Healthy Treats (A business plan)
(Back somewhere in 2009-10 I attended bizblock everyone was divided in groups of six and were tasked to create a business plan from scratch this is the business plan my group made minus a couple of pages for of course privacy reasons)
Executive Summary
Healthy
Treat is a vending company that offers nutritious snack and drink options to
students in order to support their health and well-being. Healthy Treat offers
an alternative to vending machines filled with unhealthy snacks and beverages.
With the growing trend of obesity in children, Healthy Treat will target
schools from middle school through university to promote nutritional education.
Obesity
has more than tripled in children within the United States in the past three decades. School administrators as well as state and
federal legislators are working to address the problem by offering more
nutritious food and drink options in schools.
Healthy
Treat provides and maintains vending machines in schools. The machines will
have onsite nutritional education, credit and debit capabilities in many locations,
visually appealing displays, and will be backed by an excellent customer
support system. This product and service will satisfy consumers by making the
vending machine appealing and convenient.
Healthy Treat’s primary target market will be school
districts in Colorado. The primary
decision maker as to whether healthy vending is needed will be the food and
service department within the school districts.
Healthy Treat has decided that school districts will be the primary
target market because research shows that a bill was passed in Colorado encouraging
healthy alternatives in schools.
Furthermore, each school district has a wellness program that encourages
students and faculty to promote health.
School administrators will feel better about the snacks that are offered
to students because the snacks support consumer health. Healthy Treat plans to sponsor events as well
as fundraisers to educate consumers about the benefits of healthy eating.
Healthy Treat’s competitors will be
Yo!Naturals, H.U.M.A.N Healthy Vending, Vend Natural, Coca Cola, Sodexo, and
AVI Food Systems. Healthy Treat will
need to negotiate contracts with customers before its competitors. Healthy Treat’s main competitive advantage is
its ability to secure contracts to place full service vending machine in
schools. This is done by being flexible enough to meet the demands of the
schools. In addition, Healthy Treat’s vending machines will have LCD monitors
that will educate the consumer about the products, health, and nutrition. By acquiring a contract with
school districts Healthy Treat will create a barrier for its competitors.
Healthy Treat will gross $381,000 in sales in its
first year of operations, and $640,000, $960,000, $1,340,000, and $1,781,000 in
Years 2 through 5. Net income for the first five years of operations will be ($43,000),
$6,000, $68,000, $143,000, and $232,000.
For Healthy Treat to operate efficiently in the
first year, $290,000 will be required to fund initial costs. The six owners of
Healthy Treat will contribute $15,000 each and $200,000 will be funded by
Venture Capitalists. The funding invested in the company will cover start up
costs such as 25 vending machines, licensing fees, vehicles, inventory, and
other operating costs. After the end of
the fifth year of operations, Healthy Treat will give its initial investors the
opportunity to sell their ownership in the company for 160% of their
investment, approximately $320,000. Should the investors choose to keep their
money in the company, they will be given an additional five percent on their
investment annually when they decide to sell their ownership.
Company
Overview
Introduction
·
Healthy
Treat will provide its service directly to other businesses.
·
Healthy
Treat will be located in Ft. Collins, Colorado.
·
Healthy
Treat will start with the founders managing the business and its daily
operations in a limited partnership.
·
Healthy
Treat is needed, particularly in schools. Michelle Obama is starting her
campaign for Childhood Obesity, and school districts across the nation are
changing meal plans and food options to help young people make healthier
choices. Vending machines are in most schools, and there is a demand (by
doctors, administrators, and parents) to stock healthier products in them.
Healthy Treat will offer healthy alternatives to current junk food options in
vending machines, help educate students about the importance of eating healthy,
and stock machines with items according to the needs of each specific location.
Schools have the responsibility of teaching students to make healthy choices in
their day-to-day lives. Healthy Treat
will support this effort by making it easy to provide better nutritional
choices that taste better too.
Mission Statement
Healthy
Treat provides a healthy alternative to non-nutritious snack vending machines
in school districts in Colorado. Healthy
Treat will offer a variety of both beverages and snacks in one machine, saving
space and utility costs. Healthy Treat
offers its products in schools and strives to satisfy all their vending needs. Customer service and feedback will take
priority in our company.
Objectives
·
Healthy
Treat will start as a small business but plans to add on new school districts
each year. Ultimately, it is Healthy Treat’s goal to offer an easy, healthy
alternative vending system to school districts in Colorado. Healthy Treat will
measure growth by the number of machines in use, contracted customers, and
profits at the end of five years.
