Professional Documents
Culture Documents
Entrepreneurship
Assignment
Marvin Horkins
Entrepreneurship
October 4, 2010
Contents
Question 1: Strategic Entrepreneurship...............................................................................3
a) Wal-Mart...........................................................................................................................5
b) Kauai Health Foods & Juice Company..........................................................................13
Question 2: Kauai Franchise Business Plan......................................................................29
1. Executive Summary..........................................................................................................31
2. Mission..............................................................................................................................33
3. Products............................................................................................................................34
4. Market Survey...................................................................................................................36
5. Strategy and Implementation Summary............................................................................38
6. Main Competitors..............................................................................................................39
7. Marketing Strategy............................................................................................................39
8. Sales Strategy...................................................................................................................40
9. Sales Forecast...............................................................................................................41
10. Personnel Plan..............................................................................................................42
11. Financial Plan...................................................................................................................43
12. Important Assumptions................................................................................................44
13. Other Current Assets....................................................................................................45
14. Projected Cash Flow....................................................................................................45
15. Exit Strategy and Risk.................................................................................................47
16. Appendices.......................................................................................................................48
Question 3: South African Policy Framework....................................................................56
a) Support for women-owned enterprises.............................................................................58
b) Broad-based black economic empowerment strategy......................................................59
Bibliography...........................................................................................................................61
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Marvin Horkins Student Nr: 109730
Entrepreneurship
October 4, 2010
Strategic thinking is usually associated with the competitiveness of the organisation, while
entrepreneurial thinking is associated with innovation and creativity to capture opportunities.
Strategic thinking is usually isolated as the “thinking” part of the strategic planning process.
This wrongly implies the removal of the behavioural or “action” component of strategy
thinking from the construct. Strategic thinking, just like the entrepreneurial thinking, is a
mindset that encapsulates thinking, state of mind and way of behaviour.
The concept of strategic entrepreneurship has widely been written about primarily as a
relationship between strategic management and corporate entrepreneurship.
Growth-oriented strategic thinking is essential in the globalised world and is one of the most
important factors in the development of entrepreneurial ventures. Strategy can be defined as
the direction an organization intends to take in the future mindful of its context, resources,
purpose and objectives (Lunch 1997 cited in Venter, Urban and Rwigema 2008:405).
All of the components of this definition are the elements that need to be considered when
developing and embarking on a strategic process:
Context
Resources
Purpose
Objectives
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Entrepreneurship
October 4, 2010
Before analyzing this for the two caselets, let us examine each of these elements in a bit
more detail:
Context
Context refers to the external environment within which an entrepreneurial venture operates.
Every organization operates in a context; there is a constant interaction between the
organization and the elements that impact on the business. Sometimes the best way to gain
insight into complex issues is through the use of a model or a tool. Tools that can be used
include the PESTLIED Model and a SWOT analysis.
SWOT Analysis
Internal Factors
Strengths:
When creating objectives and strategies, you should build on strengths
Weaknesses:
When creating objectives and strategies, you should resolve weaknesses
External Factors
Opportunities:
When creating objectives and strategies, you should exploit opportunities
Threats:
When creating objectives and strategies, you should avoid threats.
Let us take a look at both Wal-Mart & Kauai’s contextual elements (PESTLIED & SWOT):
a) Wal-Mart
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Entrepreneurship
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COMPANY PROFILE
Wal-Mart is the world's number 1 retailer, with more than 4,800 stores, including 1,475
discount stores, 1,750 combination discount and grocery stores (Wal-Mart Supercenters in
the US and ASDA in the UK) and 540 warehouse stores (SAM's Club).
Nearly 75% of its stores are in the US, but Wal-Mart is expanding internationally. Wal-Mart is
the number 1 retail in Canada and Mexico. The company also owns nearly 38% of Japanese
supermarket chain SEIYU.
Strengths
Is it a
Possible Strengths Response
strength?
Tangible Strengths
Consider your assets including Assets are really only shop fittings and stock with No
plant and equipment
two computers and software.
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Entrepreneurship
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Strengths
Is it a
Possible Strengths Response
strength?
Yes. Their product is high quality, low margin and
Is your business high volume? Yes
high volume in comparison
Can your scale up your volume Yes. This is in line with agreements with suppliers Yes
if you need to?
Intangible Strengths
Yes, though the brand space is becoming
Do you have or stock strong cluttered with more and more recognizable Yes
recognisable brands brands. Depleting the value of any one brand.
No, their
Do you have a positive competitors also
relationship with your Yes have good
employees employee
relations
Do you have any unique Yes, this is made possible with other
alliances with other yes
suppliers/partners
businesses?
