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Business plan

The Simit Shop

Presented to:

EAE Business School

Presented by:

Pamela Gutiérrez

Rafael González

Ahmet Eren Kongu

Daniela Uribe

2014

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Dedicated to our families, who have supported us in all the choices we have made

throughout our lives.

To our professors at EAE Business School, who have guided us throughout the entirety of

this project and also helped us understand things from different perspectives.

And to everyone who collaborated in the creation of this business plan.

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INDEX

1. INTRODUCTION

1.1 Summary

1.2 Objective

2. SITUATIONAL ANALYSIS

2.1 What is a Simit Shop?

2.2 Why a Turkish bakery?

2.3 Materials

2.4 Location

2.5 Labor force

2.6 Information sources

2.7 Promotion:

2.8 External Analysis

2.9 SWOT Analysis

3. MARKETING PLAN

3.1 Target Market and Segmentation

3.2 Differentiation and Positioning

3.2.1 Image of Bakery Industry

3.2.2 Important Feature

3.3 Competitive Strategy

3.4 Resource Allocation Strategies

3.4.1 Product Life Cycle (PCL)

3.4.2 The GE-McKinsey Nine Box Matrix

3.4.3 Loyalty-based Strategies

3.5 Growth Strategies

3.5.1 Keeping Competitive Position

3.5.2 Ansoff Matrix

3.5.3 Integrative Growth

3.6 Marketing Policies

3.6.1 Prices

3.6.1.1 Place and Distribution

3.6.2 Place and Distribution

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4. OPERATION AND PROCESS

4.1 Location

4.2 Neighborhood Analysis

4.3 Distribution of Plant

4.4 Detailed Plan of Distribution

4.5 Operation and Processes

4.6 Management of Raw Materials

4.7 Simit Preparation

4.8 Packaging and Chargign

4.9 Suppliers

4.10 Processes

4.11 Organization and Structure

4.11.1 Mission, Vision and Values

4.12 Organization Chart and Human Resources

4.13 Schedule

4.14 Description of the Work Position

4.15 Gantt and Time Charts

4.16 Training and Development

4.17 Motivation and Employees

4.18 Dismissal Polices

5. LEGAL

5.1 Social Object

5.2 Business Model

6. FINANCIAL-ECONOMIC PLAN

Preface

6.1 Three Years of Balance Sheet

6.1.1 Assets

6.1.2 Liabilities and Equity

6.2 Result Forecast- Three Years

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CHAPTER 1: Introduction

1. Summary

2. Objectives

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1. Summary

The following business plan explains to detail the entire operations of a newly opened

Turkish Bakery setup in Madrid, Spain. The bakery focuses on offering the most traditional

Turkish flavors, but specializes on one of their most popular product, the Simit. A simit is a

circular type of bread made with wheat flour, typically encrusted with sesame seeds, which

is baked to a golden brown color.

The concept of our Simit Shop is very exciting, as we wish to combine the exotic flavors of

a Turkish bakery with the exquisite tastes of Spain. Our shop design will be a combination

of a traditional and modern style, which will house the warm colors of Turkey. Our

transparent counters will allow our customers to see at all times the available selection of

ingredients for the customization of their simits, which will grant our customers the

certainty of freshness of our products.

Our product menu will offer the traditional simit, and a wide variety of articles to customize

it. Our product range will cover both salty and sweet options, such as hams, cheese,

chocolate, etc. These products can be accompanied with hot or cold beverages if desired.

Product freshness is one of the key success factors of our Simit Shop; and for that reason,

our products will be baked daily, with more than one daily batch.

Our business plan begins by describing a situational analysis, in which we explain the

characteristics of our Simit Shop and why we have opted to introduce these Turkish bakery

products into the market. We also developed a detailed PESTLE Analysis, labor force

analysis, information sources, promotion strategies, an internal and external analysis, and a

SWOT analysis, which combined, allow us to have a clear picture of our possibilities and

constraints.

The following segment of our business plan is dedicated to our Marketing Strategy. In this

section, we establish our competitive strategy, and, due to the fact that our Simit Shop will

offer a new and exciting option in the bakery market, our options revolve around this

premise. We provide a detailed analysis of the key marketing elements of our business, map

out our directions, objectives and activities for the business, customers, and employees. The

development of the Four P´s draws on the broader perspectives outlined in the business

plan.

The next segment analyzed is the Operations and Processes strategies, where we evaluate

the importance of location, which directly affects the competitive capacity of the company.

In this section we elaborate on a handful of key factors, such as the plan of distribution,

management of raw materials, our suppliers, organization and structure, mission and vision,

schedule and time charts, human resources plans, etc.

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In our Legal chapter, we establish what type of society best suits our needs, and all the

necessary elements that need to be taken into account when creating the business. We

provide an insight on why we chose to enter the bakery business with our Turkish

alternatives and why we selected Madrid and Spain as a first location, over other business

opportunities in other cities around the world.

The last chapter of our business plan is dedicated to our Financial and Economic plan,

where we make detailed projections regarding our variable and fixed costs, our assets,

liabilities and equity, and a detailed three year sales projection on three scenarios.

We finish our business plan with a set of conclusions about each segment, and highlight the

most important points of our business plan.

2. Objectives

The general objective for a business plan is to describe every action required to start a new

company, analyze the technical and economic viability of the project, and provide correct

processes that meet the needs of future company.

