Cool Moose Case

Daniel Salmon
Peter Macdonald
Advanced Report Writing
EAC 694
October 20, 2018
 Table of Contents

Introduction…… Page 3
Cool Moose…… Page 3-4
Dairy Queen…… Page 4-5
Soft Serve…… Page 4-5
Analysis…… Page 5-7
Alternatives…… Page 7-8
Recommendations…… Page 8
Conclusions…… Page 8
End Matter…… Page 9-10
Daniel Salmon

Cool Moose Case

Intro
Cool moose has been a successful company for the 2 years it has been open. It has developed a

strong community relationship and brand from this as well. In doing so, Cool Moose owner

Perantinos wants to also to explore new ways to continue growing its business and sales as he

faces a decision to pursue or not pursue this business full-time. This report will recommend

whether or not Cool Moose’s performance to date and recognition would be susceptible to be

able to continue this as a full time occupation upon graduation after two successful years.

Therefore, Cool Moose will consider if the an expansion of its product line with a purchase of a

soft serve ice cream machine would improve its profitability as this would help towards pursuing

this business as a full time occupation. As a result, Cool Moose will contemplate whether the

benefits of adding soft serve ice cream are great enough to overcome the investment, time and

effort needed to add these machines. In doing this, it will examine the options of not introducing

any soft serve ice creams machines , or expanding its line with either a single head ice cream

machine or a triple head ice cream machine.

Cool Moose
Cool Moose current product line offers a variety of 16 hard, scooped ice cream, as well as frozen

yogurts, milkshakes, floats and other frozen treats. Each of Cool Moose’s different locations

opens in May of each year operating through the summer until labour day, a four month

operating period. As of right now, Cool Moose has two different locations and is also looking to

open a third. One of the Cool Moose’s was located in Tottenham, the other in Alliston, Ontario
and it was planning to open a third one in Cookstown. The location in Tottenham was the

original foundation for the company’s future success. First founded in May 2008 the Tottenham

location was able to develop strong brand recognition and a loyal customer base. The company

was well known for its service to customers and developed 3 core values. Such business

practices allowed the company to carry over its success into its other location in Alliston,

Ontario. By the end of Summer 2019 Cool Moose creamery had seen sales growth of 233%.

After two successful years Cool Moose owner Perantinos is now interested in its overall

profitability and how to further its growth to be able to maintain a full time income.

DQ
Like every other business Cool Moose had competition as well. Even though Cool moose is the

only hard scooped ice cream parlour in both of its current locations. Prior to opening both Cool

Moose Creamery’s’ the only other business that offered ice cream was Dairy Queen in Alliston,

Ontario. In Cool Moose’s two current locations it only faces competition from one of its

location. Its only competition is Dairy Queen in Alliston. Like Cool Moose, Dairy Queen offered

frozen treats, but as well as cakes, hot dogs and hamburgers. Dairy Queen was a favourite and

destination for little league teams celebrating, business professionals taking lunch and families

taking time out. Despite that, DQ pricing model was considered high compared to the industry

and Dairy Queen’s business model was different from Cool Moose. Being that, DQ was limited

to only offering soft serve ice cream unlike Cool Moose’s hard scooped ice cream. This offered a

comparative advantage to Cool Moose for those who preferred hard scooped ice cream over soft

serve and at a low price but, also provided an advantage to DQ for people who had a preference

for soft serve ice cream. The soft serve consumer preference allowed DQ to generate revenues of
over $500 000 annually. If Cool moose taps into Dairy Queen’s market by expanding its product

line to providing two options of ice cream: soft serve and hard scooped rather than just hard

scooped at the Alliston, Ontario location it has the potential to attract new customers who would

prefer soft serve ice cream. Specifically, several of these new customers could be current DQ

customers who would switch to Cool Moose because of its lower prices, variety of ice cream,

and pleasant experience. However, this will cannibalize some profitability of scooped ice cream

sales.

Soft serve Expansion

Soft serve ice cream was very common in fast food restaurants such as McDonalds and Dairy

Queen. These machines are able to produce and dispense ice cream in a swirl pattern with a

smoother texture than scooped ice cream. Unfortunately, soft serve ice cream posed a number of

health and safety issues. As a result, if the machines were not cleaned properly they were

susceptible to bacteria and food borne illness. Therefore, not cleaning these machines would be

detrimental to their ability to function properly and longevity of their entire useful life. If Cool

Moose chose to expand its product line to include Soft serve ice cream it would have several

benefits but, it would also pose several complications for the company as well. In order to

determine whether the benefits out way the costs Cool Moose analyzed 3 options: 1) Expansion

with use of Single Head 2) Expansion with use of Triple Head and 3) No Expansion as an

alternative.

Analysis
1) Expansion with used of Single Head Soft serve Ice Cream Machine
 Cool moose is considering expanding its product line to offer soft serve with the use of a

single head machine in order to grow profitability. An evident downfall already was that

single head machines are only able to produce one flavour, vanilla. Cool Moose is

looking at purchasing a used machine. After evaluating the difference between the

benefits and cost, the single head machine is able to produce a gross profit of $2152.

Even though the cost of the used single head machine is relatively cheaper than triple

head machine with a price of $2000, Cool Moose must also take into account of potential

repair cost. According to it’s research some store owners had success with a used

machine but, others were disappointed. Additionally, with all the potential repair cost,

Cool Moose will have to look into buying a new machine after 3 Years. This would result

is spending approximately $4000 in just 6 years. Even with potential repair costs,

cannibalization of scooped ice cream of $1690.5 and a useful life of only 3 years, it

would be recommended to get the used single head machine because the benefits

outweigh the cost.

