Self-Serve Frozen Yogurt Business Plan

Kirk Spotts Mike Jones

Executive Summary Bellingham Yogurt will provide outstanding customer service while serving affordable, plentiful, and quality frozen yogurt to Bellingham inhabitants. Our products will include six flavors of delicious frozen yogurt and around 35 toppings to help our customers create their dream dessert. We will have the chance to switch out flavors using our three machines that can handle two flavors each. Being able to have a daily change to our menu will set us apart from our competition. Most dessert places have a stagnant menu and a disappointing delivery to the customer. With these changes in our offerings, we will enhance the customers experience by over serving their needs. By having an easy to read menu, lots of color and exciting music playing, getting dessert with us will be a treat in more than one way. Our prices will compete with many of the major franchise frozen yogurt stores by selling our product at a low .43 cents per ounce. Since most people will consume 8-10 ounces of yogurt plus 4-6 ounces of toppings, we will sell an average of 1216 ounces per customer, bringing in a total $5.16-$6.88 per customer. Our vision is to create a fun, energetic, and positive experience to a destination spot of frozen yogurt. The focus of Bellingham Yogurt will be to encourage all age groups to come and enjoy a healthy snack while enjoying the company of our service and others in the store. Our location will be in the downtown vicinity and will piggy back on the customer base of the other local stores. Trying not to directly compete with Mallards, we will not be on the same street. Since Mallards has been around for many decades and is a standing tradition for all of the Bellingham population, we will not likely be able to beat them straight up. Appealing to all age groups and especially college aged people, we will be drawing from a huge demographic in Whatcom county. Opening mid-morning and closing fairly late will enable us to capture all of Bellinghams demographics ranging from families, retirees, and college students. Bellingham Yogurts marketing strategy will encompass online, paper, radio and word of mouth advertising. Since the new craze is in social media, we will focus on advertising on Facebook, Twitter, and LinkedIn. Other modes of advertising will be creating frequent shopping cards for discounts, ads in the Western Bluebook, and supporting local school functions. Marketing in the physical paper and radio will be necessary but wont draw on the younger population. Making sure that people understand this is a locally started and founded company will help create a sense of community for our business and will help residents support our store. Our financial position will require a loan of $106,000 as well as our own personal contributions totaling $40,000. The total start-up expenses will be about $126,000 with working capital of $20,000. Projected revenues for our first year of operation are $288,000 with a net profit of $77,736. We expect to increase our revenues by 10% the following year. Our store will be formed as a LLC and we expect to open by January 2013.

Table of Contents Executive Summary Vision Mission Statement Management Biographies Ownership Structure Industry Analysis Competitor Analysis Competitive Advantage Business Strategy Pricing Growth Marketing Strategy Target Market Marketing Tools Market Niche Marketing Budget Location Map Floor Plan Financials Start-up Expenses Income Statements Year 1 Years 2-3 Years 4-5 Cash Flow Statements Years 1-5 Balance Sheets Year 1 Years 2-3 Years 4-5 Break Even Analysis and Ratios 2 4 4 4 4 5 5 5-7 7 7 7 7 8 8 9 9 10 10 11

17

Vision Statement The vision of Bellingham Yogurt is to create a fun, creative, and adventurous dining experience by developing an image of endless creations and friendly service. We want Bellingham Yogurt to be as fun for children as college students to visit. Creating a fun, clean, friendly place to enjoy yogurt is our goal and soul purpose.

Mission Statement To provide a fun and interactive snacking experience while providing outstanding customer service to our loyal customers.

Management Michael JonesKirk SpottsCo-Founder and Co-Owner Co-Founder and Co-Owner

Biographies Michael Jones is a senior at Western Washington University, graduating with a degree in Business Administration- Operations Management. He has held multiple jobs, ranging from fishing on the Bering Sea to being a supply chain intern at a thruster manufacturer. He knows what it takes to work hard to get results yet he knows the delicate relationship between a business and the customer. Putting in hours is an understatement when trying to describe some of his jobs in Alaska and here in Washington. Not only physical demands, but strict deadlines at Rader Farms and Aerojet helped shape his understanding of the real requirements for a successful business. He also worked at the Meridian Haggen for two years as a seafood clerk so he knows how to interact with customers and satisfy their needs. His experiences in business and grocery and his

education in lean operations will help maintain the companies values and lead us to success.

Kirk Spotts is a senior at Western Washington University graduating with a degree in Business Administration- Operations Management. He has five years of experience in retail with three years in sales, two in inventory management, and one as a sales manager, all for La-Z-Boy Furniture Galleries in the Seattle area. All of this experience has given him the opportunity to understand how to manage the technical as well as the people side to business. Ownership Structure Bellingham Yogurt will be a Limited Liability Corporation, founded in a partnership. Michael Jones will own 50% of the company and Kirk Spotts will own the other 50% of the company. Both will have an initial investment of $20,000 that they will put into the company. Being a limited liability we are able to limit our personal risks that come with starting a business.

