Group 5

Valerichelle Food Services Inc.

A Proposal to Operate an Orange Brutus Branch in Bugo, Cagayan de Oro City

Executive Summary

Executive Summary

Serviceso o o o o o o o o Great Food Clean and friendly environment Low prices Healthy Dishes DMPI Workers includes Project Hires and Contractual Students Workers & Residents Travelers Valer, Michelle, Richard

Customers

Management

Objectives

a) Open an Orange Brutus outlet at Bugo, CdO on June 1, 2005 b) Sales of Ps 5.6 million the 1st year and Ps 6.2 million in Year 2. c) Keep Food cost below 45% of revenue d) Maintain control costs & operations

Mission

Orange Brutus will strive to be a great place to eat combining highest quality food at unbelievably low prices in a clean and friendly environment. We want fair profit for the owners, and a rewarding place to work for the employees. We must deliver on this pledge 100% of the time without exception.

Keys to Success

a) Quality food, services and facilities b) Proper Pricing c) Product Lines d) Advertising and Promotion e) Availability of Raw Materials

Company Summary

Company Summary

Valerichelle Food Services, Inc. will apply for an Orange Brutus franchise for an outlet in Bugo, Cagayan de Oro City

Company Ownership

The company will be formed by three (3) XU MBA students:a) Bautista VP b) Comique MB c) Siwagan RR

Start-up Summary

Particulars Start-up Assets Franchise Fee Warranty Deposit Sub-total Leasehold Improvement Operating Equipment / Utensils Initial Inventory Sub-total Motorcycle - for delivery Total Start-up Assets Start-up Expenses: Start up Cash on Opening day Building Rental for 6 months Registrations, permits and licenses Store Launching/Opening Activities: Advertising - (see details in Exh ) Sub-total Grand Total Requirements Funding: Owners' Equity Bautista, Valeriana Comique, Michelle Siwagan, Richard Total Investment

Amount in PhP

300,000 50,000 350,000 200,000 500,000 75,000 775,000 75,000 1,200,000

108,000 90,000 60,000 42,000 300,000 1,500,000

800,000 400,000 300,000 1,500,000

Start-up CapitalStart-up CapitalOpening Cash Balance Expenses Initial Inventory Franchisee fee / Warranty Deposit

Capital Assets

Franchisee fee / Warranty Deposit Initial Inventory Opening Cash Balance

Capital Assets Expenses

Company Location & Facilities

International Port

To Puerto Barangay Hall

PETRONBus Station

ButuanVilla Trinitas SubdivisionJeepney Station

Plant Location

CALTEX

Bukidnon, DavaoSHELL

Puerto Public Market

Cagayan de Oro

Floor PlanO RAN GE BRUTUSBugo, Cagayan de Oro City

Group 5 ( name)PROPOSED FLOOR PLAN18 m 7mMale CR 11 Seats Condiments/ Aircon Garbage

Female CR

Freezer Storage

Working Area

Ref

Kitchen SuppliesMicrowv

Grill

24 Seats

Working Area

5m

Ref CounterTools/Eqpts Aircon

Aircon

Garbage

Office

Drinks

Fryer

30 Seats

Condiments/ Garbage

18 Seats

24 Seats

Summary of Section and Area DimensionSection/ Area Kitchen Food Service Area Eating Area Dimension (m) 3 1/2 x 7 1 1/2 x 7 11 x 5 Size 24.5 m2 10.5 m2 55 m2

TOTAL

18 x 5

90 m2

Seating CapacityArea Inside Table & Chairs Long side-table 6 tables for 4 6 tables for 4 3 tables for 2 Outside 10 tables for 4 6 umbrella-tables for 4 TOTAL Seating Capacity 11 24 24 6 18 24 107

High visibility Easy access to all destinations Bukidnon, CdO, Butuan, etc Heavy blue-collar worker makeup in the community No over abundance of competition in the area (same type)

Services

Services provide quality food 7 days a week Competitive Comparison Lower price point No tipping Speed of service Clean, aircon Slow and cautious growth during its initial start-up phase Franchiser continue its food technology and development and will share to all franchisee Target to introduce new product 1 for each quarter

Future Services

Market Analysis Summary

Market Analysis Summary Market Segmentation Market Needs / market survey Wants Variety and flavor in its food Seeks strong value at low prices Looks for speed of service Wants a convenient location for dining Appreciates promotional items and activities Insists upon a clean, cool, friendly and attractive dining environment

Market and Industry Analysis Competition

Outlet /Restaurant

Ave Annual Sales

Ave Sales/Mo.

