Lunch-plus

It had been a very busy fall semester for Kalsoom Abbas, Bushra Haider, Faridah Tariq, Nayab Kanwal, Lubna Aftab, and Rabia Faheem. All six students were nearing the completion of their MBA program at UCP and were contemplating their future career options. Most of the women had one year left in their program and were considering launching Lunch-Plus, an entrepreneurial venture, during their final year of studies. The Entrepreneurship course gave them high spirits and they started believing like all other students that it was not a bad idea to have a small venture in their spare time. They worked in a group for all assignments and the final group project gave them a real opportunity to know each others abilities to get along towards the successful completion of an A-grade presentation. The partners wondered how much funding would be required to start the business. They could arrange Rs.30,000 each to invest but needed to know if additional financing would be required and the likelihood of obtaining external financing. It was early February 2012 and the group wondered if they should proceed with the venture by the end of the month.
LUNCH-PLUS

Lunch-Plus would be a healthy lunch preparation and delivery service, serving elementary schools within the ten Kilometer radius of their university. The business would be managed by a six-person partnership. The Lunch-Plus would provide flexibility for parents and their children. Parents would select a sandwich or alternative, snack, dessert and drink from a set menu of choices for their child (see Exhibit 1 for a sample of menu options). Parents would choose how regularly their child participated in the program; for example, some parents might choose to order a lunch for their child every day of the month while other parents might place one lunch order once a week. The food would be prepared and assembled in the Lunch-Plus facility. For easy delivery, each lunch would be clearly labeled with the students name and placed inside a classroom container labeled with the teachers name. The partners were considering donating a portion of the gross sales to the school which the management could use for financing needy children. The partners general business experience varied but was limited to customer service and basic internship they did during last summer with different organizations. Of the partners, Bushra was the only one who had significant experience in fast food when she worked for Coffee Tea & Company-a famous coffee shop in Gulberg, Lahore, which was known for its variety of sandwiches and many other types of snacks.
OBJECTIVES

Since all six partners would remain full-time university students for another two semesters, each wanted to limit her involvement in the business to approximately 15 hours a week. Each partner wanted to withdraw a total of 30,000 spread over the period of spring to fall semesters for compensation in running the business. The partners also wanted to promote healthy eating habits for children and help reduce the parental stress involved with planning for and packing healthy lunches. Finally, the partners were interested in gaining business experience that would enable them to decide if they would pursue this or another entrepreneurial venture upon graduation.

This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan

OTHER CONSIDERATIONS Parenting Challenges

There has been a rapid increase in the number of families where both parents worked due to the constant increase in cost of living during last ten years. As a result, maintaining an acceptable balance between work and home was a constant challenge for all these parents. About two-thirds of full-time employed parents with children were dissatisfied with the balance between their job and home life. Parents blamed their dissatisfaction on not having enough time for family and spending too much time on the job. In addition, the time spent with children did not always equate to what many parents would refer to as quality time. Many parents juggled their work and family duties by including children in their own leisure and free-time activities.
Focus on Healthy Eating

The society was becoming increasingly concerned with healthy eating choices and for very good reason. The commonly spread stomach, and allergies related diseases, and obesity rates among children and adults had increased substantially during the past 20 years. Offering children and youth nourishing food was a fundamental component to enhancing their healthy development and ability to learn. According to Pakistan Medical Association (PMA), during their recent pediatrics conference in Karachi, nutrition affected childrens physical and psychosocial well-being, as well as their academic accomplishments. Making healthy foods more readily available to children during the school day would likely have a positive impact on their learning. The increased usage of electronic gadgets such as i-Pods, MP4, video games, cell phones, TV, and
internet had already taken the children away from sports and physical activities. With reduced time in exercise and increased usage of ready to eat snacks and junk food items had major impact on young childrens health.