Do you own any patents or No No
proprietary technology?
Email news letter with specials and new stock,
Do you have a proven seems to work for retaining customers.
advertising process that works Yes
Most new customers were attracted to the
well? shopping complex as well as the online options.
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Strengths
Is it a
Possible Strengths Response
strength?
Do you have more experience Yes Yes
in your field?
Are you managers highly Yes Yes
experienced?
Yes, and they do have a good set of sales skills,
Do you have superior industry particularly up selling and forming relationships. Yes
knowledge? People feel good coming by and seeing us.
Summary of Strengths
World's number 1 retailer
Geographic presence
Weaknesses
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Marvin Horkins Student Nr: 109730
Entrepreneurship
October 4, 2010
Is it a
Possible Weaknesses Response
Weakness?
Tangible Weaknesses
Is your plant and equipment old or N/A N/A
outdated?
Maybe, we only sell a few of brands of men clothing,
we could stock more accessories, but we don’t want to
Is your product line too narrow? Maybe
confuse the customer about what line of business we
are in.
Have you got insufficient financial Yes, we often think about opening a bigger store, but
resources to fund any changes the rent would be an issue if we did not get immediate Yes
you would like to make? sales
Intangible Weaknesses
Yes, maybe our shop name is not a public
Do you have a weak or recognizable brand but our stock is. Some of our Yes
unrecognisable brand? competitors are franchise and everyone knows them
Do you have a weak or No, our shop frontage tends to draw people in No
unrecognisable image?
Do you have a poor or impersonal No, we have great relationships with our customers No
relationship with your customers?
Do you have a poor relationship No No
with your suppliers?
Do you have a poor relationship No No
with your employees?
Is your marketing failing to meet No No
objectives?
Are your managers Yes, I have less than 2 years in Retail Yes
inexperienced?
Do you have low R&D? n/a N/A
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Entrepreneurship
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No
Do you lack innovative skills? No
Other Weaknesses
Few women and minorities in top management
The congestion of the large stores might deter customers from wanting to go to shop at Wal-Mart
Opportunities
Possible Response Is it an
Opportunities Opportunity?
Industry Opportunities
Can you expand your product Yes, there are no contractual restrictions to us
Yes
range? adding products to the store, store size is an issue
Can you expand your customer Maybe, through internet sales and mail order,
base? (Geographically or through Yes
maybe open another location
new products)
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Do you have placid competitors? Yes, there is not a lot of competitive advertising in Yes
our niche, and price is not so much of an issue to
our customers
Macro Opportunities
Are there any favourable changes No No
to legislation pending
Will there be any changes to any No, almost all clothing is imported there is little
import/export constraints that will domestic production and a lack of ability for
No
be favourable for your business? domestic producers to scale up. Any changes will
impact all retail outlets equally.
Is the economic outlook No, however this may play favorably to our
favourable? business as our target market might postpone
larger expenses as a result a greater share of purse No
may be allocated to clothing – this is yet to be
proven.
Are there any favourable cultural Due to increases in housing prices our target
shifts that will benefit you? customer has opted to postpone taking on longer
term debit. Instead to remain in the “nest” for Yes
longer. This trend increases their customer life for
our products.
Other Opportunities
Consumers want ease of shopping.
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Threats
Possible Threats Response Is it a
threat?
Industry Threats
Will low cost imports impact your No, our shop appeals to the middle income bracket
business? who are not interested in low cost alternatives.
No
Though high quality low cost imports will increase our
margin.
Is your market in slow growth or No, our market is relatively stable, maybe slight
No
in decline? growth
Is the power of your customers or No, maybe one supplier is trying to increase prices
suppliers growing, can they above CPI, but we can stop selling their stock and No
dictate price? shift to another supplier of a similar quality product
Are the needs of your buyers Yes, every season fashion changes, however the
Yes
changing? need for medium quality products remains unchanged.
Macro Threats
Will foreign exchange rate Yes, declining dollar will impact us, and all others in
changes affect your imports or our industry, may also reduce sales if we pass price Yes
exports? on to customer
Are there any changes in Maybe an increase in awareness about the behavior
demographics that will impact of governments of low cost producing nations may No
your business eventually impact our supply chain.
Other Threats
Industry maturity.
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Company Profile:
Kauai was born in Cape Town, South Africa in 1996 as the brainchild of three friends who
had previously lived on the Hawaiian Garden Isle of Kauai.
Kauai In Motion has been exclusively developed to offer Virgin Active members health on the
go!