Industry Analysis Americans, especially in the Pacific Northwest, are becoming increasingly health conscious. At the same time, eating healthy can sometimes mean you dont get to eat a lot of delicious food. Frozen yogurt has bridged the gap between the tasty and the healthy. Besides the frozen yogurt, consumers are loving the hip and contemporary feel

to the stores. They include Wi-Fi, LCD televisions, and great music. In other words, the people come for the yogurt, but they stay because of the ambient setting. From a financial point of view, the frozen dessert industry has grown by 16 percent since 2003, according to research from Market-Research.com, to become a $12.1 billion business and much of that growth has been from frozen yogurt. Over the past few years, the U.S, and especially the Pacific Northwest, have become increasingly healthconscious, giving frozen yogurt a competitive edge over other types of dessert and snack restaurants such as ice cream parlors. Overall the industry has been trending upward for almost a decade. One of the greatest advantages that frozen yogurt franchises, and especially the self-serve model have, is the fact that the product is versatile and customizable. With the many different flavors and toppings, there are limitless possibilities to what you can end up with. From a green tea yogurt with strawberries and peaches, to a peanut butter yogurt mixed with chocolate yogurt with M&Ms, reeses pieces, chocolate syrup, and so on. The possibilities are endless. Best of all, the customer gets to decide on every detail!

Competitor Analysis

Since we plan to open our store locally in Bellingham/Whatcom County, our only direct competitor will be a company called Red Berry, which has a single frozen yogurt store located in downtown Bellingham on East Holly Street. They do not operate in a selfserve business, offering a few different cup sizes instead. They are a local business that is very focused on the health benefits of their products, offering numerous details on the nutritional facts of each of their products on their website and in the store. The interior of the store has a very contemporary feel with very simple furnishings (five tables total), art on the walls, and free WIFI access. The store is only about 200 square feet and is located in downtown with plenty of parking and shopping around the area.

Most people that live in the area seem to know about Red Berrys existence, but it doesnt seem to get raving reviews. This is most likely due to the lack of overall variety in yogurt flavors and the fact that they are a bit expensive. They operate on three yogurt flavors on any given day. They always have the original and green tea flavors available, with one other flavor that is usually changed monthly. Although they have a limited set of flavors, the ones they do have (especially the original and green tea flavors) are very popular. They also make up for the lack of flavors with a decent variety of toppings. We have listed all of the yogurt flavors and toppings that they currently offer below. In comparison with other frozen yogurt shops we have seen in the past, Red Berry doesnt seem to get a lot of traffic. On many different occasions we have walked by and seen nobody in the store during what should be peak business hours. The overall lack of variety and control of the product may be a contributing factor in this. The prices for their products are around $7 to $8 which would end up being a lot higher than ours in many circumstances since our customers will have the ability to fill up their cups to their liking. Other Competitors in Whatcom County include Mallards and Yogu-San. Mallards is an ice cream parlour in downtown Bellingham that has become the standing tradition for Bellingham residents who want a dessert related treat. They could pose a threat as a potential substitute for our product. Yogu-San is the only other yogurt shop in the Bellingham area. It operates in a similar way that we will run but they are only in one, small, isolated location in the mall, and they do not offer self serve products. They are a franchise much like YogurtLand and Tutti Fruitti that will have much higher operating expenses than we will because rent at the mall is much more expensive than anywhere else in Bellingham, and at the same time, they will have to pay royalties to their franchiseholder.

List of Red Berrys Yogurt Flavors (alternate between two at a time): Original, Green Tea, Blackberry, Pomegranate, Mango, Chocolate, and Peach.

List of Red Berrys Toppings: Kiwi, Mango, Raspberry, Strawberry, Mochi, Walnuts,Coconut, Craisins, Granola, Almonds, Graham Cracker, White Chocolate Chips, Cocoa & Fruity Pebbles, Reese's Peanut Butter Cups, Oreos, Chocolate Chips, M&M's,Trail Mix, Blueberries, Honey, Ghiradelli, Chocolate Sauce, Mila - The Miracle Seed.

How We Will Compete Red Berry has only one location, a mediocre number of yogurt flavors, and is not based on the self-serve business model. Neither are Yogu-San and Mallards. We will have a great ability to compete in the area by differentiating ourselves from the competition. In addition to being a self-serve business, we will offer up to eight flavors (plus four twists) on any given day, with upwards of thirty toppings. The freedom the customer will have in the amount and the variety of our product will make us a more popular option for many. Since we will be charging based on the weight of the product instead of the cup size, we will create more control for the customer while at the same time increasing our margins (because variable costs are only about 20% of our costs). Besides differentiating our product and overall experience, we will also focus on picking up on markets that Red Berry hasnt catered towards (those who arent health conscious), while at the same time, taking as much of the healthy market as we can. Since Red Berry is the only direct competition we will have, there should be plenty of market to go around.

SWOT Analysis STRENGTHS: Health Aspect- People are concerned more than ever about eating more healthfully than they have in the past. Non-fat frozen yogurt has fewer calories than other desserts and provides nutrients that will help you to make it through your day

Low Start Up Costs- One of the greatest strengths of a frozen yogurt store is the fact that they require less than $200,000 to get off the ground. Low Product Costs, Low Operating Costs- Low COGS with around an 80 percent gross margin. Low total operating expenses. Variety and Customer Control- The ability to select the amount and type of yogurt and toppings gives the customer a sense of power over their choices. WEAKNESSES: Very dependent on Location- A good location is probably the single most important part of starting a frozen yogurt business. Lack of Franchise support (no brand recognition)- Since we will be starting our own business without any franchise help, we will have to depend on ourselves for training, marketing, and supplying our products. Low Ticket price- Since our product will be selling for around 45 cents an ounce, we will need a lot of customers to make money. Service- Many people go out to get served. Since the customers will be serving themselves, some people might choose other venues. (Bigger issue with elderly customers) OPPORTUNITIES: Strong Supplier Relationships- If we are able to form a good relation with our supply chain, we will be able to get our materials faster, cheaper, and in better condition than the competition. Shifts in Consumer Habits- During summer months, when everyone is trying to get into shape, we will have the ability to put more focus on the health aspects of our product. During the winter months, when people tend to care less about excercise and what they eat, we can focus on our tastier (and less healthy) products. THREATS: Substitute Products-Although Red Berry will be our only direct competition, since frozen yogurt is in the food industry, there is a huge threat of substitute products such as ice cream, smoothies and restaurants. Sub-Par Location- If this business is going to be a success, it is of the utmost importance that we have a good location. Otherwise, failure is all but inevitable. Weather- Based on our visit to a Wells Spring (Tutti Frutti supplier) seminar, it is possible for bad weather to have a huge negative impact on sales. Sales can go down up to 50% if the weather is awful enough. Barriers to Entry- There are no self-serve frozen yogurt stores in the area, and their are very few barriers to entry.

