Business Plan For Hot Dog Mania Marketing Essay

Business Plan For Hot Dog Mania Marketing Essay Being one of the most popular food type in the world, hot-dogs are sold in enormous quantities worldwide. In the US alone, people eat around 16 billion hot-dogs every year. Because of the high demand on this type of food, companies are created every year with the purpose to satisfy the people need to eat a very simple, but fast and tasty food. Hot Dog Mania is a start-up company that will be entering the Romanian food-service industry with a worldwide known product that is not used by any of the ten big companies in this industry the hot dog. The competitive advantage of this product is that it will use different culinary recipes from famous hot dog countries and it will offer its customers the possibility to customize their own hot dogs from scratch, while being able to taste different world flavors. A French company named Gira Foodservice (Ionescu, C. (April 22, 2009), Radiografia pieÃ…Â £ei foodservice din Romà ¢nia [Radiography of the Romanian food service market], http://www.foodandbar.ro/actualitatea/1481-radiografia-pieei-foodservice-din-romania, Retrieved January 05, 2010) published a Romanian country report regarding the food-service industry, in which it stated that the market revenue for 2008 is approximately à ¢Ã¢â‚¬Å¡Ã‚ ¬3.4 billion, and it predicts that the market will increase annually with a two-digit percentage. The domestic market of the company is Romania, and in the future, after a country development to at least five major cities, it will address to other Balkan countries like Bulgaria. The primary customers of the hot dog products are people living in the urban areas, which have a high value for time and mobility, and prefer to eat fast food in order to be able to spare time for other activities. Other customers that will be targeted by HDM will be people who will visit large touristic resorts in the country. The last customer type that HDM targets is the one that is keen on social events like concerts, various exhibitions, fairs, and sport games, and would like to have a snack during a short break. The main priority of this business plan is to set up a fast-food company that will establish various outlets, starting with one on the seaside, with my personal equity. Later on, between three to six months, there will be a further development, were other business partners will be required. Company Description The company name will be Hot Dog Mania, and it will be a registered trademark together with the company logo and slogan at the Romanian State Office for Inventions and Trademark. The internet domain name will be http://www.hotdog-mania.com and it will have numerous links that will redirect customers to it, depending on the country. For example, the Romanian customers will access the website http://www.hotdog-mania.ro and they will be instantaneously redirected to the .com site, with the Romanian language interface. Hot Dog Mania will be a privately held company, registered as a Limited Liability Company, with myself as a sole shareholder. Upon further development to other countries, when the brand will become a franchise, the company will be a franchisor and will have franchisees as partners in other locations. We will focus on selling mainly hot dogs and drinks. The hot dogs will have different variations from the original Frankfurters and Wieners to the hot dogs eaten in various counties in the US like Alabama, New York State or in Seattle Washington, or even the Patsos from Turkey. Besides the predetermined hot dogs, the customers will have the opportunity to customize their own hot dogs from scratch, by choosing the sausage, the bun type, the condiments, vegetables, and spices. The drinks will vary from the well knows juices, mineral water, and some beer assortments. HDM will also have a small merchandise activity, where it will offer its customers hats, badges, T-shirts or various hot dog clothing, in order to remain in the customer attention at all time. Besides the products, the company will try to provide the best quality services in the fast food industry, using the Just in Time method in order to always serve its customers as they make an order. Our main objective is to provide the high quality tasty food to our customers faster than a regular fast food. This mission is sustained by some values like: highly trained professionals, quality food, and faster than fast. The staff will be initially trained for two weeks, and then the store managers will permanently supervise the staff in order to make them provide the best services. These managers would have a higher success rate in the supervising activity because there are a few staff members necessary to run a location. The quality food will be assured by the suppliers, which will be chosen by annual auctions, so the suppliers with the best food quality will be selected. Faster than fast the generic service name that HDM chose for representing the Just in Time food preparing strategy, used by McDonalds. This way, there will be calculations of food demand depending on some factors like location, month, date, hour, events or Holidays, and media. The Just in Time method implies