The founders’ approach to the task was straightforward: to prepare food they themselves loved to eat
but couldn’t readily find anywhere in South Africa. One of their first creations was the now infamous
Kauai smoothie – it is widely credited with starting the smoothie craze in our country!
Smoothies were complemented with a range of great tasting freshly made food, with the
ingredients always left as close to nature as possible. The range now includes sandwiches,
salads, wraps and snacks.
There are currently 41 Full Concept stores nationwide directly employs over 700 people,
along with 44 Kauai In Motion outlets and two Kauai Schools and we're continuously
growing.
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Strengths
Is it a
Possible Strengths Response
strength?
Tangible Strengths
Consider your assets including plant and No, same as
Furniture & Equipment
equipment competition
Do you have long-term rental contracts for Yes, lease contract as per venue
No
your business locations? (Mall/Virgin Active)
Are your products unique or market leading? Yes yes
Yes, financial assistance available
Have you got sufficient financial resources to
from both Kauai HQ & IDC to allow for Yes
fund any changes you would like to make?
expansion to a larger footprint store.
Do you have any cost advantages over your
No no
competitors?
Do you use superior technology in your
No no
business?
No; business volume low relative to
Is your business high volume? no
others in FMCG
Can your scale up your volume if you need to? Yes yes
Intangible Strengths
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October 4, 2010
Strengths
Is it a
Possible Strengths Response
strength?
Yes, strong brand; especially
Do you have or stock strong recognisable
amongst higher income earners yes
brands
concerned with health
Your reputation - are you considered a market
Yes yes
leader? or an expert in your filed?
Do you have good relationship with your Yes, also have initiatives with
Yes
customers? (Goodwill) Schools
Do you have strong relationships with your
Yes yes
suppliers
Do you have a positive relationship with your Yes, have employee assistance
Yes
employees programmes
Do you have any unique alliances with other
Yes, joint venture with Virgin Active yes
businesses?
Do you own any patents or proprietary
Yes, patented menu yes
technology?
yes, use of Schools advertising,
Do you have a proven advertising process that
sponsorships, Joint Ventures, email yes
works well?
ad, ad’s per mall location
Do you have more experience in your field? yes yes
Are you managers highly experienced? yes no
Do you have superior industry knowledge? yes no
Are you involved with industry associations? Yes, department of education yes
Is your business Innovative? Yes yes
Weaknesses
Possible Weaknesses Response Is it a
Weakness?
Tangible Weaknesses
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Entrepreneurship
October 4, 2010
Intangible Weaknesses
Do you have a weak or unrecognisable
No no
brand?
Do you have a weak or unrecognisable
No no
image?
Do you have a poor or impersonal
No no
relationship with your customers?
Do you have a poor relationship with your
No no
suppliers?
Do you have a poor relationship with your
No no
employees?
Is your marketing failing to meet objectives? No no
Are your managers inexperienced? No no
Do you have low R&D? Yes yes
Do you lack industry knowledge? A little. yes
Do you lack innovative skills? No no
Opportunities
Is it an
Possible Opportunities Response
Opportunity?
Industry Opportunities
Can you expand your product range? Yes yes
Can you diversify your business interests? Yes yes
Can you expand into your customer's field? Yes yes
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Macro Opportunities
Are there any favourable changes to
No no
legislation pending
Will there be any changes to any
import/export constraints that will be No no
favourable for your business?
Is the economic outlook favourable? Yes, business is picking up yes
Are there any favourable cultural shifts that
No no
will benefit you?
Are there any changes in the use of
technology that your business can utilise No yes
such as Ecommerce or Internet sales?
Threats
Is it a
Possible Threats Response
threat?
Industry Threats
Will low cost imports impact your business? Yes yes
Do consumers have a choice to use a
Yes yes
substitute product?
Are substitute product sales increasing? Yes yes
Is your market in slow growth or in decline? Slow growth yes
Is the power of your customers or suppliers
Yes yes
growing, can they dictate price?
Are the needs of your buyers changing? No yes
Macro Threats
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Political
What local and national government actions are currently impacting, and may in the future
impact on the business
Economic
What fiscal policies such as taxation and interest rates can and are impacting on the
business
Social
What social trends and tolerances are there towards your business' products or services
Technological
What changes are there that may affect demand for your products or services
Legal
What legistation is there that may affect your company, e.g. health and safety law,
employment law and human rights legislation.
International
This is the big picture, where you look at the changing world and how global factors impact
on your business
Environmental
An ever-increasing factor, this part of the PESTLIED model looks at the evironmental factors
that may affect your organisation.