Service
Healthy
Treat
Healthy
Treat will provide healthy food and drink choices in vending machines for the
benefit of students in middle school, high school, and community colleges and
universities. Products carried in the
machines will include the following: nutrition bars, trail mix, baked chips,
fig bars, water, and healthy sports drinks.
This business will offer quality products and optimum features at
reasonable prices. Healthy Treat will create an image of excellence that will
be recognized by all who enjoy the taste and benefit of its products. Each vending machine will be customized
according to each location’s needs.
Features
Premium Quality: All machines will be maintained on a weekly basis,
checking appearance and functionality.
Customer service will be available weekdays from 9:00 AM to 5:00 PM and
weekends from 11:00 AM to 5:00 PM.
Safety: All machines will
be tip-resistant.
Superior service: A virtual inventory, using CANTALOUPE systems, will
be kept for each machine. Updates will be transmitted from the vending machines
to a computer in Healthy Treat’s main office to notify technicians when
products need to be restocked. Expiration dates will also be closely monitored
through the data system.
Versatility: Machines will carry both foods and beverages.
Convenience: Each location
will be assessed regarding the need to accept credit cards as a convenient
payment option. Machines will be located
in school districts demonstrating a need for healthy vending options and will
be found in convenient locations within each school.
Technology: An LCD display
will advertise information about the product options offered in each machine
and will also teach consumers about health and nutrition by displaying useful
facts and data tailored to the particular age groups found in each location.
·
Consumers
will find that the machines will be informative and easy to use. All machines will contain both food and
beverages. The credit/debit capabilities will allow consumers who do not carry
cash to buy from Healthy Treat’s machines.
·
The
interior of the machines will be well-lit so products are easily seen.
- Research suggests the features offered are important to the consumers (See Appendix A for Customer Research Summary).
Benefits
Features of Healthy Treat’s vending machines will
allow many benefits to consumers.
Healthy Treat’s vending machines will provide quality snacks that are a
healthier alternative to junk food. This
feature will allow school administrators the benefit of feeling good about
snack choices offered to students, and it will also support the consumer’s
physical health in the long run. A
virtual inventory system will monitor a variety of products and will help avoid
empty slots in the vending machine, preventing customer dissatisfaction. Furthermore,
Healthy Treat will offer a credit card payment system in select locations that
will offer convenience to the purchaser because it will eliminate the need to
carry currency. In addition to a
convenient card payment system, a customer support center will give consumers a
way to reach Healthy Treat about any questions or concerns. Safety is also a
priority for this company. By purchasing tip-resistant machines consumer
injuries may be prevented (See Table 1 for a Summary of Features and Benefits)
Table 1: Summary of Features and Benefits
|
Features
|
Benefits
|
|
Premium quality: call center and weekly maintenance
checks
|
Consumers are offered peace of mind, less stress,
and better health.
|
|
Safety: tip-resistant machines
|
Consumers will avoid injury by the machine tipping
over.
|
|
Superior service: virtual inventory
|
The snack the consumer wants will always be in
stock, increasing satisfaction.
|
|
Versatility: cash and credit card payment options.
Convenient locations.
|
Consumers will worry less and have more time.
|
Stage of Development
• Healthy Treat will offer products currently in the
growth stage of their development lifecycle. The idea of a vending machine that
offers healthier snacking and thirst quenching options is not novel, yet it is
severely underdeveloped in the convenience snack market.
•Vending machines offering healthy options are ready
for the market. Research shows consumers will buy the products if offered at
affordable prices at convenient locations.
Market
and Industry Analysis
Market
Size and Growth
The market for Healthy Treat is school districts in
need of healthier snack options for students.
Research shows that healthy snacks help individuals perform better
throughout the day. Many of the products will be organic and will be healthy
according to calorie, fat (saturated and unsaturated), sodium, and sugar
content. Healthy Treat will be marketing
to the administrators and those in charge of food options in each school
district.
• Healthy Treat will be competing in the vending
machine industry and the organic and health food industry.
• The vending machine industry has seen a constant
growth rate and the future growth rate seems to be increasing. The vending machine industry earned $22.54
billion in 2006 which was 2.4 % more than the $22.04 billion earned in
1997. Though the industry, in a period
of nine years, has only posted a compound annual growth rate of .3% there is a
large potential for growth, especially within healthy vending (Alpert, 2008).