Prime objective: Analyze the market and competitors

In this objective, we analyze and recognize the market in which the company is going to be

located, both national and provincial level, studying key factors, such as political factors,

economic factors, social factors, and technological factors; furthermore, we analyze the

direct and indirect competition for the sector.

Analysis of the macro environment: To locate the company in a macro environment

level, we analyzed the most important political and economic factors of the country

where the company is going to be located; in our case, Spain. We also considered

all the legal aspects that could affect the opening and operation of the company.

Analysis of the microenvironment: In this step, we analyze which are the strengths

and weaknesses that the new company will have, as well as understand the value

chain of the industry in which the company will operate.

Analysis of the competition: It is required to know which are the strengths and

weaknesses of our competitor, in order to improve their conditions or not fail in the

same situations. This analysis will help us differentiate ourselves from the

beginning of operations.

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Secondary objective: Detail and comply with the operations and processes that develop

the business on a day to day basis.

In this object, we develop our operations and activities that the company has to carry out to

serve their clients, and the relationship between ourselves and our customers and suppliers.

Location of the business: The location of the business is one of the most important

factors of success of the company, and for this reason, we have to analyze each

alternative in order to choose the better options.

Distribution within the business: In this point, we have to discover which is the best

distribution within the store, in order to make our customers and employees feel

comfortable.

Relationship with suppliers: The relationship with our suppliers is key to

determining our financial possibilities.

Third objective: Analyze and choose the best legal structure to operate the company.

Detail the legal and tax forms: We have to choose the best legal structure for the

company, according with the dimension of the project.

Establish the Mission, Vision and Values for the company.

Organization chart and Human Resources: Describe the job positions, including the

responsibilities and skills required for each position.

Fourth objective: Commercial plan. Decide which market segment is the most appropriate

for our company.

Meet the potential market and segmentation: According to our potential market, we

have to define and segment the market in which the company will operate and focus

most of its commercial activities.

Develop an action plan: Describe the actions that we are going to implement in order to

improve sales, obtain new clients and create brand awareness.

Fifth objective: Develop an Economic and Financial plan

The economic and financial plan has to give a prevision of the expected results and

conclusions about the profitability of the project.

Make a balance sheet: the prediction has to be for 3 years and in three different

scenarios (Pessimistic, Moderate, and Optimistic).

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Ratios: A ratio analysis offers an easy to understand financial information.

Make an investment analysis: With the NPV and IRR we analyze the viability and

the investment attraction

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CHAPTER 2: Situational

Analysis

2.1 – What is a Simit Shop?

2.2 – Why a Turkish bakery?

2.3 – Equipment

2.4 – Location

2.5 – Labor force

2.6 – Information sources

2.7 – Promotion

2.8 – External Analysis

2.9 – SWOT Analysis

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2.1 – What is The Simit Shop?

Nutrition is a major issue in every country and in every community, and due to that you can

find different forms and ways in which food is presented to customers. In Spain, you can

find different options due to both local and international culinary traditions, mainly because

of the increasing number of foreign communities established in the country. We have

realized that Turkish cuisine is not as established as it could be, and, in addition, numerous

people know at least something about several Turkish dishes.

In Spain, there is huge potential for specialized bakeries because both Spaniards and non-

nationals tend to consume bread for breakfast and in meager and quick meals and snacks.

We want to offer them a new space where they can enjoy and taste the different flavors of

our variety of Turkish bakery products. The Simit Shop is basically, a Turkish bakery that

combines the most traditional tastes of Turkey, with the most emblematic hams and cheeses

of Spain.

2.2 – Why a Turkish bakery?

The Turkish culinary culture in Spain is getting more and more acceptance, therefore we

want to use the first-mover advantage and offer Turkish bakery products. We have the

successful references of Turkish companies Istanbul Doner Kebap, which brought turkish

kebap to Spain in 1999 (http://www.istanbuldonerkebap.es/empresa01.asp) and Simit

Sarayi, which turned local crisis into advantage in 2001 and has growth internationally

from a small local shop from Turkey (http://www.simitsarayi.com/en_US/hikayemiz/).

These examples prove that Spanish culture is open to try and consume different types of

cuisine. First mover advantage would give us a huge share of the market, and considering

the current economic crisis, it is a huge opportunity to start the business.

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2.3 – Equipment

Equipment of the business would be an oven. Some of the options are as follows:

The oven will be selected after making a detailed price-productivity analysis. Another

option to be considered is a high-tech machine used to reduce time and increase efficiency-

productivity1.

Additional equipment and machinery required are: freezers, dough resting counters, dough

knead machines, dough cutting machines, cake-patty machines (optional), counters, and

tables and chairs (optional). The machinery and equipment is accessible in Spain, but if we

were to find difficulties finding the correct ones, we can import them tax free from

neighboring countries (Germany, France, etc.).

1 http://www.youtube.com/watch?v=dEu-t6JXhWM

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2.4 – Location

We will open our first shops in Madrid, and, depending on our growth, we can expand into

other cities within the Spanish national territory. Portugal and Morocco are also potential

markets to consider in the future.

Location is a key business success factor since it directly affects the competitiveness of the

company. A business concept can have tremendous success or failure depending on where

you are, and in many cases, location is one of the key variables in a commercial company.

For the first shop, these are the following factors we will be considering:

- Pedestrian transit volume.

- Proximity to professional and educational centers.

- Proximity to public transportation stops and stations and ATM machines.

2.5 – Labor force

To start, we require six employees. One baker, two assistants, two cashier/supervisors, and

one manager.

