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Liu Sanaa, Yemen

Final Project of comm105

Dr. Abdurrahman Alahdal

Subway Business Plan

Made by: Tawfiq Abdullah _ ID: 61210044

Executive Summary

The purpose of this business plan is to secure additional, long-term funding to open a QSR
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(Quick Service Retail) franchise in Sanaa, Yemen. The owners of the company are willing
to invest $30,000, and assume over $110,000 in short-term liability to secure the funding for
inventory, and early operations. The required long-term loan that we seek is in the amount of
$200,000, and if approved, will be amortized to 10 years.
The franchiser, "The Subway Shop Inc. ," is one of the fastest growing franchises
in North America. Sales last year topped $800,000,000. The chain is positioned somewhere
between traditional fast food restaurants, and sit-down restaurants. This segment of the
market is attuned to the health benefits of their eating habits, are more conscious of their
buying habits than the general population, and more importantly, they have higher incomes
and are willing to pay more for a better fast food choice. Our goal is to be that choice in
Sanaa, Yemen.
To succeed with our goal, and to encourage a healthy lifestyle, we will sponsor local
sporting events, and give 3% of profits to local charities. We will build roots into our
community. We will also market our products with local businesses in Yemen, the famous
Festivals, weekends, national holiday days, seasonal events, to local hotels, and offer
catering services through local party supply stores and through close ties to local hotel
managers and executives.
Our primary goal for this plan is that it help us secure this $200,000 as long-term loan to
finance our business project that we are aiming for. Once we have done that, our goal will be
to build value for ourselves, our employees, our customers, and the whole community here
in Yemen. We see these goals as being consistent with the goals the SBA expects of itself
and its guarantors.

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1. Objectives
Our first objective is to open the Franchise restaurant 6 months from the day that our site is
confirmed by the realtor. Our site was confirmed in April, therefore our goal is to be up and
running by August. Our P&L and Balance Sheet all begin in August. Start-up costs between
April and August may be found in the Start-up Summary Section.
Overall view :

The Subway Shop will turn a profit by the beginning of our second fiscal year of

operations.
We will pay down our $200,000 SBA loan to $180,000 by the end of year one.
Repeat customers will constitute 70% of our overall business by the end of year
one. We will track customer habits and loyalty through a local marketing research

firm, and publish the results of these findings to our employees once a quarter.
Net Profit for year one will be 21%.

1. Mission

Our mission is to bring to market the tastiest and healthiest fast food in Sanaa, at

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a slight cost premium over other fast food restaurants. Our high standards of quality and
cleanliness will establish our reputation as the cleanest fast food restaurant in Sanaa.
Our community is as important to us as making a profit. We will devote 2% of profits
to a local poor people shelter, and 1% to a local environmental conservation fund. This
company is founded on the concept that good works and good deeds not only serve the
needs of the community, but will also keep our company healthy and committed to the
success of its customers.

1. Keys to Success
The most important key to success is our location. It is very important that our location live
up to our expectations, and is convenient to as many potential customers as possible. As
stipulated by the franchise agreement, our location must contain a minimum of 50 customers
to be quickly served as soon as they have ordered for the required meal .
Another key to success lies with our ability to execute our plan. If we neglect one or more
aspects of our plan, whether that is our numbers, our employees, our cleaning and food
standards, or our commitment to customers, we will not succeed and thrive.

Company Summary
"The Sub Shop" Corporation franchises, and sometimes owns and operates quick-service
Italian-style sub sandwich shops called, appropriately, "The Sub Shop" subs.
The Sub Shop's upscale concept fits a niche between fast food and fine dining--offering the
customer the best benefits of both segments. The company provides the convenience of fast
food with rapid response times, affordability, as well as carry-out and home meal
replacement options.

The Sub Shop also offers a fresher and tastier alternative to typical fried fast food products
such as hamburgers and French fries.

The Sub Shop's concept was born in the kitchen of a popular Italian sit-down restaurant5 |
called Gianni's. The goal of the original owner was to provide great Italian food in a clean,
urban environment, and at a reasonable price. After two years as Gianni's, the owner
changed the name to The Sub Shop and began selling subs and soup to go. In 1993, the
company expanded to two stores and sales tripled. Financing was secured in December of
1993, and the company became a local Franchise, then a national Franchise. Now with 53
stores in 23 states in USA and four other countries, The Sub Shop has taken the Fast Food
segment by storm by producing a better product than its competitors, and at a moderately
low price.

1. Company Ownership
Ninety-seven percent of the restaurant belongs to Tawfiq Abdullah and Hammed Huthaily as
equal ratios for both partners. The remaining 3% is held by Waleed Mothana, Store
Manager. All of them formed the basic partnership for this investment owners of the
restaurant in Sanaa, Yemen.

2. Start-up Summary
The start-up table shows a summary of our overall start-up costs. The highest initial outlay
is for the franchise fee. This is required to launch the franchise. After paying our Franchise
fee, our only liability to the franchise will be the 7% cost of sales, and 2.2% advertising
charge. Normally the franchise fee would be paid in interest accruing installments, but we
decided to forego this to keep the books as clean as possible and to reduce the possibility of
a "parent/child" conflict between our company and the constituents.

