Thai Tai
Vietnamese
Subs
Business Plan
Michelle Coupal
Michelle Kraft
Alan Sklapsky
Stephen Yong
Table of Contents
1.0 Executive Summary ................................................................................................................................ 3
2.0 Introduction ............................................................................................................................................. 5
2.1 Mission Statement ............................................................................................................................... 5
2.2 Corporate Goals .................................................................................................................................. 5
2.3 Industry Overview ................................................................................................................................ 5
2.3.1 Threats .......................................................................................................................................... 5
3.0 Operating Plan ........................................................................................................................................ 6
3.1
Business Structure ........................................................................................................................ 6
3.1.1
Organizational Structure ........................................................................................................... 6
3.1.2
Permits and Legal Structure ...................................................................................................... 6
3.2
Site Plan ........................................................................................................................................ 6
3.3
Building and Floor Plan ................................................................................................................. 7
3.3.1
Store Front ................................................................................................................................ 7
3.3.2
Production Area......................................................................................................................... 7
3.4
Work Plan ...................................................................................................................................... 7
3.5
Health and Safety .......................................................................................................................... 8
3.6
Business Day/Week/Month/Year .................................................................................................. 8
3.7 Sourcing Materials ............................................................................................................................... 9
3.8 Performance Metrics ........................................................................................................................... 9
3.8 Inventory Management ...................................................................................................................... 10
3.8.1 Point of Sale System ...................................................................................................................... 11
4.0 Human Resource Plan .......................................................................................................................... 11
5.0 Marketing Plan ...................................................................................................................................... 12
5.1 Competitive Analysis ......................................................................................................................... 12
5.1.1 Direct Competition ...................................................................................................................... 12
5.1.2 Indirect Competition .................................................................................................................... 12
5.2 Target Market Analysis ...................................................................................................................... 12
5.3 Market Analysis ................................................................................................................................. 13
5.4 Marketing Mix .................................................................................................................................... 13
5.4.1 Product Features ........................................................................................................................ 13
5.4.2 Prototypes ................................................................................................................................... 14
5.4.3 Pricing Policy .............................................................................................................................. 14
5.4.4 Promotion .................................................................................................................................... 14
5.4.5 Distribution Strategy ................................................................................................................... 15
5.5 Sales and Profit Objectives ............................................................................................................... 15
5.6 Marketing Budget .............................................................................................................................. 15
6.0 Financial Plan ........................................................................................................................................ 16
6.2 Financial Structure............................................................................................................................. 16
6.3 Financial Analysis .............................................................................................................................. 16
6.3.1 Critical Variable Analysis ............................................................................................................ 17
7.0 Appendix ............................................................................................................................................... 19
1.0 Executive Summary
Introduction
The mission of Thai Tai’s is “to serve the city of Saskatoon the most consistent, best-tasting Vietnamese
sandwiches at an affordable price using high-quality ingredients”. This will be accomplished by providing
quality products and a memorable customer experience. We want to be the nightly food destination of
choice in Saskatoon; without the next morning regret.
Operations Plan
Thai Tai will be a corporation with four equal shareholders, who will also be involved in managing
operations. Thai Tai will be located on Broadway Ave. in Saskatoon; it will consist of a walk-in storefront
and a production area for the made to order service. The store will be open from 11am – 8:30 pm Monday
through Wednesday, and 11am -3 am Thursday to Saturday. The maximum capacity for production will
be 180 subs per day. Ingredients and other service providers will be primarily sourced from local suppliers
to ensure fresh products and timely delivery.
The capital budget will include costs for equipment, including production area, and product displays,
totaling approximately $57,000. We plan to use $90,000, including debt and equity, to fund capital budget
for the first year to ensure a positive cash flow.
Human Resources Plan
All four original shareholders will be equally involved in managing operations. Food services workers will
be hired to work at minimum wage with management supervising during the peak hours throughout the
day (ie: 12-2, 4-7 and late night hours on the weekend).
Marketing
Thai Tai will have the following sales and profit objectives:
 To sell an average of 97 submarines per day in Year 1 and to increase to full capacity of 154
subs by Year 5;
 To achieve a profit margin of 75%; and
 To sell at an average of $7.50 per unit selling price, increasing at the rate inflation.
Competitive Landscape
The competitive landscape for Thai Tai includes direct competition (Subway and other fast food
alternatives) and indirect competition (other sit down restaurant options in the local area or any late night
food substitute).
