Prepared by:
Submitted to:
Mecor M. Riego BSM –III (Negros Group 1)
Mrs. Christian Jane J. Tiu Instructor – Midwifery Entrepreneurship
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EXECUTIVE SUMMARY
Churros Company is a food business which aims to provide affordable, fun, and healthy snacks to Doña Hortencia Salas Benedicto National High School (DHSBNHS) management, employees, professors, and students. This enterprise offers churros and carrot peanut butter balls to the school community at Guerra St., La Carlota City, Negros Occidental. The entrepreneurs involved in the creation of this partnership are Mecor Riego, Glen Obelidon, Marie Occeña, Rizalyn Tingson and Charmaine Trocino. The partners are 4 educators of school and one is a registered midwife. This is the first time they have embarked in a business undertaking. As the project will require the consumption of various raw ingredients available in the local market, it will contribute to the local economy by helping local businessmen, such as peanut butter vendors and grocery store owners. Because Churros Company has healthy offerings such as carrot peanut butter balls, banana churros and mango churros, it will contribute in the long-run to the national economy by nourishing students, who are the future labor force of the country. The taxes to be paid by the entity will also help drive the national economy.
MARKETING PLAN 1
Description of the Product Churros are tasty deep fried, ridged sticks of dough, sugar-sprinkled and served with warm chocolate sauce for dipping. They have long been the working man’s breakfast or after-party snack of choice in Spain, with churrerías often the first eateries to open in the morning, and the last to close at night. (http://www.theprisma.co.uk/2011/07/17/churros-a-secret-history/). The Churros Company will offer three flavours of churros: original, banana, and mango. A classic Christmas confection in some southern states in America, peanut butter balls consist of peanut butter and other ingredients rolled into balls. When dipped in chocolate, these are called Buckeye Candy (http://www.deepsouthdish.com/2011/08/old-fashioned-peanut-butter-balls.html). Churros Co. will be putting a new spin into this rich dessert by adding carrots to the mixture. Customers can choose to have their carrot peanut butter balls dipped in chocolate and topped with either rainbow or choco sprinkles. Three pieces of churros will be included per serving, and the carrot peanut butter balls will also be served by three’s. OUR VISION Our vision is to be a sought-after pastry snack provider in La Carlota City to satisfy the urge for the sweet taste that La Carloteños crave several times a day (After meals, in breaks and the “merienda”) and that is part of our cultural and culinary heritage. Aside from these, Churros Co. shall have the unique selling proposition of “Deliciously Fun!” OUR MISSION Our mission is “to bring customers delight with every taste and bite”. CHURROS CO is dedicated to providing top of the line products and quality service. It is our goal to prosper as a business and grow as entrepreneurs. By doing so we share our success in the global market, as well as provide a profitable return to our team members and business partners. OBJECTIVES
To acquire 6% market shares in the La Carlota City To position ourselves as a small scale enterprise, with strong ties to the community. To be perceived as the cleanest, most responsive food stand within the school vicinity To end year 1 with a 10% increase in contribution margin. To increase sales , 10 % in year 2, 25% year 3 and 50% in year 4 and 5.
GOALS
To maintain positive balance in our lives so that the business rounds us out and reflects our values.
To offer our community wholesome foods that are satisfying, great tasting, and worth every cent. To have our employee/s and customers feel appreciated, supported and satisfied, every time they come in. To introduce new products in the local market
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Comparison of the Product with its Competitors Currently churros and carrot peanut butter (CPB) balls are not offered in Digos City. These are unique products that will compete with the sweet offerings within the market area. The Churros Co. banks on the novelty of its creations to entice customers to try our products. To retain customers, we will ensure that every batch of churros and carrot peanut butter balls will have the highest quality and consistency. The snacks considered relatively comparable to our products are fried bananas, kwek-kwek, fishballs, tempuras, cassava cake, and kamote delight. Our price is equivalent to the price of one cassava cake, but is higher compared to the other sweet products mentioned. The packaging for our product is more presentable than that of the other sweet snacks in the canteen, giving us a competitive edge.
Location Churros Co. will operate its first stand inside the DSHBNHS campus in La Carlota City, a 3rd class city in Negros Occidental, Philippines. Most of the production process shall take place in the individual partners’ homes for the first three years of operations. On Year 3 onwards, initial preparation of raw materials shall also occur in the stand.