Cash requirements for start-up are $19,700, and most of this will sit in a zero interest
bearing, highly liquid bank account. The first month our change in accounts payable will
top $61,000, so we need this $19,700 in case sales are not what we expected.

If sales are 30% off projected, this $19,700 will help us gather enough cash to pay off
6 our
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accounts payable within 30 days. The principles will invest a combined $30,000 to start-up
the franchise. We expect that the majority of this will be paid back to the owners within two
years of operations, in the form of dividends. This investment makes up over 8% of the total
start-up requirements for the company. The remainder consists of one $65,000 short-term
interest bearing, unsecured personal loan, one $15,980 interest-free "First Card Visa" 0%
promotional loan, and a $200,000 long-term loan guaranteed by the long-term loan program.
The term of the expected loan is 10 years.
The long-term loan program that we are seeking will be secured via the pre-appraised
market value of the land and property, as well as the improvements to be made on the
property through the current year. The estimated net market value of the property following
all improvements is approximately $320,000.

Start-up Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required
Assets:
Non-cash Assets from Start-up
Cash Requirements from Startup
Additional Cash Raised
Cash Balance on Starting Date
Total Assets
Liabilities and Capital:
Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable (Outstanding
Bills)
Other Current Liabilities
(interest-free)
Total Liabilities
Capital
Planned Investment
Tawfiq Abdullah
Hammed Huthaily
Additional Investment

$96,480
$244,500
$340,980
$224,800
$19,700
$0
$19,700
$244,500

$65,000
$200,000
$30,000
$15,980
$310,980

$15,000
$15,000
$0

Requirement
Total Planned Investment
Loss at Start-up (Start-up

$30,000
($96,480

Expenses)
Total Capital

)
($66,480

Total Capital and Liabilities

Total Funding

)
$244,500
$340,980

Start-up Requirements
Start-up Expenses:
Business License
$180
Refrigerator/Freezer
$5,500
Building Improvements
$35,000
Franchise Fee
$45,000
3% Loan Origination Fee
$7,800
Insurance
$1,500
Research and development
$1,500
Total Start-up Expenses
$96,480
Start-up Assets:
Cash Required
$19,700
Start-up Inventory
$15,800
Other Current Assets
$4,000
Long-term Assets
$205,000
Total Assets
$244,500
Total Requirements
$340,980

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3. Company Locations and Facilities

The company will be located in Al_Rowishan round, Haddah St., in Sanaa city. Because, it
is the busiest shopping district and most popular location where you would always find a lot
of people going there, and is very close to others who will be able to come from all different
places in Sanaa as a center zone to the city. also a bustling tourist destination. The building
will be decorated like many of the merchants along this thoroughfare; also, with the
American style to looks just the way that Subway fast food probably has in USA.

Products
We will offer a large variety of Submarine sandwiches, salads, soups, chili, chips, cookies,
and sodas. The sandwiches are made with The Sub Shop's unique sweet mustard sauce and
each loaf of bread is made fresh daily. The bread is toasted for every order and the soups are
made daily.

1. Product Description
All of our sandwiches are available for customization. In addition, customers will love the
fresh, toasted bread, and the freshly sliced meats and cheeses.
Below is a short list of some of the subs we will market, the rest of the products are broken
down by unit sales in the sales forecast table:

German Snack: Italian Salami, Bologna, Roast Beef, Tomato, Onion, Bell Pepper,

Cheese, Vinegar & Oil and Salt & Pepper upon request.
Swiss Delight: Cheeses (3), Tomato, Onion, Bell Pepper, Cheese, Vinegar & Oil and

Salt & Pepper upon request.

Spanish Conqueror: Cheeses (2), White Meat Chicken, Jalapeno Sauce, Tomato,

Onion, Bell Pepper, Conqueror & Oil and Salt & Pepper upon request.
American Suburban: PB&J.
American Urban: Tofu, Onions, Tomatoes, Cucumber, Carrot, and two Cheeses.

American Traditional: Angus Beef, American Cheese, Lettuce, Tomato, with a 1/4
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slice Kosher Pickle.

2. Competitive Comparison
Our competition consists of on-campus sandwich shops, fast food restaurants, and
downtown eateries. There is not yet a Subway Sandwich shop in our country, the way that
we could be the first investor who will serve the whole community with this idea. Moreover,
we just have 10 fast food restaurants here in Sanaa but with low quality standards and bad
service control. Our competition will be fierce, but our specialized sub sandwiches will set
us apart from the competition, as will our focus on healthy, yet tasty fast food. Subway has
emphasized the benefits of their healthy sandwiches, yet their sandwich bread is often
tasteless and stale, they don't toast their bread, they don't use a special sauce, and their
production facilities are rarely clean enough to make dining in their restaurant an appetizing
venture.
The other fast food restaurants in Sanaa will offer a more serious challenge: How do we
position ourselves so that people know food is both healthy AND tasty. Many people who
eat fast food burgers and fries are not concerned with the health benefits of such activities,
but rather, the way the food tastes. To be competitive, our sales literature and promotions
will make it clear that our products are tastier than any greasy halal burger, yet will provide a
fun, guilt-free eating experience.

