Delights Business Plan

November 22, 2010
ICEDELIGHTS
There is good opportunity for ICEDELIGHTS and the franchisees who want to take on the venture. The first opportunity is the fact that all the franchisees are at an optimal time in their lives to start a new venture. They are in grad school, all have investment experience, and are not currently committed to jobs or spouses. This is the perfect time for them to get involved in a business. Technology also makes the opportunity positive. The fact that the ICEDELIGHTS business perfected a way to freeze homemade ice cream, and there is no need to make the gelati on the premises gives this business a competitive advantage from the start. This will cut costs of having gelati makers and whatever machinery comes with
that. Another form of competitive advantage is the cost and quality of the product. ICEDELIGHTS found a way to make the highest quality gelati, for the lowest possible cost. Another positive about the company is the marketing opportunities. ICEDELIGHTS is able to market itself as a café. They would derive sales throughout the day from coffee, pastries, and light snacks and then also use ice cream sales in the afternoon and evening hours. The continued topic of opportunities also includes that completing this venture will give the franchisees the rights to the entire state of Florida. The risk may be there, but having the rights to the whole state posses an excellent profit potential. Another opportunity for ICEDELIGHTS is the reaction from investors. Especially excited were the contacts that Mr. Rogers had. Not all investors were in stone, but the enthusiasm shown by many posses a great opportunity for the three men to succeed.

There were many critical risk factors faced by both the three men and the business as a whole. Starting with Paul, Mark, and Eric, they obviously have a financial risk. They are planning on investing their own money into a business where they have very little experience and little control. They will also be raising $750,000, with which they are weary to have because they do not have 100% control of the company. Mark’s quote states this well. “It really scares me to think that we will have the responsibility for $825000 of other people’s money, but can’t control the two most important elements of the business” Not controlling the business fully is a major risk for the company, as well as the founders. They are expected to successfully run the business, but not have any say on the location or supply of the product. These two factors are critical to the success of the company. Gelati is not a common product, and it is not something you can go out and buy at a grocery store if you are running low. With the terms agreed upon ICEDELIGHTS has no real obligation supply the gelati, and without it the business cannot function. They had no real obligation because the ICEDELIGHTS founders believe that their company had been so stretched that they did not want to be legally bound to anything.

Another significant risk for the company is the location.
Not being able to determine their own location in Florida is one risk, but a larger risk is the unknown condition of Florida as a whole. None of the three men have really gone down to Florida to determine the feasibility of the venture. Other than Mr. Rogers going down there and looking at comparable cafés and ice cream shops, nobody has really investigated the market. There is no real analysis of competition or if the Florida demographic includes ICEDELIGHTS target market. There is also the issue of Florida being a mall-based retail economy, and nobody is certain if ICEDELIGHTS will be successful in that
form.

The potential rewards of this ICEDELIGHTS opportunity are pretty significant. First of all, the risk of becoming a franchisee is less than starting up your own business because most the business is already established. If you look at the financial projections, they are expected to make $9,690,000 of profit before taxes by the tenth year. They are breaking the million dollar mark in the fourth year. Another positive is that after the fourth year they will no longer have any liabilities. Like I stated before, a potential reward comes from the fact that they have the rights to the entire state of Florida. This could potentially mean very high profits and a large competitive advantage in the future. Attached is a break even analysis. The breakeven analysis shows that the company will hit even at $1,046,331.17 and most likely in the early months of year two.

A deal was formed including that the franchisees must pay $200,000 up front, pay $20,000 per store opened after the first five stores, and pay 5% royalty on sales.
ICEDELIGHTS are then in charge of finding the location and building, and training the franchisees and a manager per store. The three franchisees were uncomfortable with ICEDELIGHTS lack of promised obligation and commitment. They felt as if ICEDELIGHTS could pull out of the venture and leave them in a business without a secured way of attaining the product. Because of this the deal had an option that included the franchisees putting down a deposit of $75,000 up front and they would not have to pay the remaining $125,000 until ICEDELIGHTS had furnished them with a suitable location and the lease was signed. They also stated that if ICEDELIGHTS was unable to supply them, the franchisees had the right to build their own production facility. I believe this is a very good deal. This lessens the worry about ICEDELIGHTS coming through. The franchisees have a more secured future knowing they will always be able to attain products and a location. I believe this option makes the venture appear more favorable to the
franchisees.

Break Even Analysis: FC/(CM/Sales)
CM=Sales-VC

Sales: $962000
Fixed Costs: Fixed Store level: $53000 Depreciation: $69000 Start-Up: $103000 Corporate Overhead $105000 Amortization $5000 ________ $335000

Variable Costs: $654000

CM: 962000-654000= 308000

Break Even Sales: 335000/(308000/962000)= $1,046,331.17