Market Area The Churros Company production and sales area shall be in a stand located adjacent to the Master Siomai cubicle but inside the Students’ Lounge near the DHSBNHS canteen.
Main Customers The main customers of Churros Co. stand shall be the students, college students, faculty, staff, and other employees of DHSBNHS and La Carlota City College who are present during regular school days.
Market Share Due to time and labor limitations, it is estimated that Churros Company will serve carrot peanut butter balls and churros at a rate of 180 servings, each, per day.
Selling Price Churros Co. plans to sell three 3-inch pieces of churros (any flavor) in a small paper container, along with a chocolate dip in a small plastic container, at an affordable price of P10.00. For the same price a customer can buy three pieces of any type of carrot peanut butter ball in a wax paper container. 3
Sales Revenue Year 1
Year 2 626,400.00
Year 3 689,040.00
861,300.00
Year 4 Year 5 1,722,600.00 1,894,860.00
Promotional Measures Churros Co. will host a grand opening and product launch with free samples on June 6, 2016. Upbeat music shall accompany the event. Flyers shall be distributed and balloons shall be set up around the stand. The Churros Co. stand shall bear a sign with the Churros Co. logo and shall be decorated in a way that reflects the Churros Co. mission and vision. The point-of-sale display will be done in a creative manner to appear visually appealing to potential customers
Marketing Strategy To guide the organization and to leave a distinct impression upon its customers, the Churros Co. shall have mission and vision statements, which will be displayed prominently on its stand. Our mission is “to bring customers delight with every taste and bite”. Our vision is to be a sought-after pastry snack provider in La Carlota City. Aside from these, Churros Co. shall have the unique selling proposition of “Deliciously Fun!” Churros Co. will position itself as a leader in the sweet snacks market by offering unique products that will satisfy customer’s cravings and budget. This product differentiation strategy is expected to capture the attention of the academic community. Our marketing strategy will include word-of-mouth referrals and social media campaigns. A Facebook page shall be set up, showcasing Churros Co. products. Marketing Budget
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Churros Co. will mostly rely on the goodwill it will generate through its innovative and high-quality food offerings. As such, we expect our customers to share good reviews about us orally or through social media. Thus the marketing budget is simply broken down into cash needed for the grand opening and product launch, as follows: DESCRIPTION Balloons Flyers Free Samples
Tarpaulin Transportation Total
QUANTITY COST 100 pieces 200.00/pack of 100’s 100 pieces 1.00 180 servings of carrot 5.73/ serving peanut butter balls
180 servings of churros; 60 original 60 banana 60 mango 2 2x3 ft. piece
TOTAL 200.00 100.00 1,031.40
7.82/serving
1,407.60
60.00/piece
120.00 100.00 2,959.00
Raw Materials Availability The raw materials needed are available in La Carlota Public Market and various store in Bacolod City. These will be purchased weekly. To ensure availability and prevent stockouts, safety stock for one week operation for non-perishable ingredients such as oil, flour, salt, and sugar shall be maintained. Safety stock for perishable ingredients such as mango fruit, banana and carrots shall be maintained for a two-day operation. The entity shall have its purchases of perishable ingredients every two days.
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OPERATING REQUIREMENTS
Production Process The business will operate in a stand at the DHSBNHS school canteen. Before the daily operation begins, ingredients needed and products prepared shall be placed in the stall, segregated and stored in proper containers. The Churros Co. stand shall be open for 8 hours from 9:00am to 5:00pm. Preparation and Storage Churros dough and carrot peanut butter balls shall be prepared the night before. To avoid spoilage, these products must be stored in a cool place. As it would be impractical to buy a refrigerator solely for this purpose, the products will be stored in the refrigerators of each partner, from Year 1 to Year 3. But on Year 3 to 5, raw materials shall also be processed fresh on the day the products will be sold, by the additional laborer. Cooking The churros dough will be cooked upon customers’ orders. It will be served in a specially designed paper container, with the Churros Company logo, along with the chocolate syrup in a separate plastic container. Peanut butter balls will be readily available upon order and served in a The specially-designed churros containers shall be made annually before the start of the year’s operations. The number of containers produced per year shall correspond to the forecasted number of servings to be produced annually. Wax paper cup. Fixed Capital The business’ fixed capital shall include items which are used for more than one period and are expected to benefit future periods. The entity’s fixed capital shall include the following
Fixed Capital Large frying pan Butane gas stove Pastry Tip Measuring cup
Description Used for deep frying churros upon customers’ order Powered by butane gas refill Portable gas stove used for cooking Stainless steel mold for forming churros Brand: Pyrex Glassware used to accurately measure ingredients
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Life of Fixed Capital The estimated useful life of the large frying pan is estimated to be 5 years. The portable butane gas stove will also have a useful life of 5 years. The pastry tip is made of stainless steel and is estimated to have a longer useful life of 10 years after which it will be worthless. There will be 3 pieces of pastry tip for each flavour of churros. Measuring cup which is made of glass will have an estimated life of 10 years with no residual value. Due to the immateriality of the amount of their residual values, such are disregarded.
