Page 1

BUSINESS PLAN XXXXX

XXXXX XXXXX

XXXXX Strictly Confidential


Summary

Particulars

Page

1. Summary

2

2. Business Overview

4

3. Business Strategy

15

4. Marketing

18

5. Team and Management Structure

33

6. Financial Budgets and Forecasts

36

2 Business Plan: Subway Franchise


Summary

Executive Summary XXXXX is a London-based start-up looking to open a number of Subway franchisee outlets in the Greater London Area. Starting in the UK, the Company will eventually expand into other countries like Bangladesh. The Company will open the initial outlets in two of the target areas (Mount Pleasant, Essex and Kent).

Financial Highlights £1,600,000 £1,400,000 £1,200,000

The primary idea behind venturing into a Subway franchise is capturing the burgeoning health-conscious population, who are determined to eat nutritious food without compromising on taste or variety. The Company also intends to capture the tech-savvy population (especially those who order their food online).

The company will provide dine-in, delivery, to-go and catering services through its outlets, working towards capturing a large chunk of the market share in the urban population that is looking for healthy fast food options.

£1,000,000 £800,000 £600,000 £400,000 £200,000 £-

XXXXX has all the keys it needs for the business to be successful: an accessible and popular primary location foremost among these. The Company will adopt aggressive marketing, and will adapt to the changing market trends of consumers.

2017

2018

2019

2020

2021

Revenue

£422,550

£695,552

£869,684

£1,087,84 £1,361,27

Gross Profit

£219,726

£361,687

£452,236

£565,681

£707,862

Net Profit

£37,731

£70,644

£103,419

£132,116

£198,019

Cash Balance

£67,020

£157,121

£278,766

£429,657

£647,139

3 Business Plan: Subway Franchise


Business Overview

Introduction

Subway Franchise in Greater London XXXXX, a highly motivated individual with excellent people management skills, is looking to open subway franchised outlets in the Greater London Region of the UK.

Company Profile Business: Subway Franchise

He will start with two UK outlets. At at a later stage, he will also venture into developing markets in Bangladesh. The locations he has shortlisted are Mount Pleasant, Essex and Kent.

Name: XXXXX Geographical Focus: Greater London

XXXXX, and his partner visited various subways in and around London, to understand about the business, startup costs, resources etc. They have visited subway shops in Commercial Road, Barking, Grays, Southend Sea etc where some of their friends and acquaintances work. Moreover, the subway franchise would bring investments from Dubai, and these investors would also bring in their business wisdom, and experience, in addition to their capital.

Location: Greater London, UK Formation: April 2017 Founding by: XXXXX Target Customers: Young, urban, healthconscious consumers

The promoters will also be glad to get an opportunity to open the Subway franchises in Bangladesh. They would be proud and glad to take the brand to the country of Bangladesh.

4 Business Plan: Subway Franchise


Business Overview

Introduction

The Franchise Background Subway is an American fast food restaurant chain that mainly sells submarine sandwiches (subs) and salads. It is owned and operated by Doctor's Associates, Inc. (DAI) with international headquarters in Milford, Connecticut. The company was founded by Fred DeLuca and Peter Buck in 1965. Subway is the largest single-brand restaurant chain globally, with 44,589 restaurants in 111 countries. The UK has a total of 235 Subway outlets. The map below shows the countries that have Subway outlets. Target Market: Young, urban, health conscious Target Age Group: 13 to 44 years old Preferred Location: Upscale areas near residential neighborhoods and offices Sustainable Competitive Advantage: Unique association with health and taste Financial Objectives: Higher number of bills and higher billing amounts Royalty: 8% of revenue paid as royalty fees, 4.5% is allocated towards marketing funds Information Systems:  Sub-shop billing system is installed at the point of sale.  Customer data is maintained by the call centre. Logistics  Orders are taken up at the centralized call centre.  From there, information is passed on to the franchise outlet.  Delivery is handled by franchise staff.

Wash Mechanism  Store will have a cleaning bay for vegetables. 5 Business Plan: Subway Franchise


Business Overview

Current Position

Start-up Franchisee XXXXX is a start-up Subway Franchisee company. Initially, the company will have two outlets, both in the Greater London Area in the UK. UK Fast Food Industry Current Position The UK fast food restaurant market is forecasted to grow to ÂŁ51.9 billion by 2017, with branded fast food expected to reach a value of ÂŁ5.9 billion.

More than 40% of the target market prefer healthy eating outlets such as Subway, where food is fresh, healthy, and delicious. Recent research shows that only 9% of the population prefers healthy eating, but the number is rapidly rising. By 2020, more than 54% of the population will prefer healthy eating options. The sandwich and sub industry is in the mature phase of its life cycle. 6 Business Plan: Subway Franchise


Business Overview

Competitive Advantage

Competitive Advantage As a fast food restaurant, Subway’s customer base will be composed of people who live and work nearby, and motorists traveling through the area where the franchise will be located. As such, the franchise will experience direct competition from other sub shops and fast food restaurants in its immediate area, including other Subway franchises. The industry analysis under the Porters’ Five Forces model is given below:

• Bargaining Power of Suppliers MODERATE •

Subway is one of the market leaders in the Greater London Area. Not many branded sandwich providers