Table
2: Vending Machine Revenues
|
Year
|
$ in Billions
|
|
2003
|
21.05
|
|
2004
|
21.26
|
|
2005
|
21.89
|
|
2006
|
22.54
|
(Alpert, 2008)
Market
Segments
Psychographic:
- Maintain a healthy diet and lifestyle in schools
- Make students more aware of nutritional education
- Encourage students to make healthier snack choices
Demographic:
- Students from middle schools to universities
Healthy Treat will function mostly in the business to
business sector, marketing and selling services to schools. There may be a business to consumer
interaction in the customer service segment of this business, but all
contracting and exchanges will occur between businesses.
Trends
The vending machine market in this country is being affected
by Americans’ move to healthier lifestyles. Increases in childhood obesity,
coronary diseases, certain cancers, and diabetes have made people rethink the
way they eat. Another trend affecting the vending machine industry is the
increasing use of credit cards within society. Cash is becoming obsolete, in
the 15 + age demographic, as fewer people carry it regularly.
The vending machine industry needs to capitalize on
the demand by consumers for healthier food options in their daily lives
(French, 2006).
In 2009, the U.S. Department of Health and Human
Services “announced a plan to spend $373 million from the American Recovery and
Reinvestment Act on plans to, among other things, improve the healthfulness of
foods in vending machines” (York, 2009).
A study undertaken in 15 Mississippi schools from
2004-2006 shows that when given the option for healthy food at slightly
subsidized rates, vending profits would not decrease while health benefits
offered to students would increase with their healthier choices. (Brown, 2009).
In 2005 “Susan K. Neely, president and chief executive
officer of the American Beverage Association (ABA), [announced] that the
association's Board of Directors [had] approved a new school vending policy
aimed at providing lower- calorie and/or nutritious beverages to schools and
limiting the availability of soft drinks in schools…” The new policy would be flexible in order to
provide more options as students move from elementary to middle to high school.
(American Beverage Association, 2005).
A number of researchers say that by removing unhealthy
options from vending machines children will compensate by eating more unhealthy
food at home. A study by researchers from Yale University “surveyed students
from three Connecticut middle schools before and after their schools replaced
the unhealthy snacks in their vending machines with more-nutritious fare, such
as water, fruit juice, baked chips, pretzels, canned fruit, and granola bars.
They found that the switchover led to improvements in dietary intake: Students
ate better at school and no worse at home” (Viadero, 2009).
Society is moving towards a cashless economy.
“According to a 2004 report by business research firm Kiplinger, cashless
technology will increase vending industry sales from $40 billion to $70 billion
by 2008” (More cashless vending machines rolling out, 2007)
Healthy Treat will take full advantage of these
trends. Healthy Treat will provide healthy snack and beverage options in school
vending machines. In an economy moving away from currency, Healthy Treat will
accept credit and debit cards as forms of payment in locations that would use the
credit/debit capability most often.
Industry
Structure
Key players in the automatic vending machine industry
are Yo! Naturals, H.U.M.A.N. Healthy Vending, Vend Natural, Sodexo, and AVI
Food Systems, and Coca Cola.
Automatic vending machine operators market snack foods
and beverages through vending machines. The snacks and beverages are stocked in
the machines through agreements and contracts with institutions that provide
the snack foods and beverages. Furthermore, vending operators put products in
the machines received directly from the manufacturer and warehouse clubs.
Additionally, some operators purchase items at relatively high prices from
supermarkets to keep machines stocked with products
Distributors are contracted by vending machine
operators to deliver products provided by different manufacturers, food service
distributors, or warehouse clubs for the vending machines. (Young, 1997)
In the vending machine industry, suppliers have the
bargaining power because only a few provide the variety of products wanted by
customers.
Key threats in the healthy vending industry are
non-healthy alternatives and the ease of entrance into this industry because it
can be started with low capital investment and maintained with a relatively
small payroll. (Young, 1997)
For health conscious consumers, there is a wide
variety of healthy products available as substitutes. Healthy alternatives are
offered in supermarkets, convenience stores, health clubs, and vending
machines.
The vending industry is an easy market to enter and
exit because of low start up costs and the need for vending machines in new
establishments such as hotels, schools, and gymnasiums. Healthy U, a startup company and a smaller
competitor, is now offering healthy options in vending machines. The company
has already signed Chicago’s northwest school District 155. This company also
has customers in McHenry and Crystal Lake, Ill. as well as corporate customers.
(McHenry Company offers healthier vending machines, 2010)
One barrier of entry the healthy vending company might
face is that the channels of distribution may be difficult to find. The new
vendor may need to reach out to distributors that usually supply only to health
clubs. (McFadden, 2006)
Key Success Factors in Industry:
·
Customer
Satisfaction (Products consumers want in well-maintained machines found in convenient locations)
·
Differentiation
(combination vending machines and a variety of snacks and beverages)
·
Use
of CANTALOUPE systems to indicate when to restock items so the machines don’t run
out of snacks
·
Local
products may be available for certain locations
·
Variety
of well-known healthy products
·
Contracts
with schools
·
Customer
relations will be reliable, creating a good reputation
Consumers demand a wide variety of products in healthy
vending machines. Thirty-five or more products would satisfy most consumer
needs. Consumers will also want the vending machine to be well-stocked.
