A sweet SaskatOON Experience…

A sweet SaskatOON Experience…

Presented by: Alym Amlani Jennifer Chung Ayaz Jessa Celia Li Chris Pawluk David Rusnacik

Agenda Executive Summary Introduction Marketing Plan Human Resources Plan Operations Plan Financial Plan Conclusion

How it begins…

A tasty treat…

Executive Summary Goal: to establish the first super premium ice cream franchise in Saskatoon We have secured $100,000 in debt financing We will be providing $50,000 in equity and are seeking an additional $150,000 in equity financing today Anticipated IRR of 33% Anticipated ERR of 9.3% Preliminary discussions in place for location in downtown Saskatoon

Why franchise? Proven business model Predictable growth Strong brand recognition in Alberta Supplier contracts already in place Recipes and branding have already been developed Training provided Franchisee social network and national assistance Online advertising provided

Vision Marble Slab Creamery is the ultimate gustatory experience. We cater to each customer’s unique tastes providing the perfect ice cream, just how they want it. Our ice creams are fresh, delicious, and of the highest quality. We don’t just make desserts, we create experiences.

Mission Our mission is to be the pre-eminent distributor of quality ice creams in Saskatchewan. We will provide prompt service, a great experience, and the finest ice cream appealing to ice cream lovers of all ages.

Present Locations 557 stores in total located in 35 states, Puerto Rico, Canada, and in Dubai and Kuwait 35 locations in Canada – No franchises currently located in Saskatchewan

Demand for Ice Cream According to University of Guelph, annual consumption of ice cream is as follows: Country liters per capita New Zealand: 26.3 liters United States: 18.7 liters Australia: 17.8 liters Canada: 9.5 liters Italy: 9.2 liters United Kingdom: 7.7 liters Finland: 3.9 liters China: 1.9 liters Japan: 0.01 liters

Marble Slab’s Competitive Advantage 50 flavors of ice cream in a freshly baked waffle cone made on site using proprietary recipes – “Bread and Butter” for Marble Slab Select Mixins® such as berries, nuts, chocolate chips, Smarties, Gummy Bears etc. Marble Slab sells an experience Whole process involved. You get more than just a ball of ice cream. All the ice cream is mixed, flavored and frozen at each outlet.

Marketing Plan – Marketing Mix Product: Ice cream with Mixins® Specialty dipped cones Frozen yogurt Sundae Ice cream cakes and pies Price: From $4.95 for a regular ice cream cone $30.95 for an ice cream cake

Marketing Plan – Marketing Mix Promotion: Printed ads Local radio stations Facebook® In-store discount Coupons Place: 1,500 sq ft. store located on 20th Street E and 2nd Avenue S.

Marketing Plan – Store Location

Why we need 120k for leasehold improvements

Marketing Plan Segmentation Target group Positioning Age Gender Household characteristics Income level Target group Families with children High income individuals and families Positioning High-end segment

Marketing Plan – Competitive Analysis Major high-end ice cream chains Cold Stone Creamery, Marble Slab Creamery and MaggieMoo’s International Good news None of these chains are operating in Saskatoon Bad news Intense competition from Dairy Queen, Jerry’s and Homestead

Marketing Plan – Competitive Analysis

Marketing Plan Strengths Weaknesses Opportunities Threats Premium products Customized ice cream Universal recipe and training Weaknesses Low brand awareness Lost control on choosing suppliers Opportunities First-mover advantage Booming economy and increased disposable income Unsaturated market Threats Entrance of rivals Regulations on frozen dessert

Human Resource Plan Manager Background Bachelor of Commerce 2 Years Management Experience DQ Training – Management & Employees In-House Corporate Roles – Generic Duties

Human Resource Plan Motivational Incentives Compensation Work-Life Balance Employee of the Month Discounts Flexible Hours Work Environment Compensation 1 Full Time Manager = ~ $55,000 + Std Benefits Equivalent of 4 Part Time Associates = ~$20,000/annum + Std Benefits

Operations Plan – Hours of operation Daily hours of operation Winter hours (January – May, September- December) Daily 11:00am – 7:00pm Summer hours (June – August) Sunday – Thursday 11:00am – 10:00pm Friday – Saturday 11:00am – 11:00pm

Operations Plan – Typical Day Manufacture ice cream and cones Serve customers Restock goods Clean machines, floors and tables Make ice cream cakes Observe inventory levels Review sales reports and other financial data

Operations Plan – Supply Analysis Designated, reputable suppliers Base mix Flavourings Other Ingredients Menu board Equipment Fixtures Pricing negotiated by franchise

Operations Plan – Service Providers Legal and Accounting Local Law firm and Accounting firm Bookkeeping Accounting Legal services Computer Hardware and Software Support Restaurant Computer Solutions, Inc. (RCI) POS Computer System

Operations Plan – Capital Budget Computer Hardware and Software POS System Granite Slab Ice cream making machine Ice cream cone baking oven Display case Ice cream freezer

Operations Plan – Technical processes Training program provided by the franchise Training program – Houston, Texas 10 days In-depth review of Marble Slab’s Operations Manual On the job training in procedures Store operations Ice cream manufacturing

