Business Plan

Snack Food Store
Table of Contents
List of Figures.....................................................................................................................4
List of Tables......................................................................................................................5
1.0 Business Overview.......................................................................................................6
1.1 Business Profile.........................................................................................................6
1.2 Mission Statement.....................................................................................................7
1.3 Organizational Goals and Objectives........................................................................7
2.0 Project Overview..........................................................................................................9
2.1 Project Description....................................................................................................9
2.2 Methodology..............................................................................................................9
2.2.1 Industry Analysis................................................................................................9
2.2.2 Operations Plan...................................................................................................9
2.2.3 Human Resources Plan.....................................................................................10
2.2.4 Marketing Plan..................................................................................................10
2.2.5 Financial Plan...................................................................................................10
2.3 Goals and Objectives...............................................................................................11
2.4 Project Benefits........................................................................................................11
3.0 Industry Overview.....................................................................................................12
4.0 Operations Plan.........................................................................................................13
4.1 Organizational Structure..........................................................................................13
4.2 Site Plan, Building and Floor Plans.........................................................................14
4. 3 Work Plan and Flow of Work.................................................................................16
4.4 Capital Budget.........................................................................................................18
4.5 Working Capital Planning and Management...........................................................19
4.5.1 Cost of Goods Sold...........................................................................................19
4.5.2 Administration, Marketing and General Expenses...........................................20
4.5.3 Working Capital Planning and Management....................................................20
5.0 Human Resources Plan.............................................................................................23
5.1 Human Resources Strategy......................................................................................25
6.1 Overview of the 4 P’s of Marketing........................................................................27
6.2 Segmentation, Targeting and Positioning................................................................27
6.2.1 Segmentation....................................................................................................27
6.2.2 Targeting...........................................................................................................28
6.2.3 Positioning........................................................................................................29
6.3 SWOT......................................................................................................................30
6.3.1 Internal Strengths..............................................................................................30
6.3.2 Internal Weaknesses..........................................................................................30
6.3.3 Opportunities....................................................................................................30
6.3.4 Threats..............................................................................................................30
6.4 Market Analysis.......................................................................................................31
6.4.1 Past Performance..............................................................................................31
6.5 Marketing Strategy..................................................................................................38
6.5.1 Sales and Profit Objectives...............................................................................38
6.5.2 Channels of Distribution...................................................................................39
6.5.3 Pricing Policy....................................................................................................40
6.5.4 Select Markets/ Products/ Service Mix.............................................................40
6.5.5 Selling and Advertising.....................................................................................41
7.0 Financial Plan.............................................................................................................42
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Ag Ec 495 College of Agriculture and Bioresources, University of Saskatchewan
Snack Food Store
7.1 Financial Plan Summary..........................................................................................42

7.2 Economic forecast...................................................................................................43
7.3 Dividend policy.......................................................................................................43
7.4 Revenues..................................................................................................................43
7.5 Costs of Goods Manufactured.................................................................................44
7.6 Administrative, Marketing and General Expenses..................................................45
7.8 Working Capital.......................................................................................................45
7.9 Debt Financing.........................................................................................................46
7.11 Income Taxes.........................................................................................................47
7.12 Financial Ratios and Other Key Information.........................................................47
7 .14 Risk Analysis........................................................................................................49
7.14.1 Critical Variables.............................................................................................49
7.14.3 Scenario Analysis............................................................................................51
7.14.4 Contingency Plan............................................................................................51
7. 15 Financial Feasibility and Overall Financial Performance....................................52
8.0 Summary of the Business Plan.................................................................................53
9.0 Future Conciderations...............................................................................................54
10.0 References.................................................................................................................55
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Snack Food Store
List of Figures
Figure 1 Snack Food Store Organizational Structure..................................................12

Figure 2 Snack Food Store..............................................................................................13
Figure 3 Snack Food Store Facility Floor Plan.............................................................14
Figure 4 Flow of Work.....................................................................................................15
Figure 5 Common Distribution Methods.......................................................................38
Figure 6 Break Even Analysis.........................................................................................49
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Snack Food Store
List of Tables
Table 1 Snack Food Store Capital Budget.....................................................................17
Table 2 Cost of Finished Product and Gross Profit......................................................18
Table 3 Administration, Marketing and General Expenses 2007................................19
Table 4 Snack Food Store Competitors.........................................................................32
Table 5 Comparison of Features for Snack Food Store and the Competitors...........36
Table 6 Consumer needs and solutions..........................................................................36
Table 7 Market Share Goals...........................................................................................37
Table 8 Marketing Plan Budget......................................................................................40
Table 9 Key Outcomes of the Financial Plan................................................................41
Table 10 Selling Price of Snack Food Store Products..................................................42
Table 11 Increase in Sales of Snack Food Store products............................................43
Table 12 Snack Food Store Cost of Goods Manufactured...........................................43
Table 13 Administrative, Marketing and General Expenses.......................................44
Table 14 Working Capital...............................................................................................44
Table 15 Cash Flows with Increased Financing............................................................45
Table 16 Financial Ratios For the Next 5 Years............................................................47
Table 17 Critical Variables..............................................................................................48
Table 18 Average revenues per unit................................................................................49
Table 19 Scenario Analysis..............................................................................................50
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Snack Food Store
1.0 Business Overview

1.1 Business Profile
Business Name: Snack Food Store
Snack Food Store has been in existence since 1988. The company was federally
incorporated in November 1990. There are four current shareholders. The COMPANY
has 20 shares, with the other shareholders holding 33.3 shares each. Snack Food Store is
classified as a small company, with four employees. The owners hold management
positions, while two seasonal employees are hired to help with high demand periods.
Snack Food Store came into existence to provide products that were not widely available
at the time. The market was open to and interested in the product line of eleven products
that include popcorn, Kactus chips, seasonings, stove top poppers, and coconut and
canola oil that Snack Food Store had to offer. The original target focus was in Saskatoon
and Saskatchewan, following a trend for popcorn and at home snack foods that the
owners observed in Alberta. The product has since expanded into Western Canada and
the company has seen numerous business planning shifts over the years. Initially,
products were sold through Snack Food Store retail outlets in Saskatoon. From there,
sales expanded to a direct, at home sales. A decision was made in 1991 to further expand
the at home marketing, ceasing retail sales. This avenue was pursued successfully until
1994, when the company began to develop franchise relationships. Since then, owners
have also developed a relationship for consignment sales with Hudson’s Bay Company in
The Bay and Zellers. Soon after, Snack Food Store’s products were being wholesaled to
other retail stores, such as drugs stores, flower shops, hardware stores and gift shops.
Currently, Snack Food Store sells products through wholesale to franchises and gourmet
retail stores, on consignment to Hudson’s Bay Company, and direct to customers through
walk-in traffic at the Saskatoon location and through online sales.
Snack Food Store’s leases an office and production warehouse. The company does not
own any buildings or land, but they have furnished the lease space. Snack Food Store
owns some office, warehouse and production equipment, formerly used for packaging in
the warehouse. Snack Food Store now receives raw good shipments and transports the
shipments to be packaged on a contract basis, so the warehouse storage equipment and
office equipment are still in use. Production equipment is occasionally used to meet large
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Snack Food Store
orders. It is important to note that Snack Food Store’s equipment is not being used to full
capacity. This will be a factor in the business planning objectives and implementation.
1.2 Mission Statement

Snack Food Store is committed to providing unique, high quality, premium snack
food and popcorn products that round out the at home entertainment experience for the
end consumer, available through intermediaries on a wholesale basis.
1.3 Organizational Goals and Objectives

Snack Food Store has taken many different approaches to provide its products to
customers. Methods have ranged from providing a personal selling, at home experience
to bulk product sales, acting as a supply source for other snack food providers. Direct
customer service is something that Snack Food Store has been evolving away from over
the past several years. Due to the other commitments and the choice of business
approach of Snack Food Store’s owners, an intermediary approach has become more
appropriate for the company. This will mean that Snack Food Store will move away from
direct customer sales and service and begin to act more as a supplier for snack food
companies who are involved in direct customer sales. In order to evaluate and eventually
achieve this long term objective, the following goals must be met:
 Evaluate the wholesale market and possibilities for expansion
 Increase retail wholesale of Snack Food Store’s product line
 Evaluate the snack food market and potential business to business customers that
would be interested in providing products to end consumers
 Expand into new avenues to provide bulk supplies to for direct-to-consumer snack
food companies.
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Snack Food Store
2.0 Project Overview
2.1 Project Description