Consumers of different regions, countries, and climates will expect to find the
product that best meets their needs. The
style and look of the vending machine will be a factor of the company’s success
because it will catch the eye of the consumer.
Vending operators must have a strong control system
set up in order to have the vending machines filled at all times and to
maintain a positive relationship with suppliers. The company can use the CANTALOUPE
system. The system serves as a restocking tool that operators can use to
compete within the industry. The products would be tracked to find out how many
snacks there are in each machine at every location. The supplier will be
updated with this information by the company in order to keep the machines
well-stocked for the consumers (Cantaloupe Systems).
Competitive
Environment
• Price is the key to marketplace competition. When choosing snacks, the consumer is
constantly looking for the lowest price.
Consumer preference and quality also play a large role in the vending
machine business.
• There are few barriers to entry in the vending
market. Small competition doesn’t have
much of an effect on the larger companies.
Many small vendors will enter and exit the market without making a large
impact on the top competition.
• Competition in this industry does not affect
customers buying products from the machines.
As long as the snack machines work and are well-stocked, the customer is
satisfied.
• There are a few vending machine companies and
product brands that control about 75% of the marketplace. If a new vendor uses these products, they may
last more than one or two years. It will
not be hard to enter the market if new vendors do not use these products, but
it will be a challenge to compete in the market (Alpert, 2008).
Competitor
Control
• Setting Prices:
Consumer
spending and the potential for growth are the driving factors in this industry.
While consumer spending is crucial to the vending machine business, large
suppliers have the power when it comes to finance, distribution, and purchasing
advantages. The marketing research conducted for the vending machine industry
shows vendors have leeway in determining the prices of their products (Industry
Overview).
• Cost structure:
Suppliers
have strong bargaining power when it comes to vending machines. The suppliers
that sell vending machines or food and beverage products have control over the
cost of the product(s) they are trying to sell. If the contracting business has
specific needs for the vending machines, the supplier of the machines will have
power over decisions concerning the cost. The same applies to companies
providing the products to go into the machine; brands will affect cost as well
as how many products are needed and what particular products are desired. The
main weakness suppliers have is other suppliers with similar services.
• Channels of distribution:
Healthy
Treat will purchase its products from Sam’s Club Warehouse and The Healthy
Snack Store. Healthy Treat will maintain a stock of items on-hand to refill
machine as necessary.
Competitors:
Yo! Naturals is a healthy snack vending machine
company that started in the early part of 2006. Yo! Naturals introduced the
“Yozone” combo vending machine which vends snacks and beverages composed of
natural and organic ingredients. Yo! Naturals offers a variety of healthy
snacks at competitive prices while trying to meet the expectations of the
target market (mainly schools). Yo! Naturals also provides vending in locations
throughout the U.S., which allows their respondents to give franchisers immediate
responses to their requests (Yo! Naturals, 2010).
Vend Natural is a healthy vending machine company
whose mission is to “energize your body naturally, with healthy, all-natural
and organic snacks and beverages” (Vend Natural, 2010). Vend Natural has 25
years of vending experience and was created by the rising health concerns of
United States citizens. Because of this concern, Vend Natural created a program to promote a
healthy lifestyle by offering products that are accessible, healthy, and
affordable for everyone. Vend Natural offers entrepreneurial opportunity by allowing
new providers to join their team by providing equipment and training. Vend
Natural also offers healthy vending for businesses. Vend Natural offers dual
temperature vending machines which provide snacks and beverages for all Vend
Natural machines (Vend Natural, 2010).
H.U.M.A.N. Healthy Vending is a vending machine
company dedicated to “helping unite man and nutrition” which specializes in
healthy, alternative snacks. They pride
themselves on providing healthy, good-tasting snacks, foods, and drinks. H.U.M.A.N Healthy vending responds quickly to
customer service requests and will partner with new operators, providing the
machines and training necessary for success.
They claim to have the most competitive prices and best technology and
commissions (HealthyVending.com, 2010).
AVI Foodsystem was founded in 1960, and has become the
largest independently owned and operated food service company. It has also
become the leader in vending machines. AVI Foodsystems provide quality
equipment, cleanliness, confidence, and convenience. The company also has
enhanced graphics to increase customer satisfaction (AVI).