Threat of New Entrants - HIGH Threat of New Entrants- Low Subway as well•asHigh othercost sandwich of entryretailers are expanding their presence across the UK. As a result, • Difficult to identify skilled labours and create many new entrants are expected. niche Relatively low cost of establishing franchise • Requires high level of new technology adoption

Industry Rivalry - HIGH • Many existing big and small players • High number of other fast food joints • Rapid menu expansion by the big players

Bargaining Power of Buyers HIGH •

Multiple alternative options

Smaller café and sandwich bars

Many alternative fast food options

Threat of Substitute - HIGH • •

High quality of fast food products available in the market Innovation in recipes 7

Business Plan: Subway Franchise


Business Overview

Competitor Analysis

Competitors in the UK

The major players in the fast food industry in UK are Subway, McDonald’s and Yum! Restaurant Holdings (Pizza Hut and KFC). In addition to the above, the competitors in Mount Pleasant, London; Kent and Essex include Wimpy, Burger King, Five Guys, LEON etc.

Sources: Company Website

Business Plan: Subway Franchise

8


Business Overview

Map of Competitors

Map of Competitors

Competitors in Essex

Competitors in Mount Pleasant, London

Competitors in Kent Business Plan: Subway Franchise

9


Business Overview

Competitor Analysis

UK Competitors - Greggs Business Overview • The largest bakery in the UK, specializing in pastries, sausage rolls and sandwiches. • In 2016, the number of stores increased by 48 and reached almost 1,700 in the UK. • Last year, the company undertoook 200 refurbishments. • In the near future, the company is planning to add 50 more stores and spruce up 200 existing sites. • The company is focusing on improving its operations by overhauling the accounting systems for all the shops. • In 2016, the capital spend is expected to rise about £70 million, from £65 million last year.

Operations

Key Strengths

Sources: Company Website

Business Plan: Subway Franchise

Key Facts Website

www.greggs.co.uk

HQ Address

Greggs House Quorum Business Park Newcastle upon Tyne NE12 8BU

Phone

0191-281-7721

CEO

Roger Whiteside

Services

Breakfast, sandwiches, pasta-saladsoup, drinks, pastries-bakes, sweet, platter

• The company´s majorly focus is on three segments  Sandwiches  Pastries  Sausages • In 2016, the company launched trial-based delivery services

• • • •

Industry recognitions Wide array of services Industry experience Wide coverage in the UK

Key Highlights • Largest bakery in the UK • Expanding stores in the UK • Improving operations by overhauling the accounting system • Launched trial-based delivery system in 2016

10


Business Overview

Competitor Analysis

UK Competitors – Pret A Manger Business Overview • The company is one of the largest food sandwich chain shop in the UK. Founded by Jeffrey Hyman in 1983, the first shop was opened in London in 1984. • Currently the company is operating 350 outlets in major countries, such as UK, USA, Paris, Hong Kong and Shanghai. • Presently, the company serves more than 300,000 customers each day. • In recent years, the company has increased its sales and profit (by 13.9% and 14.5% respectively in 2015). • In 2016, the company is opening 36 new stores in the UK.

Operations

Key Facts Website

www. pret.co.uk

HQ Address

75B, Verde, 10 Bressenden Place, London SW1E 5DH

CEO

Clive Schlee

Services

• Sandwiches • Organic coffee • Natural food

• The company trades 67% of its products in London. • In 2014, there were around 289 shops in UK (187 in London, 9 in Scotland and 2 in Wales). • The London head office is the hub of the UK stores. New York is the hub for the American stores.

Key Highlights • Presence in major countries • Last year, sales and profit both increased • Focusing on opening more stores

Key Strengths

Sources: Company Website

Business Plan: Subway Franchise

• Industry recognitions • Wide array of products • Global presence

11


Business Overview

Competitor Analysis

Competitors in the area – McDonald’s and Burger King •

McDonald’s mainly sells hamburgers, chicken burgers, french fries, soft drinks and breakfast items. However, the company has expanded its menu over recent years to include healthier items such as wraps, sandwiches, salads and juices. Globally, McDonald’s reported revenue of US$25.4 billion (£15.8 billion) in 2015.

McDonald’s is one of the biggest employers in the United Kingdom, employing some 90,000 staff, and serving more than 3 million patrons every day. The majority of the company’s UK outlets are franchised.

During the five years through December 2016, the company’s industry-related revenue is estimated to grow at a compound annual rate of 9.5% to £2.7 billion. McDonald’s continued to perform well amid the difficult economic conditions at the beginning of the period as consumers continued to demand convenient food. The company has invested heavily in food quality over recent years in order to improve its public perception in the United Kingdom.

McDonald’s has also registered strong sales of items on its saver menu, where prices start at 89p. The company is increasingly focusing on its franchising strategy. This has been the key driver of profitability for McDonald’s, as franchised restaurants allow for much larger margins, although revenue is lower per establishment. This is expected to cause the company’s revenue growth to slow and margins to widen over the next five years.

McDonald’s UK has become the first ever major retailer to enter into a partnership with the Nuffield Farming Trust. The exclusive agreement is a further testament to its support for the UK farming industry, which the iconic brand relies so heavily upon.

Sources: IBIS World UK

Business Plan: Subway Franchise

Estimated market share

Burger King has about 550 locations across the United Kingdom, the majority of these being franchised. In early 2015, the company launched a home delivery service. The service is currently only being trialed in select locations throughout the United Kingdom; however, the company plans to expand the service nationwide over the coming years. If successful, this is likely to significantly bolster revenue and the company’s market share over the coming years.