For the purpose of this business plan, Snack Food Store’s goal to expand into
retail wholesaling of the entire product line will be considered. An analysis of the
wholesale market will be conducted and an expansion of retail wholesaling will be
introduced into Snack Food Store’s current market over a period of three years from 2007
to 2010. The focus of this market is HBC, as there is significant expansion possible with
this company and Snack Food Store has had success with this organization for many
years. The possibility for expansion into Canadian HBC stores is a perfect fit for the
current market for Snack Food Store’s products. In order to eventually achieve the
objective of bulk supplying, it is necessary to make the customer more aware of Snack
Food Store’s products. While retail expansion is an important part of Snack Food Store’s
long term goals, for this purpose, it is also important to restrict expansion so that it will
be easier to change directions when awareness is raised and the time comes for Snack
Food Store to act as a bulk supplier. The business planning project for Snack Food Store
will consist of an Operations Plan, Human Resources Plan, Marketing Plan, and Finance
Plan.
2.2 Methodology
2.2.1 Industry Analysis

The industry analysis for Snack Food Store will focus on wholesale trade, the
snack food industry, and the seasoning and dressing industry. A background defining
each industry and Snack Food Store’s role in each industry will be completed. This will
provide the grounds to further address the trends and challenges that Snack Food Store
will face as a part of each of these industries.
2.2.2 Operations Plan

In the Operation Plan, the organizational structure of the business will be prepared
on a flow chart. A floor plan of the building will be created; the building is used for an
office and distribution of products. Spices are custom blended and brought in, the
popcorn, poppers and Kactus chips are also brought in, and packaging is contracted out to
Sask Abilities.
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Snack Food Store
Also included in the Operations Plan is the working capital and management, the
cost of goods sold and the cost of sales. Other expenses are: marketing, administration,
accounting, taxes, insurance, utilities, maintenance, repairs, and supplies will be in the
Operations Plan. Cash Flow for the company varies from quarter to quarter; there is an
increase in sales in the last quarter of the year. Therefore, monthly cash flow statements
will be made. Snack Food Store also currently has no debt to affect cash flow. Snack
Food Store inventory is very fresh, due to short storage times and a high turnover.
Accounts receivable will include Internet sales and some consignment. Accounts payable
will include the cost of goods and expenses, but the company has no debts to pay off.
2.2.3 Human Resources Plan

The Human Resources Plan will include job descriptions, total wages and salaries,
and total benefits for the next 10 years. Snack Food Store will have few employees and
requirements for the Human Resources Plan, as the company is family run and operations
are primarily conducted through contract.
2.2.4 Marketing Plan

A Marketing Plan will be created for the Snack Food Store’s retail product line,
which includes seasoning, popcorn seed, stovetop poppers, Kactus chips, coconut and
canola oil, and the Theatre II Gift Pack. The marketing plan will use a pricing strategy,
distribution strategy, and promotional strategy to sell the Snack Food Store product line
to HBC retail locations and raise awareness in end consumers.
2.2.5 Financial Plan

An Economic forecast for Snack Food Store will be estimated for the next 10
years. Revenues derived from the Marketing Plan as well as cost of goods sold, expenses,
cost of sale and working capital from the Operating Plan will be used along with income
taxes to work out the financial summaries in this plan. Financial ratios including:
Liquidity, leverage, activity and operation, and profitability ratios will be assessed. An
assessment of the feasibility for this updated plan as well as financial performance and
risk analysis will be completed.
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Snack Food Store
2.3 Goals and Objectives

The objective of this business plan is to provide Snack Food Store with a current
assessment of the external business environment and the internal business structure, as
well as a framework for expanding into retail wholesale trade in the HBC. This is a
partial analysis and plan for the long term objectives of Snack Food Store. Future
considerations will be developed to address expansion into bulk sales. Once the goals
and objectives are met for expansion into retail wholesale, a business plan for bulk
wholesaling will have to be developed.
2.4 Project Benefits

As a small, retail company, Snack Food Store does not have large economic or
social effects. As a part of the expanding retail trade sector, Snack Food Store has been a
leader in supply chain management, and entrepreneurial endeavors. The benefits of
Snack Food Store’s expansion will be a small social triumph for entrepreneurs and
Saskatchewan based businesses. The benefits that this project will have for Snack Food
Store include:
 Expansion of Snack Food Store’s existing market share
 Significant growth of products
 Increase in public awareness of Snack Food Store’s product line and alternative
snack food varieties
 Positioning of Snack Food Store’s products for expansion into bulk wholesaling
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Snack Food Store
3.0 Industry Overview

Snack Food Store spans the wholesale trade industry, the snack food industry, and
the seasoning and dressing industry. By definition, Snack Food Store is a constituent of
the wholesale trade industry. As part of the wholesale trade industry, Snack Food Store
serves as a wholesale merchant, taking title to the goods and distributing those goods
further along the supply chain, and in some cases to end consumers. (Industry Canada,
Wholesaling, 2006, para. 1-3) Snack Food Store is not a manufacturer, and therefore
does not fall directly into the snack food and seasoning and dressing industries, but issues
in this industry encompass all levels of the supply chain from suppliers to end consumers.
(Industry Canada, Snack Food Manufacturing, 2006, para. 1) As a wholesaler of these
products, Snack Food Store is clearly affected by the consumption trends of end
consumers and the decisions of manufacturers.
Canada’s snack food industry, seasoning and dressing industry, and the wholesale trade
industry have all experiencing growth over the past several years. This provides an
excellent opportunity for the expansion of Snack Food Store.(Agriculture and Agrifood
Canada, 2003, para. 2, Hodgen, D., 2003, pg. 1, Lebreux, J., 2006, pgs. 3, 14) Within this
opportunity for expansion, there are a number of important factors of which to be aware.
Consumption trends are the primary issue in the snack food and seasoning and dressing
industries. Health and convenience are currently consumers’ primary concern and are
important to address. A challenge in these industries is the expansiveness of products
available, making it difficult to secure consumers. In the wholesaling industry, the
strength of the Canadian dollar has a significant impact on the industries growth.
(Lebreux, J., 2006, pg. 3) In favour of Snack Food Store, a tendency toward low
inventory-to-sales ratios is a current trend. In the wholesale industry, there are also
challenges that Snack Food Store will have to face. Recently, organizations within the
wholesale industry have had high capital investment and are quick to adopt new
technology, while globalization and product importing has also begun to have a major
influence. (Hays, A., 2006, pgs. 6 – 9) While these issues are all essential to address
through the business planning process, Snack Food Store is well aware of these
challenges in its industry, giving it a good foundation to face the issues at hand.
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Snack Food Store
4.0 Operations Plan

4.1 Organizational Structure
Figure 1 Snack Food Store Organizational Structure
Snack Food Store is a family owned and operated business. XXXX is the
President and Mr. XXXX is the Operations Manager. Mr. XXXX contributes to the duties
of Operations Manager as a financial coordinator of the business activities. Though the
family has always run the business and has an in depth knowledge of its operations and
the industry the organizational structure may need to be re-evaluated if there is a major
production increase. Currently The Operation Manager currently runs all of the day to
day operations, is in touch with Sask Abilities, sending products to be packaged to Sask
Abilities and ordering the packaged products from them for distribution. The Operation
Manager is also in charge of human resources and all staff.
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Snack Food Store
4.2 Site Plan, Building and Floor Plans

Figure 2 Snack Food Store
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Snack Food Store
Figure 3 Snack Food Store Facility Floor Plan
* Figure is a scale of approximately 1:190
The building itself is a 6459 square feet with an additional 2000 square feet on
mezzanine. The building has two high level loading docks in the rear of the building.
Located in the light industrial area, there is additional space available at minimal costs.
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Snack Food Store
4. 3 Work Plan and Flow of Work

Technical Process
Figure 4 Flow of Work
Physical Flow of Product

Snack Food Store does not actually produce any of their own products; bulk
product is purchased and brought into Saskatoon for packaging. Packaging is done on a
contract basis with Sask. Abilities. Bulk raw product is delivered to Sask. Abilities and
packaged, in the Snack Food Store packages. The products are then boxed and shipped to
the Snack Food Store facility for distribution or storage. Snack Food Store has a very
short product turn over rate. Product is not in stored long before shipping, this ensures a
fresh consistent product.
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Snack Food Store
Quality Control
Snack Food Store prides itself on quality and it is one of their major competitive
advantages along with their guarantee on products, the Snack Maker there is a 25 year
full warrantee. With promises like this the company must have a very selective nature and
trust in their suppliers. All companies involved with Snack Food Store are registered due
to the needs for crossing boarders and exporting. The snack makers as well as the spices
are imported from the United States and the Kaktus chips are imported from Mexico. Not
only is product quality monitored at the individual manufacturer level but also during
packaging and again before shipping. Damaged products are taken off the line and
discarded.
Snack Food Store packaging is done by Sask. Abilities. The abilities facility is
HACCP certified and has a large capacity for production. Although this facility has a very
large capacity for production they are currently undergoing restructuring and having
problems managing the facility for the optimum utilization. Snack Food Store has the
challenge of having to manage their contract with Sask. Abilities in advance of when they
actually need to make an order, to ensure that a supply will be packaged in time for
shipment.
Snack Food Store has very few limitations with product supply, but if capacity
was to increase on a large scale they may have to acquire further storage. Snack Food
Store may also have to look at a new packaging contract or look at the possibility of
buying out Sask. Abilties, due to the poor organization of the current facility. There are no
environmental limitations on the products that are imported because they have ties to
companies that could supply their product all over North and South America, so if there
was a crop failure in one area, some supply would be able to be provided from other
areas.
Snack Food Store may need to look into reregistering as a wholesaler rather than a
manufacturer.
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Snack Food Store
4.4 Capital Budget