Coca-Cola vending uses a website that allows the
customers to choose and purchase products. Coca-Cola Enterprise will let customers make
requests but will also recommend flavors best suited for the particular outlet.
The company provides full service
including the following: installation, maintenance, and cash handling for free.
Coca Cola Enterprise has a three year
contract for operators. After the three years, operators are allowed to break
the agreement with a month written notice. If problems occur with the machines,
Coca-Cola offers help, and responds to breakdowns within 24 hours 95% of the time
(Coca-Cola, 2006).
Future:
Yo! Naturals is also offering contributions to future
vending. It is going to provide 24 hours of product sales monitoring, a
credit/debit system, a recession proof business, and offer the best locations,
products, and machines (Yo! Naturals, 2010).
1-800 Vending is now offering credit card/ debit card
capabilities on its machines while still allowing their consumers to use cash
and coins, which means the machines will have technological upgrades that
benefit the customers. Credit card payment systems have resulted in a 15% to
20% increase in sales. In addition, it offers vending machine operators a
competitive advantage of convenience and security to consumers. (1800 Vending,
1999-2010).
Sodexo’s mission is, “to contribute to a more pleasant
way of life for people whenever and wherever they come together.” They offer
their services to businesses, manufacturing plants, schools and health care
facilities. Sodexo offers a variety of machines, convenience, quality and
national networking. The company also delivers to thousands of locations and
provides a variety of products from popular brands. Sodexo provides healthy
options through there Wellness and You! Program (Sodexo, 2003).
Table
4: Competition Matrix (1 is poor increasing to 5 which is excellent)
|
Competitive Factors
|
Healthy Treat
|
Yo! Naturals
|
Vend Natural
|
h.u.m.a.n. HealthyVending.com
|
|
Competitive Price
|
3
|
5
|
4
|
5
|
|
Location
|
3
|
5
|
5
|
5
|
|
Payment Method
|
5
|
5
|
3
|
5
|
|
Healthy Product
|
yes
|
yes
|
yes
|
yes
|
|
Product Range
|
5
|
5
|
4
|
5
|
|
Customer Service
|
5
|
5
|
5
|
5
|
|
Maintenance
|
5
|
5
|
5
|
5
|
|
Training
|
4
|
5
|
5
|
4
|
This
competition matrix (above) allows for a narrowing of the competitive market.Yo!
Naturals, Vend Natural, and HealthyVending.com are established throughout the
U.S. These three companies pose the
largest threat to Healthy Treat.
(Table
5, comparing key features offered by the competition may be found in Appendix
B.)
Table
6: Marketing Advantages
|
|
Marketing
|
|||
|
|
Healthy Treat
|
Yo! Naturals
|
Vend Natural
|
h.u.m.a.n. HealthyVending.com
|
|
Bright Colors
|
X
|
x
|
x
|
x
|
|
YouTube
|
|
x
|
|
x
|
|
Slogan
|
X
|
x
|
x
|
x
|
|
Philanthropy
|
X
|
|
|
x
|
|
Appealing Website
|
X
|
x
|
x
|
x
|
Yo! Naturals, Vend Natural, and H.U.M.A.N.
HealthyVending.com all offer their services across the United States. All three
companies have large workforces and customer bases, as well as substantial
financial resources.
Competitive
Advantages
Resources:
Human: Five experienced employees
with management, marketing, and business communication knowledge
Technological: CANTALOUPE inventory
system, credit/debit payment option, and stability technology
Organizational: Normative culture,
contracted suppliers, service providers
Capabilities:
·
Well developed relationships with suppliers
and schools
·
Operations manager will maintain healthy,
ongoing relationships with schools
·
Custom designed machines to attract and
visually stimulate consumers
·
Quality and high customer service
standards
Barriers
to Restrict Entry of New Competition
- Customer loyalty
- Contracts with suppliers
- Contracts with schools
- Location
- Brand loyalties for products carried in each machine
Table
7: Internal Analysis
|
|
Internal
|
|
|
External
|
|
Strengths
|
Provide knowledgeable management; have a dynamic
team of operators; resources to find and maintain the best locations; a fun,
motivated culture; innovative; ability to see the bigger picture.
|
Opportunities
|
Trend toward healthy eating; government support to
address growing concerns about obesity in America; new technology; support by
schools; relatively untapped market.
|
|
|
Weaknesses
|
New- Small; may lack initial funding; less
bargaining power; unbalanced product inventory in the beginning; difficult to
set low prices; maintenance; high overhead costs.
|
Threats
|
Competition among a few companies; recession;
preference for cheaper junk food by young people; lower prices set by
competition; keeping products fresh.
|
Marketing
Plan
Marketing Objectives
·
Provide
healthy vending options to schools
·
Gain
market share
·
Increase
yearly sales at a constant rate
·
Provide
quality customer service
Primary (and Secondary) Target Market
Market
Description
Healthy
Treat will market directly to schools. Healthy Treat will place vending
machines in contracted schools, selling to the students and faculty in each
location and providing a set commission (20% of total sales) to the school.