2.6 – Information sources

Turkish Embassy´s commercial counselor, the National Statistics Institute (INE), access to

the information of a similar company that did this in Germany and Holland, internet

statistics, e-commerce, government reports, student thesis found online, and access to

cultural Turkish icon in Spain.

2.7 – Promotion

Renting space for promoting our shops via banners in the already established and well

distributed around the city “Istanbul Doner Kebap shops” is a viable idea. Social Media

(Facebook, Twitter, Instagram), mouth to mouth promotion, and other forms of direct

marketing (guerrilla marketing – via flyers) are also feasible and effective.

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2.8 – External Analysis

The External Analysis will be presented with the traditional PESTLE Analysis, which

includes Political, Economic, Social, Technological, Legal, and Environmental factors, at

national terms.

1. Political

a. Spanish citizens consider the political environment in Spain as somewhat

unstable, but this opinion has become a trend since the economic crisis

struck Spain in early 2008.

b. Continuous changes in taxes add to the uncertainty and instability of the

Spanish market. In the last few years, many important laws and decrees have

been modified, including the definition and taxes of and for SME´s.

2. Economic

a. Even though the Spanish GDP has reported a decline in 2013, up to 71,000

new companies have been created. In the last trimester of 2013, a 0.1%

increase was reported.

b. The European Commission predicts an increase in GDP of 0.5% in 2014,

and another 1.7% increase in 2015, which brings hope to investors and

entrepreneurs.2

c. A study reports that the creation of new SME´s has grown 7% with regards

of 2012.3

d. Furthermore, there are many government programs that promote the creation

of SME´s, offering financial support and formation and training courses.4

e. The Consumer Price Index reported a slight increase in November 2013, and

the trend is expected to continue for 2014.5

2 http://news.xinhuanet.com/english/business/2013-11/06/c_132862056.htm 3 http://www.lne.es/economia/2013/10/10/creacion-empresas-crece-7-septiembre/1481795.html 4http://www.madrid.org/cs/Satellite?c=Page&cid=1120203321276&pagename=Emprendedores%2FEMPR_C

omun%2FDivulgacion%2FEMPR_QuienesSommosTemplate 5 http://countryeconomy.com/countries-cpi/spain

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3. Social

a. Spain is the second largest market worldwide on bread and bakery, with a

volume exceeding €5.7 billion in 2013 (according to the Food consumption

report in Spain 2013, by the Ministry of Agriculture, Nutrition and

Environment of Spain).

b. The Spanish culinary menu includes a wide variety of different breads and

other bakery products for breakfast, lunch, and dinner. Also, mid-day snacks

include fruits, baking products, and other light snacks.

4. Technological

a. The process and production of baking goods has evolved throughout history.

b. Automation has become present in most industries related to food

processing.

c. Electrical ovens are also being used to substitute classic wood and gas

ovens.

d. The ability to produce frozen bakery products changed the baking industry,

allowing local shops and supermarkets to acquire them and bake them

whenever they considered it necessary, allowing them to offer freshly baked

products.

5. Legal

a. The specific legislation for the elaboration of baking products in Spain is the

“Real Decreto 496/2010, de 30 de Abril”, in which the quality standard

norms for baking products, confectionery, and pastries is approved. 6

i. According to this decree, the standard sanitary norms of food safety

of the European Union are applicable to the country. It also includes

the regulations regarding additives, labeling and publicity.

b. Other decrees or laws that require deeper investigation include:

i. Taxing

ii. Accounting

6 http://www.boe.es/boe/dias/2010/05/14/pdfs/BOE-A-2010-7714.pdf

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iii. Hygiene

iv. Labor and Compensation

v. Syndicates, etc.

6. Environmental

a. The environmental factors we consider are those that concern the laws that

regulate environmental pollution (if existent in our production process), or

regulation regarding waste.

2.9 – SWOT Analysis

Strengths

- Innovative product

- Inexpensive to produce.

- Variety and freshness.

- Reasonably low price of sale.

- Culinary culture.

Weaknesses

- New type of product.

- Unhealthy image of baking

products.

- Cultural barriers.

Opportunities

- First mover advantage.

- Customization.

- Local and International growth.

- Unemployment (low labor cost)

- Franchisee project.

- Economic incentives for new

businesses.

Threats

- Substitutes (sandwiches, croissants,

napolitanas, hojaldres, etc.)

- New competitors.

- Lack of customer loyalty in Spain.

- Foreign market (laws, paperwork’s,

etc.)

Strengths

Turkish “bagels” haven’t been introduced into the Spanish culture. Turkish Kebab example

provides us with an idea of “how much” the Spanish and international communities living

in Spain like kebabs; we can expect a similar reaction from this new product.

The production costs of our products is not expensive. Flour, molasses, and sesame seeds

are the main ingredients of our products.

The company will offer different types of fresh products on a daily basis, as they are going

to be produced and prepared daily. It will also offer a different shape to customers.

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The selling price of the Simit will be reasonably acceptable for our potential customers.

Due to low production costs, even with a lower selling price than substitute products, our

margin will be very satisfactory.

The culinary culture of the Spanish and international communities living in Spain is another

positive point to achieve our target. Simits should be seen as close to a “tapa”. If

categorizing it into a snack, there exists the opportunity marketing it as a “quick snack”

option, or, if opting for a customized version (according to our menu items), a more

complete snack.

