Business: Cookies shop
Trade Format: countertop type store;
Store Location: Boulevard mall;
Property Type: Rental space of 50m2;
Working hours: 9 AM – 7 PM;
Sources of financing: own funds – 26,300 USD.
Key performance indicators candy store:
Monthly Profit in six months = 83,000 USD;
Net profit margin = 3872%;
Payback = first 10 days.
Specificity of the business
Various pastry shops are quite lucrative, since vast majority of people like treating themselves with sweet pastries and cakes. The specificity of such products involves only the development of the store on the local market, which determines its marketing strategy.
Most pastry shops produce sweet products themselves, which leads to the need to lease large areas for the kitchen and the purchase of specific equipment. Our store will specialize in buying fresh pastry from other local sellers nearby and selling them in the store. In addition to the sale of finished products, it makes sense to open a mini-cafe, where clients could easily think about their purchases and try products they like. Decoration of such a store should be of high quality, even a little festive with dishes, on which pastries will be served, to be pleasant to the eye. The whole shape of the confectionery must be original, neat and clean.
When we open a pastry shop, we will have to register with the tax authorities (preferably as an LLC), social funds, obtain permission from the Food Safety, Disease Control and Prevention Service and fire control authorities. It was one of the main requirements to rent a place in the closest proximity to the potential clients mainly because sweet shop sells perishable goods. Of course, the disadvantage of such a lease is its comparatively high cost, but it will be compensated with high traffic and no need to spend money on advertising.
When we were planning starting this business, we took into account all regular expenses – delivery of products, employees` wages, payment of bills for electricity and water. An important aspect is safety of the confectionary. For this purpose, it would be better to install video cameras.
The list of start-up costs:
Description of business concept and products.
The operating mode will be set from 9 AM to 7 PM without breaks and days off.
The average margin on the goods, according to the business plan, will be 40%. That corresponds to an average retail margin for this type of shopping.
The approximate range of the shop is as follows:
Bread (about 30 varieties);
Baking (about 20 species);
Cookies and candies (80 species);
Gingerbread cookies, marshmallows;
Cakes;
Breakfast cereals;
Cocoa, tea and other products.
We believe that the average bill will be 15 USD. The price level in the store will be at the average level of prices in similar shops.
Since the majority of the products of the confectionery store is perishable, the priority items will be supplied by local producers or produced on spot. These include such goods as bread, baked goods (cakes, biscuits) and cakes. Part of the products is planned to buy from suppliers on credit (on consignment).
Marketing plan
The main clients of the outlet will be office workers, visitors of the shopping center and boutiques. The shop is located in a high traffic location. On average, up to 12 thousand people per day will pass by the building in which the store is located. It is assumed that every day the store will be visited by up to 150 people. That is, slightly over 1% of patency. The peak of attendance is planned to occur from 11 AM to 3 PM, when the main revenue will be accumulated.
Based on the total attendance and average ticket, we can identify potential revenue: 150 people x 15 USD = 2250 USD. However, such income figures are not achieved immediately, as the store has yet to gain loyalty among customers. Planned revenue figures can be accessed only after 6 months of operation.
In total, the planned annual revenue is estimated at 6 million USD.
Targets revenue will be achieved by:
1. Trade of only fresh products. This will be strictly controlled on the part of the sellers;
2. A wide range of confectionery products, incomparable with any competitor within a radius of 1 mile;
3. Courteous attitude to customers by the staff.
The main source of advertising will be the outdoor advertising, billboards and banners. Advertising in the media and on the Internet is not planned.
Progress of the business
Currently, the work on the project has been started:
1. Individual business registration process is continuing in the local tax office;
2. A preliminary lease agreement for commercial premises of up to 40 m2 (plus a warehouse of 10m2) on the ground level of the building. The rent is 20,000 USD per month.
3. The search for companies, local producers of confectionery products, has been made. Contracts with 11 companies have already been signed.
Production plan
The room in which the store is located is in excellent condition. Repairs in the room are not planned. To start trading, it is sufficient to set up commercial equipment and organize goods supply.
Total floor area is 50 m2, including retail space of 40 m2 and a warehouse of 10 m2. The room meets all the standards of the Food Safety, Disease Control and Prevention Service and fire safety norms.
Planned staffing includes:
Sellers will work according to schedule: two working days followed by two days-off. For good sales figures, monthly bonuses will be possible.
In addition to the vendors, there will be need to hire an accountant and cleaners. These workers shall not be employed on a full-time, so there will be a paid-services contract concluded with them (outsourcing contract). The monthly costs of these contracts will amount to 1,500 USD.
Sales/ Profit plan
Funds planning
Current assets – 26,300 USD.
Fixed asset – 0 USD (everything is leased).
Total assets – 26,300 USD.
Debt and net assets section at the end of the first term (first month)
Current Liabilities – 10,000 USD
Fixed liability – 33,190 USD
Net asset – 14,800 USD
Total liabilities – 57,990 USD
Financial plan
Monthly fixed costs of the shop are provided in the following table:
Total monthly expenses amount to 33,190 USD and 398,280 USD per year. The structure of the annual costs of the confectionery shop is presented in chart form:
As we can see, the main expenditure in the total annual costs are rental expenses – 63%. Second, are the wages of the personnel – 20% of the total cost. Finally, on the third place are the costs associated with the payment of insurance premiums for workers in the non-budgetary funds – 6% of the total annual costs.
Breakeven point of sales with an average trade margin of 40% amounts to approximately 22,000 USD per month.
Calculation of the economic performance of a confectionery shop, according to the business plan is presented in the table of revenue and expenditure forecast:
Net income of the candy store for the year will amount to 1,018,439 USD. We can expect high returns in the very first year of operation. Profitability of cookies shop is enormous. However, such huge profitability (over 3,800%) is only possible if the store is popular among the clients which is achieved by advantageous location of it (in our case, the shop is located in a lively university district with thousands of hungry students spending most of their time nearby. Additionally, University area is rather close to the financial district of the City of Buffalo, where all major offices are located and vast majority of office workers work). In fact, the project, under such a positive scenario, will be paid off already within the first month of operation.