Maintenance and Repairs The nature of the business’ fixed assets does not require regular maintenance and repairs. The entity shall use replacement method. When asset is proved to be worthless, the same shall be replaced with a new one. Any remaining carrying amount of the old asset shall be derecognized and charged to loss on retirement of the asset.
Sources of Equipment The business aims to produce quality products through the use of equipment with good quality standards. To ensure such quality, the entity shall purchase equipment at the preferred and available suppliers. List of sources of equipment EQUIPMENT Frying pan Butane gas stove Pastry tip Measuring cup Planned Capacity
SUPPLIER Season’s Trading, Bacolod City Total Gas Station, La Carlota City Chef and Bakers Bacolod City Chef and Bakers Bacolod
The business will operate at full capacity. All the partners will industrially contribute in the preparation and production of the products, except for the 4th year onward, where the laborers will take over 7
production. The researchers estimate the capacity of each partner to produce 108 pieces or 36 servings of carrot peanut butter balls and 36 servings of churros dough.
Future Capacity The partners shall hire additional laborers upon the future expansion of the business. Future capacity will increase by 105 pcs of carrot peanut butter balls and 165 pcs of churros for each additional unit of labor. Terms and Conditions of Purchase of Equipment The acquisition of the entity’s equipment shall be on a cash basis. Thus, all equipment shall be immediately paid upon purchase.
Factory and Location Layout The business’ production and sales area shall be in a stand located adjacent to the Master Siomai cubicle but inside the Students’ Lounge near the DHSBNHS Canteen. Presented below is the layout of the production area of Churros Co.
Raw Materials The necessary raw materials for the business are as follows: PRODUCT Carrot Peanut Butter Ball
RAW MATERIALS Peanut Butter Margarine Carrot Colored Sprinkles Choco Sprinkles
SUPPLIERS La Carlota Public Market/Rosario Mesaya La Carlota Public Market La Carlota Public Market Chef and Bakers Chef and Bakers 8
Confectioner’s Sugar Wax Paper Cups
Chef and Bakers Chef and Bakers
Brown Sugar Salt Butter White Flour Eggs Vanilla extract Ground Cinnamon Confectioner’s Sugar Mango Banana Paper Container Chocolate Syrup Small Plastic cups
La Carlota Public Market La Carlota Public Market Lopue’s Grocery Store La Carlota Public Market Taala Farms Chef and Bakers Chef and Bakers Chef and Bakers La Carlota Public Market La Carlota Public Market Chef and Bakers Chef and Bakers Chef and Bakers
Churros
Chocolate Dipping
Raw Materials Availability The raw materials needed are available in La Carlota Public Market and Chef and Bakers. These will be purchased weekly. To ensure availability and prevent stock-outs, safety stock for one week operation for non-perishable ingredients such as oil, flour, salt, and sugar shall be maintained. Safety stock for perishable ingredients such as mango fruit, banana and carrots shall be maintained for a two-day operation. The entity shall have its purchases of perishable ingredients every two days.
Cost of Labor The business will hire one (1) personnel who will be in-charge in the stand daily. Work schedule will start from 9:00 – 5:00 pm. The partners will industrially contribute in the production of their products. The entity shall acquire additional labor only on the third year, as well as on the fourth year. Churros Co. shall register its employees with the SSS, PhilHealth and Pag-Ibig when they are employed. For each unit of labor that will be acquired the entity shall incur salary expense of P286.00 per day, the minimum wage for Region VI. The proponents estimate a business need of one additional labor on the third year, and another additional labor on the fourth year. The cost of labor on these periods shall be P50, 050.00 per year per laborer, since the entity will not be incurring labor expenses during the 2 months of shutdown: April and May.
