Let’s Make a Deal! “Modesty, casualness, and an air of nonchalance are characteristic attitudes in Australian business culture.” Nukarn Suwatikul Amit Shah Brought to you by: Don Ta Lloyd Wellington Hazem Yassin Outline Mission & Overview of the Wrap Core Competencies Country Profile Economic Summary Australia-US Comparison Investment Incentives Business Set-Up Checklist Australian Food Industry Characteristics Marketing Strategy Financial Strategy Mission The company's goal is that of financial success through a multifaceted approach. We will meet this goal while trying to consider: 1) the effect of our products on the health and well being of our customers (and our staff), 2) the impact that our business practices and choices will have on the environment, and 3) the high quality of attitude, fairness, understanding, and generosity between management, staff, customers, and vendors. Awareness of all these factors and the responsible actions that result will give our efforts a sense of purpose and meaning beyond our basic financial goals. Overview In 1996, fast, fresh, healthy food was difficult to find in Boston. These wildly popular food concepts existed en masse in California, but were far and few between in Massachusetts and other parts of the country. The Wrap was launched as a restaurant that featured wraps, burritos, smoothies … in a friendly, casual environment. Building and running the first location helped the management team identify the competencies that are now at the core of The Wrap. Success required three key ingredients: always being fresh, friendly, and fast. Core Competencies A unique recipe for success in hand … Bringing the healthy concept to more Bostonians. Penetrating the markets of and eventually acquiring competing businesses. Fast menu that focused on simplicity, mouth-watering recipes, and custom-ordering. Keeping the focus on our customers - as long as our customers continue to give thumbs up, The Wrap will slowly expand to communities that value its food and its services, as well as its desire to give back to its neighbors. Famous "Top 40 Bangs for the Buck" --Zagat 2003 Burritos Nutritional Fact Sheet New Location P. Sherman 42 Wallaby Way Sydney Country Profile Prime Minister: John Howard. Independence: January 1, 1901 Population: 19,731,984 Total area : 7,687 Sq. Km Major Cities: Sydney, Melbourne, Canberra (Capital), Brisbane, Perth, Adelaide Languages: English, native languages Ethnic Groups: Caucasian (92%), Asian (7%), aboriginal and other (1%) Religions: Anglican (26%), Catholic (26%), other Christian (24%), non-Christian (11%) Economic Summary Currency: Australian Dollar ($A) Market Exchange Rate: US $1=$A1.34 GDP per Capita US$: 30, 695 GDP Growth Rate: 3.7% Inflation Rate (Consumer prices): 3.1% Unemployment Rate: 5.7% Major Trading Partners: Japan, other Far East, European Union, United States Major Exports: crude materials, food & live animals, mineral fuels & lubricants Major Imports: machinery & transport equipment, manufactured goods, & chemicals Economic/Industrial Trends Traditional strength of manufacturing employment is declining, however it remains strong. Key employment areas - wholesale trade, finance, business services, health insurance, property and community services. Growth areas – retail trade, construction, restaurants, transport, storage, cultural and recreational services Employment Trends Australia-US Comparison Total area: Population in millions: GDP per Capita US$: GDP Growth: Unemployment Rate: Corporate Income tax: Highest Personal Income tax: Quality of Life: Primary Industries Australia 7687 Sq. Km 20.1 30,695 3.7 % 5.7% 30% 47% 9.35 US 9629 Sq. Km 293 39,862 3.2 % 5.4 % 40% 35% 8.11 Agricultur e Food Forest Sea food Wine Industry F i n a n c i a Age Groups Population Density Investment Incentives Australia gives investors a competitive and quality choice in the Asia-Pacific region Average business costs in Australia. is around 8 to 9 per cent below those in the US. Australia is ranked the second most cost competitive country for business operations in the industrialized world. Cheap real estate: Sydney is approx. 66% less than in London, 46% less than in Tokyo, & 11% less than in New York. More Incentives Australia's transport and logistics systems provide a mature, efficient and cost effective means of delivering products and services. Cost competitiveness coupled with a superior workforce and a low overall cost of living implies that the commercial advantages of doing business in Australia are excellent. Australia's overall tax burden as a share of GDP is significantly lower than its western competitors. Level of corruption is among the lowest of OECD (Organization for Economic Cooperation and Development) member nations. Business Set-Up Checklist Feasibility Study Location & Premises Licenses and Permits Business Planning Finance/Funding Business Structure Taxes Human Resource Business Documentation Budgeting & Finance Control Marketing & Advertising Target Industry Characteristics Legal aspects Registration & Insurance Australian Cuisine At a Glance Traditionally-based on English cuisine e.g., roasts, grilled chops, other forms of meat, accompanied with vegetables (mashed potatoes, beans, peas, and carrots) Currently– very diverse, reflective of its multi-cultural influences. South East Asian, Greek, Lebanese, and Italian foods are very common. Australian Government, through health initiatives and cultural marketing efforts, is promoting a push towards healthy food choices. Australia’s Fast-Food Industry Australian fast-food market was US$6.2billion in 2003 Market is an Oligopoly, with independent outlets e.g., McDonald’s, Burgers Burritos Nachos and Tacos (BBNT), Subway, KFC, Pizza Hut, Burger King (a.k.a. Hungry Jack’s) accounting for 70.5% of total number of fast food outlets McDonald’s is the market leader in Australia, with a market share of 34.7%. This figure is a decrease from its 2002 market share. Australia’s Fast-Food Industry – Cont. Fast food