BIKE RENTAL INC

Fallonne, Anthony, Sean, Danielle, Manasse

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Table of Contents

Section I: Financial Projections/ Break even analysis

Section II: Executive Summary

Section III: Operations Strategy

Section IV: Competitive Priorities

Section V: Positioning

Section VI: Process Choice

Section VII: Capacity Determination

Section VIII: Location

Section IX: Inventory, distribution, and TQM

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Financial/ Market Assumptions

We created this financial assumption spreadsheet based on our projected revenues and
expenses. In year 1 we will have startup costs associated with the business. We plan to buy 100
bikes which cost $199.99 each. This equals $19,999.00, in addition to this each bike will have
stash bags which are $7.39 each, for the 100 bikes it will equal $739.00. Based on some research
we believe that $12,500.00 would cover the racks, $500.00 would cover the locks, and $9,000.00
would cover the GPS units on each bike. All this equipment would go onto our bikes in hopes to
keep them secure and provide our customers with some help getting around. At each rack area
we would have to put a Kiosk for users to swipe their credit cards in order to rent the bikes, we
estimated these to cost around $2,000.00 each and since there will be five of them, $10,000.00.
Finally, the last asset we would need as part of our startup is a truck to move the bikes from rack
to rack, we estimate this to cost about $45,000.00. In total that puts our Materials& Supplies
expense at $88,738.00. We also factored some small advertising costs into our expense budget,
insurance costs for the bikes and racks, and our own salaries if us five were to really try and
undergo this operation.
We believe that throughout the year we would average 50 customers per day. While we
found no information online as to what the competition does in that category, we figure that with
the large market we have and the business of Bostons streets throughout the day, this is a fair
number. The number may be below that in the winter, but most likely above 50 in the summer,
especially during baseball season. If these projections hold true, we would make about $1000.00
per day and estimate our sales to be $364,000.00 per year. The five officers working for the
company would be the members of our group and we would be paying ourselves each a
$30,000.00 per year salary.
Analyzing further, with our fixed costs of $88,738.00 in year one, we would have to make
4,437 transactions to break even.

Please see Excel Spreadsheet on page 3

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Financial Assumptions

Income Year 1 Year 2

Gross Sales:
Customers Per Day 50 55
Days of Operation per Week 7 7
Weeks of Operation per Year 52 52

Total Customers Annually 18,200 20,020

Average Sale per Customer $20.00 $20.00
Total Gross Sales $364,000.00 $400,400.00

Expenses
Advertising $2,000.00 $2,000.00
Materials & Supplies $88,738.00 $10,000.00
Insurance (1% of Gross Sales) $3,640.00 $4,004.00
Salaries:
Officers -
Count 5 5
Average Annual Salary $30,000.00 $40,000.00
Total Officers' Salaries $150,000.00 $200,000.00
Employee Benefits (@ 15% of Payroll) $22,500.00 $30,000.00
Payroll Tax (@ 7.5% of Payroll) $11,250.00 $15,000.00
Total Expenses $278,128.00 $261,004.00

Net Income (Loss) $85,872.00 $139,396.00

Break Even Analysis Fixed Cost # of Sales needed to cover Fixed Costs
$88,738.00 4,437
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Executive Summary

Boston is a fascinating historical city full of fun attractions such as; museums,
restaurants, and lively music scenes. The city is a great place to live for young adults that want
to explore new things and enjoy their youth. College is expensive and students cannot make as
much money as they would like to, so they sacrifice their financials temporarily and make a
long-term investment to go to college. We know that students desire to go to these attraction sites
on a budget which is why we created a Rental Bike company.
Our focus is to attract college students because they need to navigate through the city.
Public transportation has set schedules and students need more flexibility and control. The Bike
rental company will give students and tourists the freedom to explore. Our company is focused
on customer satisfaction, flexibility, and diverse offerings. There are five different kinds of bikes
spread all over the city of Boston. For example, we have bikes that have baskets and family
bikes. Our bike stand location is intentionally placed near colleges and attraction locations to
encourage students to explore.
In planning for our launch, we have put together a financial plan based on the forecast for
our launch period. We are starting at $20 for 24hrs which is 15$ less than our competitors. Each
bike includes; helmet, lock and rear rack/baskets. Our prices beat our competitors and are more
affordable for students and will motivate them to choose Bike Rental company over our
competition. Boston has a lot of universities full of students that desire to explore the city which
means we have a never-ending flow of customers.