The capital budget for Snack Food Store is based on the building and equipment
Snack Food Store currently own, as well as a 2.5 times production expansion over the
next 4 years. This expansion will be into wholesaling and securing more HBC retail
outlets on a consignment basis. The company previously packaged their own product, so
they have the equipment to accommodate extra seasonal demand and backlogs from
Sask. Abilities which is the only requirement of Snack Food Store for the current
considerations of wholesale expansion. There is also capacity to expand distribution
using their current equipment, although depending on the extent of the expansion, the
company will require significant expansion in packaging and transportation costs. The
current arrangements, other than packaging and distribution are adequate for storing the
products and expanding up to 200%. The following capital budget outlines capital that
Snack Food Store currently has, with the capacity to expand to a production of 175, 000
pounds. All the capital requirements for this capital budget are based on Snack Food
Store’s 2002 – 2005 financial statements. Total working capital is the sum of accounts
receivable, raw inventory, inventory in progress and finished inventory, minus accounts
payable.
Table 1 Snack Food Store Capital Budget

Estimated Original Estimated Value after
Description
Capital ($) depreciation
2007
Buildings:
Leasehold
52,803 1,500
Improvements
Total Building Capital 52,803 1,500
Equipment:
Motor Vehicles 6,752 750
Computers 72,689 2,000
Production
13,996 1,300
Equipment
Forklift 15,967 1,000
Other Equipment 104,065 17,000
Total Equipment Capital 213,469 22,050
Total Working Capital N/A 49 423
Total Capital 266 272 72 973
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4.5 Working Capital Planning and Management
4.5.1 Cost of Goods Sold

Table 2 Cost of Finished Product and Gross Profit
Product (per Costs of Price to Gross
100g) Goods* Retailers Profit
Seed 2.45 2.88 15%
Premium 1.34 5.20 74%
Canola Oil
Coconut Oil 2.92 6.71 56%
Kaktus Chips 1.69 5.56 70%
Spice 0.99 3.00 67%
Gourmet 0.99 3.40 71%
Spice
Theater II 15.00 38.36 61%
Popper
Theater II 19.00 43.16 56%
Gift Pack
*The cost of goods sold is based on a running average calculated by Snack Food Store.
These direct costs include shipping, raw goods, and packaging.
Gross Profit Margins in the Snack food industry are generally about 35%. After
operating and other expenses, this profit is reduced to approximately 10%. SGW
currently has an average Gross Profit Margin of 51.7%.
Total Cost of Goods Sold Calculation

Beginning Inventories ($250,000/365 days * 49 day inventory turnover = $30,000) +
Cost of Goods Produced ($251, 949) – Ending Inventory (33,823) = Cost of Goods Sold
($248,126)
4.5.2 Administration, Marketing and General Expenses

The following is a list of expenses that they company currently incurs. Many of
these expenses will remain consistent because Snack Food Store current facility is
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Snack Food Store
adequate for approximately 200% expansion. There are some costs that have been
increased by a proportionate amount to reflect possible expansion.
Table 3 Administration, Marketing and General Expenses 2007

Salaries
Management $ 51 710
Part Time Staff $ 25 225

Total Salaries Expense $ 76 935
Marketing Expenses
Magazine Advertising $ 100 000
Brochures and Business Cards $ 500
Web Page $ 1 000
Travel Expenses $ 30 000
Sales Pitch $ 8 000
Demonstration Expenses $ 60 000
Personnel Expense $ 100 000
Total Marketing Expenses $ 299 500
Total Expenses $ 376 435
4.5.3 Working Capital Planning and Management
4.5.3.1 Cash Management

Snack Food Store has faced the threat of insolvency, according to their financial
statements. Accounts Payable are occasionally paid past due and cash for each year
exactly reflects Accounts Receivable from the previous period. This is something that
can be addressed by increasing the line of credit, or changing the terms of Accounts
Receivable. Accounts Receivable are generally consistent with the industry and
acceptable, but the line of credit is relatively low. Although Snack Food Store is hoping
to pay off their line of credit, increasing it during the first two years will be necessary to
ensure solvency. Orders from HBC are placed 4 times a year, and inventories for these
orders will be stocked over approximately 2 months, in keeping with the inventory
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turnover rate. This means that cash will be received on a quarterly basis, so monthly cash
flows may be negative. This will be resolved by increasing the line of credit.
4.5.3.2 Inventories
Snack Food Store has a relatively stable level of demand because their main
business is wholesaling with organizations that have consistent orders. There will be a
change in the current inventory turnover rate. Inventory is currently maintained for the
shelf life of the products. Although there is a different shelf life for each product, there is
an average inventory turnover of approximately 3.5 months. This reduces shipping and
transportation costs because it minimizes the amount of orders made to the absolute
lowest frequency. The trade off in using this method of inventory is that some of the
goods may go bad if there is a slow period and product is not moved off of the shelf
before its expiry, and with expansion, the cost of holding those goods in warehouse may
offset the cost of transportation and shipping. There will be a change in the inventory
turnover period to address these problems. Snack Food Store will be using an average 7
week (49 day) inventory turnover to avoid the problems caused by the longer turnover
period.
4.5.3.3 Accounts Receivables

Primarily, competitors in this industry are providing 30 day terms for Accounts
Receivable. This is consistent with Snack Food Store’s practices. While Snack Food
Store does not offer the typical 10% discount on terms of the accounts, they do offer price
discounts for quantities bought. Bad debt has not been a problem with Snack Food Store
accounts, because the company has had minimal problems collecting on accounts. The
companies that Snack Food Store serves are consistent in paying their accounts promptly
and Snack Food Store has an average collection period of 30 days.
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4.5.3.4 Accounts Payable

Snack Food Store currently has an approximate average days payable of 45 days,
which will be changed to address the rate that Snack Food Store is paying on their
accounts payable. Currently, they are paying interest on most of their accounts payable at
an average rate that is approximately 10%. Based on these terms from suppliers in the
industry, and the fact that many banks offer interest rates below 10%, it would be
beneficial for Snack Food Store to increase equity or use a line of credit to augment their
cash availability and pay their accounts on time, reducing their average days payable to
30 days. This is supported by their recurring cash deficit. Maintaining and even
increasing their line of credit would help Snack Food Store to manage their interest
expense and ensure smooth operations.
4.5.3.5 Cash Conversion Cycle

Based on the current activities of Snack Food Store, the company’s cash
conversion cycle is:
CCC = 105 + 30 – 45 = 90 days
By manipulating the inventory turnover period and firmly adhering to the terms of
account payables, Snack Food Store can operate with a Cash Conversion Cycle of:
CCC = 49 + 30 – 30 = 49 days
This cash conversion cycle is significantly lower that the current cash conversion cycle
and this will mean that a line of credit will be required for the first couple years of the
business plan implementation. After this time, profits will be high enough to maintain a
cash reserve and eliminate the line of credit.
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5.0 Human Resources Plan

Manager (Part Time):
Job Description: In charge of marketing, package design, distributorship organization,
and public relations (Schneider, 1992).
Skills Required: Leadership, interpersonal skills, marketing, and making large decisions.
Experience and Abilities: Convocated with a Bachelor of Commerce from the University
of Saskatchewan, majoring in Marketing and Finance. Member of the North Saskatoon
Business Association and the Saskatchewan Food Processors.
Current Salary: $12 000
Benefits: EI of $234, CPP of $594, and WC of $374.40.
Total: $13 202.40
Operations Manager:
Job Description: In charge of day to day operations, human resources, Sask Abilities,
ordering from suppliers and packagers, receiving, unpacking, sorting, recording,
managing resources and inventory levels, shipping, sales.
Skills Required: Ability to make day to day decisions, interpersonal skills, able to
motivate staff, management skills, understanding of human resources and basic
accounting and finance.
Current Salary: $35 000
Benefits: EI of $682.50, CPP of $1 732.50 and WC of $1 092
Total: $38 507
Staff
Job Description: Change description, used to be in charge of caramelizing and oil
packaging. Staff are now needed for working in the warehouse distributing products, at
times when SA is behind and packaging needs to be done. There are currently 2 staff that
work part time at Snack Food Store. The hours for these staff members will be increased
to allow for extra demands on the manager’s time due to expansion.
Current Salary: $21, 780
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Benefits: EI payments are $425, CPP payments are $1 078, WC payments are $680, and
holiday pay is $1 263.
Total: $ 25 226
Work Hours
Snack Food Store has business hours from Monday to Friday10:00am-4:30pm.
The business also shuts down for 2 weeks for Christmas and 1 month (July) during the
summer.
Overtime
Overtime is paid to employees who work more than 8 hours in a day or 42 hours in a
week (32 hours in a week with a holiday). Overtime is paid at 1.5 % to non-salaried
workers (Sask Labour, 2006). This will be the policy if overtime is required, but
overtime has not been calculated into the financial plan, as it is not projected to be
required for the expansion.
Payroll Deductions and Employer Contributions