Target Audience and Positioning Statement
The target audience is the lunch and late night crowd, along with the weekend shopper. We target those
walk-in, passerby customers who will enjoy a healthy alternative with an oriental twist.
The Marketing Mix
Thai Tai’’s Far East menu will provide many options for customers. To gain market share quickly, the
pricing strategy for Thai Tai is to enter the market at a similar cost to the direct competition at approx
$7.50 for our average sandwich. This allows an 80% gross profit margin and a mark-up of 500%.
Thai Tai will use an awareness campaign to introduce ourselves to the market. The campaign will highlight our unique subs and promote them through various media, including: social media, flyers and word
of mouth promotion.
Thai Tai will sell direct to customers and will be located on a busy street corner on Broadway Avenue in
Nutana, Saskatoon. This location is hip and trendy and will attract many nearby students, workers and
shoppers in our target audience. Modeled after similar Vietnamese sandwich shops located in
comparable locations in other cities (Vancouver, Calgary, etc) which have been very successful, we
believe that our differentiated product will gain a similar following in Saskatoon.
Financials
The financial structure of Thai Tai is 45% equity and 55% debt. The financial outlook for the company
looks good with an internal rate of return (IRR) for the company of 44% and a net present value (NPV) of
$206,279.
The critical variables that significantly impact IRR are sales growth, cost of sales and sales volume.
To realize the IRR, we will have to meet our sales targets and keep tight control over costs.
2.0 Introduction
2.1 Mission Statement
Thai Tai’s mission is to: “To serve the city of Saskatoon the most consistent, best-tasting Vietnamese
sandwich’s at an affordable price using high-quality ingredients”.
2.2 Corporate Goals
 We want to be the #1 destination for lunch and late night eating in Saskatoon
 We will provide customers with a healthy alternative to late night food, without the next day regret
 Be profitable and expand the business by 2014
2.3 Industry Overview
We believe Saskatoon is the ideal location for a Vietnamese sub shop. Saskatoon is a young and vibrant
city of 200,000 that grew by 2.8% from 2001-2006 and has a median age of 35.9 years.1 The city has
recently experienced an economic boom, which is attracting young and educated workers from across the
country to well paying jobs. The median family income is $65,268, indicating that residents have some
disposable income.2 We believe this population growth and influx of young people creates a unique
opportunity for us to introduce a Vietnamese sub shop.
Saskatoon is already home to many unique ethnic restaurants, however, the majority of them are on the
west side of Idylwyld Dr, which makes them relatively inaccessible to the lunch and bar crowd. We
believe that a Vietnamese sub shop located in the heart of the Broadway entertainment district would
provide a fresh and unique experience to the young and adventurous lunch and bar crowd.
2.3.1 Threats
The threats to our business would include:

Product substitutes (competing restaurants-Subway, Pita Pit, Booster Juice, etc.)

Reliance on suppliers for fresh, high quality ingredients

Ability to attract committed workers
1
Statistics Canada. “2006 Community Profile-Saskatoon.” Available at http://www12.statcan.gc.ca/censusrecensement/2006/dp-pd/prof/92591/details/page.cfm?Lang=E&Geo1=CSD&Code1=4711066&Geo2=PR&Code2=47&Data=Count&SearchText=Saskatoon&Searc
hType=Begins&SearchPR=01&B1=All&Custom=
2 Ibid.
3.0 Operating Plan
3.1
Business Structure
3.1.1 Organizational Structure
Thai Tai will have a flat organizational structure,, with four partners sharing all managerial responsibilities.
We will hire part-time, minimum waged employees to handle orders during busy hours (lunch and late
night).
3.1.2 Permits and Legal Structure
Prior to opening the restaurant, we will contact the Saskatoon Health Region to arrange for an inspection
of the food preparation facilities and to obtain a provincial health license. We will need several permits to
operate Thai Tai. The permit process can be long and drawn out, so we would start the process as soon
as possible.
The location, 801 Broadway Ave., is already zoned for commercial business, so we would not have to
obtain zoning permits. We would have to obtain the following permits:
 Department of Health permits (including fire inspection)
 Plumbing and building permits (if required)
 Sign permit (for outdoor and sandwich board signs)
 Vendor’s licence (to collect PST)
 Saskatoon business licence (commercial business licence costs $95)
In addition to these permits, we would need to register the business name with the province and register
with the Workers’ Compensation Board and Occupational Health & Safety. Federally, we would have to
obtain a federal business number, employer business number and a GST number.