3. Sales Literature
Our sales literature consists of menus supplied by The Sub Shop and custom flyers designed
in-house. The custom flyers will offer catering prices, explain the difference between our
lunch specials and those of our competitors, and show our hours of operation. We will place
the catering and lunch service flyers strategically in every important place that people could
find once walking around, park events, local business areas, malls, supermarkets and gas
stationsetc.

4. Sourcing
The Sub Shop Corp. will provide the supplies necessary for operation. Due to bulk buying
by The Sub Shop Corp., and our standardized franchise-based supply line, our purchasing

costs will be 10% below similar costs incurred by a non-Franchise restaurant and our 9 |
payment days average 45 instead of the industry median of 30 days. To maintain a
conservative financial perspective, we have not built this 10% discount into our cost of
goods in the Profit and Loss Statement. We have calculated cost of goods as a flat 35% of
sales, an average for our industry. We will update these amounts with real figures once we
have three months of purchase history. We expect to revise our sourcing costs down by at
least 10% in November.

5. Technology
We will take advantage of the latest technology in order to speed our business processes
and develop more efficient operations. In planning for the launch, we have purchased three
copies of Business Plan Pro software. Each partner has been given a segment of the plan to
work on. Tawfiq is in charge of writing all franchise-specific topics, Hammed is in charge of
generating and explaining the numbers, and Waleed is responsible for all operations-specific
topics.
Each person synchronizes their machine with the secureplan.com secure server, making the
most recent version of the business plan available at all times on the Web.
In addition to using technology to establish the business model and methodology, we
also use technology for day-to-day operations. The Sub Shop Corp. supplies us with the
latest in ordering equipment, including a merchant credit and debit card account, number
verification, inventory management software and time clock (HR) software. Each employee
is given a cell phone for personal use, and in exchange for this relatively inexpensive
benefit, they are expected to work flexible hours, and respond when called in to replace an
employee that is sick, or otherwise not available for their shift.
Technology is also used for routine maintenance and sustainable operations. The
company uses only biodegradable soaps and cleaning supplies, and encourages all
employees and customers to recycle plastic, glass, and cardboard items. We view these
options in sustainability as being tied directly to advances in technology. For instance, as
wind and solar power become available through the local utility, we will opt to source
through those options.

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6. Future Products
The product mix is determined by corporate (biodegradable). Future product
suggestions are welcome by corporate, and if approved, may become part of the product
mix.

Market Analysis Summary

Our market consists of all people here in Sanaa city. Just as the way that other
competitors would have in the market place. Over 100,000 visitors would visit our site
monthly..
There are about 18,000 people living and working in Ashland. If we can convince just
15% of those people to buy our sandwiches twice a month, we'll sell 65,000 sandwiches to
that market alone in 2014. Add that amount to 20% of all visitors from other cities to the
Sanaa area, and those people as different segments alone will buy 138,000 meals.
In addition, demographics have shifted in recent years from traditional households (two
parents with children) to more non-traditional households; as a result, many adults feel they
have less free time. Consumers report that they are eating out more often in order to free up
time normally spent cooking, and use that time to enjoy their families and to take advantage
of other leisure activities.
From the Sanaa Chamber of Commerce:
As we believe, Sana'a city which is the capital of Yemen country, has built its economy on a
resource base of strong strategic position to attract more people to be there, different
segments, from different places, favorable climate of this city to locate good businesses,
attractive landscape, cultural attractions, a well-educated labor force and education. In
addition, Sanaa's location off commercial zone to operate branches and the abilities to invest
and gain the maximum level of profits, give it market access that is more favorable than
usual for a rural town and other nearby cities. To offset the risk that comes with dependence
on one economic sector, the City of Sana'a and the Chamber of Commerce encourage the
diversification of markets. Establishment of light manufacturing firms with value-added

components, sophisticated services catering to a geographically dispersed clientele,

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retailing targeted to local residents are especially encouraged. gathering of people's as their
different purpose, all of this would attract more than 100,000 person to be found in Sana'a
city as a daily crowding estimation. And because Sana'a is considered a "destination" city, an
additional with around 1,000,000 person who actually live in here , also for its other
attractions such as recreation, shopping and workplace for workers. Sana'a, while widely
known for its center zone strategic place to be taken for any investor's, is also the location of
the only federally funded location from different sectors of commerce based on varieties and
.accurate labs and research facilities in the country
Having more enough companies, small businesses, also, Sana'a is gathering many
educational places such as universities, high schools, institutions, and many other trends that
make Sana'a city plays a large part of good economic health, with approximately 5,130
students, 57 faculty, 207 staff, 26 temps and 691 student employees
The City of Sana'a population over the last four years has averaged 7% growth and is not
expected to deviate from that rate The City of "official population projections" population
projection since the year 2005 till now. Over the 10-year period 2005-2015, a total of
200,000 new residents to Sana'a are expected.

