Professional blog

Question 1

On a recent trip with three other classmates to Australia, you chanced upon Jo’s Fresh2 , a small but busy eatery in downtown Sydney. It is a small cafe with a few small tables and seats, and a food preparation area behind the service and cashier counter. Having savoured their F&B offerings a few times, your team feels that there is a potential business opportunity for Jo’s Fresh in Singapore. You found out that the business has a franchise program which is appropriate for a quick business start-up upon graduation from SUSS.

Jo’s Fresh is one of the fastest growing F&B franchise concepts from Australia. The founder Josephine Taylor opened her first outlet in Sydney in 2006, and since then she has more than 30 outlets in Australia and 12 outlets in New Zealand via a franchise model. Jo’s Fresh focuses on healthy and nutritious meals and beverages for people on the go. The popular menu items are the wholemeal sourdough sandwiches, paired with hot/cold organic tea or sustainablysourced coffee. The secret recipe sauce used in all its sandwiches is a house speciality and differentiating factor. A breakfast or lunch set consisting of a sandwich and a hot or cold drink costs between $10.90 and $14.90. There are other add-ons like yogurt with fresh fruits and salad bowl, each item priced in the range of $5.90 and $8.90.

Upon return to Singapore, you contacted the franchisor and expressed an interest in operating the Jo’s Fresh franchise in Singapore, and here is a summary of the franchise conditions:

1. The franchisor and franchisee will enter into a Franchise Agreement.

2. A franchise sign-on fee of AUD30,000 (SGD22,500) is immediately payable at the start of the business.

3. A one-time franchisee training fee of AUD8,000 (SGD7,000). Training will be held in Sydney for one (1) week for two (2) persons. Air tickets and accommodation are not included. Training must be completed before commencement of business.

4. A monthly royalty of 5% of gross sales will be payable from franchisee to franchisor.

5. The franchisee is required to purchase the food and beverage ingredients and packaging materials from the franchisor. The cost of goods is around 30% of the selling price.

6. The franchisee owner-operator is not allowed to set up similar businesses selling sandwiches or fast-food restaurants. This condition will be binding during and after three years from the date of contract termination.

7. The franchisee is allowed to undertake any appropriate marketing activities to promote the brand, and the franchisee will commit its own resources and funds for the marketing activities. The franchisee must follow official corporate marketing guidelines, e.g., logo, corporate colours, etc. The franchisor will provide a marketing support of up to SGD500 per month or up to the amount of monthly marketing expenses, whichever is lower, if the month’s total sales exceed SGD50,000.

8. The franchisee is allowed to select its own premises, and shall bear all costs relating to rental, renovations, equipment purchase and maintenance of these.

9. The franchisor will provide the franchise necessary license and access for the cloud-based point of sales (POS) system.

Your team has found a suitable location for the first Jo’s Fresh outlet – within the Singapore Botanic Gardens! Rental is SGD9,000 per month for 452 square feet of space. This should be sufficient space for a small eatery with a few seats and take-away.

Your team has also incorporated your business as a private limited business with ACRA, and secured the shop rental by paying the initial deposit of three (3) months. Now, it is time to get into action!

All four of you have pulled together SGD80,000 as initial capital. However, based on your financial projections for two (2) years, the capital is insufficient; and, therefore, the team plans to apply for a bank loan to cover the shortfall.

Required:

As part of the bank loan application process, you are required to appraise the business concept and analyse the information provided above to construct a business plan with two (2) years financial projections on a monthly basis. This business plan will be submitted to the bank. Your business plan must be based on the information provided above, and organised to the sections in the prescribed Table of Contents below.

Applying your knowledge of starting a new business, demonstrate your proficiency in writing a business plan by supporting with suitable narratives, relevant research data and analysis, and any reasonable assumptions to justify the attractiveness and viability of the business to the bank. Your report shall end with a suitable conclusion of not more than one (1) page on the proposed business as a “call to action” to convince the bank to provide a loan to the company.

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