Corporate status was selected as the legal structure to enhance access to capital, take advantage of the
income tax deferrals available to new and growing businesses and to ensure protection against any
liabilities that may occur.
3.2
Site Plan
Thai Tai has chosen the trendy Broadway area in Saskatoon as the future site of the store. The exact
address for the store will be at 801 Broadway Avenue, crossroads of Broadways Avenue and 10th Street.
This choice was made for several reasons:
1)
Access to parking. Parking will be available in front of the store, across the street and
parallel to the site and around surrounding side streets.
3.3
2)
Deliveries will be easily accessible into the restaurant via the back alley entrance. The
back entrance will lead the hallway before the kitchen. This alley will easily
accommodate any delivery trucks and vans and will make the ease of transferring
supplies to and from vehicle to store effortless and easy.
3)
This site is centrally located in the Broadway entertainment district. It is a popular area
for shopping and going to restaurants and pubs.
Building and Floor Plan
3.3.1 Store Front
Thai Tai will serve walk-in traffic and corporate and private customers who pre-order sandwiches for
meetings or events. It is important that the storefront have large, street facing windows to maximize
product visibility for passing traffic. The submarines will be made to order as a take away item. As such,
customer seating areas will be limited to 8 person capacity waiting area. Canned beverages will be
available for purchase along with the sandwiches. Store furnishings and accessories will be based on
traditional Vietnamese culture. One washroom will be located in the storefront area.
3.3.2 Production Area
The production area will run perpendicular to the entrance way to allow for a flow from sub order to
payment. . The production area will be separated into raw and cooked product areas to mitigate
contamination concerns. A hand washing sink will be located at the entrance to the production area. A
product storage cooler and pantry will be located west end of the production area. Located near the
north end is a fridge to store canned drinks.
Prepping of all products will be done in the kitchen area, which is located at the rear of the store, out of
site from customers.
3.4
Work Plan
The most common task assignments will fall under the categories of production or sales and customer
experience management. Thai tai’s sub production process will begin with food preparation the prior
night so that marinades can sit overnight to achieve the ideal flavour. One hour of prep time before
opening will be needed to prepare sandwich ingredients (julienne vegetables, cook meats, etc.).
Sandwiches are made to order based on menu items listed below. The remaining processes involve
dishwashing, record keeping and general maintenance of the store.
The following list of tasks will be completed as part of sales and customer experience management:
 Providing friendly, prompt and personal service to walk in and pre-order customers
 Preparing sandwiches and related beverages
 Storefront and washroom cleaning as necessary
 Receiving telephone orders for off-peak time events.
Two staff members will be required on site to ensure that adequate attention can be paid to customers
and production during peak times.
3.5
Health and Safety
Health and Safety
As a food service company, Thai Tai will be subject to inspections by regional health authority public
health officer to determine compliance with The Food Safety Regulations and Standards. As part of
maintaining our reputation and health permits, we will all take the Safe Handling of Food course offered
by TrainCan. Courses are offered in Saskatoon, so we would take these courses as soon as possible.
These courses cost $500/per person.
3.6
Business Day/Week/Month/Year
Thai Tai will operate on Monday through to Saturday, closed on Sundays. Store hours will be from
11:00am to 8:30pm Monday to Wednesday, and 11:00 am to 3:00 am Thursday to Saturday.
Business Day
 Shifts will be divided from 10:00am to 3:30pm, 3:30– 8:30pm, and 8:30 pm-3:30 am (Thurs-Sat)
 Opening shift:
Responsibilities include: Prepping fresh vegetables for daily sandwiches, cooking meats, opening store,
ensuring adequate supplies and packaging is available.
 Closing shift:
Responsibilities include: Prepping meats for next day production, closing and storing of products in
airtight containers, closing and locking the store, cleaning of workstations. Shift premiums will be
awarded for working the late night shift.
Business Week
 Inventory of supplies and ingredients
 Thorough cleaning conducted by in-house staff to ensure all healthy and safety
measurements are upheld
 Meet with suppliers to discuss any improvements or concerns
Business Month
 Monthly management meetings – agenda will include operations, store hours, marketing and
finances
 Future marketing plans – includes any promotions or specials offered to customers
 Discuss work schedules and shifts
Business Year
 Compile financials for the year
 Ensure taxes are completed and filed
 Analyze any popular trends for future strategies in the new year
 Mitigate risks
 Evaluate equipment and supplies
3.7 Sourcing Materials
We plan to try to source out materials from local providers in order to assure timely and reliable delivery.