Market Segmentation
The largest market is tourists. Our next largest target market consists of downtown
workers. Weekend shoppers and students who work or visit downtown make up the
remaining two percent of the total market.

Market Analysis
Year 1
Potential Customers
Geographic Downtown Workers
and Students
Students - Seasonal
Others

Growth

Weekend Shoppers

2%

Total

8.57%

Year 2

Year 3

Year 4

CAGR

2%

17,000

17,255

17,514

17,777

3%

4,700
362,00
0
3,500
387,20
0

4,841

4,986

5,136

9%

Year 5

18,044

1.50%

5,290
510,99
394,580 430,092 468,800
2
3,553
3,606
3,660
3,715
538,04
420,229 456,198 495,373
1

3.00%
9.00%
1.50%
8.57%

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MARKET ANALYSIS IN SANA'A CITY

Geographic - Downtown
Workers and Students

Students - Seasonal

Others

Weekend Shoppers

Total

60000000%
50000000%
40000000%
30000000%
20000000%
10000000%
0%

Target Market Segment Strategy

Downtown Workers:
We will target downtown workers through local businesses, advertising, event sponsorship,
and word of mouth advertising.
Students:
Ashland has a seasonal student population of around 4,700. We expect to reach students
through campus activities and marketing, as well as by sponsoring special student events.
Visitors:
Over 100,000 person from different cities in Yemen will visit the capital city Sanaa.
Approximately 262,000 people will visit Sanaa for its premier recreational activities. We
will reach those people at the time they visit it. Most of them aren't thinking, "Where am I
going to find good, inexpensive lunches?" when they plan their trips because they know fast
food venues are abundant everywhere in there. The strategy will be to stand out from the
other venues available on the street, and letting people know our food is relatively
inexpensive, but without degrading the premium ambience of shopping in Downtown
Sanaa.
Weekend Shoppers:
Weekend shoppers come from everywhere to shop for clothes, gifts, crafts, and many things
they would like to get just in downtown Sanaa. Over 40,000 people live and work in

Sanaa, and we predict that at least 8% of those people will at some point shop in

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Downtown.

Market Needs
There are two market needs we are attempting to fill. First, there's a need for a fast food
restaurant that produces tasty fast food, at a low cost, in a clean environment. There are
many people, considered in the traditional sense to be "Middle Class" and above who will
not set foot inside a fast food restaurant due to:
a) The restaurant's lack of cleanliness and
b) The relative poverty and despair displayed by the people working in these fast food
restaurants.
To fill the needs of these customers, we will market products that appeal to their healthy
lifestyles, their taste buds, and their sense of "place." In addition, our food line, tables,
floors, and counters will be cleaned constantly throughout the day, and we will maintain a
very high standard of cleanliness.

Market Trends
The market for fast food is becoming more demanding. Garden burgers have become
prevalent at many fast food restaurants, and even some fast food burger franchises are
beginning to offer garden burgers, and other soy alternatives.
While marketing fast food only as "healthy" would be corporate suicide, there is a trend
towards quality in both food and ambiance. As mentioned in the Market Needs topic, many
people are heading for restaurants that offer fast food at a slightly higher price, but at a much
higher quality, and delivered by employees who do not feel degraded or otherwise fatalistic
about their role at work. While the latter issue may be debated by intellectuals in
Management 410 B-school courses or readers of the current bestselling book, "Fast Food
Nation," the fact remains that our society will continue to want more for less. If we pursue
the niche of customers that reside between the bargain-hunters and the spendthrifts, and of
those, the ones that are repulsed by standard fast food practices, lack of cleanliness, and the
.total lack ambiance inherent to most fast food restaurants, we will do a brisk business

NOTE : Consumers spend about 35% of their food budget on eating out.

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Industry Analysis
Food service industry sales will reach an estimated R.Y 1 billion in 2010, or over 3% of
Gross Domestic Product. Within this industry, the QSR (Quick Service Restaurant) segment
represents over 2/3 of total traffic and over half of restaurant sales. QSRs are defined by the
industry primarily based upon menu item, with the burger and pizza sub-segments
accounting for over half of total QSR sales. QSR sales are estimated to reach more than it
was back in 2010.

Industry Participants
The industry is composed of several large brand-name restaurants, and a large number of
local food chains but fewer fast food services. Depending on where you look in any given
year, 4-5 new fast food outlets may open and close their doors. The industry is always
changing and is a highly competitive arena where staying power and customer loyalty
is difficult to acquire. The participants in the market include Star Burger, Royal Albeick,
Royal Roosters, KFC, Altazij, Raymas , Alhamrah, and Alkhadrah.

Distribution Patterns
We distribute our products direct to customers, both through retail and through our catering
service. We don't rely on a channel of resellers or distributors to get our products into the
hands of consumers.

Competition and Buying Patterns

The fast-food business is based largely on the impulsive choice of consumers. Many people
buy their business lunch, lunch, or family dinners at a fast food restaurant, and those fast
food restaurants offer not necessarily the best selection, but the most reliable menu and the
fastest order completion time. Customers will try other fast food restaurants, and shop
around, but the majority of their fast food purchases are from one of their favorite fast food
or QSR restaurants. Our goal is to capture those customers, and to build loyalty to the
product through purchase punch cards, consistent daily specials, and a direct mail list.