Operations Strategy
The Rental Bike Inc. Company strives to be the low-cost option for inner city transportation.
Our goal is to provide our target market with the most economically friendly means for getting
around the city of Boston. We understand that many college students do not have the ability to
work full time and therefore price is an important factor for them when it comes to making
decisions. According to Bostonplans.org, there are over 152,000 students who attend college in
the city of Boston and our goal is to position ourselves to fill a need for them and anyone else
who wishes to tour the city on a bike. As with most large cities this is the most convenient form
of travel, there is limited parking in the city making traveling by vehicle very challenging, in
addition to that we know that not many college students have vehicles with them, we are
counting on this to provide us with our customers.
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Competitive Priorities
At the Bike Rental Company, we know that there are certain competitive priorities we
must maintain in order to stay competitive in our market. As mentioned in our operations
strategy we are the low-cost option for transportation which means that our priorities must align
with this strategy in order to remain competitive. We know that we need to have an adequate
number of bikes on the streets so everyone who wishes to rent one can. If we were to have a
shortage of bikes, customers would be forced to go elsewhere which would harm our profits
therefore that is the number one competitive priority. In addition to the bikes themselves, we
need to have racks located around the city for people to drop their bikes off when they are done
using them and also so the bikes themselves can become available for the next customer. Those
are two things that are absolutely needed to be in the industry of renting bikes. On top of those
necessities, we want to be the low-cost option. This means that while most companies charge up
to $45 for the day, we would charge $20 for the day. They also usually place a relatively large
hold on the customers credit card in case of theft, these holds can sometimes be over $100. This
is usually deposited back into the customers account the day after they return their bike. We
understand that not all college students have that amount of money in their accounts or want it
taken out, even if it is returned. Therefore, the hold on our bikes would only be $75. While this
does not cover the cost of the bike if it were stolen, we believe this would be enough to ensure
customers return the bikes, but it is a small enough number where it doesnt scare the customer
off.

Our Competitor
Hubway Bike is our big competitor in Boston , their company is funded by the MAPC and
Mass DOT. The MAPC ( Metropolitan Area Planning Council ) helped launch the Hubway
Bike Share system in Boston in 2010 . In 2012, they worked to expand Hubway beyond Bostons
borders and into Brookline, Cambridge and Somerville, where 34 new stations were collectively
added. This Hubway is our main competitor which we aim to defeat with our low prices. Unlike
Hubway which is funded by the city we are a private owned company. We do not have as many
expenses to pay out and can continue providing great service at a low rate.
Positioning within the Market
In regards to our plan for positioning ourselves within the market, we tie in our operations
strategy and competitive priorities. All of these need to align to be able to compete in this
populated market. As there are already several bike rental companies in Boston, we believe that
being the lowest cost will give us a particular edge in the specific market we are targeting which
is college students and those who are more concerned financially. As mentioned numerous times,
to be the low cost option in our market, our entire operations strategy revolves are keeping our
costs to a minimum. We go into detail as to how we plan to accomplish this through this text.
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Process Choice
The Process choice we agreed that would be the best process for our company to use so
that we are successful is Batch Processing. How we plan to manage this process is by having
100 bikes ordered and delivered to our main facility where our operations take place. Along with
25 bike racks that are responsible for keeping the bikes locked in the rack. These Racks will be
distributed throughout the Cambridge area for potential customers to use. We also ordered 100
pad lock and chains for each bike, that way the customers can protect the bike and the hold we
keep on the users account. One of the challenges we were faced with at first was how exactly we
are going to get these bikes to our customers.
Our solution was to purchase a truck with a flatbed that allowed us to have racks and
bikes on the back at a time and deliver them to each location. After the bikes are delivered to
each location and they are ready for the public to use, customers who wish to use our bikes will
use their credit cards at our kiosk. Each location that has racks and bikes has a kiosk which the
customers will use to purchase the use of our bikes. A hold will be put on their card, acting as a
safety deposit in case a bike is damaged and or not returned. Now if there is a sporting event and
or an area where a majority of bikes will be removed and used from one rack, ending in another
location. We were faced with how we return the bikes back to the rack they came from. Another
function of the truck we purchased with the flatbed trailer was driving to the location and
physically bringing the bikes back to the rack where they originated.
Our companies goal is the be the cheap, yet quality assurance bike company that rents out
bikes at a low cost. Our whole operation is aimed at making a profit from our business while at
the same time using the least expensive bikes we could. The company we chose to purchase our
bikes from was Target. This was because we are able to buy bikes in small or large quantities at
the low cost of 199.99 dollars per bike. While at the same time these bikes are the best quality
bikes we could purchase at the absolute lowest cost for us. Which is why we chose target as our
source of supplier. It is effective low cost. We also took into consideration if one of our bikes
needed repairs or broke when we were purchasing our bikes. Looking at repair cost and or hiring
someone to repair bikes and what we would pay in total to fix the bike. Researching Target,
instead of paying for repairs for each bike that breaks. It is less of a cost to just throw away each
bike that breaks and purchase a new bike from target all for a low cost. In the end our company
is purchasing cheap but good quality bikes. With the intent to rent these bikes at the cheapest
price we can still maintaining a profit, and if need be replacing the bikes at a low cost.