Since our business is based on providing low cost, high quality subs, we will also choose suppliers who
provide high quality ingredients at a reasonable price. We will source meat (chicken, beef, shrimp and
pork) from Centennial Food Service, which has a reputation for high quality items and has a location in
Saskatoon. Meat shipments will be received twice a week, on Tuesdays and Saturdays. We will obtain
our buns from Downey’s Bakery in Sutherland, which has extensive experience providing breads and
pastries to many Saskatoon hotels and eateries. Buns will be received every two days to maintain
freshness. The vegetables and spices will come from Sysco Foods. These items will be received three
times a week (Tuesday, Thursday and Saturday). To ensure we are receiving competitive prices, we will
ask existing and potential suppliers to fax quotes for ingredients to us monthly. To ensure quality of
ingredients, we will tour the facilities of existing suppliers.
3.8 Performance Metrics
We would use several performance metrics, financial and non-financial, to track and measure our
restaurant’s performance. These indicators would focus on areas that are critical to our business: cash
flow, inventory management and repeat customers.
Our POS system will capture sales and cost information that we could use to compare to our budgeted
performance. This variance analysis would indicate potential problem areas (ie. menu items with low
margins, escalating costs, etc.) and areas of strength (menu items with high margins, stable costs, etc.).
Another key performance metric would be repeat customers. We plan on the bulk of our business coming
from repeat customers. Our POS system, Maitre’d, would allow tracking of customers through a frequent
customer rewards program (buy 10 subs, get 1 free). This program would help promote repeat
customers.
Inventory turnover would be another important performance metric because it would indicate how well we
are managing our inventory. We would monitor this number over time to ensure that it was not increasing
because this would increase the risk of inventory spoilage. Since ingredient quality is very important to
the success of our business, we would want to ensure we were using the freshest possible ingredients.
3.8 Inventory Management
Proper inventory management is key to the quality of our products, so we need to ensure that inventory is
managed properly. The restaurant will need fresh ingredients, so deliveries will be made throughout the
week. Inventory will be tracked with a perpetual inventory tracking system through the point-of-sale
system.
To control costs and maintain quality, we will check all deliveries against orders and check supplier prices
against quotes. We will make inventory orders that take advantage of quantity breaks without increasing
spoilage.
This doesn’t make sense here --> Table 5.1 highlights capital requirements needed for the restaurant.
Table 5.1 Restaurant Equipment
Thai Tai
Capital Budget
(Source: Restaurant Equipment World)
Manufacturer
Asset
Building Improvements
Leasehold Improvements
Cooking Equipment
Conveyor Oven (2)
Meat prep machine
Vegetable prep machine
Kitchen Appliances
Industrial fridge (2)
Drink Refrigerator
Dish washing station
Hand washing system
Prep food table
Storage stand
Kitchen accessories (pans, knives, etc.)
Electronic Equipment
Point of sale equipment
Bookkeeping system
Installation costs
Total Capital Budget
GST
Total Expenditures
Unit Cost
Impact Construction
15,000
Ultra-Max
Hobart
Lincoln
8,874
3,170
338.50
Delfield
Samsung
Aero Manufacturing
Aero Manufacturing
True Manfacturing
Advance Tabco
Various
7,488
800
1,500
500
2,385
298.08
1,000
2000 IT Solutions
Dell
7,000
1,500
5,000
54,853
2,742.67
57,596
Thai Tai will require leasehold improvements of $15,000 to convert the existing location into suitable
space for the restaurant. This cost includes demolition, kitchen set up, public washroom renovation and
fixtures. We will require the following cooking equipment: two conveyor ovens for toasting subs, a meat
prep machine for slicing and preparing meat and a vegetable prep machine for slicing and dicing
vegetables. The following kitchen appliances will be required: two industrial fridges for storing perishable
inventory, a drink fridge for cooling and storing pop and juice, a commercial dishwasher, a hand washing
station, a food prep table for assembling subs, a storage stand for storing dry, non-perishable items and
various kitchen accessories (pans, knives, aprons, etc.). The restaurant will also require electronic
equipment: a POS system for ringing through sales and capturing sales and cost data and a bookkeeping
system to maintain the accounting records. The cost for all of these items is approximately $57,000.