Lack of Brand Recognition- Red Berry is a pretty well-known brand in the area, and since we are going to be a brand new start up, we will have no brand recognition at first. It will be important for us to put a lot of focus on marketing.

Competitive Advantage The fact that we will be the only self-serve frozen yogurt shop in the area is our biggest competitive advantage. We will also have more yogurt flavors, more toppings, and a better cost structure. Additionally, we will compete through experience and presentation rather than on the pricing, which our customers will have some control over (depending on how much they want). We are after the market segment that wants a new and refreshing way to experience frozen yogurt and will not go to our competitors based on price points alone. Our target customers will be willing to pay extra if we charge more, but we are not planning to do so, just for the pleasure of being at our store. People are now starting to pay attention to other things than just price, they want courteous service, a wow factor, and a feeling of satisfaction when walking out the door. Being able to fill their needs will be our goal and we will not rest until every person is satisfied.

Business Strategy We plan to run our business in a similar manner to our biggest competitors. This would include the same hours of operation, similar prices, and similar products. What will make us competitive will be our location (we will try to find locations where the competition has not entered or where the market is under served), our larger availability of flavors and toppings and the overall experience of coming to our business and getting frozen yogurt. We plan to have very bright and vibrant color schemed decorations and very friendly service. We will offer free samples of any flavor of yogurt and/or toppings to new customers in order to gain their trust and appreciation of friendliness. To create a cool setting, we will purchase cheap, contemporary furnishings, set up two LCD televisions,

and play new music through our sound system. We may even consider eventuallyhave a photo booth in the store since this would most likely become a destination for first dates and group outings.

Products and Services:

Our products will consist of many different flavors of yogurt and a variety of toppings. We will offer the product through self-service yogurt machines that the customer will be able to use themselves. They will be able to pick from the different sized cups that we will offer and fill them with as many flavors and as many toppings as they want. They will put the cups on a scale and pay by the ounce. Our employees will offer a clean store with a hip, contemporary, and friendly atmosphere. The overall day to day operations of the business are quite simple. The difficult part will be creating a brand that is popular with customers, creating a customer base, and finding the right location to get us started.

Marketing Strategy Our marketing plan will consist of multiple mediums and strategies in order to fully reach our intended customers. We will use a little of all types of advertisement, including radio, online, newspaper, and sponsorships. Through these avenues we wish to reach our target market of all ages and of middle to upper middle class citizens here in Bellingham and hopefully even all of Whatcom county. The purpose of our marketing is to gain loyal customers to our store front location. This will include using excellent customer service while interacting with either Kirk or Mike. Also, we wish to educate the populous about our products and offerings at our store. Another purpose of our advertising is to gain insight on the experience of shopping and eating with our brand as compared to Red Berry or Mallards. Also one of the most influential and crucial aspects to our marketing success will

have to be through word of mouth. Almost all people use friends and family members as references when trying to gauge a new store or restaurant. It will be critical that we maintain a high level of customer service while provide a fun and entertaining atmosphere in order to have customers influence potential customers. The primary benefit that we will offer customers is to offer a great snack with a positive experience. This will include having an inviting store front that isnt too awkwardly large or small but just right. Also making sure that all the needs of our customers are being met through our yogurt and experiences. Making an inviting store front is actually quite difficult and can be costly but the affects of not having an inviting environment are actually more devastating. We will have lots of colors and fun stencils on the walls while maintaining the new modern sleek look of simplification. Having an easy to read menu and directions on how to go through the process of choosing your yogurt and dressing it up will be critical to our inviting image. Back to the focus of customer service, the attitude and actions of both Kirk and Mike will have a direct influence on the positive experience the customer will have at our store. We will need to be courteous and respectful but also fun. Frozen yogurt is a healthy alternative for regular ice cream and gelato and is quite affordable in comparison to those two products as well. Offering many types of toppings, at least 30, will add to the benefit of coming to our store and enjoying the yogurt that we produce and garnish. Our target market for our advertisement strategy will be anyone who wants a healthy alternative to other frozen treats. This will include young children, teenagers, young adults, adults, and retirees. Young children can enjoy our yogurt as an after school snack or after sporting events as a team get together and even for birthdays and parties. Teenagers can come to us while dating, going on a family outing, and social events with friends. The young adults of Bellingham can visit us for a dating destination, for relaxing, taking their children for treats or for the babysitter to get out of the house. The adults can treat their children, also for dating and socializing as well since you are never too old for a