3.3% Estimated market share

14.9%

IBISWorld estimates that Burger King outlets will generate revenue of approximately £600 million in the current year. 12


Business Overview

Competitor Analysis

Competitors in the area – Yum! Brand and Domino’s •

Yum! Restaurant Holdings is the UK subsidiary of US restaurant group Yum! Brands Inc. Yum! Brands Inc operates or licenses KFC, Pizza Hut and Taco Bell worldwide. The company’s total global revenue reached US$13.1 billion (£8.1 billion) in 2015. In the United Kingdom, Yum! Restaurant Holdings owns Pizza Hut’s delivery business and KFC. In November 2012, it sold Pizza Hut’s restaurant business to private equity firm Rutland Partners. A sizeable proportion of KFC and Pizza Hut delivery outlets are owned by Yum! Restaurant Holdings, although the majority are franchised.

There are currently over 870 KFC restaurants, which employ 24,000 people in the United Kingdom. Approximately 75% of these are franchised. There are approximately 300 Pizza Hut delivery outlets. An estimated 76% of these are franchised.

Industry-related revenue has been estimated to account for all KFC and Pizza Hut delivery outlets, regardless of whether they are owned by Yum! Restaurant Holdings or are franchised. During the five years through 2016-17, industry-related revenue is expected to grow at a compound annual rate of 6.4% to reach £1.8 billion. Pizza Hut’s delivery service is expected to have grown over the past five years, despite the fact that its loss-making restaurant business was performing poorly. KFC has also exhibited impressive growth, with both the number of outlets and revenue growing in each of the past five years.

• 4.7% Estimated market share

Sources: IBIS World UK

Business Plan: Subway Franchise

10% Estimated market share

Domino’s outlets are expected to generate revenue of approximately £870 million in the current year. There are approximately 980 Domino’s outlets in the United Kingdom. It is estimated that approximately 85 million Domino’s pizzas are consumed in the United Kingdom every year. Domino’s was one of the first pizza franchisors to fully embrace online ordering. The number of orders placed using e-commerce has increased significantly in recent years. In 2015, almost 70% of Domino’s orders were made using a computer or mobile phone, up from approximately 40% in 2011. The company has invested heavily in technology over the past five years in order to further enhance the customer experience. In March 2015, the company rolled out an online ‘createyourown’ platform, allowing consumers to choose a pizza base, sauce, and topping combination. This is expected to bolster company revenue this year and next year.

13


Business Overview

Growth Plan

Growth Plan Over the 10 years to 2020, establishment numbers in the industry are expected to rise 2% per year. Further, industry employment will grow at an average annual rate of 2.6%. The growth is directly related to rise in Subway’s popularity. As a result of these trends, industry value added (IVA), which measures an industry’s contribution to GDP, is expected to grow at an average rate of 2.0% per year over the 10 years to 2020. The industry has strongly outperformed the food-service sector as a whole, and GDP has grown at an annualized 2.2% during the same 10-year period. The sales growth plan is given below: 300 284

250 247

200 150 100

215 170

187

285

248

216

188

150

50 2017

2018

2019 Subs Sold per day

Business Plan: Subway Franchise

Beverages Sold per day

2020

2021 14


Business Strategy

Tactics

Short-Term Tactics and Goals Upon the purchase of a Subway franchise, our primary goal will be to remodel and equip the location. We will then need to hire additional smart and reliable staff members. A competent and friendly staff will directly affect our ability to achieve our overall goals, which include sales goals, operational goals, customer service, and community involvement.

Catering Goals The management team will be involved in direct marketing, networking, B2B marketing, e-mail marketing, and B2C marketing. Our frontline staff members will help market our catering business by placing fliers in customers’ bags. Operational Goals We know that saving money is just as important to profits as making money. Cash and inventory controls will be strictly maintained and monitored, and employees will be offered incentives to help maintain these components of the business. Customer Service Customer service is paramount to our business and valuable to our growth. There will be a manager or key holder on duty to monitor the staff to make sure each customer is greeted with a smile, receives an accurate and timely order, and is sent off with a smile and a customer response card upon leaving. There will also be a response mechanism available so that customers can, if they wish, communicate concerns regarding their visit anonymously. Community Involvement It is our duty to help within the community and to be present at local events. We want the people to know that we are involved and that we will be there to help when needed. In addition to our involvement in local activities and organisations, our most direct involvement within the community will be the hiring of employees who live close by. 15 Business Plan: Subway Franchise


Business Strategy

Tactics

Long-Term Tactics and Goals Long-Term Goals: 1-3 years Catering Goals Our management team will be involved in marketing by social networking, B2B, e-mail, and B2C marketing. We will utilize the growing resources of internet ordering and immediate response. We also propose to develop off-site sales by participating in local large events that offer space for food vendors. We would like to be on site at the various local food festivals Operational Goals We plan to have technologies in place to help with inventory controls. We will continue to offer incentives to encourage each employee's participation in strictly controlling time and operational costs. Additionally, we would like to put in place best practices for time management and efficiency. Customer Service Customer service continues to be our highest priority. It is customer service that is the strongest determiner of growth. We will continue the practice of having a manager or stakeholder on duty to monitor the staff, ensuring that each customer is greeted with a smile, receives an accurate and timely order, and is sent off with a customer response card. There will also be an electronic customer response terminal, which will allow customers to convey their concerns or commendations anonymously.