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Demographic
This essentially asks companies to look at demographic trends of both customers and the
available workforce to see how this may change the shape or direction of the business
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o Workforce Development /
Economic Opportunity
o Environmental Sustainability
o Health and Wellness
The Walmart Foundation has a
particular interest in supporting the
following populations: veterans and
military families, traditionally
underserved groups, the disability
community and people impacted by
natural disasters
Technological: Wal-Mart tries to stay at the Kauai makes use of internet
What are the forefront of technology; not only for advertising
technological trends selling the latest technological Kauai makes itself visible on
that may affect the gadgets available but also making Social Networks such as
organization, it’s use of advancement in technology Facebook, Twitter, etc.
products and activities? to expand their reach into the Kauai ensures that they
market accommodate for changes in
Use of online shopping has allowed technology by training their
for Wal-Mart to offer product to the Franchise branch staff on
international market any new technologies
Improvements in supply chain introduced into the company
management between suppliers
and Wal-Mart
Wal-Mart makes use of Social
Networks such as Facebook,
Twitter, etc.
DepletionTechnologyTechnological
change (TC) is a term that is used
to describe the overall process of
invention, innovation and diffusion
of technology or processes. The
term is redundant with
technological development,
technological achievement, and
technological progress. In essence
TC is the invention of a technology
(or a process), the continuous
process of improving a technology
(in which it often becomes cheaper)
and its diffusion throughout industry
or society.
Legal: Taxation laws & custom duties need Taxation laws
What are the legal and to be adhered to both domestically Consumer protection is
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Purpose
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Resources @ Wal-Mart
Competitive Advantage:
Wal-Mart is a lowest Price leader and they have a competitive advantage in pricing,
distribution center, and store locations. Wal-Mart keeps its promise of everyday low prices,
by having a smooth business cycle maintained by unbeatable distribution center supported
by trucking networks, and excellent store locations. Wal-Mart maintains its slogan of
"Everyday low prices", by keeping its merchandise's prices low.
Wal-Mart has a competitive advantage of having constantly low prices is through having a
solid distribution center that keeps its storage fee low, cuts down items time retain on
shelves, and since the distribution centers are always within a 48 hours reachable area
resupplying the goods for two or three stores within one truck load is not a problem. This
business cycle enables Wal-Mart to get its goods on time, and cuts down on storage
expanses and gets higher product discounts from suppliers and also minimizes backorders
by buying its goods in large quantities and store in huge distribution centers. All these cuts
down from expenses allows Wal-Mart to gain greater bargaining power with its supplies
which allow it to have a higher sales margin to play with against its discounters who rarely is
able to catch up with Wal-Mart's low pricing and strategy.
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stores have set foot yet, this allows Wal-Mart to be able to monopolize in many towns in most
metropolitan areas within United States.
Customer Satisfaction:
In the mission statement we target our customers by saying: "Our first responsibility is to
provide all consumers the best products and services." Their customers are their number one
priority.
Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains one of
the best satisfaction guaranteed programs, which promotes customer goodwill. One can
return virtually any product to Wal-Mart without any problems. They simply take the product
back and promptly refund the price of the product, nearly no questions asked. They also
promote goodwill among consumers by employing a tactic, which Sam created known as the
"Ten Foot Rule." This is simply the idea that if a customer comes within ten feet of an
employee, they are required to greet them and ask if they can help them in any way. This is
also evident through employees getting to know customers on a first name basis.
Resources @ Kauai
Customer Satisfaction:
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Kauai aims to supply the South African market with nutritious wholesome food unlike any
other health food store in the fast food industry. They focus on ensuring that only the
freshest ingredients and are very conscious of meeting specific dietary requirements; thereby
satisfying a larger majority of the consumer base.
Kauai having its origins from Hawaii, comes with a fresh new feel and look to the health food
market. The brand carries itself as being known for
Their health smoothies have been the one product that saw introduction of smoothies into
the South African market; has propelled them into being seen as having the best smoothie in
the market.
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Contents
1. Executive Summary........................................................................................................31
2. Mission.............................................................................................................................33
3. Products...........................................................................................................................34
4. Market Survey..................................................................................................................36
5. Strategy and Implementation Summary.......................................................................38
6. Main Competitors............................................................................................................39
7. Marketing Strategy..........................................................................................................39
8. Sales Strategy..................................................................................................................40
9. Sales Forecast..............................................................................................................41
10. Personnel Plan.............................................................................................................42
11. Financial Plan..................................................................................................................43
12. Important Assumptions.............................................................................................44
13. Other Current Assets.................................................................................................45
14. Projected Cash Flow..................................................................................................45
15. Exit Strategy and Risk...............................................................................................47
16. Appendices......................................................................................................................48
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Marvin Horkins Student Nr: 109730
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1. Executive Summary
Kauai franchise offers a healthy alternative to fast food franchise. Cash requirements R500
000 (ex VAT) needed for full franchise excluding any lease deposit requirements, including a
franchise fee of R110 000 (ex VAT). The total set-up cost is R1.3 million.