frozen snack. The retirees of the community will want an inexpensive snack to satisfy their sweet tooth where they can people watch. If we can appeal to all of these target groups than we will both be better viewed in the community and also be in a better financial situation. We will use a variety of tools to reach our target audience. This will include online ads, newspaper, limited radio casts and associations/sponsorships. Also word of mouth but this is a element we cannot directly control but merely influence. For the online ads we will use the vacant space of popular social media sites such as Facebook and Twitter. We will also advertise on sites that have high traffic and lower costs such as Google search results, MSN, and Yahoo. The costs associated with online advertisement can range from $50 to $300 per month. For newspaper ads we will judge the price of running a full page ad in a local newspaper and decide whether we think it is justified to pay it. The cost locally for a one page ad is around $600-$1000, so we will most likely try to print small coupons in a newspaper in order to boost traffic to our store. The use of radio for advertisements has declined over the last decade and so we will match the specific listening demographics to our targeted customers. This will give us the most return on marketing investment. One of the most important ways to boost traffic is to sponsor or become associated with a certain event or cause. This can include sports teams, schools, foundations, charities, and races (especially Ski-to-Sea). With these sponsorships, our name and image will be brought to the attention of the community and to the attention of current and potential customers. Another avenue of advertisement will be the Western Blue Book. This is a great way to get our name out there and to offer some savings to the budget conscience students who still want value. Being able to advertise and offer free samples or BOGO sales will really help us win over the students of the town and their influences are felt throughout the other demographics.

Our niche in the marketplace will be having the first self-serve frozen yogurt place in Bellingham. This will give a new level of excitement for our customers and have us contrasted to DQ and Red Berry. We are confident that the offerings of a self-serve yogurt place will far out weigh anything that a traditional joint will have. Our experience is what will set us apart from other companies and we will strive for a visually appealing and positive experience location. Being able to create a welcoming feeling for customers will make us more successful in retaining them as long term assets. Our identity in the marketplace will be that of a fun, outgoing, and creative food joint. Having music playing and a creative color scheme will make us attractive. Also having wide screen tvs and free samples, frequent buyer rewards, merchandise, and a catchy slogan will keep our customers coming again and again. Location 136 E Chestnut St Bellingham WA 98225 Just down the street from Boundary Bay and across the street from La Fiammes. This will put us much closer to campus than both Mallards and Red Berry and especially closer than the Yagu San in the Bellis Fair Mall. (see next page)

Map:

Daily Operations We will operate on four self-serve frozen yogurt machines, each spaced at least eight inches apart with a three foot clearance behind them. We will do daily inspections to make sure our air conditioning is working well for health inspections. We will keep perishable products (milk, certain toppings) in our refridgerator. The yogurt powder can be stored at room temperature in the back. We plan to open our doors at 10 am. and close at 10 pm on weekdays and 11 pm. on weekends. In the morning, each machine will be started at least 20 minutes prior to opening because it takes 10 to 12 minutes to start the machines up and 5 to 10 minutes to blend the products to form a frozen yogurt. Each machine can hold about 40 cups (200 ounces) of product at a time. To mix the product requires a bag of yogurt powder, 2 gallons of non-fat milk,misc. flavoring, and a gallon of purified water. The main job of the people manning the store is to greet customers, add yogurt into machines in the morning and then again when the sensor alerts them that there is less than half a gallon of yogurt left (as necessary throughout the day), replace toppings as needed, to work the cashier and scale (which will determine the price), and to clean the machines and the store. At the end of the day, the machines must be completely sanitized. It takes about 5 minutes to clean each machine using sanitizing packets (which

cost $70 per 200 packs). Overall, day to day operations can be simple, but it is critical that employees do their jobs correctly.

Financial Assumptions We plan to purchase four frozen yogurt soft serve machines each priced at $10,750 from the Taylor Company. We will work with a company called Wells Spring to supply us with our frozen yogurt product. They will license us to sell their products under our own brand name. They offer 36 different flavors, selling each in a bag weighing 6.5 lbs. The cost for each is between $26 and $32 (depending on flavor and quantity ordered). Each bag will end upmake about 488 ounces of yogurt after being mixed with milk, water, and flavoring. The minimum order that they will process is about $600, but to get the absolute best price it is best to order a pallet, which contains 300 bags of product. Lead time for these is about four weeks and delivery is free. They will also provide us with miscellaneous flavoring costs which will cost less than one cent per ounce. Besides the actual yogurt powder (which doesnt need to be refridgerated), we will also need 2 gallons of nonfat milk for every bag of yogurt powder that we use in the machines. We will try to work with a local wholesaler to get enough delivered to us to last us through the week. Using a water filter that we will purchase, we will provide the gallon of water necessary for each batch. Overall, our total product cost amounts to about 8.5 cents an ounce (which gives us an 81% margin). One of our biggest expenses in our income statement is our payroll, which we have assumed to have 2.5 full time employees. This expense can fluctuate a lot depending on whether we work in the stores a lot ourselves, which is highly likely. In such a case, we will take much of the payroll off (or include it as executive compensation). We determined rent based on the average for locations in downtown Bellingham, which is $12 per square foot plus triple nets. We plan to find a place that is around 1200 square feet.

Startup Expenses Facility Costs First Month's Rent Lease Deposit Equipment Tenant Improvements/Construction Furnishings (tables, chairs, counters) Scale POS Refriderator LCD TV'S (2) Water Filter Yogurt Machines (4 total) Initial Inventory Yogurt Mix Non Fat Milk Flavoring Cups (2 sizes) Spoons Toppings Lids Pumps Cleaning Materials Other Costs Licenses Insurance Grand Opening Prep. and Advertising Granite Sign Legal/Accounting Working Capital Total Startup Expenses Less: Owner's Equity Estimated Loan Amount

1833.33 3000

50000 4000 500 1200 1400 800 100 43000

7800 115 20 30 10 100 20 20 50

600 500 5000 2000 4000 20000 146098 40000 106098

Balance Sheet Year 1 Jan.