In the majority of cases, parents were responsible for planning and packing their elementary school-aged childrens lunches. Parents wanted their children to eat healthy meals but also faced time constraints associated with planning and preparing lunches every day. Parental concerns associated with school-run canteens and cafeterias inside premises included value for money, variety of choices available (especially for picky eaters) and food preparation safety.
Current Lunch Options

Parents either chose to send a lunch with their child or give them cash to buy something from the school cafeteria. At home, the quick to prepare options were limited to mainly K&Ns, and a limited product choice from DAWN, and MENU. Only K&Ns offered microwave ready items for Deli sandwiches and sausages. The other items by all three companies, such as Shami Kebab, Seekh Kebab, Chappal Kebab, Burger Patties, and Nuggets, required either frying or reheating. This required considerable processing time which made it hard to manager for such parents in the morning. Cooking oil being the main processing ingredient in all such items again raised an issue of health for the parents.
Packaged Lunch Options

Local bakery chains such as Gourmet Foods, Cakes & Bakes, DOCE, and some others have offered lunch packs for children, but that included items such as Burgers, Sandwiches, Pizza, Patties, Bread Rolls etc, which was generally nor perceived as healthy choice. Most of the schools have outsourced the campus cafeteria to outside vendors and hardly maintained a check on product quality and price. The children were not allowed to leave the school premises during the working hours that left the children no choice but to
This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan

select one of the few options.

Target Market

The partners decided to focus mainly on the children under the ages of ten. The menu was carefully selected based on a survey with approximately three hundred parents regarding their childrens eating habits. The menu also focused on health and nutritious values therefore juice and milk were included in the combination rather than soft drinks.
Sales Strategy

The partners needed to develop a sales pitch directed at both schools and parents and were wondering what the most appropriate message was and how it should be delivered. Once decided on, the partners planned to use backpack mail to distribute order forms directly for children to take home to their parents on a monthly basis. If parents decided to participate in the program, they would be required to fill out the form and return it to the school along with the payment. The school would then forward orders to Lunch-Plus for money reconciliation and order consolidation. The partners considered different methods of additional promotion including a website, promotional packages for principals and teachers, and flyers distribution to children and parents at the start and close time of school session. An informational website would cost approximately 10,000 to develop and 1,000 per year for hosting fees. If this option was selected, the partners would need to decide what information to include on the website and how to present the information. The purpose of promotional packages for principals and teachers would be to introduce the business and provide details about how the program would work, its benefits, the story behind the business, etc. These could be distributed with the intent of scheduling a meeting or presentation with the school principal or administrator. Costs to develop the package would amount to Rs.5,000 and the printing of each package would cost Rs.100. the other method to promote the idea was to participate in schools festivities, fund raising activities, and sports days. The cost to attend such activities was free but the partners would need to invest in a quality display system to communicate a professional image if they were going to attend any such event. A display system was estimated to cost Rs.20,000.
OPERATIONS

After considering commercial regulations imposed by municipal authority and Ministry of Health, the partners decided that the best location for the business would be a 1,000 square foot commercial space located in Township area. Rental costs for the space would amount to Rs.10,000 per month. The partners would be required to pay for six months in advance to sign a lease agreement. Significant renovations totaling Rs. 20,000 would be required to meet minimum operational requirements. The renovation costs would be amortized over a 5-year period using the straight-line method. Lunch-Plus planned to offer lunches for 38 weeks of the school year from September to June (see Exhibit 2 for a breakdown of the number of weeks of operation for each month). Once orders were placed, the lunches would be prepared on site. It was estimated a total of 100 lunches could be made per person each hour. The completed lunches would be labeled appropriately and placed in the schools classroom container. Two containers would be required for each classroom and would be used on a rotating basis. The container from the previous day would be picked up when the lunches for the current day were delivered. A delivery van, rented for Rs.20,000 per month (including fuel and maintenance) starting
This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan

in September, would be required to deliver and pick up the containers. Two partners would be involved in the distribution of lunches each day, which would take approximately two and a half hours. Shopping, cleaning and food preparation (outside of the time it would take to assemble the lunches) would take approximately 10 hours each week at the expected sales levels. The partners determined that administrative duties, including order collection and processing, banking and inquiry handling, would take approximately 20 hours per week. If the number of hours required to spend working for the business exceeded the partners maximum, they would hire an administrative assistant at a rate of Rs.8,000 per month.
PROJECTED COSTS AND SALES Sales