Consumer
Market
The target demographic for these healthy products is student
in middle schools through university.
The psychographics are dominated by health conscious
people interested in attaining a healthy lifestyle. Active, young adults have a more positive
outlook on healthy products. (Hughner, McDonagh, Prothero, Shultz, and Stanton,
2007)
Though young adults tend to prefer healthy products
more than other groups, the funds are not necessarily there. Students with parents that make a higher
income will be targeted for the higher priced products. If Healthy Treat can compete with the low
prices of the junk food market, it will greatly expand the target market’s
scope. (Hughner, McDonagh, Prothero, Shultz, and Stanton, 2007)
Target
customers have some concerns with the vending machine industry. It is understood that people will still
purchase cheap, fast, and unhealthy food options, but the idea is to have
healthy choices available. “The approach
is not to limit the choice, but to provide a broader choice,” says Richard Wyckoff,
president of Aramark Refreshment Services, “It's appropriate to have choices
that are indulgent and others that are better for you.”
Target
customers are willing to change, due to the fact that society and the culture
of the country is becoming more health conscious; and finds healthier options
vital to the nation. They feel healthy
vending machines will not answer the problem because this is an epidemic that society
and the government must address. Healthy vending machines are a place to start
to help make changes to unhealthy eating habits that citizens of the United
States face (Susan Yara, 2010).
Customers’
decisions to purchase items may vary in convenience, price, options, location,
or personal discretion. The ultimate
decisions are made by the customer purchasing the products from the vending
machine. The place that hosts the
vending machine, as well as the food industry, influences what will go into as
well as be purchased from the vending machines.
Customers, who usually purchase from vending machines typically use
frequent, impulse buying decisions that will be repeated.
Product/Service
Strategy
Healthy
Treat offers healthy alternatives to consumers in a convenient vending machine
distribution system.
Services
offered by Healthy Treat that are different from competitors are: modern
vending machines, LED lighting, more product options, and monitoring of
expiration dates on products through an electronic inventory system. Not only does this help Healthy Treat stand
out from competitors but it enhances services for consumers.
Healthy
Treat will provide customer service seven days a week. All outside employment will be contracted on
a flexible basis. Repairs on the vending
machines will be contracted on occurrences where the vending machines are out
of order.
Identity
What persuades
customers to purchase healthy snacks from Healthy Treat is the visually
stimulating machines and excellent customer relationships. Healthy Treat is an available name that
adequately describes the nature of the business.
Healthy
Treat has chosen a health conscious and environmentally friendly position to
promote a positive image that sets it apart from its competitors. The unmet need in the market is the lack of
availability of convenient and healthy snacks and drinks for health conscious consumers. Healthy Treat’s vending machines are visually
appealing and offer a wide range of products to satisfy most customers’ desires.
Pricing Strategy and Tactics
Healthy
Treat will use a status quo based pricing strategy in order to sell products that
are competitive within the market.
Status quo pricing is based on the prices of competitors. In the health food industry consumers expect
higher prices when purchasing healthy alternatives, therefore this market less
price sensitive.
Healthy Treat Product List (Reference Appendix C).
With an uncertain future it is likely that strategies
will need to be adjusted according to the situations that Healthy Treat
encounters. Higher taxes, relations with
locations, and increases in costs of goods may force changes in pricing. Changes
in credit industries may force a change in credit card payment policies.
Healthy Treat’s pricing strategy is based off of major
competitors with slight variations in order to compete in the industry and to
capture market share.
Most of Healthy Treat’s pricing is matched with the
lowest advertised prices of vending competitors, and all other prices remain
lower than the highest prices of competitors.
Analysis of competitor pricing shows that Healthy Treat’s pricing is
feasible.
Channel Strategy and
Tactics
Potential channels for Healthy Treat are distributors
and wholesalers. Healthy Treat is a
value added retailer. Healthy Treat’s
food suppliers are The
Healthy Snack Store and Sam’s Club.
IMC Strategy and Tactics
Healthy
Treat’s strategy to entice customers and increase their desire for Healthy
Treat’s products is to advertise through the placement of machines, word of
mouth, sponsoring events, and internet forums. Healthy Treat will forms contracts
with school districts and sponsor events to build product awareness and foster
sales.