Assets Cash Receivables Inventory Total Current Assets Plant Assets(Equipment/Ten.Improv.) Accumulated Depreciation Net Plant Assets Total Assets Liabilities Accounts Payable Other Payables Total Current Liabilities Long Term Debt Total Liabilities Common Stock Retained Earnings Total Equity Total Liabilities & Equity $5,320 0 -------5,320 -------104,233 -------109,553 -------40,000 6,146 -------46,146 -------$155,699 ======== 107,343 -------40,000 11,055 -------51,055 -------$158,398 ======== 105,576 -------40,000 15,694 -------55,694 -------$161,270 ======== 104,031 -------40,000 21,475 -------61,475 -------$165,506 ======== 102,708 -------40,000 29,005 -------69,005 -------$171,713 ======== 101,606 -------40,000 38,474 -------78,474 -------$180,081 ======== 100,505 -------40,000 50,200 -------90,200 -------$190,704 ======== 98,516 -------40,000 61,067 -------101,067 -------$199,583 ======== 95,420 -------40,000 67,696 -------107,696 -------$203,116 ======== 92,988 -------40,000 71,975 -------111,975 -------$204,963 ======== 91,000 -------40,000 75,610 -------115,610 -------$206,610 ======== 88,790 -------40,000 77,736 -------117,736 -------$206,526 ======== 102,466 100,700 98,933 97,166 95,400 93,633 91,866 90,100 88,333 86,566 84,800 4,877 4,877 5,098 5,542 6,207 6,872 6,650 5,320 4,655 4,433 3,990 $4,877 0 $4,877 0 $5,098 0 $5,542 0 $6,207 0 $6,872 0 $6,650 0 $5,320 0 $4,655 0 $4,433 0 $3,990 0 $54,279 0 8,200 -------62,479 -------94,800 1,580 -------93,220 -------$155,699 ======== $158,398 $161,270 $165,506 $171,713 $180,081 $190,704 $199,583 $203,116 $204,963 $206,610 $206,526 91,640 90,060 88,480 86,900 85,320 83,740 82,160 80,580 79,000 77,420 75,840 94,800 3,160 94,800 4,740 94,800 6,320 94,800 7,900 94,800 9,480 94,800 11,060 94,800 12,640 94,800 14,220 94,800 15,800 94,800 17,380 94,800 18,960 66,758 71,210 77,026 84,813 94,761 106,964 117,423 122,536 125,963 129,190 130,686 $61,384 0 5,374 $66,356 0 4,854 $72,700 0 4,326 $80,454 0 4,359 $89,268 0 5,493 $103,706 0 3,258 $114,296 0 3,127 $118,289 0 4,247 $122,104 0 3,859 $125,586 0 3,604 $128,111 0 2,575

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Income Statement Year 1 Data for Year Ended 2012 Sales Cost of Sales Gross Profit Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Total Expenses Net Income Before Interest & Taxes Interest Expense Taxes Net Income After Taxes Cumulative before tax earnings

Jan.
$24,000 4,560 -------19,440 1,500 5,000 1,580 250 2,417 50 264 480 1,050 -------12,591 -------6,849 704 0 -------6,146 ======== 6,146

Feb.
$22,000 4,180 -------17,820 1,500 4,800 1,580 250 2,417 40 242 440 950 -------12,219 -------5,601 692 0 -------4,910 ======== 11,055

Mar.
$22,000 4,180 -------17,820 1,500 5,200 1,580 250 2,417 23 242 440 850 -------12,502 -------5,318 680 0 -------4,639 ======== 15,694

Apr.
$23,000 4,370 -------18,630 1,500 5,000 1,580 250 2,417 22 253 460 700 -------12,182 -------6,448 668 0 -------5,781 ======== 21,475

May
$25,000 4,750 -------20,250 1,500 4,800 1,580 250 2,417 42 275 500 700 -------12,064 -------8,186 656 0 -------7,530 ======== 29,005

Jun.
$28,000 5,320 -------22,680 1,500 5,200 1,580 250 2,417 52 308 560 700 -------12,567 -------10,113 644 0 -------9,469 ======== 38,474

Jul.
$31,000 5,890 -------25,110 1,500 5,300 1,580 250 2,417 45 341 620 700 -------12,753 -------12,357 632 0 -------11,725 ======== 50,200

Aug.
$30,000 5,700 -------24,300 1,500 5,400 1,580 250 2,417 36 330 600 700 -------12,813 -------11,487 620 0 -------10,867 ======== 61,067

Sept.
$24,000 4,560 -------19,440 1,500 5,000 1,580 250 2,417 12 264 480 700 -------12,203 -------7,237 608 0 -------6,629 ======== 67,696

Oct.
$21,000 3,990 -------17,010 1,500 4,900 1,580 250 2,417 37 231 420 800 -------12,135 -------4,875 596 0 -------4,279 ======== 71,975

Nov.
$20,000 3,800 -------16,200 1,500 4,800 1,580 250 2,417 14 220 400 800 -------11,981 -------4,219 584 0 -------3,635 ======== 75,610

Dec.
$18,000 3,420 -------14,580 1,500 4,600 1,580 250 2,417 27 198 360 950 -------11,882 -------2,698 572 0 -------2,126 ======== 77,736

TOTAL 288,000 54,720

--------

233,280
18,000 60,000 18,960 3,000 29,000 400 3,168 5,760 9,600 -------147,888 85,392 7,656 0 -------77,736 77,736

|::