Community Involvement The Company will be actively involved in the community and local events with sponsorships and other involvements. 16 Business Plan: Subway Franchise


Business Strategy

Strategic Issues

Strategic Issues Overcoming a weak economy The industry was able to avoid the effects of the slow recovery, mainly due to major player Subway, and its wildly successful Five Dollar Footlong promotion (which began in 2008). Subway, which holds over 50.0% of the industry’s market share, has a large influence on overall revenue. It was able to offer sandwiches at an attractive price point to generate consumer interest. This strategy helped negate the overall effect of the weak economy. Demand for healthy food The industry has also experienced significant shifts in the market and changes in consumer preferences. Demand for healthy foods has increased, and consumers are increasingly rejecting high-fat, high-salt and super-size meals. As the obesity epidemic grows, healthy eating has become a cornerstone of marketing strategies in the industry. A focus on healthy options allows fast food industry players to target a new segment of the market and renew interest in their products. Subway was one of the first restaurants to capitalize on consumers’ health and weight concerns, with the company successfully marketing the health benefits of its sandwiches.

Strategic • Build local awareness • Achieve synergistic effect • Be at all times socially responsible and environmentally friendly • Use healthy products Managerial • Build relationships with franchisor and suppliers • Establish a rapport with employees Tactical • Produce high-quality products • Provide excellent service • Enhance customer satisfaction levels 17

Business Plan: Subway Franchise


Marketing

SWOT

Strengths – Weaknesses – Opportunities – Threats Strengths • • • • • •

Established global brand Highly customizable product that appeals to customers Healthy meals Partnerships with British and American Heart Associations Creates a number of employment opportunities Helps keep customers healthy

Opportunities • • • • •

Growing demand for healthy food Changing customer habits New customer groups Increasing demand from take-away/home delivery segment Expansion into other countries

Business Plan: Subway Franchise

Weaknesses • Subway offers only eat-in service, which ignores the delivery segment • High employee turnover • No scope to meddle with the mediocre interiors of outlets • High degree of franchisor control

Threats • • • •

Competition from other fast food restaurants Lawsuits against Subway Food safety risk Product differentiation from similar products necessary to carve a larger niche in the industry and increase market share

18


Marketing

Critical Success Factors (CSF)

CSF - Location and marketing Proximity to key markets Location is the most critical factor in any food service outlet. Choosing the right location with proximity to the target market (schools, colleges, universities, gyms, yoga classes, health and well being centers etc.) is important.

Accessibility to consumers/users Consumers choose to eat fast food for the taste and price, but they also enjoy the quickness and convenience of dining in a fast-food establishment. Hence, accessibility is another key factor for the success of the business.

Adapting to market trends Keeping menu items fresh and offering consumers new products to suit their changing tastes and needs is essential to keep them interested and encourage return business.

Aggressive marketing The industry is extremely competitive, and the largest players have found success through notable ad campaigns across multiple media platforms. Hence, the goal will be to initiate creative marketing campaigns that will strike a chord with the target market and bring in sales revenues. 19 Business Plan: Subway Franchise


Marketing

Market Research

The UK fast food industry is driven by busier lifestyles and diversity of fast food available. Market Overview •

Takeaway and Fast-food Restaurants Market (GBP billion)

Fast food is benefiting from two trends in the UK. Firstly, busier lifestyles are making people less willing to cook for themselves, with many attracted to fast food by its affordable prices. In addition, the quality and diversity of fast food available in the UK continues to improve. The takeaway and fast-food restaurants market in UK is estimated to grow at a CAGR of 2.7% from 2012 till 2017 and reach GBP 20.6 billion. Although consumers tend to trade up to more expensive restaurant meals during periods of economic growth, the consumer preference for cheaper, on-the-go food has remained, despite the improving consumer backdrop of the past five years.

Segments

Sandwich

Burger

20.6

18.0

2012

Pizza

2017

Fish and Chips

Top Players

20 Business Plan: Subway Franchise


Market Research

Marketing

Branded Emerging Fast Food is the dining sector forecast to grow the fastest in coming years. Key Insight

McDonalds is the Most Popular Chain with Subway at Third

Branded emerging fast food is experiencing the highest rate of growth among all dining sectors in the UK.

Demand for emerging branded fast food is expected to grow at a rate of 14.4% during 2014-2017, while demand for traditional branded fast food is expected to grow at a CAGR of 5.5% during the same period.

McDonald´s is the most popular chain of quick service restaurants in the country.

This statistic shows the leading fast food (quick service) restaurants in the United Kingdom (UK) in 2015. During the survey, 57% of respondents said they went to McDonald's, while 42% chose KFC. 35% chose Subway.