As owner, I am seeking a conventional loan R 1,3 million to complete their start up financing.
Start up funds will be utilized to pay for lease, purchase equipment and inventory, pay labor,
and cover all general, marketing, and administrative costs for the first six months of
operations. Kauai is expected to generate positive net earnings in the fifth month of the first
year of operations.
Kauai will capitalizes on a low number of competing restaurants in the same area, a growing
population with higher-than-average household income in the region, and a large business
population located within a 3 to 10 kilometre radius. Kauai is positioned as a high-value
dining experience with interesting, fresh health conscious meals offered as a healthy
alternative to fast food franchise. Kauai caters to the health conscious, irrespective of race,
gender, age. Kauai menu offers only the freshest and tastiest ingredients are used to prepare
the delicious and nutritious meals you have come to know and love.
The establishment is owned and operated by my wife and I, Marvin and Jo-Anne Horkins,
whom has over 20 years experience in managing successful, upscale family restaurants and
fast food outlets.
With initial start-up capital of, Kauai is forecasting R1,707,711 in gross sales in the first year
of operations, increasing to R3,136,140 in the second year of operations and R3,452,162 in
the third year. Net profits are forecasted at R87,530 in the first year, R190,515 in the second
year and R212,933 in the third year. Net profit from sales is projected at 5.13% in the first
year, 6.07% in the second year and 6.17% in the third year.We project a net cash flow of
R198,339 in the first year, increasing to R299,741 in the second year and R262,581 in the
third year. Net worth is projected at R122,780 for the first year, increasing to R313,294 in the
second year and R526,228 in the third year.
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1.1. Objectives
To establish a long-term health food and juice company and be recognized as a unique,
consistently good dining and social experience within the residential and business
communities found in the area. Gross margins, operating ratios, sales, and net revenue
projections are benchmarked against the national industry averages.
To succeed in the long-term and generate revenue appropriate for servicing a conventional
loan obligation, we have established the following goals, which are detailed in this business
plan.
· Maintain a Cost of Goods of less than 36% for food and 25% for beverages
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Additionally, the Kauai is distinguished from the competition by its distinctive, unique
atmosphere. Kauai has a quaint ambiance and brand will be distinctively one-of-a-
kind, following the successful suggestion of the mother franchise. Kauai’s menu will
offer the same high quality products that are prepared with the freshest of ingredients
and served in interesting presentations, as per the mother franchise. Kauai’s will
provide outstanding service in a fun, unique atmosphere.
Kauai already includes a juice bar, expected to drive 22% of total revenue. The juice
bar will cater to business people meeting after work and to singles during the
weekend specializing in the freshest juices and juice combo; and of course our well
known Kauai Smoothies.
2. Mission
Our mission is to have products that are recognized by global consumers and our
employees as tasty, healthy, natural, affordable and convenient - in an
environment that reflects the natural elements of our products.
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3. Products
Only the freshest and tastiest ingredients are used to prepare the delicious and nutritious
meals you have come to know and love, and you can rest assured that all stores abide by
Kauai's Ten Principles of Good Nature:.
1. It’s all fresh: Your servings are made right before your eyes, with only the freshest
ingredients.
2. No, REALLY, it's all fresh: And that applies to their sauces, spreads and dressings
too!
3. As nature intended: They keep their ingredients as close to their whole and natural
state as possible so that they don't lose any of their flavour or goodness.
4. No trans fats: Trans fats are neither good nor natural, which is why you won't find any
in Kauai’s products.
5. No fry zone: None of Kauai’s products are fried – in fact, the oiliest thing in their
kitchen is an avocado!
6. FREE of MSG and Tartrazine: You won't find any MSG or tartrazine in any of their
meals.
7. 100% wheat free: Kauai’s rye bread is, well, rye bread and 100% wheat free.
8. They only pick the best, so that's what you get: Kauai’s supplements are made
from premium choice herbs, minerals & vitamins.
9. No dairy? No problem: All dairy smoothies can be made with GM-free soya milk for
the lactose intolerant.
10. Vegan friendly: Kauai mayo is reduced in fat and egg free - perfect for vegans.
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Taste is paramount to Kauai, the good natured food company, and the folk who develop
Kauai’s new products have paid special attention to making their summer menu full of good
nature and flavour. Tantalise your taste buds with their healthy and delicious smoothies,
wraps, sandwiches, burgers and, now, dessert.