Capacity Determination
Capacity planning is when a company reaches an optimal level of where production
capabilities meet the demand. The capacity strategy includes anything from equipment,
employees, and spacing. There are three main factors to capacity determination; what kind of
capacity is needed, how much is needed, and when itll be needed. These factors all should be
very accurate.
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For our Bike rental company, we chose to use the tracking capacity strategy. This
strategy focuses on providing a limit then later add incremental capacity as time goes on. It
allows us to get a better perspective of how many equipment and employees are needed. This
strategy also allows us to not over purchase things we dont need or worry about unnecessary
hiring. As demand increases over time we would provide more services. This strategic capacity
plan plays as somewhat of a safety net in terms of our competitors. Since our target market of
consumers are generally college students, our company faces popular organizations. Our
competitors are companys like the MBTA, Uber, Lift, and other bike rental companies. The way
this strategy benefits our company is we could test the waters with the number of products we
first purchase then based off the first couple trials, we can determine whether or not we should
keep the same capacity limit or diminish some or add some.
Capacity planning also involves a short and long term considerations. Our company is
short term considerations is changes in the capacity requirements due to season changes, or
irregular fluctuations in demand. Like during the winter time our biking company wouldnt be
too popular due to the weather change. Our company is more of an effective capacity oppose to
an design capacity because some consumers would rather their bike differently and the best way
to keep consumers happy is by going neutral. Although we will have surveys shared towards the
public on what they believe we could do to better our company, an effective capacity restricts the
personalization level that consumers are interested in.
Our company plans to have us as the sole and only employees which would then make us
not only sole employees but also as sole owners of this company. We have a total of five
different locations to start but we plan on enlarging our territory once we see how consumers feel
about our company and services. We plan to have a total of 25 bike racks per location, where 20
of the 25 are for the bikes rented out and the remaining five spots are extra in case there is an
overflow of bikes at the current location. So therefore we would have a total of 100 bikes total.
Location and Layout

Boston is the home of elite colleges that holds thousands of students. There are over 35
major University and colleges that surround the city of Boston and Cambridge and about
152,000 students at Boston's institutions of higher learning. Boston comprises 10% of the state's
total population, it has 34% of the state's total college enrollment. Cambridge Massachusetts is
populated with 105,162 people making it the best place to operate as a business.
Our Company provides a service and operates within 5 major locations in Boston. We
have kiosk machines that will primarily be located near train stations and tourist outlets. Our
Kiosk machines will be placed with 5 locations our total cost invested in the kiosk is $10,000 or
$2,000 per kiosk. Our Company is aimed to attract young college students as customers and we
as business owners will perform all forms of operations from advertising to customer service.
This will allow our company to keep our low prices and provide a low cost option to our
customers.
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City of Cambridge Operation Locations (Figure 1)