McDonalds KFC Subway Burger King Pizza Hut

57% 42% 35% 33% 28%

UK Eating Out Market Forecast CAGR by Segment 2014–2017E 14.4 10.6 7.7

Branded Emerging Fast Food

7.6

Street Food Coffee Shops Fine Dining

Sources: Canadian Imperial Bank of Commerce

Business Plan: Subway Franchise

7.2

7.1

Branded Pubs & Bars

Airports

6.8

5.9

Convenience Sandwitch Stores Bars

5.9

5.8

Branded Restaurants

Stadia and Sports Grounds

5.5

Branded Leased Pubs Independent Traditional Restaurants -0.7 Fast Food -1.2

21


Marketing

Market Research

Sandwich sales in the UK are driven by growing retail sales. Key Insight • •

Sandwich sales by type

The UK sandwich market for the 12 months ended January 3rd, 2016 was GBP 3.3 billion, decreasing slightly over the last year. The statistic below shows the amount spent on prepared sandwiches, rolls and baguettes (SRB) in the United Kingdom from December 2009 to January 2016

31%

Chicken Cheese

44%

It also shows the distribution between convenience bought and total retail bought SRB. In the 52 week period ending 27th December 2009, 2.8 billion GBP was spent on convenience SRB, whereas only 743 million GBP was spent on retail SRB.

Ham 13% 5% 11%

Bacon Baecon

Others

Spending on convenience and retail sandwiches, rolls and baguettes (SRB) from December 2009 to January 2016 (in million GBP)

2,774.7

3,140.2

3,273.1

3,023.5

3,235.7

3,283.5

3,397.5

2,400.1

743.5

610.7

664.5

628.8

559.1

555.8

600.8

930.1

27/Dec/2009

26/Dec/2010

25/Dec/2011

08/Jan/2012

03/Feb/2013

02/Feb/2014

01/Feb/2015

03/Jan/2016

Retail SRB Sources: Statista

Business Plan: Subway Franchise

Convenience SRB 22


Marketing

Market Research

Sandwich sales in the UK are increasing at a number of major grocers. Key Insight •

Sandwich sales in major grocers in the UK increased significantly in 2015. This is primarily due to number of promotional offers and product bundles.

•

This statistic shows the amount spent on sandwiches, rolls and baguettes for major multiple grocers in the United Kingdom from December 2007 to January 2016. In the 52 week period ending 2nd December 2007, almost GBP 345 million was spent on sandwiches, rolls and baguettes at major grocers in the UK.

Spending on sandwiches, rolls and baguettes for major multiple grocers in the United Kingdom from December 2007 to January 2016 (in million GBP)

345.0

347.1

Sources: Statista

Business Plan: Subway Franchise

372.2

396.1

424.6

425.9

425.9

439.0

438.8

491.6

23


Market Research

Marketing

Subway plans to double its shops in the UK by 2020. Key Insight •

In the UK and Ireland, Subway grew rapidly in 2015, adding a record 270 stores and taking the store count over 2,000. This compares with the likes of McDonald´s (c. 1,200 outlets) and Costa Coffee (c. 2,000 outlets), and Greggs (c. 1,650 outlets). But the business sees much further opportunity, having previously spoken of a 2020 target of 3,000 stores, driven no doubt by the recruitment of new franchise partners and expanding the portfolio of some of its existing franchisees It has franchise packages available which cost between GBP 10,000 and GBP 13,000. This includes mentoring from existing franchisees and other essential start+up assistance.

• •

Subway Stats Total Stores (2015) – 2,004 Total Stores Planned (2020) – 3,000 Subway Sales growth (2014) – 3.5% Franchise Fee – GBP 10,000-13,000

Four pronged strategy of Subway in the UK 1

• •

Moving into new types of catchment To achieve this growth, the operator is increasingly considering different types of catchments. Business parks, for example, have been among the locations targeted in the past year, while Subway is gaining great traction through its partnership with EuroGarages: there are already 100 Subways on EuroGarages forecourts, with plans in place to almost double that number. Other locations under consideration include universities, stations, convenience stores, hospitals and airports.

2

Enhancing its health and ethical focus

 There's been a shift to focus more on health and ethical considerations. Increasingly, nutritional and allergy information is featured prominently in Subway outlets, helping customers to make more informed choices. The ethical dimension is also growing, though perhaps lagging the hugely impressive progress that McDonald's, for example, has made here in recent years.

3 Sweating the assets to meet more missions and occasions

4

 A key recent trend across food-to-go has been to target the breakfast occasion, and Subway has done this to good effect, enhancing the breakfast menu and opening earlier to achieve this.

 Launched in 2015, the impact of this will become more evident over 2016. The success of this will be key in determining Subway's ability to meet its lofty UK growth targets in the face of changing consumer expectations in areas such as health and nutrition and an increasingly competitive trading environment.

Sources: IGD RetailAnalysis

Business Plan: Subway Franchise

Brand revitalisation

24


Marketing

Market Research

Rising demand for fast food is the key market driver.

Market Overview

1

Rising demand of fast food

• With busier lifestyles, demand for ready-to-eat fast food products are rising in the UK. It is expected to grow at a significant pace in the coming years, which will encourage new players to enter the market. • Additionally, demand for branded fast food is rising at a faster rate than other types of food demand.

2

Subway expansion plans

• Subway has reported positive performance in the UK market and has rapid expansion plans. It is one of the leading sandwich chains in the country and expected to offer a number of enticing franchise deals in coming years

Sources: Toronto Real Estate Board, IPSOS, CMHC

Business Plan: Subway Franchise

Market Overview

1

Rising Competition

• Subway has a number of competitors in the UK market. Some of the closest competitors are Greggs, Pret and Gourmet among others • Counties such as Essex, Kent and Liverpool have a high number of existing Subway franchises, as well as other other fast-food franchises. Opportunities for Subway Franchise • Leveraging good performance and rapid future expansion plans of Subway in the UK • Cashing in on recent branding and advertising initiatives by Subway • Targeting unconventional locations such as universities, offices, hospitals and airports 25


Marketing

Market Research

The Subway Franchise •

Subway has big expansion plans in Kent for the next five years. In 2014, it announced it would open 30 new stores in the area by 2020. It hopes to set up 200 stores in the UK within the next 15 years the restaurant franchise is targeting key footfall areas like train stations, university campuses, petrol stations, business parks and even hospitals.