Main Competitors

Our main competitors are the major national fast food restaurant. Subway is one who15
would
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hit the whole competitors in the Sanaa city. Subway contributes to the growth in our
market by advocating for healthy eating habits via online, TV, and radio advertising. They
are our largest competitor, yet they also contribute to the nationwide growth of the healthy
food segment of this market. We can count on them to bring people into our stores, and will
target their local operations through direct mail flyers that offer specials to customer that
bring in their Subway 10-sandwich punch cards.

Strategy and Implementation Summary

Our #1 strategy is to focus on our customer experience. Our success hinges on
whether customers receive what we promise them, and are pleased enough to come back for
more. Our KISS (Keep it Simple Stupid) approach will be successful only if we don't
distract ourselves from the core business of making good sandwiches fast, and of treating the
customers as if they are special.
As with any business model in the new millennium, we must adapt our strategy to the
customer and market trends, while maintaining consistency of brand and message. This is a
challenge for any business in any industry because the nature of business will always, and
has always determined that the best strategy with the most resources behind it will survive.
This millennium has proved to be very successful in growing this market, and of supporting
it's franchises.

Strategy Pyramid

Build
Custo
Loyalty
mer
Word-of-Mouth

Value Proposition

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Our value proposition is that we offer high-quality, healthy fast food at a reasonable price.
Our facilities are clean and our food is tastier than that of our competitors. The ambiance of
our facilities contribute to customers' desire to eat their meals in a comfortable, healthy
environment.

Competitive Edge
We have a competitive edge in regards to the overall quality and differentiation of our
products, and in the cleanliness and ambiance of our seating area. Our sandwiches, soups,
etc. are all of the finest quality, and have been refined through taste-tests sponsored by The
Sub Shop Corporate. Our seating area will be clean, the murals and prints on the wall
will feature airy Italian landscape and European lifestyle motifs. The walls will be painted a
rich yellow color, the tables and chairs are a rich walnut color, and the floor will consist of
high-quality tile.
We will differentiate our food from Sub Sub's in regards to taste, quality of bread and
contents, attentiveness to customers, and overall experience. We will build off of Sub
Sub's national marketing strategy so that we gain from their conversion of burger eaters to
sandwich eaters, but alternately prove that we are more responsive to customers and offer
better fare than Subway franchises.

Marketing Strategy
Our Marketing Strategy is to reach the largest amount of tourists, residents, and students for
the least amount of money.
Our strategy will focus on three solid points:
1. Building customer loyalty.
2. Extending the franchise brand locally.
3. Develop local word-of-mouth advertising (buzz).

Positioning Statement

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For people looking for a fast, friendly, and tasty lunch, we produce a quick meal. Our
seating area will be clean and the overall ambiance of the place will be pleasing to the
senses. The food will be good and the service, friendly and fast.

Pricing Strategy
Our pricing strategy is different for different customers. Prices to retail customers will be
fixed by the chairs, and based on a relative cost of living indicator. Retail prices will be
competitive at about $6 for the average meal. This is about 30% above McDonald's and
Burger King prices, but only about 15% above the average price of a Subway sandwich.
Customers are simply willing to pay more for healthy, flavorful food served in a clean,
comfortable environment.
Our highest margins will come from our catering services and large sub products. We will
focus on expanding this segment of the market as soon and as aggressively as possible.

Promotion Strategy
The chairs will promote our products on the national level. In order to reach our local
customers, and build loyalty, we will offer special mid-day promotions, sponsor local
community events, advertise in the local classified paper, and our President will become a
leading figure and spokesman in the community. Our strategy is to focus on promoting the
business through local PR efforts, rather than paid advertising.

Distribution Strategy
We plan to distribute our products direct to customers, without the use of a separate channel
of distributors.

Marketing Programs
Our marketing programs will include customer-centric appeals to switch from the
competition, build loyalty, provide cost value to the customers, and build word of mouth
marketing. Here's a list of the sales and marketing programs we intend to implement within
the next 15 months:

Five daily in-store regular specials, at least 15% off one particular sandwich item.
18 |

A direct mail coupon offering 50% off your first sandwich when you bring in a
stamped Subway card and sign up for our coupon mailing list.

High profile sponsorship of two local sporting or charity events.

20% off a menu item when you bring in your friends and family.

Free delivery to any of the local hotels (market only through hotels), and offer to pay
hotels a slotting fee.

We may institute more programs as we see fit. This list of programs is aggressive when
compared to the local marketing done by our competitors, so this should give us an early
advantage as long as we can keep cash balance and sales numbers up.

Milestones
The following table shows important milestones for the franchise Sub Shop.