Ave. Sales/Day

1) Consumers Coop DMPI 2) BOEA Canteen Sub-total DMPI 3) Outside carenderias: a) Grace Food house b) JB Restaurant c) Princess d) Ayelet Bakeshop 4)Lechon manok/liempo - LD Cons 5 smaller stalls Sub-total outside DMPI Grand Total market

24,102,000 3,000,000 27,102,000

2,008,500 250,000 2,258,500

77,250 9,615 86,865

4,200,000 2,400,000 1,800,000 900,000 3,075,600 4,500,000 16,875,600

350,000 200,000 150,000 75,000 256,300 375,000 1,406,300 3,664,800

13,462 7,692 5,769 2,885 9,858 14,423 54,088 140,954

43,977,600

Strategy & Implementation Summary

Strategy and implementation strategy Competitive Edge Popular prices No tipping Fast service

Marketing strategy Pricing Positioning Marketing Tactics Promotion Marketing Program

Sales StrategyEstd No. of Customers / Frequency Particulars Annual Amount Annual Monthly Daily

Total patronage frequency Average sales / transaction Sub-total sales regular Total seasonal demand Average sales /transaction Sub-total seasonal Estimated Gross Sales

126,719 45 5,702,374 3,781 150 567,122 6,269,495 3,781 130,500 10,875 363 126,719 10,560 352

Sales ProgramsGrand Opening Budget

Sticker designOrange Brutus DeliveryBugo Highway 857-8888/74-8888

Poster & Flyer designBugo Highway, Fronting Del Monte Cannery 857-8888/ 74-8888

Orange Brutus

Opens on June 1, 2005With Sheree of Viva Hotbabes With Sheree of Viva Hotbabes

Free Ice Tea on the Opening Day! Free Ice Tea on the Opening Day!Try our Power P25 Snacks (with Iced Tea) Brutus Power Meals for as low as P29 only Brutus Budget Meals for P39.00 only(With Rice & Softdrink) Vegetable Lumpia & BBQ Vegetable Lumpia & Beefstew Vegetable Lumpia & Pork Adobo Vegetable Lumpia & Chicken Wings Vegetable Lumpia & Ham Steak

Home of the Best Burgersteak & Home of the Best Burgersteak & Fresh Fruit Shakes Fresh Fruit Shakes

Streamer designOrange BrutusBugo Highway, fronting Del Monte Cannery

Opens on June 1, 2005With Sheree of Viva HotbabesFree Ice Tea on the Opening Day!

Home of the Best Burgersteak & Fresh Fruit ShakesTry our Power 25 Snacks (with Iced Tea) Brutus Power Meals for as low as P29 only Brutus Budget Meals for P39.00 only (With Rice & Softdrink)

Advertising Media ExposuresAdvertising Media Coverage Airtime: 3 weeks before the opening Radio Schools, Offices, Posts at the three areas (Bugo, Puerto & Tagoloan) Posters Trees along Carmen Hill Highway Tagoloan Highway Agusan Highway Bugo Highway Proposed Site Motorellas, Jeepneys, Trisikads Schools, Offices, Terminals Stickers Offices, Clinics, Banks, Hospital at the three areas

Streamers

Flyers

Gantt Chart for the Activities on Each StageActivities/ Month Radio Grand Opening Flyers Stickers Activities/ Month Flyers Stickers Activities/ Month Flyers Activities/ Month Flyers 1 Introduction Stage 2 Growth Stage 2 Maturity Stage 2 Decline Stage 2 3 4 5

1

3

4

5

1 1

3 3

4 4

5 5

Advertising Budget SummaryStage Promotional Activities Estimated Cost Introduction rand Opening Priest Hotel Accommodation of Guest Balloons - 2 dozens Flowers - 2 toppery stand Radio production Growth Radio 200 pcs3 weeks Flyers - airtime Streamers200 pcs Stickers - - 5 pcs Maturity Posters -- 40 pcs Flyers 200 pcs ubtotal Subtotal Stickers - 500 pcs Flyers - 400 pcs Flyers - 200 pcs Subtotal ubtotal 1,000 33,600 1,800 400 1,250 800 42,000 400 500 900 400 400 400 400 500 1,000 500 1,150