Labor Productivity Each night before every workday, each partner is expected to make 36 servings of carrot peanut butter balls and enough churros dough to make 36 servings. However, each additional unit of external labor is expected to produce an output of 180 servings of carrot peanut butter balls and 180 servings of churros each day, since the laborer has the whole day to process the raw materials.
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Rent Expense The business shall operate and produce products in a stand at Doña Hortencia Salas Benedicto National High School canteen. The school charges P5, 000.00 as rent expense for stand vendors. Rent expense is paid one month in advance. In addition, a P15, 000.00 rent deposit shall be paid at the beginning of the first month. Churros Co. plans to continue operations indefinitely, thus this deposit shall be considered as noncurrent asset. Its rent expense shall be considered part of the factory overhead expense for the reason that the stand is used for the production and operation of the business. Production Cost During the first year of operation, the Grand Opening of the Churros Co. stand requires free samples of 180 servings each for carrot peanut butter balls and churros. The costs of these amounts will be expensed instead of added to inventory. The entity shall maintain a desired ending inventory equal to the safety stock of one week operation of the next year’s sales. Budgeted production shall equal the annual forecasted sales. The sales of each flavour and variation are derived by multiplying the annual sales by the sales mix ratio. It is assumed that prices will remain constant and stable for the first five years of operations.
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ORGANIZATION AND MANAGEMENT PLAN
Form of Business Churros Company shall operate as a partnership between Mecor Riego, Marie Occeña, Charmaine Trocino, Rizalyn Tingson and Glen Obelidon. All partners will contribute capital and industry to the partnership. 3.2. Organizational Structure The partnership shall be organized as follows:
The partners have decided that Ms. Riego shall be the General Manager. Ms. Trocino shall be the operations manager, Ms. Tingson shall be the assistant operations manager, Mr. Obelidon shall be the financial manager, and Ms. Occeña shall be the marketing manager on the first year.
FINANCIAL MANAGER
Responsible for all financial matters relating to the business. Ensures that proper accountability and accounting is established. Collects and safe keeps any additional capital contributions from the partners. Finds ways to generate more income for the company. Initiates proposals for investing excess cash. Maintains a set of books for accounting. Prepares financial reports and budgets.
The following are the duties and responsibilities of each member of the organization OPERATIONS MANAGER
Oversees the business operations. Manages logistics and inventory concerns. Keeps production and product quality reasonably high and constant. 11
OPERATIONS ASSISTANT MANAGER
Assists the operations manager in the management of the main business activity, Prepares inventory lists.
MARKETING MANAGER
Manages relationships with customers. Develops marketing strategies and plans. Responsible for advertising concerns
Pre-operating Expenses The following table shows the pre-operating expenses of Churros Company: ACTIVITY Research and development Training Organization Cost Setup of Stand Total
AMOUNT 581.22 361.20 14,605.00 17, 676.02 33,381.02
Research and Development Breakdown Cost Particulars Brown sugar Salt Margarine White flour Eggs Vanilla extract Ground cinnamon Confectioner’s sugar Chocolate Bond paper Mango Banana Peanut butter Carrot Toothpick Wax paper cup Sprinkles Transportation TOTAL
Quantity 37.50 g 16.68 g 351.99 g 2 kg 6 pcs 18 ml 4.71 g 187.50 g 1 bottle 5 pcs 1 pc 2 pcs 1½ cup 3 medium-sized 1 box 6 pieces ½ kg
Price 40.00 per kg 18 per kg 10.00 per 100 g 42.00 per kg 6.00 per pc 260.00 per 450 ml 560.00 per kg 130.00 per kg 92.95 per bottle 1.00 per pc 20.00 per pc 5.00 per pc 35.00 per cup 10.00 per pc 35.95 per 1000 pcs 6.25 per 90pcs 128.00 per kg 76.00
Total 1.50 0.30 35.19 84.00 36.00 10.41 2.64 24.36 92.95 5.00 20.00 10.00 52.50 30.00 35.95 0.42 64.00 581.22
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Particulars Quantity Brown sugar 12.50 g Salt 5.56 g Margarine 72.33 g White flour 656.25 g Eggs 2 pcs Confectioner’s sugar 62.50 g Bond paper 10 pcs Mango ½ pc Banana 1 pcs Peanut butter ½ cup Carrot 1 medium-sized Transportation TOTAL Training Cost Breakdown
Price 40.00 per kg 18 per kg 10.00 per 100 g 42.00 per kg 6.00 per pc 130.00 per kg 1.00 per pc 10.00 per pc 5.00 per pc 35.00 per cup 10.00 per pc 270.00
Total 0.50 0.10 7.23 15.75 12.00 8.12 10.00 5.00 5.00 17.50 10.00 P 361.20
Administrative Expenses The budget for annual administrative expenses are as follows: ITEM Bond Paper Special Books Envelopes Ballpens Stapler Stapler Wires Total