Milestones

Milestone
Shakespeare Festival Ticket Stub Promoti
50% off Coupon - Preparation and Distribu
Sponsorship of "Pear Blossom Run"
Establish Menus in Hotels - Slotting
Devise Specials Schedule and Logistics
Wrap-up Menu, Special Offers
Complete Interior Decor
Hire and Train Employees
Other
Totals

Sales Strategy
Our sales strategy will be to reach the largest amount of people with consistent value-added
incentives to purchase our products and visit our restaurant. In this industry, and especially
as a franchise, our marketing programs are almost indistinguishable from our sales
programs. The indistinguishable handles a lot of the national and regional marketing, and we

just pay our fee to have it done. Our flexibility will lie in our ability to push the boundaries
19 |
of freedom the indistinguishable has given us, and to take advantage of opportunities to
differentiate ourselves on sales by sale level explained in $ US dollar amount for each unit.

Sales Forecast
The majority of our revenue will be generated through medium subs and cookies/desserts.
The breakdown by product is below:

Sales Forecast

Pa

Pa

Pa

20 |

Pa

Pa

Subto

Strategic Alliances
The fast-food business is based largely on the impulsive choice of consumers. Many people
buy their business lunch, lunch, or family dinners at a fast food restaurant, and those fast
food restaurants offer not necessarily the best selection, but the most reliable menu and the
fastest order completion time. Customers will try other fast food restaurants, and shop
around, but the majority of their fast food purchases are made through one retailer. Our goal
is to capture those customers, and to build loyalty to the product through purchase punch
cards, consistent daily specials, and a direct mail list.

Management Summary
Our managers are also owners. We want our managers to take a personal stake in the success
of the company, and for that reason we have given them a share of any profits they
generate. Specific information about each manager is available in the following plan topics.

Personnel Plan
Most of our employees will be part-time students and will not need healthcare benefits or
401K benefits. This will hold our payroll burden to less than 8% of total payroll. The store
will hold an annual rafting trip and picnic in Alhudydah city each summer. This "team

building" exercise will come out of the marketing budget. Our employees will

21 |

be respected, and will wear a company polo or sweatshirt, not a tight-fitting, artificial fiber,
company-mandated jumpsuit. Our employees will be paid more (in salary & benefits) than
employees at most other fast food restaurants will be given tuition reimbursements, thereby
making them more empowered, and more content workers. In this way, we will meet the
needs of our market, and differentiate our company from the myriad of fast food behemoths,
who's primary goal is to churn out worthless, tasteless food in a degraded facility and by
degraded employees.
Personnel Plan

Organizational Structure
The organizational structure is very flat. While it's important that our manager on duty is
clearly in charge, we will not belittle our employees through rankism that disempowers them
from taking initiative. Our manage on duty will have the final say regarding all decisions,
yet we have trained her to teach the employees how to react to customer issues on their own
and respond based on their knowledge of company policy, and when that fails them, their
common sense. Fortunately all of the people we have lined up for our open positions appear
to have an abundant supply of common sense.

Management Team
The management team has a combined 5 years of experience in the food service industry,
with 5 years of delicatessen experience. Tawfiq Abdullah, the owner, owned and managed a
similar business before this plan, OR for 5 years. During this period, he turned the deli into a
full-service convenience mart, added a dining area, and increase the menu from 20 items
when launched, to over 36 items prior to his exit from the company. Tawfiq, has been living
off personal investments and other ventures for the last year. Also, he received his University
degree from LIU Yemen and earned his own experience business finance by time.

Management Team Gaps

22 |

The only gap we face is the fact that none of us have run a franchise business. But both
Waleed Mothana and Hammed Huthaily have experience in running a sole proprietorship,
and non-franchised restaurant, our experience will more than compensate for the increased
"hand-holding" that comes with owning a franchise.
Due to the limited number of people managing the restaurant, our goals may not be met if
we were to lose a manager or owner. We have drawn up a legal contingency plan with a $1
million policy on the owner to prevent this from disrupting the business. We have also
allowed for a cash balance that would allow for a recruitment bonus to another Store
Manager if Waleed were to leave for any reason.

Financial Plan
Our financial plan is available in the following chapters. Our numbers are based on past
experience, knowledge of the industry, growth expectations for the fast food sector
nationwide, and common sense.

Long-term Plan
Our long-term plan includes expansion into our market in year two, followed by healthy
dividend payouts in years three through five. Our goal is to build a business out of two
franchises, and run each franchise as a profit center for the purpose of building wealth for
employees, and the whole the community.

Important Assumptions
The long-term loan program stipulates that loans for the purpose of purchasing and
improving small business real estate will not exceed 7.5%. The loan is pegged to the 10 year
treasury note +1.7%.
The current rate for our Treasury Notes here in Yemen is 5.13%, so our estimated longterm loan rate will be about 7%.
The tax rate includes the local and for charity Tax, currently at 6.6% of NET revenue. We
have prorated the assumptive country tax rate to 4.6% due to the fact that this tax is levied

on NET revenue, not GROSS. The local tax rate average for our net revenue is expected
23 to
|
average 31%. Thus, or assumed total tax rate for this table is 37.6%.

Year 2
2
8.40%
7.00%
37.60%
0

Key Financial Indicators

The following chart shows the projected benchmarks.