3.8.1 Point of Sale System
We have evaluated the existing POS systems and have chosen the Maitre’d system. We believe this
system offers the best combination of functionality and flexibility. The system offers:
 Touch screen printers
 Scalability (can add other computers as the restaurant grows; can add more restaurant locations)
 Allows service of more than one customer at a time
 Comprehensive cost and revenue reporting (high and low margin items for marketing campaigns
and menu decisions)
 Perpetual inventory system based on bar codes
 Automatic conversion function converts quantity received to quantities used for recipes
 Recipes can be displayed to help train employees or for customer enquiries
 Automatically generates shopping lists based on minimum stock quantities
 E-commerce interface directly with suppliers like Sysco
 Customer rewards program-tracks points, etc. (buy 10 get 1 free)
The main benefit of this system is the interconnectivity between product sales and inventory
management. Every time a sale is made, inventory records are automatically updated to reflect the new
levels. Inventory reports can be generated quickly and cheaply, which is important is we want to manage
inventory effectively to keep costs low and quality high. This system would help minimize inventory
spoilage which would help control costs.
4.0 Human Resource Plan
During the initial start-up phase our organizational structure will be flat as all four original shareholders will
be equally involved in managing operations. Food services workers will be hired to work at minimum
wage ($9.50) with management supervising during the peak hours throughout the day (ie: 12-2, 4-7 and
late night hours on the weekend).
Stephen Yong will be the General Manager based on his background working in numerous Asian food
establishments and extensive business background in Saskatoon. Alan Sklapsky will be our Director of
Finance responsible for the development of our cash projections, budgeting and financing requirements.
Going forward, he will continuously monitor the cash position of the company, analyze budget-to-actual
results and be our contact with the bank regarding the capital and working capital financing to be acquired
as well as maintaining relationships with equity financers. Michelle Kraft will be our Director of
Operations, responsible for purchasing and ensuring that the level of quality and consistency is
maintained. Michelle Coupal will be the Marketing Manager in charge of promotional activities and
advertising as well as over-seeing human resource requirements.
All staff and management will be fully trained to prep and make all sandwiches, open/close the shop and
operate the cash register.
5.0 Marketing Plan
5.1 Competitive Analysis
5.1.1 Direct Competition
As Thai Tai is the first freshly-made Vietnamese Sandwich shop in Saskatoon, there are currently no
direct competitors selling our unique style of subs but the other sub shops and fast food establishments in
the city would need to be considered our direct competition. Direct competitors would be fast food
establishments in the Broadway business district as well as the downtown core especially during the
summer months when the lunch crowd is known to walk across the bridge during the lunch hour. Our
most comparable competition Subway is located in numerous locations throughout the city and also on
Broadway Avenue as well as other well known fast food franchises Mr. Sub, Pita Pit and Booster Juice.
5.1.2 Indirect Competition
Indirect competition comes in the form of all other food establishments in the Broadway area including sitdown restaurants (Broadway Cafe, Nutana Cafe, Christie’s Il Secondi, etc), late night entertainment
establishments that serve food (Amigos) and bakeries/cafes (Starbucks, Nutana Bakery) that serve takeaway dining options. The price range for the full-serve restaurants will be higher while the late night and
cafe options would likely be comparable and draw some of the lunch/late night market we are targeting.
5.2 Target Market Analysis
1) The Broadway lunch crowd (and downtown business lunch market during the summer) would
include employees of businesses in Nutana along Broadway and students at E’cole Victoria,
Oskayak High School and Nutana Collegiate (high schools within three blocks of Thai Tai).
These groups will be able to walk to Thai Tai over the lunch hour; the business crowd goes out
for lunch approx. 3-5 times per week while the students would go out for lunch 1-2 times per
week. The business crowd would also make larger 10+ sandwich orders for lunch meetings
during the work week.
2) The Broadway area has an active late night entertainment scene that draws from all areas of
Saskatoon. To capture this market and serve their desire for cheap, quick and delicious food
after a long night of music and dancing, Thai Tai plans to be open Thursday – Saturday nights
until 3:00AM. Thai Tai is already perfectly situated in the area surrounded by pubs and late night
establishments (Amigo’s Cantina, Yard and Flagon, Vangelis Tavern, Broadway Theatre and The
Roxy on Broadway) that are all open until 2:00AM when patrons are then out on the streets
looking for the closest, well-lit food establishment that Thai Tai is perfectly situated to capture.