market in Australia is predicted to grow about 17% to $7.25 billion by 2008. Takeaway foods favorites in Australia are: meat pie fish & chips sausage rolls Marketing Strategy “Fresh-Friendly-Fast” Fresh – fresh ingredients make a tasty product. Friendly- friendly atmosphere suits our customer base and our work culture. Fast- fast service to maximize our clients’ lunch and relaxation time. But Also “Healthy-Reasonable” Healthy- we serve fast, healthy food to fit the lifestyles of our customers. Price- quality offerings at reasonable prices has and will enable us to increase our market share. Marketing Strategy Our Customers… Professionals and young adults – our stores are typically found close to business districts and universities. Everyone that shares our ideology of a tasty, healthy meal at an affordable price. Marketing Strategy Promotions and Advertising Strategy Our theme is : “Fresh-Friendly-Fast” Primary medium for advertisement will be the radio. Radio spot and jingle will create brand recognition. Special promotions will be advertised in newspapers. We will also do flyers and coupons periodically. Frequent customer reward card. We will also sponsor health events. Setup Costs of a Typical Deli Franchise Investment required: $100,000-$200,000 Includes $60,000-$80,000 towards furniture/fixtures Initial Franchise Fee: $10,000-$25,000 Royalty Fees: 6-8% Advertising Fund: 3.5%-4.5% 6-8 employees 2-4 weeks of management training Franchise Costs in Australia Investment Required: $125,000 $80,000 in Equipment, Furniture & Fixtures Initial Franchise Fee: $15,000 Royalty Fees: 6% Advertising Fund: 4% 4 weeks of management training Breakdown of Initial Investment Franchise Fee $15,000 Equipment, Plumbing & Smallwares $30,000 Millwork, Fixtures/ Signage & Graphics $30,000 Leasehold Improvements $20,000 Start-up Supplies & Inventory $10,000 Training $1,000 Opening Advertising $2,000 Other Prepaid Expenses $2,500 Legal & Accounting Costs $500 Insurance & Permits $1,500 Miscellaneous Expenses $1,400 Additional Funds - 3 months $20,000 First Month Rent & Deposit $6,100 Total Investment Cost $140,000 Industry Derived Values Broken down from annual sales 25% target profit Ranges from 20-30% 75% expenses 25% dedicated to food and paper costs Range from 70-80% The value of the business is typically sold 3-4 times the annual profit Expect positive return on investment after 4-5 years Australia Investment Strategy 1. Use current retained earnings of $400,000 to penetrate the growing health conscious Australian fast food market 2. Establish one store in each of the largest two cities: Sydney and Melbourne 3. Aggressively develop the business and create franchising opportunities Australia Investment Strategy 4. Franchise at a pace of two locations annually 5. Sell the Melbourne store after the 5th year 6. Maintain the Sydney operation as a franchisor-owned location where management training and franchisee consulting takes place 7. By the end of the 10th year, comprise of at least 20 franchisee-run stores while achieving a positive present value return and to further expose as an expanding international franchise opportunity 1) Melbourne Acquisition Target Asking Price: $52,238 US Annual Sales of $111,940 US Low start-up capital required as the majority of the furniture/fixtures can be carried over Situated in the heart of the city’s business and residential population – considered one of the best locations in the Melbourne Central Business District New local university opening soon High visibility in an upscale shopping plaza Annual lease is US$25,224 for 1,200 sq ft Total acquisition and transition start-up costs is less than US$100,000 2) Establish in the Prime Darling Harbor area in Sydney Darling Harbor Houses Sydney's convention and exhibition centers, as well as several major tourist attractions, shops, restaurants and cafes One of the world’s leading waterfront leisure and entertainment destinations. Attractions include the Imax Theatre, Sydney Aquarium, Chinese Garden of Friendship, Australian National Maritime Museum, Powerhouse Museum, Harbourside Shopping Centre and Cockle Bay Wharf. 2) Establish in the Prime Darling Harbor area in Sydney King Street Wharf The most recent prestigious waterfront office location overlooks the Harbor The location will be larger than normal to accommodate itself as the management training and corporate store Annual lease is $100,000 for 2,980 sq ft 1,635 for restaurant and 1,345 for office Total investment costs at $250,000 Tax methods Companies are taxed at a straight 30% rather than at a marginal tax rate Depreciation For each capital cost worth under $1,000, depreciation is calculated at 37.5% of the annual value until it is fully depreciated Items over $1,000 use 15% the first year and 30% annually thereafter Capital gains tax is not a separate tax, but a component of income tax 10 year Business Plan - Assumptions Tax rate at 30% Depreciation at 37.5% No capital gains tax (rolled into income) Annual Escalators Sales Revenue and Royalty Income: 3% yrs. 2-3 4% yrs. 4-5 5% yrs. 6-10 Expenses: 4% yrs 2-5 2.8% yrs. 6-10 (inflation rate and max operation efficiency) Discount rate at 11%, with 10% and 12% as alternatives 10 year Business Plan - Financials $400,000 initial investment $350,000 actual investment cost $50,000 in reserves for unexpected costs Achieve a positive return at the end of the 5th year when the Melbourne restaurant is sold for approximately $150,000. Projected annual royalty income of $0.5 million by the 10th year, assuming two franchises are established annually. Present Value and Rate of Return 10 year Net Present Values range from $800,000-$1,300,000, using 10-12% discount rates. Internal Rates of Return range from 33%-34% after taxes. As evidenced by the projected return with a conservative 10 year forecast, this project is guaranteed to be a market success for the expanding health conscious sector in Australia and Project will open the doors for future development in Asia and Europe.