Decline

TOTAL

43,700

Management Summary

Organizational StructureO RANGE BRUTUSBugo, Cagayan de Oro City

Valerichelle Food Services Inc.PROPOSED SET-UP

Franchise Ow ners

Counter Supervisor

Adm Staff in

Cashiers 2

Cooks 4

Dining Crew s 3

Management Team1) Bautista VP - CPA, will be responsible for all company finances and accounting as the Chief Financial Officer. She earned her Bachelors of Science in Commerce, major in Accounting from Polytechnic University of the Philippines. Her financial control skills will be invaluable in keeping Orange Brutus on track and profitable. Comique MB will act as HR Manager and will focus on the personnel issues. She has earned her Bachelors of Science in Industrial Engineering from the University of San Carlos. She has three (3) years experience as HR specialist at Del Monte Philippines, Inc. Siwagan RR - CPA, will be the Operations Manager. Richard has extensive experience of organizations ranging from six to 12 people. He earned his undergraduate course from Cagayan de Oro College. He has extensive Audit experience and currently working as Accountant of PANTEL 10FAB for three (3) years already.

2)

3)

Management Team Gaps

Personnel Plan

Financial Plan

Financial Assumptions

Financial Assumptions1) Patronage frequency is computed based on the target population and average sales at Ps 45. This is also near the per capita consumption of P541.17 a year.

INCOME BRACKET # of Household Population INCOME Total income (in '000 pesos) EXPENDITURE TOTAL (in '000 pesos) Expenditure on certain items: in % Total Food Food Consumed at Home Food regularly Consumed outside the Home Other expenditures Total Expenditures (in '000) Total Food (42.6%) Food consumed at home (39.2%) Food consumed outside the home (3.3%) Per capita - food consumed outside the home Average per month

Total CDO (Puerto/Bugo) 98,937 461,877 18,069,999

Total Misor (Tagoloan) 122,070 664,338 10,942,328

Total Combined 221,007 1,126,215 29,012,327

13,083,099 % 42.6 39.2 3.3 57.4 13,083,099 5,573,400 5,128,575 444,825 963.08 80.26

8,665,676 % 50.7 48.8 1.9 49.3 8,665,676 4,393,498 4,228,850 164,648 247.84 20.65

21,748,775

21,748,775 9,966,898 9,357,425 609,473 541.17 45.10

2) Initial franchise fee is Ps 300,000 plus a security deposit of Ps 50,000. The term is 5 years renewable with a 20% renewal fee based on the latest franchise fee.

3) The franchise fee includes the following: Equipment stainless cooking wares, kitchen/utensils Furniture & Fixtures tables, chairs, air conditioners etc Training management and store staff Store Launching/Opening provision of an Opening Team for 7 days after opening Marketing Support

4) Royalty fee is 5% of sales and 2% for Marketing Support Fund

5) CAPITALIZATION. Start-up capital is around Ph P 1.5 million, which will be financed by equity as follows:Investors Bautista, Valeriana Comique, Michelle Siwagan, RichardCapitalization

Amount in Pesos 800,000 400,000 300,000

Siwagan, Richard 20%

Bautista, Valeriana 53% Com ique, M ichelle 27%

6) PROFIT MARGIN. During the first year, gross profit margin is estimated to be 55% of sales. In the succeeding years, although gross profit will be the same at 55% of sales, but an increase in net from 11.9% to 12..6% of sales

7) GROWTH IN SALES.Sales is estimated to increase by 10% in the second year and by 20% in succeeding years. This is due to expected increase in customers patronage.

8) PERSONNEL PLAN.The following is the ideal number of staff and crew for our type and size of outlet: Supervisor 1 Cook 2 to 4 Admin staff 1 Cashier 2 Dining Crew - 3

The owners will be hands-on franchisees and each would be assigned to personally oversee the outlets operations.

8)Salaries & Wages The following shall be the planned salaries of the outlets staff and crewPosition Supervisor Cook Cashier Admin Clerk/Clerk Crew Monthly Rate 10,000 8,000 7,000 6,000 5,000

An annual increase in salary at 8% annually will be provided.