3) Weekend shoppers, festival goers that flock to Broadway as well as those living in the vibrant
community of Nutana can be found strolling along Broadway Avenue on any given Saturday right
in front of Thai Tai – this crowd will make up the demand for a Saturday opening and will be
drawn to Thai Tai through word-of-mouth advertising or our sidewalk board display. Nutana is
known as the cultural hotbed of Saskatoon with annual events such as the Broadway Art
Encounter (June), Saskatoon Fringe Festival (August), Broadway Street Festival (September) all
bring in large crowds of people from outside Nutana to the streets right in front of our location.
5.3 Market Analysis
Market Share
We expect to attract 5% of our target market, partly due to our trendy location and partly due to our highquality and differentiated subs. Despite the fact that our direct competition is located near us, we believe
a product differentiation strategy will work to our advantage – we are selling a product that is new and
different; yet similar enough not to scare away our target market. Based on the success of many of the
Vietnamese restaurants located in the downtown core (often packed during lunch hours) we believe that
the Saskatoon market is ready to embrace Vietnamese subs in a similar fashion.
5.4 Marketing Mix
5.4.1 Product Features
Thai Tai offers a fresh, new, Far East taste to the sub market; the location will be decorated with an Asian
flair and cater to all ages from the middle-aged business man, the young party-crowd after a long night at
Amigos, the high school student using their allowance for lunch or the young family wandering down
Broadway with a stroller during the summer.
Thai Tai will offer reasonably priced, high quality sub sandwiches. To maintain this offering, we will keep
our menu small with menu items that have simple ingredients. A small menu will allow us to maintain
consistent and high-quality subs. Menu items with simple ingredients will minimize our inventory costs
because we will not have to maintain a wide range of inventory items. Simple ingredients will also
facilitate speedy production and increase our flow-through rate.
We will offer the following subs:
 Ultimate sub (spicy)
 Buddha veggie
 Oriental cold cuts
 Pineapple beef
 Sate beef/chicken/pork rib (spicy)
 Lemongrass beef/chicken
 Sate beef onion (spicy)
 Curry beef/chicken (spicy)
 Teriyaki chicken
 Tiger prawn
 Charbroiled pork
Prices will vary between $6 (Buddha veggie) and $8 (Ultimate sub). We will add and remove menu items
depending on customer preferences and popularity.
5.4.2 Prototypes
Refer to Appendix 2 for sub prototypes
5.4.3 Pricing Policy
To gain market share quickly, the pricing strategy for Thai Tai is to enter the market at a similar cost to the
direct competition (Subway, Pita Pit, etc) at approx $7.50 for our average sandwich. This allows an 80%
gross profit margin, and a mark-up of 500%.
5.4.4 Promotion
Thai Tai will use an awareness campaign to introduce ourselves to the market. The campaign will highlight our unique subs and promote them through various media, including:
 Company website
 Social media (Facebook, YouTube, Flickr, Twitter, BlogSpot, etc.)
 Sandwich board displayed outside our store-front to attract walk-by traffic
 Customer loyalty program – repeat customers will receive 1 free sub after purchasing 10
 Coupons for discount subs in the SPC coupon book to gain awareness among highschool/university market (likely makes up a large portion of the late-night crowd we will be
targeting)
 Flyers offering $1 off for a sub to be distributed at the colleges, festivals and late night
establishments in the area
We will also have promotional materials available at the store including business cards, stationery,
brochures and product order forms.
After Year 1, we will continue to improve the displays and website, to promote via online social media, to
provide product samples and giveaways and to produce marketing materials. We believe word-of-mouth
advertising will be our strongest promotion tool.
5.4.5 Distribution Strategy
Thai Tai will sell direct to customers and will be located on a busy street corner on Broadway Avenue in
Nutana, Saskatoon. This location is hip and trendy, and will attract many nearby students, workers and
shoppers in our target audience. Modeled after similar Vietnamese sandwich shops located in
comparable locations in other cities (Vancouver, Calgary, etc) which have been very successful we
believe that our differentiated product will gain a similar following in Saskatoon.
Orders can be placed in person at our convenient location or for large orders over the phone, and can be
either picked up or delivered (for an extra charge).
