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A Feasibility Study on Franchising Waffle Time

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Eldy Manebo

on 27 February 2015

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Transcript of A Feasibility Study on Franchising Waffle Time

A Feasibility Study
on Franchising Waffle Time

WAFFLE TIME
SM ARANETA CENTER CUBAO
ENTERPRISE

By Elrosedan G. Mañebo
SUMMARY OF THE PROJECT
NAME OF THE FIRM
BRIEF DESCRIPTION OF THE PROJECT
Waffle Time is a franchise business owned by a business administration student of Systems Plus Computer College
who aims to provide accessible and affordable snacks for, children, students and busy persons.Waffle Time is located at ground floor, SM Araneta Center Cubao, Quezon City. Araneta Center Cubao is one of the best place to put up business because according to statistics millions of people are going to Araneta Center Cubao everyday and it is the most visited place in Quezon City. Aside from it SM Araneta Center Cubao is directly connected through a retail
bridgeway to Ali Mall and Shopwise.
BRIEF HISTORY
Waffle Time started on September of 1998 in the province of Iloilo, Philippines as a simple business venture. It is the first and original purveyor of delicious, nutritious, and reasonably-priced waffles in a cart, with a vast selection of exciting flavors to choose from.The first outlet was in The Atrium Mall, Gen. Luna St., Iloilo City. On June 2002, Waffle Time started to penetrate the Metro Manila market. After which, they opened outlets in Cebu, Cagayan De Oro, Davao, Dagupan. Waffle Time opened its doors to franchising on March 2004. Mr. Johnny Que, president, said that the “main franchising lesson Waffle Time learned was that an established business system is a prerequisite for a seamless franchise program for it would then be easier for internal and external controls to be efficiently enforced. Once this is in place, the franchisor can go on to look for a committed and dedicated franchisee that will take care of the brand. With franchisor’s support and assistance to novice entrepreneurs, a win-win partnership is ensured.”

HIGHLIGHTS AND MAJOR ASSUMPTION
MARKET PROJECTION
ASSUMPTIONS:

A. Approximately 200,000 persons are going toSM Araneta Center Cubao everyday and 268,000 during weekends or 10% of the total population in Quezon City.

B. Since the food cart is inside SM Araneta Center Cubao and there are a lot of food cart competitors, it is assumed that 0.0005% (1/2000) or 100 persons will buy from Waffle Time SM Araneta Center Cubao Enterprise during weekends at an average purchase of Php 70/buyer or five (5) pieces of waffles at P14/waffle and Php 72/buyer or six (6) pieces of waffles during weekdays.

C. Monthly sales from Mon. to Fri. :

100 persons x Php 72/person x 22 days = Php 158,400.00

Sales on Saturday and Sunday :

134 persons x Php 70/person x 8 days = Php 75,040.00

Total Gross Sales per month : Php 233,440.00


D. Gross margin per waffle is 30% or gross income of Php 70,032.00/month.

E. Annual sales is Php 2,801,280.00 with an annual gross margin of Php 840,384.00. Sales is assumed to increase at the rate of 10% per annum due to growing population and migration of people from provinces.

F. Cost of Goods Sold (CGS) is 70% of Sales.


G. Salesperson salary is Php 399.00/day. According to Wage Order No. NCR-18 of National Wages and Productivity Commision of Department of Labor and Employment (DOLE), that if business has only less than fifteen (15) employees, minimum wage is not strictly implemented so that the daily salary as indicated does not follow the minimum wage. However, an annual increase of 1% in salary is assumed.