Break-even Analysis
Our break-even analysis is based on a rough estimate of fixed costs. We predict average
fixed costs to include the cost to lease the building, equipment leases, and various other
equipment costs and fees. Our variable costs include the cost of labor, food inventory, and
other product-related costs. Our variable cost estimate is $1.14 per unit, although that
number may be revised as we review our actuals in the coming months. Our monthly breakeven unit sales are 12,754. This includes units other than sandwiches, such as cookies, soda,
chips and other add-ons. The basis for this break-even point is an average of entrees
(sandwiches) and add-ons. The average per unit revenue is $3.26.

24 |

Break-even Analysis
Monthly Units Break-even
Monthly Revenue Break-even
Assumptions:
Average Per-Unit Revenue
Average Per-Unit Variable Cost
Estimated Monthly Fixed Cost

12,754
$41,538
$3.26
$1.14
$26,994

Projected Profit and Loss

Pro Forma Profit and Loss Statement

Pro Forma Profit and Loss

Sal
Direct Cos
Franchisor R

25 |

Projected Cash Flow.

Total Cost
Gross M
Gross M
Expe
Payr
Sales and Marketing
Deprec
Deprec
Deprec
Insur
Cleaning
Cell Phon
Leg
Payroll
Oth
Total Operati
Profit Before Int
EBIT
Interest E
Taxes In
Net P
Net Prof

Pro Forma Cash Flow Statement

26 |

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Year 4

Year 5

Cash Received
Cash from Operations
Cash Sales

$1,401,0

$1,541,1

$1,695,2

$1,864,7

$2,051,276

Subtotal Cash from Operations

48
$1,401,0

54
$1,541,1

69
$1,695,2

96
$1,864,7

$2,051,276

48

54

69

96

$0
$0
$0
$0
$0
$0
$0
$1,401,0

$0
$0
$0
$0
$0
$0
$0
$1,541,1

$0
$0
$0
$0
$0
$0
$0
$1,695,2

$0
$0
$0
$0
$0
$0
$0
$1,864,7

$0
$0
$0
$0
$0
$0
$0
$2,051,276

Additional Cash Received

Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending

48
Year 1

54
Year 2

69
Year 3

96
Year 4

Year 5

$158,40

$167,83

$177,97

$188,65

$199,977

Bill Payments

0
$922,93

4
$1,036,0

8
$1,130,3

7
$1,244,0

$1,361,367

Subtotal Spent on Operations

8
$1,081,3

91
$1,203,9

75
$1,308,3

14
$1,432,6

$1,561,344

38

25

53

71

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current

$0
$12,000

$0
$12,000

$0
$12,000

$0
$12,000

$0
$12,000

Borrowing
Other Liabilities Principal

$15,980

$0

$0

$0

$0

Repayment
Long-term Liabilities Principal

$20,004

$20,004

$20,004

$20,004

$20,004

Repayment
Purchase Other Current Assets
Purchase Long-term Assets

$0
$35,000

$75,000
$250,00

$0
$0

$0
$0

$0
$0

Dividends

$202,00

0
$0

$300,00

$400,00

$500,000

Subtotal Cash Spent

0
$1,366,3

$1,560,9

0
$1,640,3

0
$1,864,6

$2,093,348

Net Cash Flow

22
$34,726

29
($19,775

57
$54,911

75
$121

($42,072)

Cash Balance

$54,426

)
$34,651

$89,562

$89,683

$47,611

Projected Balance Sheet

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Year 4

Year 5

$54,426
$47,468
$4,000
$105,89

$34,651
$52,215
$79,000
$165,86

$89,562
$57,437
$79,000
$225,99

$89,683
$63,180
$79,000
$231,86

$47,611
$69,498
$79,000
$196,109

Long-term Assets
Long-term Assets

$240,00

$490,00

$490,00

$490,00

$490,000

Accumulated Depreciation
Total Long-term Assets

0
$4,548
$235,45

0
$9,096
$480,90

0
$13,644
$476,35

0
$18,192
$471,80

$22,740
$467,260

Total Assets

2
$341,34

4
$646,77

6
$702,35

8
$703,67

$663,369

Assets
Current Assets
Cash
Inventory
Other Current Assets
Total Current Assets

Liabilities and Capital

Current Liabilities
Accounts Payable

6
Year 1

0
Year 2

5
Year 3

2
Year 4

Year 5

$80,627

$85,564

$93,565

$103,02

$112,687

Current Borrowing
Other Current Liabilities
Subtotal Current Liabilities

$53,000
$0
$133,62

$41,000
$0
$126,56

$29,000
$0
$122,56

5
$17,000
$0
$120,02

$5,000
$0
$117,687

Long-term Liabilities

7
$179,99

4
$159,99

5
$139,98

5
$119,98

$99,980

Total Liabilities

6
$313,62

2
$286,55

8
$262,55

4
$240,00

$217,667

Paid-in Capital
Retained Earnings

3
$30,000
($298,48

6
$30,000
($2,277)

3
$30,000
$30,214

9
$30,000
$9,801

$30,000
($66,338)