Our direct competition also sells via storefront in similar areas and locals although many of our direct
competitors do not stay open later and do not attract the late-night market that Thai Tai will cater to.
5.5 Sales and Profit Objectives
Thai Tai Vietnamese Subs has the following sales and profit objectives, which are outlined in our financial
plan:
 To sell an average of 97submarines per day in Year 1, and to increase to full capacity of 154
submarines by Year 5;
 To achieve a profit margin of 75%; and
 To sell at a $7.50 per unit selling price, increasing at the rate inflation.
5.6 Marketing Budget
The promotional initiatives, as discussed in the promotional section, make up the following marketing
budget for Thai Tai:
Promotional Activities
Display
Website
Year 1
$3,000
$5.000
Yrs 2-5
$0
$0
Flyers
Pr.oduct Giveaways
Promotional Materials
Total Marketing Costs
$5,000
$8,000
$3,000
$24,000
$1,000
$8,000
$3,000
$12,000
6.0 Financial Plan
6.2 Financial Structure
Thai Tai Sub’s will be financed by approximately 45%equity and 55% by a Canadian Small Business
Loan (CSBL). This provides the prospective shareholders with a leveraged return using traditional small
business financing. The CSBL has maximum cost of debt of prime plus three percent, and has been
incorporated into our financial model. The following is a summary of the financing requirements for Thai
Tai’s:
Table 6.1: Financing Requirements
Financing Requirements
Expenditure
Debt
Capital Expenses
50,277
Forecasted cash shortfall in Year 1
Incorporation Fees
Permits and licencses
Total financing
50,277
Weight
56%
Equity
12,569
20,138
3,000
3,500
39,207
44%
6.3 Financial Analysis
The following summary forecasts the operating performance of Thai Tai’s over the next five years:
Table 6.2 Summary Income Statement
Thai Tai
Summary Income Statement
For the Year Ended, December 31
Year
Revenue
Cost of Sales
Gross Profit
2012
243,479
48,097
195,383
2013
268,239
53,964
214,275
2014
322,391
66,052
256,339
2015
371,342
77,479
293,862
2016
390,542
82,980
307,562
Total Operating Expenses
Earnings b efore Amortization, Interest, and Taxes
CCA
Interest Expense
Income b efore Taxes
Income Taxes - 27%
Net Income (Loss)
193,022
2,361
9,186
3,017
(9,842)
189,669
24,606
13,367
2,413
8,826
2,383
6,443
193,426
62,913
10,103
1,810
51,000
13,770
37,230
197,296
96,567
8,030
1,207
87,330
23,579
63,751
201,281
106,281
6,667
603
99,011
26,733
72,278
(9,842)
The overall success of Thai Tai’s is based on the company’s ability to exponentially increase demand for
the products through word of mouth and targeted advertising. The product’s popularity in the local
community is imperative to the long-term success of the company. Appendix 1 demonstrates the
estimated sales forecasts based on aggressive sales targets.
6.3.1 Critical Variable Analysis
A significant amount of sensitivity analysis has been performed on the financial analysis. It is imperative
to note that sales growth is the most significant variable to consider in valuing this company:
Table 6.3: Sensitivity Analysis Variable 1 – Sales growth
Metric
Worst Case – 5%
Base Case – 10, 20, 15, 5%
Valuation
-$21,277
$210,450
Internal Rate of Return
12.7%
46.2%
Payback Period
> 5 years
3.3 years
Best Case – 18%
$397,311
44.1%
3.1 years
By a significantly bearish scenario of 5% annual growth over the next 5 years, IRR will decrease to 12.7%
and will not make Thai Tai’s a reasonable venture. Under the base case scenario, annual sales targets of
annual growth of 10, 20, 15, and 5% are not unreasonable. These metrics are based on the success of
Thai Tai’s in its original environment, which we believe the operating success can be replicated in
Saskatoon.
The second variable which was considered significant in the analysis of Thai Tai’s is the change in prices
of cost of sales over the forecasted period. There is no doubt that there is a great amount of uncertainty in
food prices for the foreseeable future. As such, Thai Tai’s is a fair example of a company that is exposed
to a significant risk in the change of food prices.