Canada Pension Plan (CPP) is deducted from the employee’s cheque at 4.95 %,
deductions stop when either the employee’s maximum pensionable earnings is met
($42,000 in 2006) or the maximum an employee can contribute for the year is met ($1,
910.70 in 2006). The employer is required to meet the employee’s contribution at 4.95%
(Canada Revenue, 2006).
The Employment Insurance (EI) Premium rate for 2006 is 1.95% deducted from
employee’s insurable earnings. Deductions stop when you meet either the employee’s
maximum insurable earnings ($39,000 in 2006) or the maximum employee premium for
the year (729.30 for 2006). The employer is required to pay 1.4 times the amount the
employee pays (Canada Revenue, 2006).
The amount of income tax deducted from employees check depends on the amount they
earn and the pay period they are in. The employer does not contribute to income tax
payments (Canada Revenue, 2006).
Workers Compensation (WC) is calculated as $3.12 for every $100 earned.
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Vacation and Vacation Pay

Snack Food Store pays wage earning employees holiday pay at 5.80% of their
wage.
Training Program
While Snack Food Store has not had employee turnover for several years, and the
company does not have a large number of employees, it is important to have a template
for training new employees. This template can be relatively informal, due to the size of
the company and the availability of the manager to clarify any problems for new
employees.
Part one: Instruction manual

 Organization – Company history, mission statement, objectives, policies,
procedures.
 Safety – Workplace hazards, safety equipment and precautions, emergency
contacts.
 Introduction to Job Orientation.
Part two On Site Job Orientation

 Job description and pay, pay period, expectations, work hours, tour of offices and
warehouse, flow of work, record keeping, management, equipment and proper
use, skills and techniques required and handling materials
5.1 Human Resources Strategy

In order to motivate employees, Snack Food Store will be giving staff employee
discounts on Snack Food Store products and have staff popcorn parties, where staff
and management can try products and mingle. Staff will get a 38% discount on all
Snack Food Store products except the Theater II Snack Maker, on which they will
receive a 35% discount. Popcorn party representatives get a wholesale discount on
products, as well as a volume discount, rewarding representatives for volume sales.
Managers and employees will be given evaluations, where they are able to give
23
Snack Food Store
comments on business operations, management, marketing, job quality and other

comments. Snack Food Store being started and now operated will create an
enthusiastic environment, as well as good management. Good management will be
key to the human resource strategy, as it will create leadership, a good quality
environment and motivated employees by following example. This is also why the
organizational structure will be re evaluated to create more management focus on
operations as well as employees.
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Snack Food Store
6.0 Marketing Plan

6.1 Overview of the 4 P’s of Marketing
This overview of the 4 P’s, is a summary of the details described later in the
marketing plan.
Product – Snack Food Store product line includes everything required for at home snack
making. The product line fits directly into the market with consumer and snack food
trends.
Place – The main focus of this plan will be to target an increase in HBC stores carrying
the Snack Food Store product line, in western Canada. As well they will maintain
relationships with chains and smaller gourmet and retail stores.
Price – The gourmet focus of the product line allows for premium pricing. Pricing
strategies are in place for wholesale purchases to retailers and chain stores.
Promotion – The focus of promotional strategies will be to attract new retail outlets. As
well, advertising strategies will create a pull by consumers, through magazines and a
push by utilizing in store demonstrations.
6.2 Segmentation, Targeting and Positioning
6.2.1 Segmentation
Snack Food Store is expanding into the wholesale trade for the sale of semi-bulk
products. This requires an industrial marketing segmentation, as other business
organizations, not individual people are the consumer. Industrial segmentation is
categorized by location, company type, and behavioral characteristics.
Location is geographical and may be specified to a single location or generalized

to a global scale, according to the marketing objectives. Company type is defined by the
type of industry the company is in, the company size, the organizational and decision
making structure, and the criteria they have for purchasing. Behavioral characteristics
include the buyer status, usage rate, and purchasing procedures of the organizations.
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Snack Food Store
6.2.2 Targeting
Location
Snack Food Store products are best suited to the Canadian market because direct
competitors carry more threat outside of the Canadian market. Snack Food Store
competitive advantage is being able to provide product quickly and conveniently to
customers in the Canadian market. The local and provincial focus will be the first target
of Snack Food Store in order to grow manageably. The Western Canadian market is also
attractive because it is comparatively easy and cost effective for small companies, such as
Snack Food Store, to penetrate this market. Because of the international, and sometimes
global reach of the organizations that Snack Food Store will be targeting, future
considerations will be to expand contracts with these organizations to an international
level, depending on the success of the western Canadian focus.
Company Type
Customer trends in general are moving toward convenience and away from small,
private stores, so Snack Food Store will be targeting large, commercial organizations that
cater to this consumer need. The industry that these companies are involved in is the
diverse sector of the retail trade. Large commercial stores can also be defined by
subcategories of retail trade, specifically
 Motor Vehicle and Parts Dealers
 Furniture and Home Furnishings Stores
 Electronics and Appliance Stores
 Building Material and Garden Equipment and Supplies Dealers
 Food and Beverage Stores
 Health and Personal Care Stores
 Gasoline Stations
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Snack Food Store
 Clothing and Clothing Accessories Stores
 Sporting Goods, Hobby, Book and Music Stores
 General Merchandise Stores
 Miscellaneous Store Retailers
 Non-Store Retailers
Snack Food Store products primarily fall under the food and beverage sector, but
Snack Food Store also has some products in the general merchandise sector. Snack Food
Store will be focusing on organizations that are looking for unique products that fit the
everyday lifestyle needs of consumers and require mid range pricing and production
capacity. The decision making unit of these organizations, as it relates to Snack Food
Store is typically a buying team. These teams can be accessed through general managers
of local branches, or as a panel of buyers who evaluate a product proposal at a higher
level.
Behavioral Characteristics
At this point, the status of the organizations that Snack Food Store will be
targeting is potential buyers, with an objective of developing contracts that will classify
these organizations as regular buyers. The usage rate of these regular buyers is
approximately four times a year monthly. The contract that Snack Food Store is currently
under with HBC follows this buying cycle, which is consistent with other large
commercial centers in Canada. The purchase procedure with these organizations is
generally called a vendor contract relationship.
6.2.3 Positioning
The positioning of Snack Food Store product for the retail organizations, which
will filter down to consumers, is as a premium quality product, sold in bulk for
convenience and affordability.
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Snack Food Store
6.3 SWOT
6.3.1 Internal Strengths
 Gross Profit Margin

 Strong Management Team
 Inexpensive Supply Costs
 Strong Industry knowledge and understanding
 Strong Customer base and current contracts
 Very little wasted/ damaged/ returned product
 Commerce educated and experienced management
6.3.2 Internal Weaknesses
 Debt Management
 Some Management team members have other commitments
 Sask. Abilities Contract May not meet capacity with expansion
 Research and Development understanding
 Assets aren’t managed wisely
 Out dated marketing plan for current marketing and little wholesaling plans
 Consumer Awareness
 Many Competitors
 No defined entry strategy
 Flow of authority in upper level management
6.3.3 Opportunities
 Industry Growth trends towards box store shopping

 Minimal Canadian competition
 Product Differentiation
 Increasing demand in the gift market
 Retailers have the ability to focus product attention based on seasonal trends
6.3.4 Threats
 Highly Concentrated market

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Snack Food Store
 Increase in competition due to globalization and industry growth

 Many snack food products currently in retailers
 Customer demands and shopping trends are shifting
 Competition in many sectors ( gift pack, snacks, appliances,)
 Retailer can be difficult to reach
 Snack Food Store brand image confusion with other non-related companies
6.4 Market Analysis
6.4.1 Past Performance