Sales Strategy
Healthy Treat will focus on building relationships
with its consumers and will expand every year by acquiring new contracts to
place vending machines in areas of heavy foot traffic. Healthy Treat is a new
business coming into an established market; therefore, initially the sales
strategies will depend on word of mouth and prime locations.
Management and Operations Plan
Company Organization
As a small
company Healthy Treat will not require many employees. For the first five years
Healthy Treat will be run by an Operations Mangers. After five years, Healthy
Treat will be run by a CEO along with a Customer Service Manager and Operations
Manager. Healthy Treat will have a board of advisors which will consist of the
management team. Having a board of
advisors within the company will help reduce costs as well as maintain cohesion
and goal orientation. The ownership of
the company will be determined by the percentage of the initial investment.
Organization
Chart: See Appendix D-1
Management Team
The founders
and organizers of Healthy Treat will retain a stake in the business
proportional to that of their initial investments.
The
Operations Manager of Healthy Treat will be responsible for maintaining the daily
operations of the company. These duties include product ordering, scheduling
maintenance, and managing inventory. The Operation Manger will direct and
supervise all of Healthy Treats most important business decisions. As part of
their compensation Healthy Treat plans to offer stock and share incentives on
top of the base salary of $60,000. Operation Mangers Resume: See Appendix D-2
Operations Strategy
·
Healthy
Treat will be purchasing all products from The Healthy Snack Store and Sam’s
Club, which are wholesalers that buy all of their products from several
different distributors. Healthy Treat
will then sell directly to consumers through schools.
·
Healthy
Treat will maintain accountability for all services offered. Healthy Treat will be polite and courteous to
customers and suppliers because positive experiences will ensure strong and
positive customer and supplier relationships.
·
Quality
is essential to Healthy Treat because consumers will be willing to pay more for
higher quality products.
·
As
a small company flexibility is important when deciding locations for machines.
·
Timeliness
is important to Healthy Treat in regard to expiration dates and product
stocking.
·
Healthy
Treat will use extranets to provide wholesalers with access to inventory
numbers and useful internal information.
Scope of Operations
Healthy
Treat will place all of its orders for machinery and products, as well as stock
the vending machines. Healthy Treat will
take care of consumers’ concerns and complaints through a customer care line.
Ongoing Operations
·
Healthy
Treat will be getting all supplies from Healthy Snack Store and Sam’s
Club. Healthy Treat will also purchase
vending machines through Sam’s Club.
·
Healthy
Treat will need to have 25 vends per-day to make $380,000 a year to operate
efficiently.
As a start
up vending machine company Healthy Treat will rent a small office located in
Fort Collin, Colorado. This location was chosen because of affordability and
proximity to where machines will be located (Craigslist 2010).
In the initial stages of this company’s development, a
phone operator, sales person, and product stockers will be needed to carry out
day-to-day operations.
Products
will arrive at the main office using a just-in-time business method and product
stockers will place products in machines.
See Appendix D-3 for the company Flow Chart.
Healthy
Treat is planning on having at least 25 vends per day and each machine will
offer approximately 30 different products. Each machine will carry
approximately 240 products that will need to be restocked about every 4 to 7
days, depending on sales. Healthy Treat will have 25 machines in the first year.
There will need to be at least 6000 products on the shelves at all times.
Financial
Plan
Key Assumptions
Healthy Treat will begin its operations with
$182,332.84 in assets including 25 vending machines, 2 trucks, electronic
equipment, and furniture and fixtures. Depreciation will be measured using a
straight line method and costs including rent and insurance will be fixed.
Healthy Treat has calculated the average vend price to be $1.67 and the average
cost of each item to be $0.97. Healthy Treat will pay the owners of the
locations of its machines 20% of gross sales. Healthy Treat will purchase an
additional 10 vending machines each year. In Year one of operations Healthy
Treat expects to average 25 vends per day with a growth rate of five vends anually.
Vends per machine per day can top out anywhere from 50 to 200. Wages are based on the state minimum wage in
Colorado and the salary for the Operations Manager is based on an average
salary from the industry. These salaries and wages will include a 5% increase
each year.
Funding
and Pro-forma
Financial Statements
Income Statement
As expected
net income for the first four quarters is negative, however, each quarter shows
improvement over the last. Years two through five show Healthy Treat’s net
income increase from $6,225 to $68,532, $144,005, and $232,728 respectively.