that every employee will have its own activity, and it will be perfectly related to the other employees activity, in order to have no time loss between product preparing and supplying. When there will be high customer queues, one member of the staff will use a Palm PDA to collect orders from the queue, and it will automatically send it to the food processing display, so other employees will be able to make the food before the clients arrive to the cash register, in order to make the waiting time lower. The mission of the HDM company providing high quality tasty food to the customers faster than a regular fast food, will be accomplished by this three main activities. The initial management activity will be conducted by me, and after the opening of another location, two of the staff members will be promoted as store managers one for each location. This means that in the first months I will need to work a little harder in order to both manage the first location, and the company as a whole. After undertaking an ambitious expansion plan, there will be area managers, which will supervise five different management locations in order to assure the correct operations between store managers and employees. Possible management positions will be added later after development, when it will be indispensable to have a Marketing Manager, a Sales Manager, a Store Operation Manager, Human Resources Manager, and Purchasing Manager. Regarding the personnel plan, each location will have two cooks, two cashiers and one store manager that will handle every situation required. Hot Dog Mania locations will be represented by medium and large caravans, that are both mobile and space sufficient for this kind of activity. The first location will be at the seaside, targeting a large number of potential customers, closest to the beach as possible. The fact that the company is using caravans offers the high mobility, which allows us to create new locations in just a few hours. One day the store can be at the seaside, and the other day at a concert event in Bucharest. The location will use large LCD screens to display the products and menus, and it will have its own originality in displaying the tasty hot dogs. We will equip the stores with modern technology, and we will aim for maximum cleanliness in order to attract the customers to maintain it. Another facility is to equip the store with umbrellas and tall bar tables, to allow them to eat the food just in front of the store. The mobile locations will be settled with priority to major events, like soccer games, concerts, exhibitions, fairs. There will also be seasonal locations, on the touristic areas, and fixed locations in the major cities, close to downtown. The initial funds will be covered from my own capital, and it will reach and approximate investment of à ¢Ã¢â‚¬Å¡Ã‚ ¬50,000. The start-up funding necessary is shown in the table on the next page: Start-up Funding Start-up Expenses to Fund 800 Start-up Assets to Fund 43000 Total Funding Required 43800 Assets Non-Cash Assets from Start-up 0 Cash Requirements from Start-up 43800 Additional Cash Raised 5000 Cash Balance on Starting Date 48800 Total Assets 48800 Liabilities and Capital Liabilities Current Borrowing 0 Long-term Liabilities 0 Accounts Payable 0 Other Current Liabilities 0 Total Liabilities 0 Capital Planned Investment 50000 Additional Investment Requirement 0 Total Planned Investment 50000 Loss at Start-up 800 Total Capital 48800 Total Capital and Liabilities 48800 Total Funding 50000 The milestones and timelines of the company have been made on a five-year time interval, and they represent objectives of the company. They are shown on the table below: Task Timeline Milestone Make a sales volume high enough to reach the break even 1 month Reach break even Acquire the necessary licenses to set locations on events 3 months Obtain location licenses Set up the second location of hot dogs 6 months Acquire second location Set up the third location of hot dogs 12 months Acquire third location Expand the company to fixed locations in other major cities 3 years Develop in other cities Create a franchise to the company to have franchisees countrywide 3 years Create a Romanian franchise Expand the company to other countries in the Balkans area 5 years Expand abroad Industry Analysis and Trends The main characteristics of the fast-food industry are the following: Low cost in comparison to a traditional restaurant; The mobility that it offers to its customers, having them the opportunity to eat the food as they go; Specific demographic identities for customers: usually young people, sometimes families, driven by children; living in urban areas, and having medium or lower medium income, although recently young people with high income have developed a sympathy for this kind of food; Faster times in the food preparing, up to a few seconds after the order has been taken; Development in many locations, which are very important for this kind of activity; High competitiveness among companies, based on the fact that customers are not always loyal to a brand, and will consume the products based primarily on the location of the establishment; The fast-food industry in Romania has developed