From mid November, you will be able to try the new addition to their range of healthy burgers
– the Hawaiian chicken burger, a mouth-watering twist on the traditional variant, made with a
tangy and sweet pineapple relish atop a smoky barbeque tender chicken fillet on a nutritious
linseed bun.
Kauai will also introduce their first dessert, the Berry Dream. Pro-biotic, low fat Berry Dairy
frozen yoghurt, with fresh raspberry puree topped with delicious cranberry & macadamia
biscotti crumble.
For a wake up call on a hot summer’s day we have a brand new, and brilliantly low in fat,
Iced Latte. Made with quality Espresso, chilled vanilla dairy sorbet, fat free milk and crushed
ice. Double Espresso shots and decaf options are available too.
Kauai products are kept as close to their whole and natural state as possible and are freshly
made in each Kauai. The rye bread is 100% wheat-free and all dairy smoothies can be made
with GM-free soya milk for the lactose intolerant. All products are MSG and tartrazine-free.
No food is fried and Kauai mayonnaise is egg free, making it suitable for vegetarians.
Occupying a leased, 1,500 square foot former restaurant facility, Kauai will provide a total of
30 tables for diners. Diners will choose from indoor seating designed with warm interior
decorations and outdoor seating in a romantic garden setting. The indoor seating area
includes twenty tables. The outdoor seating will include ten tables. The service will be friendly
and professional, with experienced staff trained to emphasize an upscale dining experience.
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We believe that the two most important elements in this outlet's value equation are food and
service, followed by price and ambiance. The most important factors in determining our menu
are consistency, creativity, and prices. The menu will be the same as that of the head
Franchise.
4. Market Survey
The restaurant's customer profile represents two segments: residential customers (families
and singles) and business customers. The following analysis is a breakdown of this customer
base that supports the restaurants projected sales revenue.
Kauai Tygerberg will be located in the town of Tygerberg that has a large residential
population of higher-than-average household income. Each household has an average of
2.96 people, with a higher-than-average median income of R65,288 per household, and eat
out an average of 2.5 times per week. This information supports the restaurant's pricing
position of charging a slightly higher than average price per meal. The population is
increasing at a rate of 1.9% annually. Individual residential customers are forecasted to
contribute 33% of the lunch sales and 67% of dinner sales. Additionally, Kauai will be located
in an ideal location, providing the opportunity for a healthy alternative to fast food.
The business community within a 7 to 10 kilometres radius of the outlet has a labour
population of 448,669 individuals. 48% of these individuals are in management or
professional positions that are likely to frequent the restaurant for lunch and dinner meetings.
These individuals eat out approximately 4.3 times per week.
The following table provides a market analysis for the region's total population, along with
projected growth estimates. The table shows that the Compounded Annual Growth Rate
(CAGR) for the combined residential and business population is 2.05%.
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Potential
Customers 2011 2012 2013 2014 2015
Growth
Individual 770723 785367 800289 815494 830989
Residential
Customers
1.9%
Individual 448,669 458,988 469,545 480,345 491,393
Business
Customers
2.3%
Total 2.5% 1,219,392 1,244,355 1,269,834 1,295,839 1,322,381
Customer Forecast
Seasons will compete with all food establishments and has targeted 2.5% of the total
potential customer base as a fair representation of the market. The combined total population
of potential residential and business customers is 1,219,392 people. The target customer
base is expected to frequent the restaurant two times per year. Individual business
customers are forecasted to contribute 66% of lunch sales and 33% of dinner sales.
The population is broken down into lunch sales and dinner sales. Lunch sales are projected
to have an average revenue per person of $17.00, including beverage. Dinner sales are
projected at $25.00 average revenue per person, including beverage. Bar sales are projected
to generate an additional 22% sales revenue. During the week, the owners anticipate 33% of
lunch sales attributed to residential customers, and 66% to business customers. Weekday
dinner sales are expected to consist of 66% residential customers and 33% business
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customers. During the weekend, both lunch and dinner customers are expected to be 100%
residential.
Our priority is to determine a realistic net revenue stream for the outlet. Based on
determining start up costs and an accurate forecasted financial situation, the owners will
secure start up and working capital to proceed with the launch. By identifying a market
opportunity with limited competition, the owners can leverage the successful branding Kauai
nationally carries; together with our management experience into a stable, long-term
business concern with strong financial stability.
