change in cash | | | | | | increase/decrease in cash | 20000 | 8305.237 | 19458.72 | 24631.16 | 31500.37 | cash beginning of year | | 13451.28 | 21756.52 | 41215.23 | 65846.39 | cash end of year | 20000 | 21756.52 | 32112.99 | 34080.1 | 37290.8 |

4/ break-even point

| | year1 | year2 | year3 | year4 | net sales | 100.0% | 188864.949 | 211380 | 286000 | 348582 | cost of sales | 30.0% | 58500 | 63414 | 85800 | 104574.6 | gross profit | 70.0% | 136500 | 147966 | 200200 | 244007.4 | Salaries | 50.0% | 94440 | 97745.4 | 143606.3 | 179770 | Rent | 6.4% | 12000 | 12420 | 12854.7 | 13304.61 | Insurance | 7.9% | 15000 | 15525 | 16068.38 | 16630.77 | Utilities | 1.9% | 3600 | 3726 | 3856.41 | 3991.384 | accounting and legal | 1.1% | 2100 | 2173.5 | 2249.573 | 2328.308 | repair and maintenance | 0.5% | 1000 | 1035 | 1071.225 | 1108.718 | Advertising | 1.0% | 1000 | 1035 | 1071.225 | 1108.718 | Depreciation | 0.5% | 963 | 996.705 | 1031.59 | 1067.695 | total operating expenses | | 130103 | 134656.6 | 181809.3 | 219310.2 | operating profit | 3.3% | 6397 | 13309.4 | 18390.65 | 24697.16 | INTEREST EXPENSES | | 261.9488 | 196.4616 | 130.9744 | 65.4872 | pre-tax income | | 0 | 13112.93 | 18259.68 | 24631.68 | Taxes | 28.0% | 0 | 3671.621 | 5112.71 | 6896.87 | net income | | 0 | 9441.312 | 13146.97 | 17734.81 |

References

* Market line 2012: “profit foodservice in the united kingdom”, January 2012 * Key note 2011: “market report plus 2011, restaurants” * Datamonitor: “Benjy’s case study”, august 2004 * Key note 2010: “fast food and homemade delivery outlets” * Market summaries: “dewberry red point” 2006 * Bank of England: “ inflation report February 2012”