(See Appendix E-1 for Income Statements)
Balance Sheet
Based on the estimates for initial
investment Healthy Treat’s assets, liabilities, and stockholder’s equity will
balance. Assets consist of cash, inventory, supplies, vending machines, trucks,
electronics, and furniture and fixtures. Liabilities and equity include
treasury stock, common stock, and retained earnings. By year five Healthy
Treat’s assets will equal $701,101. (See Appendix E-2 for Balance Sheets)
Cash Budget
Healthy
Treat has determined that it will need $90,000 in cash after its initial
investments in order to maintain a positive cash balance with extra funds to
cover unforeseen expenses. (See Appendix
E-3 for Cash Budgets)
Revenue
Model
Growth as a
percentage of sales declines as the business expands. This is to be expected.
As sales increase, so to do the base numbers used to divide them and determine
the percentage of growth.
Growth by Year
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
School Vending Sales |
$380,683.59
|
$639,548.44
|
$959,322.66
|
$1,340,006.25
|
$1,781,599.22
|
Growth % |
NA |
68% |
50% |
40% |
33% |
Risks
A
risk to be considered by Healthy Treat is that not all of Healthy Treat’s
customers will approach the machines wanting a healthy snack. However,
according to the general manager of Highline Vending, Don Scheid, when a
potential customer approaches a vending machine and does not find something
desirable, that customer will generally still make a purchase.
A
second important risk is the shelf life of perishable inventory. By maintaining
an electronic inventory of all items in its machines, Healthy Treat can
determine what products to order and in what quantities based on purchase
statistics.
A
third risk that is imperative to consider is developing positive relationships
with the schools in which the machines are located. To do this, Healthy Treat
will offer 20% of its gross margin to the schools, as well as sponsor school
events and have fundraisers to help school promote nutritional education. By
offering schools assistance over the basic 20% premium, Healthy Treat will
ensure good relationships with the owners of the locations in which it plans to
place its machines as well as exposure to the students.
Funding
Uses of Funds
Cash
obtained to fund the business will be used to purchase assets (land, equipment,
building, inventory), pay for pre-opening expenses (advertising, salaries,
training), and support cash deficits from operations (if applicable) early in
the business.
Based
on Healthy Treats estimations the initial investment needed is $292,833. This
figure represents the sum of the purchases of 25 vending machines, two trucks,
office supplies, electronics, furniture and fixtures, on hand inventory, and
minimum starting cash balance of $90,000. The $20,000 needed for inventory is
enough to fully stock the first 25 machines twice over, allowing Healthy Treat
to have its machines stocked and to have an available inventory on hand to
cover restocking as needed. By taking the total dollar amount of operating expenses
for year one on the Cash Budget and dividing it by twelve, Healthy Treat has
determined its operating expenses for the first month to be $15,955. An
analysis of the pro-forma Cash Budget helped determine that in order to operate
efficiently while considering early losses the minimum cash balance needed is
$90,000.
After
the 5 years Healthy Treat will give its initial investors the opportunity to
sell their ownership in the company at a 160% return on their investment. This
will be a $324,533 return after their investment of $202,833. Should the
investor choose to keep ownership within the company they will be offered a five
percent annual increase on top of their 160% return on the initial investment. With
the five percent annual increase the investor will accumulate $10,142 per year.
Investments and Financing
|
Vending Machines
|
$ 137,250
|
|
Trucks
|
$ 40,898
|
|
Inventory
|
$ 20,000
|
|
Cash
|
$ 90,000
|
|
Supplies
|
$ 500
|
|
Computers &
Printers
|
$ 2,700
|
|
Furniture &
Fixtures
|
$ 1,485
|
|
Initial Investment
|
$ 292,833
|
|
Amount Financed By
Managing Partners
|
$ 90,000
|
|
Amount Financed By
Venture Capitalists
|
$ 202,833
|
Development
Plan
Development Strategy
·
Hire Employees: As a start-up company, Healthy Treat will
need to hire only a few employees to set up contracts with schools and
suppliers and to place, maintain, and stock the machines. (2 weeks)
·
Apply for vending license: All vending machines must pay
state sales taxes; therefore, a vending license is necessary. (4-6 weeks) www.colorado.gov/oed/industry-license/348IndDetail.html)
·
Obtain an office space and transport equipment: (2 weeks)
·
Contract with suppliers and school districts. (1 Month)
·
Order machines for delivery. (4-6 weeks)
·
Order inventory. (2 weeks)
·
Update technology. (Beginning of year three. 6-8 weeks)
·
Add advertising capabilities to machines. (Beginning of three
years. 6-8 week)
·
Expand business into a franchise. (Beginning of three years.
1 year.)
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