Opportunities

First mover advantage is one of the key reasons to be optimistic about the business. As our

business proposal fits into the culinary culture of the territory, the largest part of the market

will be obtained by our business, as there is no available competitor.

The customization of our products will help us on the introduction stage. Customers can

choose to add some supplements inside of the simit, all according to their likes (and the

availability of ingredients). This will also give the company and extra opportunity to earn

more money, as these customized products will, evidently, be more expensive.

Examples of Customization of Simit

Related to first-mover advantage, this sector has the potential to grow in a short period of

time. Aided by the ideal location of Madrid, it is only logical to expand, at first, within the

city limits. Once the Madrid area is covered, other cities and countries will be considered as

an option for expansion.

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The high unemployment rate will help us in various ways. First, because of the reduced

household income, people tend to spend less money on food consumption (without

reducing consumption itself). Price is preferred rather than quality. In accordance to the

National Statistics Institute (INE), annual average net income per household in Spain stood

at €23,123 in 2012, a decrease of 3.5% compared the previous year. Meanwhile, the

average per capita income reached €9,098, 2.4% lower than the previous year.

The average income of Spanish households has fallen by 9.5% during the crisis, which

translates to about €2,400 less per year between 2008 and 2012, as shown in the following

table.

Source: National Statistics Institute

Source: National Statistics Institute ( INE )

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Furthermore, finding employees who are willing to work for a low or even minimum wage

is possible. With 26% of unemployment rate, Spain has the second highest unemployment

rate in Europe after Greece. Moreover, more than half of the unemployed population has

been looking for a job for more than one year. These figures will help us find appropriate

individuals to hire for a lower cost and wage.

The expansion plan we consider is that of franchising, which will allow us to grow faster

and reduce our risk.

Increased economic incentives due to the economic crisis is the another opportunity to

assist us in the creation of the business.

Weaknesses

Given that we offer a new product, a considerable amount of time will be required for the

introduction stage. Our marketing costs will be greater in comparison to any other similar

products at the introduction stage.

Health concerns related to pastry and baking products is another weak point for our

business. We have to fight against that to eliminate these ideas. We might also use these

negative ideas regarding baking products in our favor, offering the entire nutritional value

of our products.

Threats

Even though it is an original product, it can be substituted by another types of meals and

snacks, such as sandwiches, croissants, napolitanas, etc. It will be hard to keep customers

loyal to our products.

Because of the low costs, other companies might appear in the sector, given the market

potential.

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CHAPTER 3: Marketing

Plan

3.1 – Target Market and Segmentation

3.2 – Differentiation and Positioning

3.2.1 – Image of Bakery Industry

3.2.2 – Important Features

3.3 – Competitive Strategy

3.4 – Resource Allocation Strategies

3.4.1 – Product Life Cycle (PLC)

3.4.2. – The GE-McKinsey Nine Box Matrix

3.4.3 – Loyalty-based Strategies

3.5 – Growth Strategies

3.5.1 – Keeping Competitive Position

3.5.2 – Ansoff Matrix

3.5.3 – Integrative Growth

3.6 – Marketing Policies

3.6.1 – Prices

3.6.1.1 – Place and Distribution

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3.1 – Target Market and Segmentation

Our company is going to offer a new and exciting nutritional option in the bakery market,

with a different and original product. We aim to introduce the Turkish bakery concept into

the Spanish and international society of Spain for the first time, which consumes high

volumes of baking products7 (with a rising demand, in spite of crisis).8 Regarding both

Spanish and international communities in Spain, we also have to take into account the huge

immigrant population and tourist groups (national and international) in the country, who are

more willing and open to taste different cuisines and flavors.

7 http://www.eae.es/news/2013/10/21/espana-es-el-segundo-mercado-mundial-de-pan-y-bolleria-con-un-volumen-de-4.662-millones-de-euros-en-2012 8 http://www.clubdarwin.net/seccion/negocios/sector-de-panaderia-y-pasteleria-industrial-en-espana-crece-un-16

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Given that our starting operating point is in Madrid, the immigrant population is also

considered a key target.

In addition, Spain is the second most preferred tourist location in Europe after France, with

60.601073 yearly visitors. The following table shows that the Madrid region is the 3rd most

visited location of the Spain.

When focusing on baking products consumers, we face a very wide market, which

complicates us in the creation of a target group. Nevertheless, market segmentation is

necessary. Segmentation is the process of differentiating the total market for a

product/service or homogeneous groups of people and organizations together as different as

possible from others. (Miquel, and Bigné Molla, 1994).In other words of Kotler and

Armstrong (2002), who define a market segment as "a group of consumers who respond in

similar ways to determined marketing efforts."

Segmenting the market of “baking product consumers” is, therefore, the first step to

defining the target markets of Simit Shop, where we will center most of our commercial

efforts. This does not mean, in any case, that the rest of the segments of the market will be

abandoned or ignored, as we will also have an offer for them.

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The key criteria factors that we will use to segment the market will be geographical,

demographic and psychographic.

Geographical

The shop will not be located exactly in the center of Madrid (around Puerta del Sol), but,

ideally, in its surrounding neighborhoods and streets. We will avoid Puerta del Sol, so as to

escape the high financial requirements of rent. On the other hand, we consider that being

close to the city center allows us to be close to our potential clients, such as students,

professionals, residents of the area, tourists and any person passing through the city center´s

streets. If the location of the shop meets these requirements (amongst others), the location

will allow us to have higher sales.

Demographic

Gender: No gender discrimination.