After obtaining start up capital, we will begin marketing efforts to establish a presence within
the community. Within the same time frame, we will secure lease arrangements and begin
obtaining equipment and furnishings. Staffing interviews will be conducted, with an emphasis
on recommendations and referrals. The outlet will open for business in the second month
after funding is secured.
a. Competitive Edge
The outlet’s competitive edge is its proximity to a large residential and business population
that is located in the quaint town of Tygerberg; tougher with the interest generated from the
Virgin Active close by for a In-motion branch; we feel that is area under served by similar
Health Food outlets. In conjunction with capitalizing on this business opportunity, the Kauai
will provide a unique atmosphere and menu along with excellent service at appropriate
pricing.
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6. Main Competitors
Kauai's main competition is represented by all other Health Food and Juice opportunities
currently available to residential and business customers. These segments include all sectors
within this industry, such as fast food, casual restaurants, and fine food establishments.
The main competitive category for the outlet is a full-service, moderately upscale Kauai
experience; experienced at other branches nationally. One similar Health Food/Fast Food
outlets are identified within the immediate area. The following is a price matrix breakdown of
these restaurants compared to our restaurant:
Outlet #1: Medium quality/medium price. Juicy Lucy; menu allows high margins. Limited
seating with a standard sandwich menu. This is an old brand that has been around since
1970 and definitely needs revamping to come close to competing with Kauai.
Our Restaurant: High quality/high price. Fresh, diverse menu with engaging atmosphere
catering to business, family, and single demographic. Bar and restaurant expect to gain
overflow from other restaurants.
7. Marketing Strategy
The marketing strategy will include advertising in local print publications, flyers distributed to
residences and business within a 3 to 10 kilometre radius, advertising on local radio also co-
supported by the branding support received from head franchise. Advertising in the local
yellow pages with a coupon will also be another marketing strategy.
Print ads will appear in local newspaper and business publications beginning six weeks prior
to the restaurant's grand opening. A print campaign will be ongoing. Direct Mail will be used
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Local restaurant reviewers will be invited to attend a pre-opening event and provided with
copy material for reviews and articles. Press releases will be distributed to all business and
community newspapers and publications within the county.
8. Sales Strategy
We will maintain a pricing strategy that limits the cost of goods to 36% of total sales for food
and 25% of total sales for beverages. We are projecting an average lunch ticket of R60.00
per person (including beverage).
Menu Pricing
Kauai's value proposition is positioned as high-quality with mid-range pricing. Because the
restaurant has limited geographic or comparable service competition, the menu will carry the
same pricing strategy as is seen nationally.
The owners are estimating the cost of food at 36% and the cost beverages at 25%.
Pricing follows a full-cost strategy that reflects the establishment's actual costs. The following
formula will determine menu pricing: Menu Price = Cost of Food divided by Food Cost
Percentage.
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9. Sales Forecast
The owners will begin preparing the restaurant and bar in December for an expected January
opening in 2011. No revenue is projected for January. As the restaurant is a start up
business, the owners expect sales at 20% of the projected total for the restaurant's opening
month, increasing by 10% each month until reaching the total projected units in December of
the first year.
Gross sales for the first year, including food and bar, are projected at R1,707,711, with Cost
of Goods projected at R607276.
After reaching capacity in during the second year, sales are projected atR3,136,140 with a
Cost of Goods at R1,114,843. In accordance with industry statistics, sales are projected to
increase by 5% annually.
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The restaurant industry is labour intensive, with traditionally high turnover rates that often
result in lower hiring standards. To circumvent this problem, we are targeting production
payroll, including wait- and kitchen-staff, at 25% of total sales annually. The owners are also
designating 3.4% of total sales for employee benefits to retain long-term employees.
In the first year, the restaurant will have 8 full-time and 4 part-time employees, with total
hours worked increasing incrementally as sales volume increases. Total payroll for the first
year is projected at R431,467, increasing to R784,035 in the second year and R863,041 for
the third year. Payroll Tax is projected at 10% of Payroll.
· General Manager
· Front Manager
· Head Chef
· Supporting Chef
· Cooks
· Prep Cooks/Dishwashers
· Waitpersons
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· Important Assumptions
· Start Up Costs
· Exit Strategy
The Appendix of this plan includes 12-month projections for Sales, Profit and Loss, Cash
Flow, and Balance Sheet.
Based on statistics from the Restaurant Association of South Africa, the restaurant is
expected to see an annual increase in sales of 5% annually.
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All projections are compared against industry averages as provided by the Restaurant
Association of South Africa.
The start up funding requirements are R500,000. The following is a breakdown of start up
costs and required funding, which reflects a cash balance of R290,500 after start up
expenses.