Twenty schools located in close proximity to the business location would be targeted initially. Preliminary conversations with principals and administrators from these schools indicated a strong interest in learning more about the Lunch-Plus offering. The average population for these twenty schools was 200 students. (initial target market) The selling price per lunch would be Rs.100. The estimates of the expected number of lunches ordered per week can be found in Exhibit 3. These figures were based on the survey conducted during last one month through meetings with school administration, and personal observation. Also, the partners wanted to project the results if sales were 10 per cent less than estimated.
Costs

Lunch-Plus would need to purchase equipment in August in order to prepare for the September orders. The company would require two refrigerators at a cost of Rs.20,000 each and two ovens at a cost of Rs.15,000 each. They also needed two microwave ovens at a cost of Rs.10,000 each. It was expected that the appliances would last for 5 years. Office equipment, which included a computer, printer, desk and chair, would total Rs.25,000 and would be amortized over a three-year period. All equipment was planned to be taken on 6-months easy installments from AR Electronics. Kitchen utensils would cost Rs.10,000 and a business license would be required for a fee of Rs.1,000. Beginning in August, telephone and Internet charges of Rs.2,000 and utilities charges of Rs.10,000 will be incurred monthly but paid approximately 15 days after the end of the month. Cleaning and office supplies would total Rs.3,000 per month starting in September. The company bank account would be set up in early September and the partners thought it best to estimate two per cent of sales for bad cheques. The partners calculated that the cost to produce a lunch would average Rs.65 including packaging costs. A food, cleaning supply and packaging inventory of Rs.50,000 would be established in September and maintained throughout the year. Reusable transportation containers would cost Rs.4,000 per school and order forms would cost Rs.300 each month for each school served. These costs would start in September and the containers were expected to last for three years. The supplier of containers agreed on granting a credit for 30 days. The partners decided to position the lunch program through social media and planned to endow five per cent of sales to the participating schools.

This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan

CONCLUSION

The partners knew it was time to get down working and doing the necessary analysis that would enable them to finalize their decision. Given that all six partners planned to continue their studies on a full-time basis, they wanted to make sure each partner would not exceed the set time commitment. In addition to the number of decisions they had yet to make, the partners were also interested in assessing the overall riskiness of the venture. The major challenge would be to price the lunch which will be affordable for the parents as well as give an attractive return for the partners to pursue the venture.
Exhibit 1 SAMPLE MENU

Monday Chicken Burger Fries Juice Cookie

Tuesday 250gms of Chicken and vegetable noodles Milk Chocolate Brownie

Wednesday A 4.5 pizza slice Juice Pastry

Thursday Egg & Vegetable Sandwich Cole Slaw Juice Cake Slice

Friday Chicken Shawarma Milk Fruit Yogurt

Exhibit 2 NUMBER OF OPERATIONAL WEEKS PER MONTH

Month September October November December January February March April May TOTAL

# Weeks 4 5 5 4 5 4 5 5 4 41

Note:

The number of weeks are expected to be approximately 38 based on the holidays such as Eid-ul Fitr, Eid-ulAzha, Ashoora etc.

This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan

Exhibit 3 SALES ESTIMATES # of Lunches Per Week 0 1 2 3 4 5 Proportion of Students 50% 30% 10% 6% 2% 2%

Learning Outcomes

Students are expected to: 1. Prepare detailed cash flow statement incorporating monthly figures. 2. Prepare projected financial statements. 3. Perform a breakeven analysis to assess the riskiness of the venture. (FC/(P-VC)) 4. Make a recommendation on whether to proceed with the business including any alterations to the original plans.

This case was written by Khalil Mohammad-Professor of Finance at FMS-UCP with assistance from Sidra Kanwal-Research Assistant for class discussion only. The case is a property of Case Repository Cell at Faculty of Management Studies, University of Central Punjab, Lahore, Pakistan