Snack Food Store is currently selling through three routes. They sell as a
wholesalers, as well as a retailer, they also sell to HBC on contract at a discounted retail
price. These markets are very diverse, as they represent final consumers and
intermediaries. Primarily, end consumers are in their 30’s – 50’s and have been
introduced to the Snack Food Store product through home popcorn parties and personal
selling techniques that are most effective in this market. The contract with HBC has
brought this product to the attention of some younger people who are homemakers and
are looking for products for their own homes. Products are primarily sold in trade fairs
and through online advertising. This reaches current consumers and a small portion of
potential consumers who are looking for a specific product, but this marketing reach does
not have the effectiveness or capacity to expand into the area of wholesaling to
commercial organizations. In order to expand into the area of wholesale trade, Snack
Food Store will be able to use their expertise in the development of their contract with
HBC. The expansion into the wholesale trade in the consumer market will follow this
pattern exactly.
The products have a sizeable margin, ranging from to approximately 20% to 70%.
This average provides plenty of room for manipulation. Products are priced at a premium
compared to most competitors, as the product is and may need to be re-evaluated to
increase the market of end consumers that will be interested in buying the product.
Competitors of the Snack Food Store products include companies that directly
compete with popcorn products, such as Back to Basics, ACT II, Orville Redenbacher’s,
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Snack Food Store
and Kernels, as well as indirect companies that produce replacement snack foods, or
alternative food options. The major competitors can be seen in Table 5
The Market
Information about the retail market is widely available because most large commercial
organizations are public, but the information is also very general, due to the size of the
organizations and the size of the market itself. Statistics Canada and company websites,
as well as publicly available sales and financial information are useful sources of
information to explore the possibilities for penetration into the market. Company
websites in particular outline the procedure for developing contracts with the organization
and provide insight into what type of products each organization is looking for and how
large a company has to be to get involved.
In Canada, there are almost 100 companies that are considered large commercial
establishments. Although there are approximately 200 000 companies in Canada that are
registered as retail organizations, many of these companies are small or privately owned,
so they do not take on products from other organizations and would not have a large
enough order to be cost effective. Sales among these companies are very large, although
it also covers a wide range of products. Within retail trade, sales in Canada almost reach
$60 billion and growth in this sector averaged 5%. There are currently 500 HBC stores in
Canada and 100 in western Canada
There is very little that will affect the growth of this market, as it is well established, and
does not have significant development in innovative sectors. The growth of the market
shows promise for a strong future. The trends of consumers toward health and wellness,
pleasure, value, and convenience all support this growing market, as consumers are more
and more often shopping in large commercial establishments.
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Snack Food Store
Competition
Table 4 Snack Food Store Competitors
Competitor Products Price(Cdn $) Strengths Weaknesses
Back to Basics - Popcorn $50 - price is - location –
– US based popper slightly better Snack Food
internet sales than Snack Store can ship
Food Store for more easily
some products within Canada
ACT II - Microwave $20-$40 - brand power - not known as

popcorn popcorn - product a gourmet
convenience product
- limited
products
compared to
Snack Food
Store
Orville - Microwave $17-$23 - brand power - quality
Redenbacher’s popcorn - variety of (commercialize
popcorn - Kernel products d, while Snack
popcorn and oil Food Store is
- Prepopped viewed as
popcorn home made)
- Popcorn
cakes
The Ultimate - Gift pack $99.95 - provides a - price

Popcorn full product - product
Lover’s Gift line variety
Pack – online, - appealing
US based product
company appearance
Trends in the industry are favorable for all competitors of Snack Food Store products. In
order to combat competitors, Snack Food Store will have to position their product
uniquely, focusing on health and freshness.
Customers/Target Market
The end consumer for Snack Food Store products are people who are looking for a
snack product that will compliment their at home entertainment. These customers range
from young families to retired couples. Many of these customers are changing their
shopping trends and are shopping in larger retail establishments. Ultimately, this means
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Snack Food Store
that the target market of Snack Food Store product line is the large establishments that
will sell Snack Food Store products. These large retail organizations want products that
are unique enough to attract consumer’s attention. Snack Food Store product line fills the
need of convenience, indulgence, and premium products that will attract consumers based
on these impulsive desires, as well as being a product that consumers will learn to trust
and appreciate through high quality.
While the commercial market can be relatively difficult to enter, and often has a high
level of competition. The market is very large and provides a large variety of products,
that new products that meet the needs and trends of consumers can find the appropriate
niche within this highly competitive market. At this point, the nature of the market
becomes beneficial because the large volume of products attracts a large number of
consumers. Also, the costs in the industry, after the initial costs, are lower because their
product is sold through one channel, instead of several, smaller orders. Snack Food Store
product is very specific and has attributes that meet the trends within the industry. The
advantage of entering this industry is that Snack Food Store has a unique product line that
is not yet seen in large establishments. Products that are very similar in quality and style
to Snack Food Store products are not offered in commercial establishments. By being a
first mover in this market, Snack Food Store will secure a hold on the market before
competitors move.
Product/Service Features
The product that Snack Food Store will be selling is the entire line of Snack Food Store
products. This may be changed to satisfy the need of each commercial establishment that
Snack Food Store proposes a contract to. As each of Snack Food Store products are
closely related and fit into the same retail category, they are all a fit for the organizations
that Snack Food Store will be targeting. Snack Food Store product line is very
comparable to competitors and closely meet consumer needs, as shown in Tables 6 and 7
Snack Food Store product line includes:
Gourmet Seasoning Six Pack
Gourmet Seasoning Six Pack contains the following six seasonings: All Dressed, Cheddar
Cheese, Cool Ranch, Dill Pickle, Herb & Garlic and Sour Cream & Onion. Each packet
contains ample seasoning to make one - two batches of flavored snacks.
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Snack Food Store
Gourmet Spice Selection

Variety Pack containing 20 packets of Snack Food Store Gourmet World popcorn
seasonings. Each packet contains ample spice to make one batch of flavored popcorn
(theatre spice -14 gram / .49 oz is sufficient to make three (3) batches of popcorn/ 1/2 tsp
of Snack Food Store Gourmet World Theatre Spice is recommended per batch)
Kettle Corn Seasoning

Snack Food Store Gourmet World Kettle Corn Seasoning is a unique blend making a
salty and sweet snack. The Kettle Corn Seasoning has no sugar therefore adds NO
CALORIES OR FAT to the popcorn or the snacks. The Kettle Corn Seasoning can be
placed in the Snack Maker during the cooking process. The seasoning can also be
sprinkled on the popcorn or snacks after they are made.
Snack Seasonings
Snack Food Store Gourmet World has a multitude of seasoning flavors. Any flavor you
can purchase in a chip flavor is now available for a snack seasoning. Presently Snack
Food Store Gourmet World markets 17 flavors excluding the Theatre Spice and the Kettle
Corn Seasonings. All of Snack Food Store Gourmet World seasonings are placed on the
product after the product is made (excluding Theatre Spice). The seasonings can be
incorporated into any system. SEASONINGS WITHOUT MSG: CHEDDAR CHEESE,
CINNAMON SUGAR, HONEY MUSTARD & ONION, KETTLE CORN, SALT &
VINEGAR, THEATRE SPICE, WHITE CHEDDAR
Theatre Spice
Theatre Spice is a unique popcorn salt. The Theatre Spice and the Kettle Corn Seasonings
are the only seasonings that are placed into the Theatre II Snack Maker during the
cooking process. The Theatre Spice is a butter flavored seasoning.
Gourmet Popcorn Seed

Snack Food Store Gourmet World Popcorn Seed is high quality commercial seed.
Popcorn is a high fiber snack.
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Snack Food Store
Premium Canola Oil

Snack Food Store Gourmet World Coconut Oil and Snack Food Store Gourmet World
Premium Canola Oil can reach a higher temperature before they start to burn or smoke.
These oils are suggested because their low molecular structure makes them more stable
and lighter than other oils. All Schneider' s Gourmet World suggested usages are
guidelines to make a perfect snack. Individual consumers make the product, determining
the amount of oil and seasonings they wish to use. Neither Snack Food Store Coconut Oil
nor Snack Food Store Gourmet World Premium Canola Oil are hydrogenated. Beta
Carotene additive enhances provides a butter flavoring and butter coloring.
Theater II Snack Maker

The Snack Food Store Gourmet World Theater II Snack Maker reaches 475° F, the same
temperature as commercial poppers. The thru-the-handle stirring paddle keeps kernels
moving and evenly heated. This prevents burning and 97% popping of extra-crispy
popcorn. The steam escapes through the vents allowing the kernels to explode.
Theatre II Gift Pack

Great for any gift idea, gift pack includes Snack Food Store Gourmet World Theatre II
Snack Maker, 100 g / 3.6 oz Snack Food Store Gourmet World Popcorn Seed, 100 g / 3.6
oz Snack Food Store Gourmet World Kactus Chips, 100 g / 3.6 oz Snack Food Store
Gourmet World Kettle Corn Seasoning and 14 g / .49 oz Snack Food Store Gourmet
World Snack Seasonings Packets.
Kactus Chips
KAKTUS CHIPS: These unique chips are made from corn, potato, and rice or wheat
flour.
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Snack Food Store
Table 5 Comparison of Features for Snack Food Store and the Competitors
Competitors product features Snack Food Store product features
- Individual packaging and bulk packaging - Bulk packaging for value purchasing
- some variety - wide variety
- commercial products and private labels - private label
- medium to high quality - high quality
- low price to high price - premium, slightly high price
- single to variable serving sizes - variable serving sizes
- low to high brand image - low brand image
Table 6 Consumer needs and solutions