Table 6.4: Sensitivity Analysis Variable 2 – Cost of Sales
Metric
Worst Case – 4%
inflation
Base Case – 2%
inflation
Best Case – 1.5%
inflation
Valuation
Internal Rate of Return
Payback Period
$190,421
32.2%
3.8 years
$210,450
33.6%
3.3 years
$215,295
40.0%
3.1 years
The estimated gross margin is based on an actual analysis of the inputs in producing the subs and
purchasing the drinks. As such, the analysis has been prepared based on the increase of prices over the
forecasted period. Under the worst case scenario, Thai Tai’s will still earn a significant IRR of 32.2%
which is due to the superior pricing strategy and quality of products that Thai Tai will sell.
The last critical variable examined in the forecasts for Thai Tai’s is the company’s exposure to sales
volume. As noted in Appendix 1, the expected sales volume for subs is 80 units from Monday to
Wednesday, 100 subs for Thursday, and 120 subs for Friday and Saturday. Drinks are projected to be
sold for every second customer, based on the low prices and ease of sale.
Metric
Table 6.5: Sensitivity Analysis Variable 3 – Sales Volume
Worst Case – Expectations
Base Case
Best Case – Expectation
decrease 20%
increase 20%
Valuation
Internal Rate of Return
Payback Period
-$45,279
11.6%
> 5 years
$210,450
46.2%
3.3 years
$466,179
61.8%
1.3 years
Under the worst case of a decrease in expectations by 20%, Thai Tai’s will not earn a favorable return
and IRR will decrease to 11.6%. This analysis solidifies the critical point that management of Thai Tai’s
must effectively market the product using efficient target marketing and a key focus on product quality.
6.3.2 Break-even Analysis
Break-even analysis was performed based on the projected five year NPV of $210,450 at a weight
adjusted cost of capital of 15.24%. As shown below, Thai Tai’s projected sales for the five year period
are greater than those required for break-even:
Year
2012
2013
2014
2015
2016
Table 6.6: Break-even Analysis
Projected
Breakeven
29,967
32,963
39,556
45,489
47,764
31,601
31,490
31,000
30,761
30,977
Margin of Safety
(units)
(1,634)
1,473
8,556
14,728
16,787
7.0 Appendix
Appendix 1: Sales Growth Projections
Sales Forecasts
Assumptions used:
Volume increases
Price and Cost Inflation
Percentage of drinks sold per sub
10%
20%
15%
5%
Day of the Week
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Average Daily sales volume
Number of days
Estimated Annual Sales - subs
Unit sales price
Unit cost of sale
Total Sales Revenue
Total Cost of Sales
Gross Margin
Gross Margin %
Units Sold - Subs
2012
2013
80
88
80
88
80
88
100
110
120
132
120
132
96.67
106.33
310.00
310.00
29,966.67
32,963.33
7.50
7.65
1.48
1.51
224,750.00 247,225.00
44,350.67
49,761.45
180,399.33 197,463.55
80.3%
79.9%
2014
106
106
106
132
158
158
127.60
310.00
39,556.00
7.80
1.54
296,670.00
60,908.01
235,761.99
79.5%
2015
121
121
121
152
182
182
146.74
310.00
45,489.40
7.96
1.57
341,170.50
71,445.10
269,725.40
79.1%
2016
128
128
128
159
191
191
154.08
310.00
47,763.87
8.12
1.60
358,229.03
76,517.70
281,711.32
78.6%
Day of the Week
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Average Daily sales volume
Number of days
Estimated Annual Sales - drinks
Unit sales price
Unit cost of sale
Total Sales Revenue
Total Cost of Sales
Gross Margin
Gross Margin %
Units Sold - Drinks
2012
2013
40
44
40
44
40
44
50
55
60
66
60
66
48.33
53.17
310.00
310.00
14,983.33
16,481.67
1.25
1.28
0.25
0.26
18,729.17
21,014.13
3,745.83
4,202.83
14,983.33
16,811.30
80.0%
80.0%
2%
50%
2014
53
53
53
66
79
79
63.80
310.00
19,778.00
1.30
0.26
25,721.29
5,144.26
20,577.03
80.0%
2015
61
61
61
76
91
91
73.37
310.00
22,744.70
1.33
0.27
30,171.07
6,034.21
24,136.86
80.0%
2016
64
64
64
80
96
96
77.04
310.00
23,881.94
1.35
0.27
32,313.22
6,462.64
25,850.57
80.0%
Appendix 2:Prototypes
Satay Chicken Sub
Ultimate Sub