Cash Flow Statement Year 1 Sales Change in Receivables Cash From Sales Cost of Sales Change in Payables Change in Inventory Cash Cost of Sales Cash Margin Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Net change in other current items Total Cash Expenses Net Cash From Operations Income Taxes Interest Expense Investment and Financing Transactions Sale of (Purchase) Plant Issue (Retire) Longterm Debt Issue (Retire) Stock Total Nonoperating Cash Changes Net Cash Increase (Dec)

Jan. $24,000 0 -------24,000 -------4,560 (5,320) 8,200 -------7,440 -------16,560 1,500 5,000 1,580 250 2,417 50 264 480 1,050 0 -------12,591 -------3,969 0 (704) (94,800) 104,233 40,000 -------48,730 $52,699

Feb. $22,000 0 -------22,000 -------4,180 443 (2,826) -------1,797 -------20,203 1,500 4,800 1,580 250 2,417 40 242 440 950 0 -------12,219 -------7,984 0 (692) 0 (1,767) 0 -------(2,459) $5,525

Mar. $22,000 0 -------22,000 -------4,180 0 (520) -------3,660 -------18,340 1,500 5,200 1,580 250 2,417 23 242 440 850 0 -------12,502 -------5,838 0 (680) 0 (1,767) 0 -------(2,446) $3,392

Apr. $23,000 0 -------23,000 -------4,370 (222) (528) -------3,620 -------19,380 1,500 5,000 1,580 250 2,417 22 253 460 700 0 -------12,182 -------7,198 0 (668) 0 (1,767) 0 -------(2,434) $4,764

May. $25,000 0 -------25,000 -------4,750 (443) 33 -------4,340 -------20,660 1,500 4,800 1,580 250 2,417 42 275 500 700 0 -------12,064 -------8,597 0 (656) 0 (1,767) 0 -------(2,423) $6,174

Jun. $28,000 0 -------28,000 -------5,320 (665) 1,134 -------5,789 -------22,211 1,500 5,200 1,580 250 2,417 52 308 560 700 0 -------12,567 -------9,644 0 (644) 0 (1,767) 0 -------(2,411) $7,234

Jul. $31,000 0 -------31,000 -------5,890 (665) (2,235) -------2,990 -------28,010 1,500 5,300 1,580 250 2,417 45 341 620 700 0 -------12,753 -------15,257 0 (632) 0 (1,767) 0 -------(2,399) $12,859

Aug. $30,000 0 -------30,000 -------5,700 222 (131) -------5,791 -------24,209 1,500 5,400 1,580 250 2,417 36 330 600 700 0 -------12,813 -------11,397 0 (620) 0 (1,767) 0 -------(2,387) $9,010

Sep. $24,000 0 -------24,000 -------4,560 1,330 1,120 -------7,010 -------16,990 1,500 5,000 1,580 250 2,417 12 264 480 700 0 -------12,203 -------4,787 0 (608) 0 (1,767) 0 -------(2,375) $2,412

Oct. $21,000 0 -------21,000 -------3,990 665 (388) -------4,267 -------16,733 1,500 4,900 1,580 250 2,417 37 231 420 800 0 -------12,135 -------4,598 0 (596) 0 (1,767) 0 -------(2,363) $2,235

Nov. $20,000 0 -------20,000 -------3,800 222 (255) -------3,767 -------16,233 1,500 4,800 1,580 250 2,417 14 220 400 800 0 -------11,981 -------4,253 0 (584) 0 (1,767) 0 -------(2,351) $1,902

Dec. $18,000 0 -------18,000 -------3,420 443 (1,029) -------2,834 -------15,166 1,500 4,600 1,580 250 2,417 27 198 360 950 0 -------11,882 -------3,284 0 (572) 0 (1,767) 0 -------(2,339) $945

Total $288,000 -------$288,000 -------$54,720 ($3,990) $2,575 -------$53,305 -------$234,695 $18,000 $60,000 $18,960 $3,000 $29,000 $400 $3,168 $5,760 $9,600 $0 $0 $147,888 -------$86,807

($7,656) ($94,800) $84,800 $40,000 -------$22,344 $109,151

BALANCE SHEET YEAR 2 Initial Perio Quarter 1 Quarter 2 Quarter 3 Quarter 4 Assets Cash Receivables Inventory $128,111 $133,074 $169,567 $209,086 0 0 0 0 2,575 9,485 5,897 5,532 ----------------------------Total Current Assets 130,686 142,559 175,463 214,618 ----------------------------Plant Assets(Equipment/Ten.I 94,800 94,800 94,800 94,800 Accumulated Depreciation 18,960 23,700 28,440 33,180 ----------------------------Net Plant Assets 75,840 71,100 66,360 61,620 ----------------------------Total Assets $206,526 $213,659 $241,823 $276,238 ======== ======== ======== ======== Liabilities Accounts Payable $3,990 $4,795 $6,650 $7,315 Other Payables 0 0 0 0 ----------------------------Total Current Liabilities 3,990 4,795 6,650 7,315 ----------------------------Long Term Debt 84,800 79,500 74,200 68,900 ----------------------------Total Liabilities 88,790 84,295 80,850 76,215 ----------------------------Common Stock 40,000 40,000 40,000 40,000 Retained Earnings 77,736 89,364 120,973 160,024 ----------------------------Total Equity 117,736 129,364 160,973 200,024 ----------------------------Total Liabilities & Equity $206,526 $213,659 $241,823 $276,238 ======== ======== ======== ======== $212,789 0 9,959 -------222,749 -------94,800 37,920 -------56,880 -------$279,629 ======== $4,648 0 -------4,648 -------63,600 -------68,248 -------40,000 171,381 -------211,381 -------$279,629 ======== Assets Cash Receivables Inventory