Downtown
Harvard Square
TD Garden
Fenway Park
Newbury

Our bikes will be equipped with a GPS system that will provide customers of available
parking spots and social places to visit while in the city. Customer can use the GPS systems
based on proximity and with a simple touch a customer can request information for available
locations to park bicycles or request restaurants within the area. Each GPS units are purchased in
batch for a price of 90$ per device. The Garmin e-Trex 10 Hiking GPS Navigator is our
navigating device in which we will use on each bicycle.

How it Works
Our Bikes are located within the 5 locations listed in figure 1. Customers will select
location and pick up a bike at any station around Boston and Cambridge and take it for a ride.
They will then return the bikes to any available stations which will be provided to them through
the GPS system on the bike. Customers are to slide the bike firmly into an empty bike dock and
wait for the green light to make sure it's locked. Fast and easy, no need for a complicated APP
or membership just pick up, ride and return.

Inventory, Distribution, and TQM

Total quality management is a philosophy that stresses three principles for achieving
high levels of process performance and quality. The principles relate to customer satisfaction,
employee involvement, and continuous improvement in performance. We strive to make the
renters experience efficient, as most customers define quality based on delivery speed. When
obtaining a rental, renters can sign up using our kiosk or first signing up online. In order to rent a
bike you must be 18 years of age or older. Signing up requires you to enter your name, address,
an e-mail to create your account with us, an offer to purchase a helmet or not, as well as agreeing
to all terms and conditions.
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Our target being college students, we know how busy their lives can be. Due to signing
up and obtaining a rental being timely, we also offer you to sign up online on our website. All
bikes will have a GPS Monitor that allows the renter to look up places to go as well as directions
to available racks to park your bike. Our website also makes it easy for customers to report any
damages or to gain contact with our support unit. This allows us to keep any technical issues
minimal and easily accessible in the event something occurs.
In order for us to maintain our bikes, we require all renters to sign up using a credit or
debit card. This allows us to charge any fees if a bike is stolen, damaged, or returned late. All
orders will be first come first serve but will not start until your rental has been taken out for your
use. Our prices are also subject to change. Our main goal is to provide a quality service for a low
price. As our target customers are college students, we will offer the most suitable bicycle for
their every need. Our bikes will be Schwinn Solara road bikes. Having one type of bike makes it
easy for us to manage our inventory.
The Schwinn Solara is a top-quality bike, and as we purchase them in bulk, they come
out to a good price. Target offers the bikes for $199.99. We purchased 100 bikes to start the
business off leaving three spots empty in the five racks we have located around the city. Each
bike will have a stash bag attached to the handle bars. The stash bags are also purchased from
target at $7.39 which will allow our renters to have a safe and convenient spot to put any
valuables like a phone, map, keys, or money. We also gave the renters the choice of purchasing a
helmet through our site that could be purchased and shipped within 2-3 weeks. The law states
that anyone 16 years or younger must wear a helmet when riding, but because our age limit is
18+ we want to make it an option and make it available to those renting our bikes to ensure
safety. Our bike helmets are the Bell Adrenaline helmet from target at the price of $22.99. It is
an adult helmet that is about 56-60 cm and is adjustable to fit the renters head. The average head
size for a female is 55 cm and for male it is about 57 cm. All of our bikes are equipped with a
GPS monitor system that we purchase in bulk at $89.95 from the GPS store. These give the
renter access to different rack locations as well as giving directions to areas around the city.
Just like a car, a bike needs regular maintenance as well. Apex Velo is a bike shop
located in Newton. They have been known to have a quick turn around with high quality results.
We were thinking to partner with Mike and Seth over at Apex to ensure our riders continue to
have a safe ride but for the most part, since the bikes are relatively cheap it is often more
economically feasible for us to just purchase a new bike then to have maintenance done on them.
Having maintenance performed would be on a case by case basis, if it is a minor repair and it
would save us money but just getting it fixed we will do that, but for most major repairs we will
just purchase a new bike.