8)Fringe Benefits SSS, Compensation insurance and Philhealth premiums shall be provided by the company. Refer to Schedule 2 for details of Employees Salaries and Wages and benefits.

9) DEPRECIATION CHARGESLeasehold improvements shall be depreciated over 10 years as the term of the lease will be short-term only. Equipments, furniture and fixtures are to be provided by the franchiser. Due to absence of breakdown, the total package shall be depreciated over 10 years. A motorcycle to be used for delivery shall be purchased and to be depreciated over 4 years. Repairs and Maintenance of the equipments and Motorcycle is also provided at 2% cost when not yet fully depreciated and 5% of cost after fully depreciation.

10) OTHER EXPENSES. SPOILAGE AND WASTAGES. This represents spoiled food, estimated at 0.01% of sales. MISCELLANEOUS EXPENSE. This represents cleaning materials for sanitation and disposal of garbage, estimated at 0.08% of sales.

Break-even Analysis

Fixed Costs Monthly Units Break-even Monthly Revenue Break-even Average selling price per unit Cost of Sales - 45% Royalty fees - (5% + 2% MSF) Gross Margin / Unit Building Rental Salaries & Wages Employee Benefits Depreciation/Amort of Preoptng Costs Business Tax and licenses Utilities Repairs & Maintenance Others Total Fixed Costs Estimated Fixed Costs per Month

Annual Costs 216,000 924,000 154,440 169,150 15,000 180,000 15,500 50,783 1,724,873 143,739 6,655 299,457 45.00 20.25 3.15 21.60

100 % 45% 7% 48%

Break-even Analysis:

Assumptions:

Break Even Chart 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 300 900 1,500 2,100 2,700 3,300 4,500 3,900 5,100 5,700 6,300 6,900 7,500 8,100

Sales

Profit Break-even point Loss

Units Sales Total Cost

Projected Profit & Loss

Projected Cash Flow

DESCRIPTION OPERATING ACTIVITIES Net income after tax Depreciation Amortization - Franchise fee Increase in inventories Increase in prepayments Increase in tax payable Increase in VAT payable Sub-total INVESTING ACTIVITIES Payment to Franchiser/Assets

YEAR 1 668,813 88,750 60,000 (10,580) (81,600) 314,736 373,035 1,413,154

YEAR 2 784,783 88,750 60,000 (1,058) 20,400 54,574 37,303 1,044,753

YEAR 3 1,107,569 88,750 60,000 (2,328) 20,400 151,899 82,068 1,508,358

YEAR 4 1,509,960 88,750 60,000 (2,793) 20,400 189,361 98,481 1,964,159

YEAR 5 2,024,572 70,000 60,000 (3,352) 20,400 242,170 118,177 2,531,968

(1,125,000) (1,125,000) -

FINANCING ACTIVITIES Bank loan Owner's Equity Decrease in Loans Payable Withdrawals NET CASH INFLOW Cash, beginning CASH, END

1,500,000 1,500,000 1,788,154 1,788,154 1,044,753 1,788,154 2,832,907 1,508,358 2,832,907 4,341,265 1,964,159 4,341,265 6,305,425 2,531,968 6,305,425 8,837,392

Projected Balance Sheet

DESCRIPTION ASSETS: CURRENT ASSETS Cash Inventories Total Current Assets FIXED ASSETS Leasehold improvements Equipment/fixtures/Tables/Chairs Motorcyle Total Less: Accumulated depreciation Total Fixed Assets OTHER ASSETS Secuirty Deposit Preoperating Cost - net Franchise fee, net Total Other Assets TOTAL ASSETS LIABILITIES Income tax payable VAT Payable Loans payable Total Liabilities OWNER'S EQUITY Owner's Equity Net income Total Equity LIABILITIES & OWNER'S EQUITY

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

1,788,154 10,580 1,798,734 200,000 500,000 75,000 775,000 88,750 686,250 50,000 81,600 240,000 371,600 2,856,584

2,832,907 11,638 2,844,545 200,000 500,000 75,000 775,000 177,500 597,500 50,000 61,200 180,000 291,200 3,733,245

4,341,265 13,965 4,355,231 200,000 500,000 75,000 775,000 266,250 508,750 50,000 40,800 120,000 210,800 5,074,781