sensitivity to seasonality. In this respect, the industry cycle has fluctuations especially during the Holidays. For example, at the end of December, during the Christmas Holiday, the Romanians have developed a food cult, when they prepare specific Romanian dishes, which they eat for approximately two weeks. During this time, the fast-food industry suffers a dramatic sales drop. The same phenomenon occurs during the Easter Holiday, when Romanians have a highly valued religion holiday. Although these industry cycles are occurring every year, the companies in the market are aware of it, and they are not very affected by it, having time to prepare for these seasonality cycles. The industry life cycle has not yet reached the maturity stage, being in a constant growth for the last ten years. This is happening because the young people, like students, prefer to eat fast food in order to associate to a social trend. Afterwards, even if they have matured and have jobs, they still feel attracted to this food because of the high mobility that it offers. Nevertheless, the state will have a high influence on this trend in the years to come, since they have various campaigns against fast food. Future regulations will impose a vice tax to boost the fast-food prices, and the Ministry of Health is working together with the Ministry of Finance to increase the VAT for this economic sector. Since now, no law like such has been approved in the Romanian Parliament, and it will need the consent of the European Commission. The Romanian fast-food industry is having an accelerating rate of increase, according to a survey made by Euromonitor International (Stoica, A. (May 24, 2007), Fast-food-urile inghit doua miliarde de euro [The fast-foods are eating two billion euros], http://www.romanialibera.ro/bani-si-afaceri/a96203-fast-food-urile-inghit-doua-miliarde-de-euro.html, Retrieved January 05, 2010). According to them, the average growth rate is about 26% every year, and in 2005 the industry reached total revenues of $2 billion, and in 2007 it reached more than à ¢Ã¢â‚¬Å¡Ã‚ ¬2 billion. Bucharest is the Romanian city with the highest revenue in this market. The fast-food industry is consisted on many types of food, from the well-known hamburgers, to chicken, pizza, fries, hot dogs, and the Turkish kebab, called Shaorma in Romania. There are a total of more than 900 fast-food outlets in Bucharest alone, so there is a fierce competition. According to a local newspaper called Romania Libera (TOP 10 fast-food-uri in Bucuresti [Top ten fast-foods in Bucharest] (November 10, 2007), http://www.romanialibera.ro/a110940/top-10-fast-food-uri-in-bucuresti.html, Retrieved January 05, 2010), there are ten major competitors on the fast-food market in Bucharest, among them being McDonalds, KFC, Pizza Hut, Gregorys, Snack Attack, Burger King, Spring Time, and there is a rather new competitor, on a retail store specialized in furniture, Ikea, that offers food at competitive prices. We will make a detailed analysis of these competitors on the following pages. All of these major competitors can offer products that represent substitutes to the HDM hot dogs, but they have some differences. McDonalds represents the most important competitor that can offer substitute products, being the most appreciated fast-food company in Romania. Their products are not similar to hot dogs, but they have many stores all across the country. Their products have a high demand from customers because of the quality of the food and service. The only drawback of this company is that their food is standardized, and they rarely bring new products on the market. Having the nearest prices to the HDM food, and the same delivery speed, McDonalds is the most significant competitor that can offer substitution products. KFC and Pizza Hut are other competitors that can offer substitution products, although their products are completely different from the hot dogs. In fact, they are very different from another, too. One of them offers chicken recipes, and the other one offers pizza. The only main advantage of these products is that they have a very good taste, and they have various options to choose from. Besides that, the service type is different. Their companies offer customers experiences closer to restaurants, taking long times to prepare, and because of the food type, the customers need to stand at a table in order to eat them, and it takes quite some time to do so. Another drawback represents the high prices of their food, being at least three times more expensive than a traditional hot dog. The only reason that we can say that these two companies offer substitution products is the fact that they are major players in the fast food-industry. Gregorys and Snack Attack are two fast-food companies offering cold sandwiches with salami, ham, cheese and some vegetables. They have a few assortments, but their food is cold. The queue time is low, but the prices are considerably higher than a hot dog. Snack Attack has recently developed and is now supplying food to supermarkets, mini markets, and other stores that might have access to events. Ikea has a fast-food division that returns annual revenues worth of à ¢Ã¢â‚¬Å¡Ã‚ ¬5 million. Although