Operations Plan – Floor Plan Front of store

Operations Plan – Floor Plan Back of store

Financial Plan – Initial Cost Item Amount % Franchise Fee 25,000 8% Equipment 95,000 32% Working Capital 10,000 3% Furniture 4,000 1% Uniforms Leasehold Improvements 120,000 40% Small Equipment & Supplies 6,000 2% Signage Inventory - Food Licenses 3,000 Legal & Accounting Costs 7,000 Grand Opening Marketing Total 300,000

Financial Plan – Capital Structure $300,000 in funds required to commence operations Financed via Combination of Debt & Equity Corporate franchisor does not offer direct or indirect financing $100,000 in debt financing @7% over 10 year period Translates to annual payments of $14,238 $200,000 in equity financing required Raised $50,000 personally and are seeking $150,000 Required return on equity = 20%

Financial Plan – Sales & Growth First year sales revenue expected Ice Cream & Cake Sales Year 1 ~ $430,000 growing to ~ $545,000 in year 5 Growth Ice Cream – ~10% in year 1, ~5% thereafter Cakes – ~6% per year

Financial Plan – Statement of Income and Retained Earnings Gross Profit Margin = Average 50% Net Profit Margin = Average 13.7% Operating costs/Gross Sales = Average 34% Composition of Cost of Goods Sold Direct Materials = 41% Average Direct Labor Used = 41% Average Variable Manufacturing Overhead = 18% Average

Financial Plan – Cash Flow Initial Working Capital - $10,000 Net Cash Flow from Operations ~$57,000 in year 1 rising to $116,000 in year 5 Net Cash Flow from Financing ~$293,000 (net of year 1 interest) in year from initial equity offering and proceeds from long term debt Net Cash Flow from Investing ~($264,000) in year 1 and ($30,000) resulting from capital expenditures

Financial Plan – Investment Analysis Net Present Value of Investment = ~60,895 Using required rate of return on equity of 20% IRR on equity = 33% Total Net Cash Flow to Equity ~86K in Y1, 86K in Y2, 91K in Y3, 70K in Y4, 107K in Y5 External Rate of Return on Equity Investment 9.3% Estimated dividend payment schedule 40K in Y2, 65K in Y3, 80K in Y4, 95K in Y5 Undiscounted Pay Back Period 5.1 Years (Dividends Received)

Assumptions for Sensitivity: Scenario Estimates Variable Worst Case Base Case Best Case Quantity of Sales 80% 100% 110% Labour Costs 130% $10.15/hr Min wage Labour Hours 150% 75% Materials Costs 125% 90%

Financial Plan: Break Even + Sensitivity

Conclusion Saskatoon loves ice cream Established market exists Knowledge and expertise exists Established business model, brand, and training Asking for $150,000 in equity, IRR of 33%

Conclusion Marble Slab has quickly expanded beyond its original Southeastern presence and become a fast-growing franchise. It is ranked in Entrepreneur Magazine's Franchise 500 (#93), Fastest-Growing Franchises (#72) and America's Top Global Franchises (#75) Don’t miss out on this excellent investment opportunity

Questions?

Market Drivers Health issues – both negative (obesity, diabetes) and positive (natural, organic) have continued to generate new products Consumers crave indulging in richness and luxury Carry super-premium image to healthier segments

Market Drivers Market Challenges Trade-offs exist where popularity of new product detracts from sales of older one Ice cream and frozen novelty market has nearly completely penetrated among kids Ice cream and frozen novelty market has near penetration amongst kids Mature ice cream segment Continuously develop products that consumers seek and react to call for healthier choice.

Financial Plan - Assumptions In preparing estimates, we obtained actual sales figures for similar establishments located in Canada and the United States. In a sample of 68 stores, the range of actual sales was between a low of $258,711 to a high of $867,770. Corporate profit and loss statements obtained from similar establishments to assess whether our estimates were reasonable

Risk Factors Why go Independent? Marble slab is easily imitable Marble slab does not yet have traction in Saskatoon; brand goodwill is trivial Flexibility to run the business how you choose Ability to change store layout Can offer products not offered by Marble Slab Works in other cities Why go Independent? Business model of franchise is easily imitable Marble slab does not yet have traction in Saskatoon so the value of goodwill associated with the name is not known Flexibility to run the business how you choose Ability to change store layout to improve customer flow Can set prices Can offer products not offered by Marble Slab but competitive with local market (eg Sundays, Floats, etc) Successful model as seen in Vancouver – namely Dolce Amore and Casa de Gelato, two local stores that are incredibly successful. Ditto for Mondo gelato. May be worth looking into how much startup and design costs would actually be as these could be commensurate with initial franchise fee Potential for franchising the brand if it becomes popular! (Taco del Mar) Could just buy dairyland ice cream and sell 

Financial Plan - Assumptions The royalty fee as franchisee is equal to 6% of gross sales – Payable weekly An advertising fee is also assessed that is equal to 2% of gross sales Initial price for the standard seven ounce serving of ice cream will be $4.95 Initial price for ice cream cake will be $30.95 Expected real growth Ice Cream Sales – 5% in yr 1 and 3% subsequently Ice Cream Cake Sales – 5% in yr 1 and subsequently Expected rate of inflation = 3%