BALANCE SHEET YEAR 3 Initial Perio Quarter 1 Quarter 2 Quarter 3 Quarter 4 $212,790 $228,963 $274,694 $326,322 0 0 0 0 9,959 9,362 5,700 5,776 ----------------------------Total Current Assets 222,749 238,325 280,394 332,098 ----------------------------Plant Assets(Equipment/Te 94,800 94,800 94,800 94,800 Accumulated Depreciatio 37,920 42,660 47,400 52,140 ----------------------------Net Plant Assets 56,880 52,140 47,400 42,660 ----------------------------Total Assets $279,629 $290,465 $327,794 $374,758 ======== ======== ======== ======== Liabilities Accounts Payable $4,648 $5,024 $7,315 $8,311 Other Payables 0 0 0 0 ----------------------------Total Current Liabilities 4,648 5,024 7,315 8,311 ----------------------------Long Term Debt 63,600 58,300 53,000 47,700 ----------------------------Total Liabilities 68,248 63,324 60,315 56,011 ----------------------------Common Stock 40,000 40,000 40,000 40,000 Retained Earnings 171,381 187,141 227,479 278,747 ----------------------------Total Equity 211,381 227,141 267,479 318,747 ----------------------------Total Liabilities & Equity $279,629 $290,465 $327,794 $374,758 ======== ======== ======== ======== $336,067 0 10,085 -------346,152 -------94,800 56,880 -------37,920 -------$384,072 ======== $5,098 0 -------5,098 -------42,400 -------47,498 -------40,000 296,574 -------336,574 -------$384,072 ========

INCOME STATEMENT YEAR 2 Income Statement Year 2 Sales Cost of Sales Gross Profit Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Total Expenses Net Income Before Interest & Taxes Interest Expense Taxes Net Income After Taxes Cumulative before tax earnings $64,900 12,331 -------52,569 $90,000 17,100 -------72,900 $99,000 18,810 -------80,190 Total $62,900 316,800 11,951 -------50,949 60,192 -------256,608 Sales Cost of Sales Gross Profit

INCOME STATEMENT YEAR 3 Total $68,000 12,920 -------55,080 $99,000 18,810 -------80,190 $112,480 21,371 -------91,109 $69,000 348,480 13,110 -------55,890 66,211 -------282,269

4,500 4,500 4,500 4,500 18,000 15,000 15,000 15,000 15,000 60,000 4,740 4,740 4,740 4,740 18,960 750 750 750 750 3,000 5,000 5,000 5,000 5,000 20,000 100 100 100 100 400 714 990 1,089 692 3,485 1,298 1,800 1,980 1,258 6,336 2,400 2,400 2,400 2,400 9,600 -----------------------------------34,502 35,280 35,559 34,440 139,781 -----------------------------------18,067 37,620 44,631 16,509 116,827 6,439 6,010 5,581 5,152 23,182 0 0 0 0 0 -----------------------------------11,628 31,610 39,050 11,358 93,645 ======== ======== ======== ======== ======== 11,628 43,237 82,288 93,645 230,798

Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Total Expenses Net Income Before Interest & Taxes Interest Expense Taxes Net Income After Taxes Cumulative before tax earnings

4,500 4,500 4,500 4,500 18,000 15,000 15,000 15,000 15,000 60,000 4,740 4,740 4,740 4,740 18,960 750 750 750 750 3,000 5,000 5,000 5,000 5,000 20,000 100 100 100 100 400 748 1,089 1,237 759 3,833 1,360 1,980 2,250 1,380 6,970 2,400 2,400 2,400 2,400 9,600 -----------------------------------34,598 35,559 35,977 34,629 140,763 -----------------------------------20,482 44,631 55,132 21,261 141,506 4,722 4,293 3,864 3,434 16,313 0 0 0 0 0 -----------------------------------15,760 40,338 51,268 17,827 125,193 ======== ======== ======== ======== ======== 15,760 56,098 107,366 125,193 304,416

|:: Cash Flow Statement Sales Change in Receivables Cash From Sales Cost of Sales Change in Payables Change in Inventory Cash Cost of Sales Cash Margin

CASH FLOW YEAR 2 Quarter 1 $64,900 0 -------64,900 -------12,331 (805) 6,910 -------18,436 -------46,464 Quarter 2 $90,000 0 -------90,000 -------17,100 (1,855) (3,589) -------11,657 -------78,343 Quarter 3 $99,000 0 -------99,000 -------18,810 (665) (364) -------17,781 -------81,219 Quarter 4 $62,900 0 -------62,900 -------11,951 2,667 4,427 -------19,045 -------43,855 Total $316,800 0 -------316,800 -------60,192 (658) 7,384 -------66,919 -------249,881

|:: Cash Flow Statement Sales Change in Receivables Cash From Sales Cost of Sales Change in Payables Change in Inventory Cash Cost of Sales Cash Margin

CASH FLOW YEAR 3 Quarter 1 $68,000 0 -------68,000 -------12,920 (376) (597) -------11,947 -------56,053 Quarter 2 $99,000 0 -------99,000 -------18,810 (2,291) (3,662) -------12,857 -------86,143 Quarter 3 $112,480 0 -------112,480 -------21,371 (996) 76 -------20,451 -------92,029 Quarter 4 $69,000 0 -------69,000 -------13,110 3,213 4,309 -------20,631 -------48,369 Total $348,480 0 -------348,480 -------66,211 (450) 126 -------65,886 -------282,594

Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Net change in other current items Total Cash Expenses Net Cash From Operations Income Taxes Interest Expense Investment and Financing Transactions Sale of (Purchase) Plant Issue (Retire) Longterm Debt Issue (Retire) Stock Total Nonoperating Cash Changes Net Cash Increase (Dec)

4,500 15,000 4,740 750 5,000 100 714 1,298 2,400 0 -------34,502 -------11,962 0 (6,439)

4,500 15,000 4,740 750 5,000 100 990 1,800 2,400 0 -------35,280 -------43,063 0 (6,010)

4,500 15,000 4,740 750 5,000 100 1,089 1,980 2,400 0 -------35,559 -------45,660 0 (5,581)

4,500 15,000 4,740 750 5,000 100 692 1,258 2,400 0 -------34,440 -------9,415 0 (5,152)

18,000 60,000 18,960 3,000 20,000 400 3,485 6,336 9,600 0 -------139,781 -------110,101 0 (23,182)

Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card service fees Misc. Costs Utilities Net change in other current items Total Cash Expenses Net Cash From Operations Income Taxes Interest Expense Investment and Financing Transactions Sale of (Purchase) Plant Issue (Retire) Longterm Debt Issue (Retire) Stock Total Nonoperating Cash Changes Net Cash Increase (Dec)

4,500 15,000 4,740 750 5,000 100 748 1,360 2,400 0 -------34,598 -------21,455 0 (4,722)

4,500 15,000 4,740 750 5,000 100 1,089 1,980 2,400 0 -------35,559 -------50,584 0 (4,293)

4,500 15,000 4,740 750 5,000 100 1,237 2,250 2,400 0 -------35,977 -------56,052 0 (3,864)

4,500 15,000 4,740 750 5,000 100 759 1,380 2,400 0 -------34,629 -------13,740 0 (3,434)

18,000 60,000 18,960 3,000 20,000 400 3,833 6,970 9,600 0 -------140,763 -------141,831 0 (16,313)

0 0 0 0 0 (5,300) (5,300) (5,300) (5,300) (21,200) 0 0 0 0 0 -----------------------------------(11,740) (11,310) (10,881) (10,452) (44,382) -----------------------------------$223 $31,753 $34,779 ($1,037) 65,718 ======== ======== ======== ======== ========

0 0 0 0 0 (5,300) (5,300) (5,300) (5,300) (21,200) 0 0 0 0 0 -----------------------------------(10,022) (9,593) (9,164) (8,734) (37,513) -----------------------------------$11,433 $40,991 $46,888 $5,005 104,317 ======== ======== ======== ======== ======

BALANCE SHEET Year 4

Assets Cash Receiv ables Inv entory Total Current Assets Plant Assets(Equipment/Ten.Improv .) Accumulated Depreciation Net Plant Assets Total Assets

Year 5

505,862 0 6,871 -------512,733 -------94,800 75,840 -------18,960 -------531,693 ========

702,858 0 6,847 -------709,705 -------94,800 94,800 -------0 -------709,705 ========

Liabilities Accounts Payable Other Payables Total Current Liabilities Long Term Debt Total Liabilities Common Stock Retained Earnings

6,984 0 -------6,984 -------21,200 -------28,184 -------40,000 463,509 --------

7,682 0 -------7,682 -------0 -------7,682 -------40,000 662,023 --------

Total Equity Total Liabilities & Equity

503,509 702,023 --------------531,693 709,705 ======== ========

Income Statement Data for Year Ended Sales Cost of Sales Gross Profit Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card serv ice fees Misc. Costs Utilities Total Expenses Net Income Before Interest & Taxes Interest Expense Taxes Net Income After Taxes Cumulativ e before tax earnings

iNCOME STATEMENT Year 4 Year 5 383,328 72,832 -------310,496 18,000 60,000 18,960 3,000 20,000 400 4,217 7,667 9,600 -------141,843 -------168,653 1,717 0 -------166,935 ======== 495,206 421,661 80,116 -------341,545 18,000 60,000 18,960 3,000 20,000 400 4,638 8,433 9,600 -------143,031 -------198,514 0 0 -------198,514 ======== 693,719

Cash Flow Statement Sales Change in Receiv ables Cash From Sales Cost of Sales Change in Payables Change in Inv entory Cash Cost of Sales Cash Margin Rent (+nnn) (assumes 1200 sq ft) Payroll (including payroll tax and edd) Depreciation Insurance Marketing Misc. Supplies Credit Card serv ice fees Misc. Costs Utilities Net change in other current items Total Cash Expenses Net Cash From Operations Income Taxes Interest Expense Inv estment and Financing Transactions Sale of (Purchase) Plant Issue (Retire) Longterm Debt Issue (Retire) Stock Total Nonoperating Cash Changes

Year 4 383,328 0 -------383,328 -------72,832 (1,886) (3,214) -------67,732 -------315,596

Year 5 421,661 0 -------421,661 -------80,116 (698) (23) -------79,394 -------342,267

18,000 18,000 60,000 60,000 18,960 18,960 3,000 3,000 20,000 20,000 400 400 4,217 4,638 7,667 8,433 9,600 9,600 0 0 --------------141,843 143,031 --------------173,752 199,236 0 (1,717) 0 0

Net Cash Increase (Dec)

0 0 (21,200) (21,200) 0 0 --------------(22,917) (21,200) --------------150,835 178,036 ======== ========

Break Even Analysis: We will break even if we manage to sell $188,000 a year or on average $500 in revenue per day. (500*360 days).