Top locations for Subway Franchise in Kent • • • • •

Ashford Canterbury Dover Dartford Faversham

• • • • •

Folkestone Gravesend Herne Bay Maidstone Medway

• • • • •

Sevenoaks • Sittingbourne • Tonbridge Tunbridge Wells Thanet

West Malling Whitstable

Competitors

Local Players

National Players

Company

No. of Franchise/ Shop Locations

Geographic Coverage

Takeaway Service

50

High

Yes

10+

High

Yes

2

Low

Yes

1

low

Yes

0 (Online Order)

High

Yes 26

Business Plan: Subway Franchise


Marketing

Market Research

Essex – Subway Market Research • •

Subway leads the Essex sandwich market in terms of reach. The area has a number of local sandwich bars and cafés that sell sandwich rolls and baguettes. Subway franchise in the area faces challenges from both small local players and larger national players such as Greggs and Pret A Manager.

Competitors

Local Players

National Players

Company

No. of Franchise/Shop Locations

Geographic Coverage

Takeaway Service

49

High

Yes

10

High

Yes

1

Low

Yes

1

low

Yes

1

low

Yes

1

low

Yes

1

low

Yes 27

Business Plan: Subway Franchise


Marketing

Market Research

Liverpool – Subway Market Research • •

Subway has expansion plans in the Liverpool region. In 2014, Subway signed a multi-year sponsorship deal with Liverpool FC that will see the sandwich chain become the Premier League leaders’ “Official Training Food partner”. This partnership can be leveraged by the local franchise

Competitors

Local Players

National Players

Company

No. of Franchise/Shop Locations

Geographic Coverage

Takeaway Service

10 (within 1 KM)

High

Yes

10+

High

Yes

1

Low

Yes

1

low

Yes

1

low

Yes

28 Business Plan: Subway Franchise


Marketing

Distribution Channels

Dine in – To Go – Delivery – Catering

Dine in

To Go

Delivery

Catering

The franchise outlets will offer the following services:

Dine in: All the franchise outlets owned by the company will offer dine in services.

To Go: All the outlets will also have a to-go option for the customers to order at the outlet or through other means like phone, website etc. and pick the well-packaged up ‘to-go’.

Delivery: The company will tie up with delivery partners or have their own delivery staff at their outlets to cater to the increasing delivery market.

Catering: The company will also take up catering for events, parties, business functions, picnics etc. 29

Business Plan: Subway Franchise


Marketing

Strategic Alliances

Strategic Alliances Key Supplier The European Independent Purchasing Company (EIPC) is a purchasing company owned by SUBWAY® franchisees that manages the purchase and supply chain activity for all food, packaging, equipment and services in the UK and Ireland and other European countries. The EIPC manages over £1.5 billion worth of contracts on behalf of franchisees.

Key Service Provider SUBWAY® Cambridge has developed a comprehensive training programme for franchisees. Each franchisee candidate is required to attend an intensive two-week training course. In addition, the SUBWAY® System also runs the University of SUBWAY® - a well-established online training programme coordinated by the worldwide SUBWAY headquarters in Connecticut, USA. Offering over 700 online courses for store staff and managers, the University has trained more than 5.5 million participants.

30 Business Plan: Subway Franchise


Marketing

E-commerce and Technology

E-Commerce and Technology The e-commerce aspects of the food business will be adopted by the franchisee to enable today’s tech-savvy generation to order online, increasing sales for the outlets. A few of the features will include: • • • •

User-friendly website Easy-to-navigate layout Access to menu and nutritional information Secure payment portal

The Company will leverage technology (kitchen equipment, point of sale systems, order processing tools, etc.) to: • • • • • • • • • • • • •

Minimize labor and food costs Reduce waste Increase sales Improve business processes Support growth Maintain current operations Provide better meal experiences Gain an advantage over their competitors Ensure quality service Reduce customer waiting time Update order-processing systems Reduce food preparation time Make the experience more convenient for the customer 31

Business Plan: Subway Franchise


Marketing

Tactical Promotion Plan

Tactical Promotion Plan Print Media The franchisee will advertise in local print media, especially in newspapers, local dailies, and magazines in circulation. This will also help boost the brand image of the company. Social Media In today’s world, no business can survive without having a social media presence. This Subway franchise will promote its brand by using social media (primarily Twitter, Instagram and Facebook).

Radio Advertising This is the best way to reach the target customers within the local community. Advertising on the right channel at the right time will help capture the attention of youngsters and the driving population who listen to the radio. This w<ill help this franchiseeâ&#x20AC;&#x2122;s Subway outlet become a recognized name in the community.

Print Media

Social Media

Flyer

Events Word-of-Mouth Marketing The franchisee will be active on all food and travel websites, replying to guest comments and feedback. This will show the franchiseeâ&#x20AC;&#x2122;s commitment to customer service.