2) Expansion with used of Triple Head Soft serve Ice Cream Machine
Cool moose is considering expanding it product line to offer soft serve with the use of a

triple head machine in order to grow profitability. Unlike, single head machines that were

only able to produce one flavour, its counterpart the triple head was more sophisticated

and is able to produce 2 flavours. A person can either have a choice between vanilla and

chocolate or a combo of both of them in a swirl. After, a differential analysis between

benefits and cost the triple head machine is able to produce a gross profit of $1394. Even

though, the triple head machine are 3 times more expensive than single head machine

with a price of $12000 it wouldn’t need to worry about repair cost like the single head
 needs to. Also, the useful life of the these machines are 2 times more longer than the

single head machines. However, the single head will still cost less than a triple head

machine in 7 years with a cost of approximately $4000 only, not taking into account any

repair cost. As a result, it would not be recommended to take on the use of the triple head

machine because of it’s high cost. Also, the cannibalization of scooped ice cream of

$2415 is hard to justify for the triple head machine relative to a lower gross profit margin

of $1394 than single head machine which is $2152.

Alternative
3) No product expansion
Sometimes it is better not fix anything that doesn’t need to be fixed. This can be the case

for Cool Moose as it has the alternative of not expanding its product line to offer soft

serve ice cream and to only continue serving scooped ice cream. This has a couple of

benefits and disadvantages. The advantages of this is that Cool Moose doesn’t need to

worry about additional time, costs and expenses associated with purchasing a soft serve

ice cream. Also, it can focus on its existing customers by potentially introducing more

flavours and frozen treats and a potential catering service. By introducing a catering

service they would be able to specialize in certain desserts and target a audience that DQ

hadn’t yet. This would please anyone looking for a place to go for either generalized or

specialized desserts. On the other hand, the disadvantages of not expanding its product

line with soft serve ice cream is not tapping into DQ’s market of customer. All in all it

will miss out in opportunity cost of gaining new customers through soft serve products

and increasing the company’s profitability. In this scenario benefits outweigh

 disadvantages but, it has to give up the opportunity cost of sales growth and profitability

from the expansion in the product line and its new customers.

Recommendations
If Perantinos wants to pursue Cool Moose as a full time occupation he should look to keeping it

open for longer than 4 month period. Dairy Queen runs all year. Even though sales might be

slower in colder seasons Cool Moose can cutback on inventory as well as hours to lower cost so

that they can continue to maintain profitable during those slow seasons.

Conclusion
In conclusion, after considering the benefits and costs of adding soft serve ice cream. It is evident

that the benefits of soft serve ice cream are great enough to overcome the investment, time and

effort needed to add these machines. It is recommended that Cool moose expands its business to

offer soft serve ice cream. As a result, Perantinos should look to keep this business and operate it

full time upon graduation. The profitability from the scooped ice cream and from soft serve will

be able to maintain him a full time income. Sales alone by introducing soft serve ice cream

would amount to almost 20% of sales made by DQ in a whole year, not including any scooped

ice cream sales. When expanding its product line with soft serve ice cream machines it is

recommended that they should do this through the use of the single head machine rather than

triple head machine. This is because the single head machine will be more advantageous in

aspects such as a higher gross profit margin, less time and effort required, less cannibalization on

scooped ice cream, and less costly over the same period of time as the triple head machine.
End Matter
Single Head Machine:
[Useful life= 3 years]
(+)Sales=> 2800 servings x $2.50= $7000
(-)Costs=> $4848
- Refrigerator Costs (4 month period)=> $150 x 4months= $600
-Additional Costs=> $924
-Bag=> $2800 servings x $.25= $700
-Cups/ Cones=> $2800 servings x $.775= $196
-Napkin=> $2800 servings x .01= $28
-Training Costs=> $21.80 x 120 days= $2616
-Cleaning Costs=> $10.90 x 120 days= $1308
(=)Gross Profit=> $2152
Start up Costs:
- Used Machine= $2000
- Delivery=> $150
- Installation Cost=> $650
Cannibalization of Scooped ice cream:
-Sales=> 980 servings x $2.50= $2450
-Cost=> 980 servings x $.775= $759.5
-Net=> $1690.5
Depreciation:
$2000/ 3 years= $666/ year

Triple Head Machine:

[Useful life= 7 years]
(+)Sales=> 4000 servings x $2.50= $10000
(-)Costs=> $8606
- Refrigerator Costs (4 month period)=>$350 x 4mths= $1400
-Additional Costs=> $1320
 -Bag=> 4000 servings x $.25= $1000
-Cups/ Cones=> 4000 servings x .07= $280
-Napkin=> 4000 servings x .01= $40
-Training Costs(3hrs)=> $32.70 x 120 days= $3924
-Cleaning Costs=> $16.35 x 120 days= $1962
(=)Gross Profit= $1394
Start up Costs:
- Machine= $12000
- Delivery= $150
- Installation Cost= $650
Cannibalization of Scooped ice cream:
-Sales=> 1400 servings x $2.50= $3500
-Cost=> 1400 servings x $.775= $1085
-Net=> $2415
Depreciation:
$12000/ 7 years= $1714/ year