Start-up Requirements
Legal R2,500
Insurance R5000 Rent &Security Deposit R10,000
Phone &Gas Deposit R750 Cleaning R2,000
Other $0 Total Start-up Expenses R20,250
Start-up Assets Needed
Cash Balance on Starting Date R30 Other Current Assets R155,750
000
Total Current Assets R185,750
Long-term Assets $0 Total Assets R185,750
Total Requirements R206,000
Funding
Investment Owner Equity R20,000
Owner Equity R20,000 Total Investment R40,000
Current Liabilities
Accounts Payable $0 Current Borrowing R150,000
Other Current Liabilities $0 Current Liabilities R150,000
Long-term Liabilities $0
Total Liabilities R150,000
Loss at Start-up (R14,750) Total Capital R35,250
Total Capital and Liabilities R185,250
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The line item 'Other Current Assets', which totals $155,750 in the Start Up table, is included
in the Balance Sheet for depreciation purposes. The following is a breakdown of these items,
which are targeted specifically for start up expenses and will be purchased in the same
month that loan proceeds are distributed for use.
We project a net cash flow of R198,339 in the first year, increasing to R299,741 in the
second year and R262,581 in the third year. Net cash flow is projected to be positive for each
month, with the exception of the sixth month of operations. Net cash flow falls to (R845) due
to increase cost of goods reflecting anticipated sales growth.
Cash balance is projected at R227,839 in the first year of operations, increasing to R527,579
in the second year and R790,160 in the third year.
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We recognize the risk involved in a restaurant of this nature. In the event that Kauai
Tygerberg can not achieve profitability, we will attempt to sell the restaurant, with the
proceeds used to pay any debts. If we are unable to sell the restaurant, the owners may be
forced to default on their outstanding loan obligation.
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16. Appendices
a) General Menu
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The promotion of entrepreneurship and small business remains an important priority of the
government of South Africa. Government’s commitment is to ensure that small businesses
progressively increase their contribution growth and performance of the South African
economy in critical areas such as job creation, equity and access to markets.
Since 1994, with the advent of a new democratic era, government has taken measures to
ensure that small business development becomes a key policy focus. In March 1995 an
important milestone was achieved when government released its White Paper on national
strategy for the development and promotion of small business in South Africa, the first time a
comprehensive policy and strategy on small business development was formulated in the
country.
These included:
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Since then, government owned institutions and programmes have evolved all three spheres
with the aim of providing comprehensive support to small business.
These institutions have made progress in delivering a wide range key support services.
These services continue to benefit an increasing number of small businesses year after year.
Government will continue to lead efforts to increase the level of entrepreneurship through
supporting small business creation, but we are mindful that this important task cannot be
successfully undertaken by one player alone.
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One such initiative that Government has implemented is Support for women-owned
enterprises:
The Government has initiated various measures to increase women entrepreneurship and to
support women in business. These include: Sawen (South African Women En trepreneurs’
Network), a Department of Trade & Industry -initiated national networking forum for
individuals and organisations committed to the promotion andadvancement of women
entrepreneurs.
Sawen represents and articulates the aspirations of women entrepreneurs, and holds
organised educational and trade missions for members. Business linkages between SA
women entrepreneurs and their counterparts in other parts of the world have also been
facilitated. Sawen continues to be an advocacy network for women in business, ensuring that
policies and strategies are sensitive to gender issues. TWIB (Technology for Women in
Business) is a Department of Trade & Industry initiative that supports the advancement of
women in business through the application of science and technology in their ventures. This
is aimed at overcoming constraints to enterprise innovation and growth, as well as fostering
local and global competitiveness. The sector departments have also developed initiatives to
give targeted support to women in business. These have led to a grid of sector-specific
women in business networks, including Sawic (construction sector), Woesa (oil and energy
sector), and Sawima (mining sector).
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Several objectives of the B-BBEE strategy bear relevance to small business development
and therefore to this strategy. These are:
Besides increasing enterprise ownership by blacks, the B-BBEE strategy also outlines
measures to increase procurement from black-owned enterprises, and to strengthen the
supply capacity of black-owned firms.
This sort of support benefits a new franchise from a finance perspective; and this actual
supports the financial backing that Kauai is willing to commit to their employees as well as
any interested franchisee.
The IDC is there to support financially in getting small medium enterprises started financially
and assisting in sustaining them; based on agreements signed between both parties.
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Aspect relevant to
small business Current or proposed B-BBEE strategy action
development
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Bibliography
Kroon, J. (editor) 1998. Entrepreneurship. Start your own business, Cape Town. Kagiso
Education.
http://www.doh.gov.za/docs/policy/gender.pdf
www.dti.gov.za
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