Radio Kiosks

32 Business Plan: Subway Franchise


Team and Management Structure

Skills, Experience, and Training

Skills, Experience and Training The starting salary for the general manager will be £12,500 per year, and the assistant manager will be paid £8 per hour. The bonus structure will be based upon: ▸ Exceeding sale goals ▸ Passing audits ▸ Passing health inspections ▸ Catering Sales ▸ Customer survey experience Managers will be trained at the Subway UK’s Training Facilities. Training will include online courses and video training. Management will analyze the competition to determine effective strategies. Managers will also visit local Subway establishments and shadow employees to learn the best practices to increase demand. There will be one team leader for each of the two locations.

Manpower Costs Designations CEO General Manager Procurement Manager Team Leader Admin Manager Sandwich Artists Salaries CEO General Manager Procurement Manager Team Leader Admin Manager Sandwich Artists

Total

5% 5% 5% 5% 5% 5%

1 1 1 2 1 10

1 1 1 2 1 13

1 1 1 2 2 15

1 1 2 3 2 18

1 1 2 3 2 20

12,500 12,500 10,000 10,000 7,500 4,500

13,125 13,125 10,500 10,500 7,875 4,725

13,781 13,781 11,025 11,025 8,269 4,961

14,470 14,470 11,576 11,576 8,682 5,209

15,194 15,194 12,155 12,155 9,116 5,470

£80,625 £127,050 £151,594 £197,954 £218,791

Sandwich Artists (employees) will be paid between £7.20 and £9.00 per hour depending on experience, and will be found by posting listings in-store, online, and through job databases. Employment agencies will be considered if needed. Applications will be available and accepted both in-store and online. Each prospective employee will be interviewed by the owners or by the manager. Employees will be trained by the management team or the employee with the longest tenure. 33 Business Plan: Subway Franchise


Team and Management Structure

Management Systems

Management Systems and Processes

Customer

Company Exteriors Customer Arrives

Company Ambience Customer Walks In

Furniture

Goes to Table

Menu Views Menu Card

Company Staff

Places Order

Receives and Eats

Customer pays

Greeted by Staff

On Stage

Contact Person

Line of Interaction Received Order

Delivers the Order

Generates Bill

Line of internal interaction Prepares Subs

34 Business Plan: Subway Franchise


Team and Management Structure

Floor Plan

Floor Plan

Preparation area

The Subway restaurant is a quick-service, dine-in restaurant where food is prepared right in front of the customer.

35 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Sources & Uses

Sources and Uses of Funds Particulars Uses of Funds Franchise Fee Training Agent Fees Consulting Solicitor Fees Refurbishment of Leased Premises Air Conditioning Electricals Extraction H&K Equipment Refrigeration Signage Coke Machine Coffee Machine POS System Intruder Alarm Insurance Opening Stock Staff Training Pre-Opening Pack Marketing Computers Working Capital Total Sources of Funds Equity Total

Amount (ÂŁ) 17,000 4,000 12,000 5,600 1,000 138,000 40,000 40,000 10,000 51,150 16,000 8,000 11,350 7,990 12,000 1,800 1,900 5,000 2,700 510 10,000 4,000 16,000 416,000

416,000 416,000

1% 0%

0%

1%

Uses of Funds

0% 2%

1%

3%

1%

1% 0%

3%

4% 4% 2%

3% 2%

4% 33% 12%

10% 2%

10%

Training

Agent Fees

Consulting

Solicitor Fees

Refurbishment of lease premises

Extraction

H&K Equipment

Refrigeration

Signage

Coke Machine

Coffee Machine

POS System

Intruder Alarm

Insurance

Opening stock

Staff training

Pre-opening pack

Marketing

Computers

Working Capital

36 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Profit & Loss Forecast

Profit & Loss Forecast Particulars Revenue Subway Sales Other items Total

2017

2018

2019

2020

2021

£321,300 £101,250 £422,550

£518,364 £177,188 £695,552

£655,730 £213,954 £869,684

£829,499 £258,349 £1,087,848

£1,049,316 £311,957 £1,361,273

Cost of Goods Sold Cost of Goods Sold Royalty Total

£169,020 £33,804 £202,824

£278,221 £55,644 £333,865

£347,874 £69,575 £417,448

£435,139 £87,028 £522,167

£544,509 £108,902 £653,411

£219,726 52.0%

£361,687 52.0%

£452,236 52.0%

£565,681 52.0%

£707,862 52.0%

£80,625 £22,500

£127,050 £30,600

£151,594 £31,212

£197,954 £31,836

£218,791 £32,473

£42,255 £8,451 £1,800 £450 £8,451 £8,030 £172,562

£69,555 £13,911 £1,836 £459 £13,911 £16,060 £273,382

£86,968 £17,394 £1,873 £468 £17,394 £16,060 £322,962

£108,785 £21,757 £1,910 £478 £21,757 £16,060 £400,537

£136,127 £27,225 £1,948 £487 £27,225 £16,060 £460,338

£47,164 £9,433 £37,731 8.9%

£88,305 £17,661 £70,644 10.2%

£129,273 £25,855 £103,419 11.9%

£165,145 £33,029 £132,116 12.1%

£247,524 £49,505 £198,019 14.5%

Gross Profit Expenses Manpower Cost Rent Marketing - Franchisee Fund Repairs and Maintenance Lighting and Utilities Internet Other Administration Costs Depreciation Total Net Profit Taxes Net Profit after taxes