they are specialized in another industry, they have created a fast-food in every store to develop a differentiation competitive advantage, and this strategy has proven to be very efficient. Their food is very cheap, and they are the only competitors that can offer a similar product to HDM. Their hot dogs have the most competitive price on the market, with a price of only à ¢Ã¢â‚¬Å¡Ã‚ ¬0.25 per unit. The only reason why Ikea cannot become a very strong competitor is that they only build fast-food outlets inside their stores, and at this time, there is only one store in the country. Spring Time and Burger King are two other competitors that can offer substitution products for the HDM hot dogs. While Spring Time has reached a company life cycle of saturation and decline, Burger King is not appreciated by the Romanian consumers, and thus they cannot develop, as they register constant loss every year. Other fast-food firms that are selling hot dogs are insignificant, having just a small stand in the street, with no strategies and development plans, being managed by only one self employed person in general. After this analysis of the competitors, we can observe that the fast-food industry has multiple market segments. These market segments are shown in the chart below: As shown on this empirical made graph, the hot dog segment in the Romanian fast-food industry is not yet developed, and a strong competitor on this market segment would be able to benefit from this opportunity. McDonalds has had a continuous market share growth because the customers want to eat faster every year, and they were able to provide that. But a hot dog product can be eaten even in another manner, which would not necessary involve fast eating: doing it on the street. As anyone can see in socially developed countries like USA, Germany and Austria, the hot dog products are bought in the middle of the street, and are eaten on the street. This would provide the Romanian customers an even bigger mobility. The product customization will offer them a bigger flexibility. These two advantages combined with the fact that there are no major competitors in the segment, offers to the hot dog product every prerequisite necessary to become a successful brand in the Romanian market. Even if the market trend shows continuous growth every year, the Government regulations might lower the industry growth rate in the upcoming years. But offering a relatively new product in the market, which have not been exploited by other major competitor, will increase the customer interest to it, and will allow a fast development. Country Report Expansion is a problem which every developing company its asking to itself. Because there are various methods of expanding a company, the financial risks are lowering, and thus allowing growing companies to think about such measures. The first advantage that HDM would benefit from expansion is the fact that it will create an economy of scale. By increasing the total number of customers, than it will increase the order volume that it will make from its suppliers, and then the power of negotiation will increase, and thus, the costs with raw material per unit will be lowered. Another advantage that the company will have is a wider access to the customers, through more fast-food outlets. This should be identified as an opportunity, because at this point a marketing campaign would have expected results, attracting more customers to the stores, and creating a public awareness. If the customers are content with the products and services, then they will become devoted to the brand, although in general this happens to a relatively small number of customers. Higher revenues can be efficiently transferred into management budgets, and allow the company to hire professionals to manage activities with broader instruments and more time than one single manager for all the operations. A Marketing Manager, a Sales Manager, a Store Operation Manager, a Human Resources Manager, and a Purchasing Manager will be key positions to create a professional strategy of product improvement and expansion. By accessing a large number of customers, than the revenues will grow, and the profits will be increased as well, allowing the company to have future expansion at higher rate, because of the increasing capital. One other advantage that expansion brings to the company is the access to lower cost workforce, and especially in Bulgaria, lower raw materials. Expansion to more than ten different locations can bring in an optimistic financial hypothesis the possibility to create a production factory, where the company will have complete access to the raw food processing and it will acquire a complete quality control of the food. Besides, a vertical development can considerably lower the company fixed costs. There is a high opportunity to expand a hot dog company in Romania and even in the Balkans, because the markets have not reached their maturities, and being emerging countries, the middle class will expand in the upcoming decade. This way, the product lifecycle will be extended to at least five to ten years. The major opportunity of expansion to Bulgaria is that the country has similar fast-food industry