Consumer Needs Snack Food Store Answer
- natural foods - foods with no MSG
- novel foods - Kactus chips and stove top popping
- entertainment - a range of snack foods that are fun to
make
- comfort - popcorn is an ultimate comfort food and
at home convenience adds to comfort
- indulgence - a range of products that are snack
indulgences
- premium products - Snack Food Store products are high
- value time quality
- Snack Food Store products complement
at home entertainment and are quick and
easy
The positioning of Snack Food Store product line will be as a home spun product that
appeals to the tendency for consumers to appreciate the value of time and the value of
home entertainment. The quality of Snack Food Store product line will stand out in
consumers’ minds and will be represented by a small price premium.
The Opportunity
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Snack Food Store
The important aspect of this market is the new awareness of the Snack Food Store
product line and the match between consumer trends, Snack Food Store product, and the
market itself, as well as the growth of the target market. Snack Food Store will be able to
secure a part of the market and consumer base that will be consistent due to the nature of
the contracts that Snack Food Store develops with these organizations.
Snack Food Store will be focusing on obtaining a very small market that will be
consistent with the growth capacity of the company. After 3 years, Snack Food Store will
have developed contracts with an additional 60 HBC stores, and maintaining
relationships with their current 40 stores, increasing their market shares, see Table 8
Table 7 Market Share Goals
Current Year 1 Year 2 Year 3
Market Share (of HBC stores) 8% 12% 16% 20%
Expansion Output 90,000 units 96,700 units 145,050 units 193,400 units
Expansion Revenue $478,215 $513,816 $786,138 $1,069,148
6.5 Marketing Strategy
6.5.1 Sales and Profit Objectives

The objective of the Snack Food Store is to expand their relationship with HBC.
Therefore, the company will have to compete with similar products on the shelf. On the
other hand, Snack Food Store will have more control over their product prices, because
they offer a gourmet, health first product. Currently the cost to the retailer is retail value
less 20%, for products. For example, the current retail value of 100g of spice is $4.25;
retailers would buy spice at $3.40. Snack Food Store can expect a 2.5 times sales increase
at the end of 3 years, by increasing stores.
6.5.2 Channels of Distribution

Figure 5 Common Distribution Methods
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Snack Food Store
Manufacturers/product
s
Agents/brokers
Wholesalers/distributor
s
Retailer Retailer
s s
Consumers and organizational end

users
There are several basic channels of distribution, Snack Food Store however only
utilizes, direct distribution, retail distributing and wholesalers/distributors. Currently
Snack Food Store distributes through many retailers of different sizes. The retailers
would range from; HBC being the largest to smaller firms such as Saskatchewan Made
Marketplace. Based on the new wholesaling focus of Snack Food Store, it is in the best
interest of the company to maintain and build their wholesale relationship with the large
chains as well as smaller gift stores. Snack Food Store distributes directly to consumer
via e-commerce. E-commerce is an expanding trend in the industry but may not be
relevant to a wholesale focus. Currently the only distributors that Snack Food Store deals
with are private representatives for their popcorn party sector. For the focus of this
marketing plan we would recommend that distributing through the popcorn party
representatives is not in the best interest of the incoming strategy. Home parties are
diminishing in the market place. Snack Food Store would benefit from developing a
relationship direct to HBC stores. With the new focus in the business Snack Food Store
will shift towards distributing solely to retailers, via company to company relationships.
In developing recommendations for the distribution strategies, 3 basic objectives

were followed:
Distribution Objectives:
 Minimize total distribution costs for a given service output
 Determine the target segments and the best channels for each segment
 To align distribution with the way customers buy, by evaluation;
 Customers’ channel preferences and buying behavior
 Tabulate channel selection to key buying criteria
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Snack Food Store
 Provide flexible channel options

 Monitor (and respond to) changes in buying behavior
We intend on using these objectives a measurement of success in our distributing
strategies.
6.5.3 Pricing Policy

Because the product is marketed as a gourmet, health smart choice, the company is
able to have higher prices than the competition due to superior quality. Up to this point
the company has had complete control over price. Now that Snack Food Store is
increasing wholesaling, competitor prices are going to have to be considered. The price of
Snack Food Store’s biggest competitor, Kernels at big box stores spice ranges from
$2.47-3.19 for 60g, Snack Food Store advantages include, a quality, gourmet product, a
100g bag, and a larger selection of spice flavors. Volume discounts will always be offered
in order to increase sales to big box stores. These prices will be maintained over time
because the extra discount is only taking away from the profit margins, which are still at
high levels, covering costs will not be a problem especially since sales will be increased.
The cost of Snack Food Store products will be sold to HBC stores at retail less 20%.
6.5.4 Select Markets/ Products/ Service Mix

The goal is to offer a superior gourmet product to consumers, yet stay competitive
with other similar products; the company will be a small factor in the market. Advantages
that competitors cannot easily duplicate/counter by price cuts The competitors cannot
easily duplicate the freshness of the product due to the inventory turnover rate or the
health aspects of Snack Food Store product. Also, competitors offer popcorn seed, but not
the kactus chips, these air popped chips offer consumers a new choice and flavor in snack
foods.
6.5.5 Selling and Advertising

The objective of Snack Food Store is to establish their company as a wholesaler;
this will mean applying to retailers and creating a sales pitch. The company would have a
higher success going through a well-known distributor that has already earned the trust of
retailers. Once a relationship has been established with retailers a future consideration
would be to have a general awareness campaign, to increase sales of the product to
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Snack Food Store
consumers from retailers. Snack Food Store will not be hiring sales staff as the Snack
Food Store family already takes care of sales and marketing.
6.5.6 Marketing Plan Budget

The marketing plan budget includes magazine advertising directed at consumers
residing in Western Canada. The amount allotted for a sales pitch will be used to
convince the HBC buying team to put Snack Food Store in more stores. The company
will also be paying for demonstrations to the public at these stores.
Table 8 Marketing Plan Budget

Magazine Advertising $100,000
Brochures/Business Cards $500
Web Page $1,000
Travel Expenses $30,000
Sales Pitch $8,000
Demonstration Expense $60,000
Personnel Expense $100,000
Total Marketing Expense $299,500
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Snack Food Store
7.0 Financial Plan

The following is a summary of both past and projected financial data for Snack
Food Store. Within this section will be an analysis of revenues, expenses, profit and
feasibility. As well, how the financial situation of the company was evaluated and
conclusions as to the feasibility of the operation, is included.
7.1 Financial Plan Summary

The following table shows a summary of the key outcomes of the financial plan. These
are the primary important variables for the basis of financial evaluation. Further analysis
will look at the ratios of these variables and the changes in these variables
Table 9 Key Outcomes of the Financial Plan

Year 2007 2008 2009 2010 2011
Sales 513,816 786,138 1,069,148 1,363,164 1,390,427

COGS 248,126 348,615 464,721 585,605 611,920
Gross Margin 265,690 437,524 604,428 777,559 778,507
Expenses 376,435 442,764 509,219 567,314 551,373
Net Income (loss) (110,745) (5,240) 95,208 191,299 204,421
Year 2012 2013 2014 2015 2016
Sales 1,4,18,236 1,446,601 1,475,533 1,505,043 1,535,144

COGS 623,765 635,932 648,407 661,184 674,256
Gross Margin 794,471 810,669 827,125 843,859 860,888
Expenses 557,563 563,869 570,294 576,848 583,532
Net Income (loss) 213,217 222,120 231,148 240,311 249,621
Internal Rate of Return on Equity Investment 41.7 %
External Rate of Return on Equity Investment 24.6 %
7.2 Economic forecast

The annual inflation rate for the 10 year plan is estimated to be a constant inflation
of 2% per year. This estimation was based on the inflation forecast from the Bank of
Canada as reported by RBC Royal Bank
The annual interest rate on long term debt for the 10 year plan was calculated at
8% this eight percent would only be relevant to if Snack Food Store had long tem debt,
which they don not.
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Snack Food Store
7.3 Dividend policy

Snack Food Store does not pay dividends to their investors because the investors
are exclusively family. Rather than pay out dividend the Management receives a wage
and the company retains the earnings for future expansion and in case they were to show
a loss in any given year.
7.4 Revenues
Table 10 Selling Price of Snack Food Store Products
Product Selling Price less
Discount
2007
Seed 2.88
Premium Canola Oil 5.20
Coconut Oil 6.71
Kaktus Chips 5.56
Spice 3.00
Gourmet Spice 3.40
Theater II Popper 38.36
Theater II Gift Pack 43.16
The selling price less discount price of Snack Food Store products is based on the
retail price, which is listed in the financial statements, less the 20% discount to the Bay
stores. The prices in Table 11 reflect this discount and are the prices that Snack Food
Store will receive from sales. These prices will only be changing due to the inflation rate
over the next 10 years. This will cause Snack Food Store expenses and selling prices to
increase at a rate of 2% every year. (Bank of Canada)
Table 11 Increase in Sales of Snack Food Store products