6,305,425 16,758 6,322,183 200,000 500,000 75,000 775,000 355,000 420,000 50,000 20,400 60,000 130,400 6,872,583

8,837,392 20,110 8,857,502 200,000 500,000 75,000 775,000 425,000 350,000 50,000 50,000 9,257,502

314,736 373,035 687,771 1,500,000 668,813 2,168,813 2,856,584

369,310 410,338 779,648 2,168,813 784,783 2,953,597 3,733,245

521,209 492,406 1,013,615 2,953,597 1,107,569 4,061,166 5,074,781

710,570 590,887 1,301,457 4,061,166 1,509,960 5,571,126 6,872,583

952,740 709,065 1,661,804 5,571,126 2,024,572 7,595,698 9,257,502

Business Ratios

ACCOUNTS Sales Revenue Less: Cost of sales GROSS PROFIT Operating expenses: Royalty fees Franchise fee - Amortization Building rental Salaries & wages SSS, ECC and Philhealth Depreciation expense Amortization - preoperating expenses Business tax Utilities expense Repairs and maintenance Spoilage and wastages Miscellaneous expenses TOTAL EXPENSES BEFORE INTEREST INCOME BEFORE INTEREST Interest expense INCOME BEFORE TAX INCOME TAX NET INCOME AFTER TAX

YEAR 1 5,642,546 2,539,146 3,103,400 394,978 60,000 216,000 924,000 154,440 88,750 20,400 15,000 180,000 15,500 5,643 45,140 2,119,851 983,549 983,549 314,736 668,813

YEAR 2 6,206,800 2,793,060 3,413,740 434,476 60,000 226,800 997,920 154,440 88,750 20,400 16,500 189,000 15,500 6,207 49,654 2,259,647 1,154,093 1,154,093 369,310 784,783

YEAR 3 7,448,160 3,351,672 4,096,488 521,371 60,000 238,140 1,077,754 162,162 88,750 20,400 18,150 198,450 15,500 7,448 59,585 2,467,710 1,628,778 1,628,778 521,209 1,107,569

YEAR 4 8,937,793 4,022,007 4,915,786 625,645 60,000 250,047 1,163,974 162,162 88,750 20,400 19,965 208,373 15,500 8,938 71,502 2,695,256 2,220,530 2,220,530 710,570 1,509,960

YEAR 5 10,725,351 4,826,408 5,898,943 750,775 60,000 262,549 1,257,092 170,270 70,000 20,400 21,962 193,056 19,000 10,725 85,803 2,921,632 2,977,311 2,977,311 952,740 2,024,572

Marketing Research

120 Respondents

Methods of Research Data Analysis Survey Questionnaire Traffic Count

Occupation of All the Respondents4% Bugo Residents 4% Puerto Residents 4% Tagoloan Residents Travelers 20%

Del Monte 63% Other Co. Workers 5%

Del Monte Puerto Residents

Other Co. Workers Bugo Residents

Travelers Tagoloan Residents

Age of All the Respondents16-20years old (8) More than 30years old (45) 21-25years old (30)

26-30years old (37)

Analysis & Interpretation of Data

Traffic CountWest to CdO = 329350 300 250 200 150 100 50 0

CdO to West = 296272

338 318

332 331 285

8/31/2004 5:00 PM 8/21/2004 3:00 PM West to CDO CDO to West 8/21/2004 10:30 AM

8/21/2004 10:30 AM

8/21/2004 3:00 PM

8/31/2004 5:00 PM

Occupation Will Patronize/ Will Not80 70 60 50 40 30 20 10 0Will Patroni ze

74 DM Travelers Other Co. Workers 19 6 5 0Travelers

4 1Other Co. Workers

Tagoloan Residents

4 5

1 0Bugo Residents Puerto Residents

Puerto Residents Bugo Residents Tagoloan Residents

1Will Not Patroni ze DM

Reasons for Preference Will Patronize120 100 80 60 40 20 0 Ra nk 1 Rank 2 Rank 3 Rank 4 Rank 5 29 58 3 67 40 36 18 17 1 19 4 4 45 40 24 2 7 8 3 4 0 42 37 97

P r ic e Food S e r v ic e L o c a tio n W ith p r o m o

Respondents: Will Patronize/ Will NotWill Not Patronize 7%

Will Patronize 93%