Age: Our age target is only limited to infants (due to physical reasons). Children,

teenagers, young adults, senior citizens, etc. are included in our target age.

Social Stratum: The concept of the Simit Shop addresses mainly to medium and

medium-high class, with medium and medium-high purchasing power. Our

combination of a good price, nutritious products, and unique concept will help us in

reaching our target group.

Other demographic variables, such as religion, marital status, height, weight, etc. are

irrelevant to our business and will not be used when segmenting the market.

Psychographic

According to the Ministry of Agriculture, Nutrition and Environment of Spain, bread and

other baking product consumers value variety. For this reason, we understand that the

novelty and unique taste of our product (simit), will add the much desired value. We will

also offer our customers a chance to customize their orders, which we understand will add

more value to our product and our brand.

The freshness of our products, combined with the healthy image of our type of bakery, will

allow us to break apart from the paradigm that “all bakery products are unhealthy”. We can

also offer our products in a gluten free recipe, for our celiac customers.

We are never going to present stale or poor quality products to our customers, as we

consider that our brand image can be strongly damaged by the opinion of the public.

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Both men and women in the province of Madrid, who are within our age group and belong

to medium and medium-high social economic class, open to taste new and unique flavors,

appreciate quality and variety, are

3.2 – Differentiation and Positioning

As our product is new and unique in the Spanish market, we have to position ourselves

according to the bakery market. We are going to give major importance to following

attributes:

- Freshness

- Quality

- Schedule

- Information

- Natural Ingredients

- Closeness

- Sincerity

- Cleaning

The most difficult task we have to complete is to change the “unhealthy” image of bakery

products in the country. We plan on offering natural high quality products in a clean and

relaxing environment. In addition, the freshness of our products is another important factor

for our Simit Shop. We are going to produce our simits on daily basis, offering them

directly from the oven to our customers; we want to fix our schedule with respect to the

demand of our clients.

3.2.1 – Image of Bakery Industry

Even though the ingredients of baking products (eggs, flour, milk…) could make the

resulting products a basic article in anyone´s diet, the additives, preservatives, sugars, and

fats that the industry adds to the products, in order to produce in mass and extend their

expiration date, makes these products obtain an “unhealthy” image.

As you can see on the following nutritional pyramid, baking products are situated at the top

the pyramid. Consuming these articles is recommended “sparingly” or “occasionally”.

Anyhow, all the ingredients that together make the baking products are set at the base.

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According to the Institute of Nutrition and Eating Disorders of the Autonomous

Community of Madrid (Instituto de Nutricion y Trastornos Alimentarios de la Comunidad

de Madrid), people choose not to consume baking products for the following reasons:

In an effort to change this negative image, the fabricants of baking products are reducing

the quantity of salt, saturated fats, sugars and calories present in their products, while also

incorporating healthy ingredients, such as fiber, vitamins, and other components.

0.00%10.00%20.00%30.00%40.00%50.00%

Motives to the non consumption of Baking Products

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To address this issue, Simit Shop will offer products the highest quality ingredients,

offering the best quality homemade and frozen dough (one that has the less amount of

artificial additives). This will be one of Simit Shop´s most important and firm

commitments, which will be demanded from our suppliers.

The dough will be flavored in the shop with natural ingredients, including the sesame seeds

and the other ingredients considered for our specialty simits.

To enforce the image of a quality and healthy alternative, we will inform our clients of the

nutritional value of our product via posters in the shop. We could also print brochures with

the nutritional value of our products for our clients to take with them. If clients do so, it

would also be a good way to promote our shop via mouth to mouth marketing.

3.2.2 – Important Features

In the list of the most valued attributes of baking products (in Spain), only 2.35% of people

consider price as a determinant factor, while the flavor and freshness of the product are the

two characteristics most appreciated.

Our Simit Shop is going to prepare products in batches of a few units throughout the day,

so the freshness of the product is guaranteed. It will be a distinctive feature compared to

other establishments which prepare products early in the morning and sell throughout the

entire day, or receive them packaged and sold during weeks.

53.50%

13.62%

26.53%

2.35%

4%

Valued Attributes of a Good Bakery Product

Good Taste Do not contain saturated fat Refreshness Affordable Low Expiration

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Related to having good taste, we are only going to buy flour from a manufacturer. Then we

are going to prepare all of the products in according to our recipe to get original flavor. We

are not going to use saturated fat and we are going to give information about that to our

customers.

3.3 – Competitive Strategy

According to Phillip Kotler, we must identify our target market´s Leader, Challenger,

Follower, and Nicher. The market leader (or leaders) is the dominant firm of the industry,

with the largest market share. Market leaders commonly take the first steps into price

changes, new product introductions, control the intensity of advertisement and promotion,

and have the most coverage in the marketplace. 9

Given that we are a Simit Shop with our specialized baking products, finding a market

leader would only be possible if we look at our market as the industry as a whole. Since we

are introducing a novelty of baking products, no specific leader could be pinpointed. We

would become the leaders of this specific niche market; with a first mover advantage in

hand. As market leaders, we will, in theory, have all the market share regarding our

product, as no other bakery or supermarket currently sells simit. With the introduction of

the Simit in the specialized bakery sector, we hope to attract customers for the following

reasons:

The introduction of the Simit as a new product to the market.

With the growing amount of internationals living in Spain, new products have been

introduced into different markets. Both the Spanish and Internationals, especially in

Madrid, have become culturally flexible and curious about other products available,

especially in the food sector. (I.e. kebabs, Chinese, Latin American, Indian

restaurants, etc.)