segmentation as Romania, where the major competitors are addressing different segments, while the hot dog segment is only represented by small companies with low retaliation power. Another opportunity of expansion is represented by the fiscal measures regulated in the foreign countries. Bulgaria has lower taxations than Romania, and it will allow Hot Dog Mania to increase its gross profits. Hot Dog Mania will have two different methods to enter foreign markets. The first method is the foreign direct investment which consists in using the companys own capital to expand to foreign markets. The main advantage is that the expansion will have a high profit potential, while it will have a full control of the operations. The disadvantage of using the foreign direct investment is that the company will have higher financial risks than if it had used other expansion methods. In the foreign country, the company will have exposure to political risk, macroeconomic risk, authority abuse risk, and Government regulations. Setting up new headquarters also involves a managerial investment, but with a higher complexity because of two main reasons: if the manager is Romanian, than it will have to become accustomed to the foreign country culture, habit and measures of communication; and if the manager is foreign, then it will probably have a different perspective over the home country vision, which will be adjusted in a large period of time. The other method that HDM will use to enter foreign markets is the franchise. This is a very easy and financial risk free method to enter other countries. HDM will ask for a monthly franchise tax, and will supply the franchisee with the raw materials as a subcontractor, in order to maintain the food quality and higher income. The company will assess the country potential and will obtain know how about the foreign market, which will allow the company to extend to the country with risk free foreign direct investments. Nevertheless, the franchise method also has some disadvantages. Even if it will act as a subcontractor to the franchisee with the food supply, it will still have low margins to allow the franchisee to have competitive prices on the market. These low margins will offer a lower profit than a profit potential of a FDI. Having a franchisee creates dependence with him, because the home company will always need to supervise and check if the quality is maintain at the company standards. Another risk is that the franchisee could learn the know-how of the hot dog company, and create a new company adapted to its market, and act as a competitor. In the first expansion stage, the HDM company will select the franchise method, because its less financial risky than a foreign direct investment, and it will provide every necessary information that will allow the company to create a future FDI. The primary legal issue of HDMs target country, Bulgaria, is that the judicial system is not fully independent. According to the Heritage website, in Bulgaria Weak property rights, lingering corruption, and inefficient bureaucracy hold down the countrys overall economic freedom. According to the same website, The non-salary cost of employing a worker is high, but dismissing a redundant employee is costless. Even if these regulations are negative to the legal aspect of Bulgaria, the Investment Promotion Act offers equal treatment to both foreign investors and local ones. Another regulation that represents a good opportunity to extend to Bulgaria with a foreign direct investment method is the fact that EU members can buy land in this country. This way, opening new locations will allow HDM to have wholly owned subsidiaries. Starting a business in Bulgaria takes approximately 50 days, in comparison to the EU average of 38 days. According to the Heritage website, Bulgarias economic freedom score is 64.6, which is well above the world average. This is primarily because they have high fiscal freedom, with a flat corporate tax of only 10%. The general time lines for going global represent a projected plan, being subjected to different changes in the upcoming years, due to changes that may occur in the financial status. As in the timeline for the company description, I will use some of the milestones in order to project appropriate timelines for the distant future. The first two milestones that will lead to the extension of the company will be the expanding of the company in other major cities of the home country as a wholly own subsidiaries or franchises, to allow our management to gather enough experience and know-how for future, more complex expansions. After expanding to Bulgaria, the Hot Dog Mania will search other potential locations in the Balkans, with similar people patterns, and similar Government regulations. Considering the fact that the start-up year of the company will be in 2012, the expansion to other countries will take place in 2017. This information is shown on the following table and graph, shown bel ow: Event / Name Start End Length Expand in Other Romanian Cities 2014 2015 1 Create a Franchise 2014 2015 1 Expand to Bulgaria 2016 2017 1 Search for Other foreign Countries 2016 2018 2 Expand to Serbia 2018 2019 1 Expand to Slovakia 2018 2021 3