Quantity of Sales (units) 2007 2008 2009 2010
Spice 50,000 75,000 100,000 125,000
Gourmet Spice 10,000 15,000 20,000 25,000
Coconut Oil 5,000 7,500 10,000 12,500
Premium Canola Oil 100 150 200 250
Seed 17,000 25,500 34,000 42,500
Kaktus Chips 10,000 15,000 20,000 25,000
Theater II Popper 2,000 3,000 4,000 5,000
Theater II Gift Pack 2,600 3,900 5,200 6,500
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Snack Food Store
These numbers are consistent with a 2.5 times production increase. Currently
Snack Food Store products are sold in 40 HBC stores across Western Canada, with the
goal of being sold in 100 HBC stores. After 2010 the quantity of sales numbers for each
product will stay at the 2010 level. This is because 2010 is the year Snack Food Store will
reach their sales goals.
7.5 Costs of Goods Manufactured

Table 12 Snack Food Store Cost of Goods Manufactured
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Direct
212, 324 44 5 5 5 5 6 6 6
Expenses
084 ,489 1,304 62,663 73,916 85,395 97,103 09,045 21,226 33,650
Total Overhead
Costs
39,865 39,116 39,096 39,255 39,555 39,967 40,468 41,043 41,679 42,366
Total Cost of
Goods
Manufactured 251,949 363,604 480,400 601,918 613,471 625,361 637,571 650,088 662,905 676,016
The Cost of Goods Manufactured includes Direct Expenses and Overhead

Expenses. Direct expenses include the cost of shipping raw materials, the cost of raw
materials themselves, and the cost of packaging and production of raw materials. Each
item in Snack Food Store’s product line has these costs imbedded in a multi year average.
The costs are then increased by inflation for the next ten years. Total direct expenses are
the total costs of all of Snack Food Store’s sales. Overhead costs include occupancy
expenses and the cost of depreciation of Snack Food Store’s capital assets. Occupancy
expenses include the cost of Snack Food Store’s lease, utilities and related costs.
Depreciation is based on the original capital assets that Snack Food Store acquired at the
company’s inception.
7.6 Administrative, Marketing and General Expenses

Table 13 Administrative, Marketing and General Expenses
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Administration
Salaries &
Wages 76,935 78,474 80,043 81,644 83,263 84,891 86,543 88,222 89,934 91,680
Marketing
Expenses 299,500 364,290 429,176 485,670 468,110 472,672 477,326 482,072 486,914 491,852
Total Admin
& Marketing
Expenses 376,435 442,764 509,219 567,314 551,373 557,563 563,869 570,294 576,848 583,532
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Snack Food Store
The administration expenses for Snack Food Store are a total of manager, part
time manager, and seasonal worker wages, as well as the benefits for these workers.
Snack Food Store will have one full time manager, one part time manager, and two
seasonal staff workers. Marketing expenses include magazine advertising, brochures and
business cards, web page maintenance, travel expenses, sales pitch, demonstration
expense, and personnel expenses. These expenses include costs for managers to travel
and maintain relationships with customers, direct costs of the forms of promotion that
have been selected, and cost of office expenses and material preparation required for
sales meetings.
7.8 Working Capital
Table 14 Working Capital
Statement of
Working 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Capital
Accounts
Receivable 42,231 64,614 87,875 112,041 114,282 116,567 118,899 121,277 123,702 126,176
Finished
Inventory 33,823 48,813 64,492 80,805 82,356 83,953 85,592 87,272 88,993 90,753
Accounts
Payable 26,632 36,054 45,843 56,010 57,129 58,268 59,430 60,614 61,822 63,054
Total Working
Capital 49,423 77,372 106,524 136,837 139,510 142,252 145,061 147,935 150,873 153,875
Working capital consists of accounts receivable, inventory, and accounts payable.

The amount of accounts receivable is based on a percentage of total sales. Snack Food
Store receives on account every 30 days, so an average of 30 days of sales revenue is
attributed to accounts receivable. Finished inventory is the only significant inventory that
Snack Food Store holds. Goods are shipped to Sask. Abilities soon after they are
received. Goods in progress are inventory that Sask Abilities is responsible for. Total
days inventory for Snack Food Store is therefore 49 days, or 7 weeks, on average. This
means that finished inventories is calculated as the total expense of 49 days worth of
inventory. Snack Food Store will pay on account every 30 days. This means that the
accounts payable calculated by the model is based on 30 days of purchases.
7.9 Debt Financing

Table 15 Cash Flows with Increased Financing
2007 2008
Net Cash From (Used-In) (155,303) (29,774)
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Snack Food Store
Operations
Net Cash From (Used-In)
Investment Activities (value of 2,000 0
leasehold improvements)
Equity 124,000 0
Additional Equity/Financing 31,000 30,000
Increase (Decrease) in Cash 1,697 226
Beginning Cash 0 1,697
Ending Cash 1,697 1,923
Table 7.9 shows additional equity requirements for the first two years of
expansion. Snack Food Store does not require any long term debt financing due to the
low capital requirements for this project and the generally positive profit and cash flow of
the expansion. Despite this, the first two years of the expansion will result in a negative
cash flow if additional financing is not secured. After two years, additional financing will
not be required, so the tables do not show debt financing projections beyond 2008.
Additional financing may be secured from increasing equity investments, as

shown in the financial plans for the first two years. Another consideration for the lack of
cash in the first two years is to secure a line of credit from Snack Food Store’s financial
institution. Increasing equity is the least cost approach to creating a positive cash flow.
Securing a line of credit may be necessary if the owners of Snack Food Store desire to
continue to remove their equity investments and rely on company financial independence.
7.11 Income Taxes

Snack Food Store will pay the following income taxes:
 Federal Income Tax at a rate of 21 % on all taxable income.
 Provincial Income Tax at a rate 5% up to $400 000 taxable income, which Snack
Food Store will not exceed in the next 10 years.
 Snack Food Store does not pay Capital Tax.
 Snack Food Store will receive a Small Business Tax Credit at a rate of 16 % up to
$400 000.
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Snack Food Store
7.12 Financial Ratios and Other Key Information

The financial ratios for Snack Food Store show that once the expansion is
complete and sales targets are met the company will be able to make a lot of profit. The
Current ratio shows that Snack Food Store always has high current assets/current
liabilities because Snack Food Store has very little long term debt. Total asset turnover
equals net sales/ total assets, therefore how assets are being used to produce revenues.
Snack Food Store total asset turnover keeps getting lower because the company is
increasing sales without buying new any assets. Direct expenses/sales is 41% because of
high profit margins. Debt /asset ratio also decreases over time because of very low debt
and increased production.
Net income is negative for the first two years because the company is expanding and
therefore does not have a high income. The return on total assets and equity are also
negative for the first two years because the company is not yet making money, but these
numbers grow with the increased sales. The numbers in this table include projections for
the next 5 years, a complete 10 year ratio analysis is available in Appendix 4, Schedule
11.
Table 16 Financial Ratios For the Next 5 Years
2007 2008 2009 2010 2011
Liquidity Ratios
Current Ratio 3 3 5 8 11
Activity and Operating Ratios

Total Asset Turnover 7.25 7.45 5.09 3.31 2.25
Direct Expense/Sales 41% 41% 41% 41% 41%
Direct Labour/Sales 0% 0% 0% 0% 0%
Overhead/Sales 7.8% 5.0% 3.7% 2.9% 2.8%
Administration/Sales 15.0% 10.0% 7.5% 6.0% 6.0%
Leverage Ratios
Debt/Asset Ratios 37.6% 34.3% 21.8% 13.6% 9.3%
Profitability Ratios
Gross Profit Margin 51.7% 55.7% 56.5% 57.0% 56.0%
Net Profit Margin -21.6% -0.7% 8.9% 14.0% 14.7%
Return on Total Assets -156.2% -5.0% 45.3% 46.5% 33.2%
Return on Equity -250.2% -7.6% 58.0% 53.8% 36.5%
Net Profit Margin* -21.6% -0.7% 8.9% 15.4% 16.3%
Return on Total Assets* -156.2% -5.0% 45.3% 51.1% 36.8%
Return on Equity* -250.2% -8.6% 58.0% 59.1% 40.6%
45
Snack Food Store
*Using net income before tax.
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Snack Food Store
7 .14 Risk Analysis
7.14.1 Critical Variables

Table 17 Critical Variables
Allowable %
Critical Variable Base Case IRR = 0%
Change
Unit sales (avg unit
sales) 1200 units 9500 units -22%
Selling Prices
(weighted avg. -13%
revenue/unit) $5.31 $4.62
Direct expenses
(weighted avg/unit) $2.19 $2.87 +31%
2.5 times 1.9 times
Growth of sales current sales current sales -40%
Marketing Expenses $299 500 $554 000 +85%
Table 18 shows that the most influential critical variable is the selling prices of the
product line. Snack Food Store’s products are premium priced to reflect quality and
indulgence, but this may not be acceptable to consumers and may prove detrimental to
introducing the Snack Food Store product line into new retail establishments. The
sensitivity of the price of Snack Food Store’s products means that there is very little room
to negotiate wholesale discount rates. Although direct expenses are not an obvious
critical variable, it is important to note that average direct expenses may fluctuate
drastically, as Snack Food Store obtains raw materials internationally. This means that
exchange rates as well as raw material prices will have an effect on direct expenses. It is
also important to note that the financial success of this venture depends on a significant
growth in sales. Sales must nearly double (1.9 times current sales) to obtain an internal
rate of return of 0%.
47
Snack Food Store
7.14.2 Break Even Analysis