We want to make Simit Shop more than just a selling point. The idea is to make the

purchase of our products an experience for the customers. A good service is the

starting point for a positive experience.

Customization of the Simit is another strategy we want to take on. We can offer a

variation in the recipes, adding new ingredients to make our product more attractive

to other target customers.

9 Kotler, Philip (1997), Marketing Management, 9th Ed., Prentice Hall, New Jersey.

29

But, since we are not in a position to close our doors to the general market, typical baking

product suppliers and distributors (fresh and frozen) will be considered as the Market

Leaders, as this company (or companies) is the one providing our potential niche

competitors with their basic products. ASEMAC10 (Asociacion Española de Masas

Congeladas) contains the biggest players in the industry, and generally sets the trends in the

baking products market in Spain.

If any of the firms in the ASEMAC conglomerate begin to offer products similar to ours,

we would make a special emphasis on how our product has better quality and is genuinely

fresh. As opposed to the products used by most bakeries in Spain, frozen dough. This is

also an opportunity for the Spanish market to realize that “out of the oven” is not a

synonym for “fresh”.

The Challengers are “Firms that are not market leaders in their industry or product category

are trailing firms. One or two of them could be close competitors to the market leader and

they can be termed as runner-up firms. These firms can take the role of challengers when

they make aggressive efforts to further their market share or they can be termed followers

when they keep quiet and maintain their market share.” 11 Since ASEMAC gathers all of

the market´s baking products companies, there is no clear challenger in the industry. Any

bakery offering similar or substitution products will be considered our challengers.

Supermarkets and Franchises like Starbucks, who offer a wide variety of baking products

will be regarded as challengers. Given that there are so many bakeries in Madrid, but

without a strong brand and presence in the Turkish bakery market, we will refer to them as

followers.

Europastry, Precopan, Pastyfrio, and Orconsa are only a few of the companies that belong

to ASEMAC. These companies can be considered as followers, who basically follow what

the leaders do, the leaders set (prices, processes), innovate, etc. Since this is an association

of companies, they all follow the same line.

If we look at our market as “people who consume baking products”, we will find ourselves

with a huge market, making it very difficult to target them in general. Because of that, a

market segmentation is required. According to Kotler and Armstrong (2002), segmentation

is "the act of dividing a market into distinct groups of buyers who might require separate

products and/or marketing mixes."

A niche market, as described in the Business Dictionary, is the “concentrating all marketing

efforts on a small but specific and well defined segment of the population. Niches do not

10 http://www.asemac.es/quienes.html 11 Kotler, Philip (1997), Marketing Management, 9th Ed., Prentice Hall, New Jersey.

30

'exist' but are 'created' by identifying needs, wants, and requirements that are being

addressed poorly or not at all by other firms, and developing and delivering goods or

services to satisfy them. As a strategy, niche marketing is aimed at being a big fish in a

small pond instead of being a small fish in a big pond. Also called micromarketing.”12

On this basic idea, we want to compete in “arenas, rather than industries”. In our case, if we

consider the baking industry as the main competitor, we are not going to find a new market

necessity, but rather discover a new niche market that is unattended. Our business will work

in a different and improved way, to a segment that consumes and knows about bakery

products, also creating an image of “healthier” baking products for them to

consider/consume.

Segmenting the market of “baking product consumers” is, therefore, the first step to

defining the target markets of Simit Shop, where we will center most of our commercial

efforts. This does not mean, in any case, that the rest of the segments of the market will be

abandoned or ignored, as we will also have an offer for them.

This way, we will be able to avoid the larger firms, by targeting niches that are little or of

no interest to the larger firms. Once these niches have been identified or created, the next

step would be to expand them and protect them (protection of the niche is very important; if

larger firms see the potential or success of the niche, they might opt to enter the market).

According to Philip Kotler, “a firm should `stick to its niching’ but not necessarily to its

niche. That is why multiple niching is preferable to single niching. By developing strength

in two or more niches the company increases its chances for survival.”

Establishing a sustainable competitive advantage is becoming extremely difficult in today´s

world. As technology evolves, your competitive advantage can become obsolete the next

12 http://www.businessdictionary.com/definition/niche-marketing.html

31

day. These types of advantages are considered to be transient (according to Rita Gunther

McGrath), and not sustainable. “To operate, we need a new set of assumptions about how

the world works and a new playbook to compete and win when competitive advantages are

transient”.13

3.4 – Resource Allocation Strategies

3.4.1 Product Life Cycle (PLC)

Phase 1 – Introduction

This phase is the most expensive, because we need to invest heavily in promotion to build

awareness (such as free samples and marketing cost) and, with the correct strategy, target

our marketing efforts at people who influence others to buy a new and unique product.

During this phase, we will hold some special events to attract customers, such as a

“greeting week of tasting”. In order to have a successful store launch, we will be giving

away flyers inviting potential customers to our opening.

Phase 2 – Growth

In this phase, we expect our sales to increase, causing our unitary costs to lower.

Competitors will appear and aim to grab some market share. Our marketing objective will

now be to maintain and increase our market share. For example, by improving our product

portfolio and offering new packaging alternatives, therefore, attracting more clients.

Phase 3 – Maturity

In this phase, our product will peak, and we expect the competition is going to be numerous

and complex. In order to maintain our market share and margins, we will innovate our

product portfolio, adding a few services, such as catering, event planning, etc.