Earnings

0)
$296,20

$332,49

$379,58

$423,86

$482,039

Total Capital

3
$27,723

1
$360,21

8
$439,80

1
$463,66

$445,702

Total Liabilities and Capital

$341,34

4
$646,77

1
$702,35

2
$703,67

$663,369

Net Worth

6
$27,723

0
$360,21

5
$439,80

2
$463,66

$445,702

Business Ratios
Ratio Analysis
Sales Growth
Percent of Total Assets
Inventory
Other Current Assets

27 |

Total Current Assets

Long-term Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Net Worth
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios
Net Profit Margin
Return on Equity
Activity Ratios
Inventory Turnover
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Appendix

28 |

Sales Forecast
Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

10

11

12
1,674

Unit Sales
Large

0%

1,500

1,515

1,530

1,545

1,561

1,577

1,592

1,608

1,624

1,641

1,657

Subs
Medium

0%

11,000

11,110

11,221

11,333

11,447

11,561

11,677

11,793

11,911

12,031

|
12,1512912,272

Subs
Small

0%

4,000

4,040

4,080

4,121

4,162

4,204

4,246

4,289

4,331

4,375

4,418

4,463

Subs
Entree

0%

1,500

1,515

1,530

1,545

1,561

1,577

1,592

1,608

1,624

1,641

1,657

1,674

Salads
Side

0%

1,200

1,212

1,224

1,236

1,249

1,261

1,274

1,287

1,299

1,312

1,326

1,339

Salads
Chips
Party

0%
0%

3,000
20

3,030
20

3,060
20

3,091
21

3,122
21

3,153
21

3,185
21

3,216
21

3,249
22

3,281
22

3,314
22

3,347
22

0%
0%

1,300
5,000

1,313
5,050

1,326
5,101

1,339
5,152

1,353
5,203

1,366
5,255

1,380
5,308

1,394
5,361

1,408
5,414

1,422
5,468

1,436
5,523

1,450
5,578

0%

1,400

1,414

1,428

1,442

1,457

1,471

1,486

1,501

1,516

1,531

1,546

1,562

0%

4,000
33,920

4,040
34,259

4,080
34,601

4,121
34,948

4,162
35,297

4,204
35,650

4,246
36,007

4,289
36,367

4,331
36,730

4,375
37,098

4,418
37,468

4,463
37,844

Sales
Unit

Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

Month

Prices
Large

1
$7.10

2
$7.10

3
$7.10

4
$7.10

5
$7.10

6
$7.10

7
$7.10

8
$7.10

9
$7.10

10
$7.10

11
$7.10

12
$7.10

Subs
Medium

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

Subs
Small

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

$3.89

Subs
Entree

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

$5.10

Salads
Side

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

$1.59

Salads
Chips
Party

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$0.89
$22.00

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.49
$1.39

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

$1.89

Subs
and/or
Trays
Desserts
Cookies
and
Desserts
Soups and
Chili
Drinks
Total Unit

Subs
and/or
Trays
Desserts
Cookies
and
Desserts
Soups and
Chili
Drinks
Sales
Large

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$0.99

$10,65

$10,75

$10,86

$10,97

$11,08

$11,19

$11,30

$11,41

$11,53

$11,64

$11,76

$11,88

Subs
Medium

0
$56,10

7
$56,66

4
$57,22

3
$57,80

2
$58,37

3
$58,96

5
$59,55

8
$60,14

2
$60,74

8
$61,35

4
$61,96

2
$62,58

Subs
Small

0
$15,56

1
$15,71

8
$15,87

0
$16,03

8
$16,19

2
$16,35

1
$16,51

7
$16,68

8
$16,84

6
$17,01

9
$17,18

9
$17,36

Subs
Entree

0
$7,650

6
$7,726

3
$7,804

1
$7,882

2
$7,961

4
$8,040

7
$8,121

2
$8,202

9
$8,284

8
$8,367

8
$8,450

0
$8,535

Salads
Side

$1,908

$1,927

$1,946

$1,966

$1,985

$2,005

$2,025

$2,046

$2,066

$2,087

$2,108

$2,129

Salads
Chips
Party

$2,670
$440

$2,697
$444

$2,724
$449

$2,751
$453

$2,778
$458

$2,806
$462

$2,834
$467

$2,863
$472

$2,891
$476

$2,920
$481

$2,949
$486

$2,979
$491

$1,937
$6,950

$1,956
$7,019

$1,976
$7,090

$1,996
$7,161

$2,016
$7,232

$2,036
$7,305

$2,056
$7,378

$2,077
$7,451

$2,097
$7,526

$2,118
$7,601

$2,140
$7,677

$2,161
$7,754

Desserts
Soups and

$2,646

$2,672

$2,699

$2,726

$2,753

$2,781

$2,809

$2,837

$2,865

$2,894

$2,923

$2,952

Chili
Drinks
Total

$3,960
$110,4

$4,000
$111,5

$4,039
$112,6

$4,080
$113,8

$4,120
$114,9

$4,162
$116,1

$4,204
$117,2

$4,246
$118,4

$4,288
$119,6

$4,331
$120,8

$4,374
$122,0

$4,418
$123,2

Subs
and/or
Trays
Desserts
Cookies
and