Figure 6 Break Even Analysis
Table 18 Average revenues per unit

Year Average Revenue/Unit
Cash Flow Net Income Economic
2007 $5.29 $6.46 $4.93
2008 $5.42 $5.46 $5.02
2009 $5.14 $5.04 $5.12
2010 $4.85 $4.77 $5.23
2011 $4.80 $4.81 $5.33
2012 $4.89 $4.89 $5.44
2013 $4.97 $4.96 $5.55
2014 $5.05 $5.04 $5.66
2015 $5.13 $5.12 $5.77
2016 $5.21 $5.20 $5.89
The break even analysis for Snack Food Store was completed for the selling price of
Snack Food Store’s products, which was the primary critical variable. The analysis was
completed for a cash flow and net income of zero for all ten years of the forecast, as
represented by the first two graphs and columns of Figure 6 and Table 19. The economic
break even analysis, as represented by the third graph and column in Figure 6 and Table
19, shows values for the selling price that cause a net present value of zero. The
48
Snack Food Store
economic break even analysis, as calculated for a net present value of zero, causes an
internal rate of return of 20%.
7.14.3 Scenario Analysis
Table 19 Scenario Analysis

VARIABLE WORST CASE BASE CASE BEST CASE
Unit Sales 82,195 96,700 111,205
Average Selling Price $4.51 $5.31 $6.11
Average Direct Cost $2.52 $2.19 $1.86
Percent Change -15% 0% 15%
NPV - $1,001,000.00 $300,300.00 $1,738,500.00
IRR - 16% 42% 129%
Table 20 represents the scenario analysis for the three most critical variables, specifically,
units sales, selling price, and direct costs. Each variable is factored up or down by a
value of 15% to represent the best and worst cases. In the base case, it can be seen that
the project is very lucrative with significant rates of return and net present value. It can
also be seen that it is important to meet the projected goals, as the project is volatile and a
significantly negative rate of return and net present value will occur from a relatively
small percentage change in the critical variables.
7.14.4 Contingency Plan

If the goals for the financial plan are not met and the project becomes infeasible, there are
changes that can be made to restore success. If the selling price is perceived as too high
by consumers, retail locations will need to be re-evaluated to find venues that will
support premium pricing. This may mean expanding business into smaller, gourmet retail
locations instead of large department stores. If the unit sales are not met, due to difficulty
in securing more locations, marketing expenses may be reallocated to facilitate direct
selling and sales pitches, instead of being devoted to raising awareness. Changes in
direct cost have been and must continue to be absorbed by revenues. This has not been a
problem in the past, but if it becomes a problem, new, national suppliers may have to be
found.
7. 15 Financial Feasibility and Overall Financial Performance
Snack Food Store and the way their financial statements read in the proposed
business plan is a financially feasible company and will not only show a profit, but
49
Snack Food Store
continue to build on their profit every year until they meet production limits. At this time
it is our recommendation that they reevaluate the business plan and continue to grow the
business.
50
Snack Food Store
8.0 Summary of the Business Plan

The financial analysis that has been done for Snack Food Store has been done
with a minimum of 20% required rate of return. Conservative estimates were made for
the costs and industry averages used. There was also wide latitude given to the value of
equipment and cost of labor. It was found that an IRR of 42% would be easily achieved
by using the given model and forecasts. By industry standards this is an acceptable IRR.
The economic feasibility of Snack Food Store is dependant on meeting sales objectives.
Additional areas studied include external rate of return. The return is based on the
investment that would be needed from shareholders for basic operations. It was found
through detailed analysis that an external rate of return (ERR) of 25% would be achieved
for all shareholders in Snack Food Store. Although increased equity through short term
loans and line of credit are only required to counter a negative cash balance in the first
two years of the plan.
The results conclude that the increased sales would be a feasible and profitable
venture for shareholders, if a significant expansion in sales (1.9 times current sales) can
be met.
51
Snack Food Store
9.0 Future Considerations

Although the business plan projected for a 2.5 times increase in sales utilizing current
contracts and expanding into more stores, Snack Food Store has expressed interest in
expanding the bulk sales portion of their business. This would require increasing the
storage facility as well as constructing new packaging. Sask Abilities, the current
packaging contract holder, may not have the capacity to expand to this size. Therefore it
may be in Snack Food Store’s future considerations to purchase either Sask. Abilities or
to purchase a large packaging facility of their own.
52
Snack Food Store
10.0 References
Agriculture and Agrifood Canada. (2003). Canada’s Agriculture, Food and Beverage
Hays, Alex. (2005). Wholesalers: A Key Link in Canada’s Economy (No. 11-621-
MIE2005026). Statistics Canada. http://www.statcan.ca/english/research/11-621-MIE/11-
621-MIE2005026.pdf.
Hodgen, Donald A. (2003). Snack Foods – 2003. Retrieved September 17, 2006 from
http://www.ita.doc.gov/td/ocg/search=%22snack%20food%20industry%20canada%22.
Industry Canada. (2006). Definition Seasoning and Dressing Manufacturing. Retrieved

September 18, 2006 from
http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis31194defe.html.
Industry Canada. (2006). Definition Snack Food Manufacturing. Retrieved September 18,
2006, from
http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis31191defe.html.
Industry Canada. (2006). Definition Wholesale Trade. Retrieved September 20, 2006,
from http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis41defe.html.
Industry. Retrieved September 16, 2006 from http://72.14.203.104/search?
q=cache:hoeoXVVIl2kJ:ats.agr.ca/supply/3320_e.htm+snack+food+industry+canada&hl
=en&gl=ca&ct=clnk&cd=1.
Lebreux, Jean. (2006). Between the Producer and Retailer: A Review of Wholesale Trade
for 2005 (No. 11-621-MIE2006040). Statistics Canada.
http://www.statcan.ca/english/research/11-621-MIE/11-621-MIE2006040.pdf.
Schneider, Darrell. (1992). Business Plan. Snack Food Store
Schneider, Darrell. Personal Interview. September 21, 2006.
53

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Snack Food Store

7.1 Financial Plan Summary..........................................................................................42

Figure 1 Snack Food Store Organizational Structure..................................................12

1.0 Business Overview

1.2 Mission Statement

1.3 Organizational Goals and Objectives

2.0 Project Overview

2.1 Project Description

2.2.1 Industry Analysis

2.2.2 Operations Plan

2.2.3 Human Resources Plan

2.2.4 Marketing Plan

2.2.5 Financial Plan

2.3 Goals and Objectives

2.4 Project Benefits

3.0 Industry Overview

4.0 Operations Plan

4.2 Site Plan, Building and Floor Plans

Figure 3 Snack Food Store Facility Floor Plan

* Figure is a scale of approximately 1:190

4. 3 Work Plan and Flow of Work

Physical Flow of Product

4.4 Capital Budget

Table 1 Snack Food Store Capital Budget

4.5 Working Capital Planning and Management

4.5.1 Cost of Goods Sold

Total Cost of Goods Sold Calculation

4.5.2 Administration, Marketing and General Expenses

Table 3 Administration, Marketing and General Expenses 2007

Part Time Staff $ 25 225

4.5.3 Working Capital Planning and Management

4.5.3.1 Cash Management

4.5.3.3 Accounts Receivables

4.5.3.4 Accounts Payable

4.5.3.5 Cash Conversion Cycle

5.0 Human Resources Plan

Current Salary: $21, 780

Payroll Deductions and Employer Contributions

Vacation and Vacation Pay

Part one: Instruction manual

Part two On Site Job Orientation

5.1 Human Resources Strategy

comments on business operations, management, marketing, job quality and other

6.0 Marketing Plan

Location is geographical and may be specified to a single location or generalized

 Motor Vehicle and Parts Dealers

 Furniture and Home Furnishings Stores

 Electronics and Appliance Stores

 Building Material and Garden Equipment and Supplies Dealers

 Food and Beverage Stores

 Health and Personal Care Stores

 Clothing and Clothing Accessories Stores

 Sporting Goods, Hobby, Book and Music Stores

 General Merchandise Stores

 Miscellaneous Store Retailers

6.3.1 Internal Strengths

 Gross Profit Margin

6.3.2 Internal Weaknesses

 Industry Growth trends towards box store shopping

 Highly Concentrated market

 Increase in competition due to globalization and industry growth

6.4.1 Past Performance

ACT II - Microwave $20-$40 - brand power - not known as

The Ultimate - Gift pack $99.95 - provides a - price