37 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Working Capital Forecast

Working Capital Forecast Particulars Current Assets Inventory Supplies Total

2017

2018

2019

2020

2021

£22,536 £11,268 £33,804

£37,096 £18,548 £55,644

£46,383 £23,192 £69,575

£58,019 £29,009 £87,028

£72,601 £36,301 £108,902

Current Liabilities Material Suppliers Total

£5,258 £5,258

£8,656 £8,656

£10,823 £10,823

£13,538 £13,538

£16,940 £16,940

Net Working Capital

£28,546

£46,988

£58,752

£73,490

£91,962

38 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Cash Flow Forecast

Cash Flow Forecast Particulars Cash Inflows Revenue Equity Total

2017

2018

2019

2020

2021

£422,550 £416,000 £838,550

£695,552

£869,684

£1,087,848

£1,361,273

£695,552

£869,684

£1,087,848

£1,361,273

Cash Outflows Franchise Fee Training Agent Fees Consulting Solicitor Fees Refurbishment of Leased Premises Air Conditioning Electricals Extraction H&K Equipment Refrigeration Signage Coke Machine Coffee Machine POS System Intruder Alarm Insurance Opening stock Staff Training Pre-Opening Pack Marketing Computers Cost of Goods Sold Manpower Cost Rent Marketing Repairs and Maintenance Lighting and Utilities Internet Other Administration Costs Taxes Total

£17,000 £4,000 £12,000 £5,600 £1,000 £138,000 £40,000 £40,000 £10,000 £51,150 £16,000 £8,000 £11,350 £7,990 £12,000 £1,800 £1,900 £5,000 £2,700 £510 £10,000 £4,000 £197,566 £80,625 £22,500 £42,255 £8,451 £1,800 £450 £8,451 £9,433 £771,530

£330,467 £127,050 £30,600 £69,555 £13,911 £1,836 £459 £13,911 £17,661 £605,450

£415,282 £151,594 £31,212 £86,968 £17,394 £1,873 £468 £17,394 £25,855 £748,039

£519,452 £197,954 £31,836 £108,785 £21,757 £1,910 £478 £21,757 £33,029 £936,958

£650,008 £218,791 £32,473 £136,127 £27,225 £1,948 £487 £27,225 £49,505 £1,143,791

£67,020 ££67,020

£90,101 £67,020 £157,121

£121,646 £157,121 £278,766

£150,891 £278,766 £429,657

£217,482 £429,657 £647,139

Surplus Opening Balance Closing Balance

39 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Balance Sheet Forecast

Balance Sheet Forecast Particulars Assets Cash and Bank Balances Inventory Supplies Non-Current Assets Total

2017

2018

2019

2020

2021

£67,020 £38,332 £11,268 £342,370 £458,990

£157,121 £37,096 £18,548 £326,310 £539,075

£278,766 £46,383 £23,192 £310,250 £658,591

£429,657 £58,019 £29,009 £294,190 £810,875

£647,139 £72,601 £36,301 £278,130 £1,034,171

Liabilities & Equity Capital Retained Earnings Payables Other Liabilities Total

£416,000 £37,731 £5,258 ££458,990

£416,000 £108,375 £8,656 £6,044 £539,075

£416,000 £211,794 £10,823 £19,975 £658,591

£416,000 £343,909 £13,538 £37,428 £810,875

£416,000 £541,929 £16,940 £59,302 £1,034,171

40 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Break-Even Analysis

Break-Even Analysis Particulars Sales (-) Variable Costs Contribution

2017 422,550 202,824 219,726

2018 695,552 333,865 361,687

2019 869,684 417,448 452,236

2020 1,087,848 522,167 565,681

2021 1,361,273 653,411 707,862

Fixed Costs

164,532

257,322

306,902

384,477

444,278

Break-Even Point Break-Even Revenue Margin of Safety Margin of Safety (%)

75% 316,408 106,142 25%

71% 494,850 200,701 29%

68% 590,197 279,487 32%

68% 739,378 348,470 32%

63% 854,380 506,893 37%

BREAK-EVEN ANALYSIS Sales

Variable Costs

Fixed Costs

1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2017

2018

2019

2020

2021

41 Business Plan: Subway Franchise


Financial Budgets and Forecasts

Key Financial Indicators

Key Financial Indicators Particulars Ratios Average Gross Profitability % Average Net Profitability % Average Return on Investment NPV @ 10% Internal Rate of Return (IRR) Particulars Revenue Gross Profit Net Profit Cash Balance

2017

2018

£422,550 £219,726 £37,731 £67,020

£695,552 £361,687 £70,644 £157,121

Financial Highlights 52% 12% 26% £469,936 32% 2019

2020

2021

£869,684 £1,087,848 £1,361,273 £452,236 £565,681 £707,862 £103,419 £132,116 £198,019 £278,766 £429,657 £647,139

£1,600,000

£1,400,000

£1,200,000

£1,000,000

£800,000

£600,000

£400,000

£200,000

£-

2017

2018

2019

2020

2021

Revenue

£422,550

£695,552

£869,684

£1,087,848

£1,361,273

Gross Profit

£219,726

£361,687

£452,236

£565,681

£707,862

Net Profit

£37,731

£70,644

£103,419

£132,116

£198,019

Cash Balance

£67,020

£157,121

£278,766

£429,657

£647,139

42 Business Plan: Subway Franchise

Profile for OGS Capital

Subway Franchise Business Plan  

Subway Franchise Business Plan  

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