H. Amount of Rent is Php 10,000.00 per month with an increase of 5% per annum.

I. Electricity (Utilities) bill is assumed at Php 2,500.00/month and is assumed to increase at 5% per annum.

J. Value Added Tax (VAT) under Taxes and Licenses is 12% of Cost of Goods Sold (CGS)

K. Income tax rate or Provision for taxes is 30% to be imposed on Operating Income.

L. SSS and PhilHealth deductions for the salesperson’s benefit amounts to Php 500.00 per month or Php 12,000.00 annually with an increase of 5% per annum.
PROJECT SUMMARY
The project, Waffle Time Araneta Center Cubao Enterprise is a franchise business that aims to provide affordable snacks with a wide variety of waffle flavors that fits in all ages and in all occasions. The overall study as supported by the marketing, technical, financial analysis proves to be feasible and satisfying in terms of profit and sales. Moreover, a look into the management aspect determines the organizational and operational elements essential in the development of this undertaking. Further, the desirability and benefits of putting up this project were cited in the socio-economic aspect.

1. MARKET FEASIBILITY

The target market of the firm are the customers and employees inside SM Araneta Center Cubao specifically in the supermarket as well as the food court which Waffle Time foodcart is located.

2. TECHNICAL FEASIBILITY

Waffle Time SM Araneta Center Cubao Enterprise will be located at SM food court C3, Araneta Center Cubao, Quezon City. The total project cost to put up the business, including the taxes and other legal requirements amounted to Php 330,000.00

3. FINANCIAL FEASIBILITY

An over-all capital requirement of Php 330,000.00 inclusive of pre-operating expenses is needed to put up the business. For five (5) years, income statements generated a net income, which represents an increase in gross profit

ORGANIZATIONAL CHART
Delivery Process
BOOTH LAYOUT AND EMPLOYEE'S UNIFORM
Expenses Cost

Franchise Fee Php 250,000.00

Working Capital Represents
the Utilities (Electricity and Water)
and Employee’s Salary Php 50,000.00

3 Months Advance
Rental Fee (10,000/month) Php 30,000.00

Total = Php 330,000.00

Total Project Cost
Financial Assumption

1. The business forecast is for five years.
2. Sales will increase 10% annually.
3. Sales are based on the actual prices inclusive of 12% VAT.
4. Cost of Sales will be 70% of sales.
5. Cost of Sales will increase 10% annually.
6. Utilities and Maintenance is estimated to increase 5% annually.
7. Salaries and wages will increase 1% annually.
8. Salaries and wages are estimated inclusive of all benefits.
9. Income Tax is 30% of Net Income.
10. Cash and cash equivalent will increase 25% annually.
11. Inventory is maintained 5% of total products.
12. Interest income is 2% of Cash and Cash equivalent.

Waffle Time SM Araneta Center Cubao Enterprise
Projected Income Statement for Five Years 2014-2019
Waffle Time SM Araneta Center Cubao Enterprise
Cash Flow Statement Statement for Five Years 2014-2019
Waffle Time SM Araneta Center Cubao Enterprise
Projected Balance Sheet for Five Years
2014-2019
Computation of Daily Net Income

Daily Sales: Php 2,801,280.00 (Annual Sales)
divided by 360 days = Php 7,781.33/day

Cost of Goods Sold: Php 1,960,896.00 (Annual CGS)
divided by 360 days = Php 5,446.93/day

Gross Profit Php 2,334.40/day
Operating Income

Less: Operating Expenses:
Php 590,948.00 (Annual Operating Expense)
divided by 360 days = Php 1,642/day

Operating Income:
Php 249,436.00 (Annual Operating Income)
divided by 360 days = Php 693.00/day
Less: Income Tax X .30%
Php 208.00
= Php 693.00/day
- Php 208.00
Net Income Per Day.............................................................Php 485.00/day
Computation of Payback To Achieve in Three (3) Years

100 persons x Php 72/person x 22 days
= Php 158,400.00 X 12 mos = Php 1,900,800.00

134 persons x Php 70/person x 8 days
= Php 75,040.00 X 12 mos = Php 900,480.00
Total Php 2,801,280.00

Therefore: Net Income as follows:

Payback for Three (3) Years

Year 1 = Php 174,605.00
Year 2 =Php 210,286.00
Year 3 =Php 249,908.00

Total Php 634,799.00 > Payback for 3 years vs
Php 330,000.00 Total Investment

THANK YOU
AND
GOD BLESS!!!
Full transcript