QUANTITY 1 ream 4 pcs 5 pcs 12 pcs 1 pc 1 box
AMOUNT 300.00 150.00 40.00 60.00 85.00 50.00 685.00
Organization Cost Breakdown Procedure Registration and Verification at Securities and Exchange Commission Preparation of Legal Documents Bank Account Opening Notarization of SEC Documents Registration at SEC and TIN acquisition Obtain Barangay Clearance Submit document and pay for business permits Apply for Certificate of Registration and TIN at the Bureau of Internal Revenue Registration as Barangay Micro Business Enterprise with the City Treasurer’s Office Total
Estimated Cost 40.00 500.00 250.00 500.00 3,500.00 300.00 8,100.00 115.00 1,000.00 14,605.00
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FINANCIAL PLAN
Project Cost The cost of the investment is as follows: Particulars Rent Expense Rent Deposit Fixed Assets Raw Materials Factory Supplies Variable Factory Overhead Transportation In Miscellaneous Expense Permits and License Transportation Expenses Administrative Expenses Business Tax Pre-Operating Expenses Initial Cash TOTAL COST
Amount 5,000.00 15,000.00 3,620.00 35,462.34 473.50 4,280.58 270.00 70.00 1,200.00 150.00 685.00 1,836.00 33,381.02 1,571.56 103, 500.00
Financing Plan and Loan Requirement The partners have decided to finance the business using their own money. They shall contribute P 20,600.00 each, amounting overall to P 103,000.00 The partners shall register the business as a Barangay Micro Business Enterprise (BMBE) to avail of the income tax exemption. A BMBE is defined as any business enterprise engaged in production, processing, or manufacturing of products, including agro-processing, as well as trading and services, with total assets of not more than P3 million (RA 9178). However, the business is not exempt from paying monthly percentage tax of 3%. The business is exempt from the minimum wage requirement.
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RISK MANAGEMENT PLAN AREA Marketing
Operations
RISK MANAGEMENT ACTION Avoid over-reliance on customers or products Over the years, test market for new products Develop multiple distribution networks ( consider putting other business in another place e.g. plaza,) Quality and Assurance Control Hold spare capacity
Finance
Financial manager will keep the financial records up-to-date. Make sure payables are being paid before the deadline to avoid penalty or interest Practice investment appraisal technique
People
In employing personnel, make a background check. Partners will take turns in managing the business every year so that each partner will have experience in running the business (financial manager to operational manager, operational manager to marketing manager). The control environment will be a result of monthly employee and partners meetings during which we will discuss the current marketing activities, sales, promotional activities, and ideas that will lead to improvement. CONTIGENCY PLAN
Disaster such as fire breakdown. Have a standby fire extinguisher. Check always the kerosene (gasul) if it’s properly close before closing the stand. There is also a first aid in the cabinet. Theft and fraud. Everyday sales is being check by the financial manager and monthly financial statement will be reported. The operational manager and marketing manager together with the personnel will conduct a twice a month inventory of stocks. Illness. In case the worker is sick or if there is any situation that hinders him/her to report, we will hire a person who can be in-charge in the operation. That person will be paid on a daily basis. Financial Crisis. Cut operational and variable cost. The financial manager should monitor the cash flow of the business. Failure in Marketing Strategy.
Run promotional campaign. Survey customers and change the strategy to perceived value pricing. Think how to improve products or introduce new ones.
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CONCLUSION AND RECOMMENDATION Based on the analyses of the projected financial reports, Churros Co. is a viable business venture. The enterprise requires a relatively lower capital than other businesses, but gives a large positive net present value. Because the rate of return of investing in the enterprise is higher than investing in riskfree government securities, we conclude that it is better to invest in this business than buy related, available bonds from the government. In the fourth and fifth year of operation the income increases relative to the third year of the business, this is offset by the fact that the partners will no longer participate in production during these two years, freeing them to concentrate on other matters aside from business, while earning profit from the business. It is recommended that the excess cash from operations be invested in investment funds or marketable securities, in order to earn passive income and increase the wealth of the partners.
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