13 http://www.forbes.com/sites/stevedenning/2013/06/02/its-official-the-end-of-competitive-advantage/

32

Phase 4 - Decline

As demand starts going down, the market will be getting smaller, as some customers lose

interest and drop off; therefore, sales will fall as new products emerge. This phase is

inevitable for some reason; one of them might be because people get bored of the product

or because the product necessity disappears. We are going to offer a mix of new products,

such as desserts, beverages, bread, etc. Then, we will reduce some variety of simit flavors

and focus on high demand goods. Finally, we plan on opening new shops in different cities

33

3.4.2. – The GE-McKinsey Nine Box Matrix

L O W H I G H

MARKET ATTRACTIVENESS

C

O

M

P

E

T

I

T

I

V

E

P

O

S

I

T

I

O

N

Protect position

Grow as much

possible.

Sustain

strengths.

Grow selectively

Invest in attractive

segments

Neutralized our

competitors

Increase rentability

via productivity

Protect and reorient

Win

Concentrate on

attractive

segments

Defend our

strengths

Invest for growth

Selective

development of

strengths.

Reinforcement

in weakness.

Win selectively

Invest on segment

of good rentability

and lowest price.

Win

Protect our

position on

rentable

segments.

Improve our

products.

Minimize your

investment.

Grow selectively

Neutralize our

weakness.

Find different

solutions if not

growing.

Expand selectively

Expand at lower

risk or lower

investment.

Divest

Reduce our fixed

costs.

Sell maximizing

our cash.

H

I

G

H

M

E

D

I

U

M

M

L

O

W

M E D I U M

34

3.4.3 – Loyalty-based Strategies

Loyalty nowadays is one of the most important assets of any food shop. The future for the

company depends on the strategies that the company uses to get a good customer base, who

come back to consume any type of products, and that suggest as a good option to eat to

others potential customers. For this reason, we are going to design some strategies to keep

our customers satisfied.

Loyalty program

This strategy consist on creating a loyalty card, where the costumer can accumulate points

with each purchase, and when 10 points are accumulated, the customer is entitles to one of

any type of Simit that they want free of charge. Furthermore, this loyalty card serves us to

generate a database, which will help us understand which are the types of simits that

customers consume the most; and which are the flavors that people would like to taste.

Rewards program

This strategy is different to our loyalty program, as our customers are not required to have

any type of card or affiliation to get the reward. The control is an internal aspect for the

bakery. For example, we could provide a birthday or special occasion simit, so they get to

know how important he/she is to us.

3.5 – Growth Strategies

3.5.1 – Keeping Competitive Position

With the aim of minimizing risk, and regarding the tendencies of the bakery market in

Spain, and especially in Madrid, we have to adapt to the new lifestyle and current

preferences of the consumer, with new technologies and new products. Our strategy is

focused on providing our products to the new consumer, a quick, nutritious, and exotic

snack. According to the GFK market research company, “In the field of marketing, this

new healthy consumer is considering their physical, emotional and intellectual well-being

up above the traditional consumerism, luxury and somewhat unnecessary things for their

35

own development. They are more aware of what to do to make your life healthier”14, and

that’s what we are going to provide to our potential market, this way we maintain our

competitive position.

3.5.2 Ansoff Matrix

Source: Authors

a) Market Penetration

In Spain, the consumption of bakery products, pastries, cakes, and biscuits reveals a

clear upward trend in the last year in a 1,8 %15; bakery products have a great

acceptance among the different age structures which provide a big range of potential

consumers. Today, consumers are more selective and focus in product

diversification. They want something fast, different, and healthy. The industry is

committed to diversifying the product ranges and adapt to the changing needs of

consumers, who increasingly value new formats and innovative and healthy

products. Having said that, on the one hand, the industry is trying to bring to the

market products that contribute to a more comfortable lifestyle, but at the same

time, lead to an improvement of the nutritional profile, so that the consumer has a

maximum ease to a balanced diet.

14 Las 12 tendencias del nuevo consumidor según GFK,

http://www.revistapym.com.co/noticias/mercadeo/las-12-tendencias-nuevo-consumidor-segun-gfk 15 20 minutos.es, “El consumo de pan en España rompe la tendencia y aumenta en medio de una guerra de

precios”,http://www.20minutos.es/noticia/2018890/0/consumo-pan/guerra-precios/marcas/#xtor=AD-

15&xts=467263

PRODUCTS

Traditional New

Traditional

Market Penetration Product Development

MARKET

New

Market development Diversification

36

b) Market development strategies

As we are going to enter a new product in the existing bakery market in Madrid, our

market will develop according to our penetration and the acceptance of the product

in the current market. In the future, we consider exploring other markets, like frozen

bakery. In terms of advertisement we are going to focus on visual ads, promoting

the business via mouth to mouth, and gaining notoriety within the social networks.

Another aspect which is of vital importance to us is promoting the business in the

already establish Turkish venues, such as the kebabs restaurants, markets etc. Our

objective in this regard is to create a network, which we hope will become our base

of potential customers.

In terms of adaptation, due the products that we will be handling in the bakery are

unknown to the Spanish consumer, it is imperative to adapt it and offer them in an

innovative way, with clear differentiation from the traditional Spanish bakery

products. We want them to discover our products as a substitute of the current

“bocadillo”, a different way of eating a healthy snack.

c) Development strategies

One of the strongest points of our Turkish bakery is that the company is open to

change, and will remain in constant innovation. In this business, we are going to

manage a wide variety of products, offering different packaging and presentations

that will be key in attracting new customers and engaging new ones, according to

market evolutions and trends.

d) Diversification

Our diversification strategy is not for the near future, as we consider it too risky at

the beginning. First, we want to establish our products and our brand, and when we

position ourselves successfully regarding the market situation, we will analyze how

we can enter new markets. We are also taking into account that the Spanish market

of bread consumption at home during 2012 stood at 1.65 million tons, with a value

close to 3,890 million euros16. Consumption is growing, and according to this

growing trend, we need position our product and give the consumer one clear

choice.

16 Libre mercado “el consumo de pan aumenta por primera vez en décadas”,

http://www.libremercado.com/2013-10-16/el-consumo-de-pan-aumenta-por-primera-vez-en-decadas-

1276501877/

37

3.5.3 – Integrative Growth

Backwards Integration Horizontal Integration Forward Integration

Suppliers Competition Distribution

The company is going to

produce its own dough. This

way, we will eliminate

intermediaries in the

production line.

Even though the company

could benefit by the

detriment of our competition,

it is not the key factor of our

potential growth and success.

The commercialization of

simits will be by our own

shop, with no additional

channels of distribution.

38

3.6 – Marketing Policies

- Product

A Simit is crisp, round bread in a donut shape, decorated with sesame seeds. It

has different characteristics in term of size, crunchy texture and customization

options.

- Packaging

For those who want to have their simits to go, the packaging of our products will

be in paper bags with the company logo printed on it. For customers who want to

consumer our products on spot, it will be handed to them on a napkin with the

company logo printed on it.

- Size – 11, 8 cm average it can vary.

- Portfolio

Our portfolio is based on the customization of our Simits, with salty and sweet

ingredients, based on the most likely combination in the Spanish market, such as

cheese, ham, chocolate, cream, olive oil, etc.

39

3.6.1 – Prices

a) Bags

Ours packaging bags are going to be of paper, and after analyzing different

options the most suitable one for us is buy them online in solostocks.com,

because it provides us more quantity for less price. 15 euros for 1000 bags which

means that each bag cost us 0,015.

3.6.1.1 – Place and Distribution

Our business idea is thought of in a long term period of time. At the beginning of business,

our distribution channel will be our physical premises (shop). As we grow and strengthen

our position within the market, we will evaluate if the creation of additional distribution

channels is a positive idea.

There are a few elements to take into account in this regard:

a. Objectives to be reached: Our main goal in terms of place and distribution is to

locate our shop in a place (or places) where we are visible and accessible to

potential customers.

b. Market and consumer's typology: Adult couples without children or with older

children and households in which the person responsible for making the purchase

does not work, such as retirees, are the ones that consume the most bread, while

households with children under 6 years and young adults living alone are showing

a lower preference for this food17. Other key factor in the profile of the consumer

is that today, young adults tempt to eat more sandwiches, and healthy bread

17 Pan cada día, “Perfil del consumidor”, http://pancadadia.wordpress.com/noticias-2/perfil-del-consumidor/

40

snacks as part of their diet due to the time of preparation or because of economic

aspects, they search for a take and go option.

The market shows important growth in comparison with the previous year. As shown

in the chart below, even though the presented growth is slight, we understand the

future growth prospects are even more positive, given the diversification of cultures

within Spain and the pursuit of economic already made food for daily choices.

Source: Ministerio de Agricultura Alimentación y Medio Ambiente

c. Products/Services and its characteristics: Simit and its variations, simple, fresh,

healthy.

d. Customer’s buying habits: A few years ago, the vast majority of bread was

bought and sold in specialist shops. However, currently these establishments

represent just 42% of sales, while supermarkets and hypermarkets and coalesces

41.6% of the sector18.

2.6.2 – Place and Distribution

a) Advertisement: In this aspect our objectives are: First, to inform the community of

Madrid of the arrival of new products into the bakery market. We need to inform

them the choices they have, let them now about our product. Secondly, persuade the

potential consumer to pick us above the other market options. Third and final, for

18 20miutos.es, “El consumo de pan en España rompe la tendencia y aumenta en medio de una guerra de

precios”. http://www.20minutos.es/noticia/2018890/0/consumo-pan/guerra-precios/marcas/#xtor=AD-

15&xts=467263

41

customers to become familiar with us, create brand awareness, and make simits their

first choice.

b) Promotion: Our promotion strategy focuses exclusively on the consumers. As we

grow, we can expand our strategy to the employees and intermediaries if the case

demands it.

Our strategy includes:

a) Price reductions: We are going to make promotions to achieve the introduction

of a new item on the market and fight for customer loyalty jurisdiction over our

store; this will be a complement of our campaign, we are not planning to have

permanent or continuous promotions, only for the introduction of our product the

Simit.

b) Tasting: Give samples in front to the store to it in invite people to enter and

know us, other possible action in terms of testing will be making a partnership

with the Turkish restaurants in the town so they gave our product as company of

their dishes always with the projection of permanent partnership.

c) Services: our differentiated services will be focus on provide quality attention

and fulfill our customer’s needs; by working in our human resources and

improving our contact with the costumers we will create loyalty among them, we

want to create brand awareness so they prefer to buy our products regardless the

other products in the market.

42

CHAPTER 4: Operations

and Processes

4.1 – Location

4.2 – Neighborhood Analysis

4.3 – Distribution of Plant

4.4 – Detailed Plan of Distribution

4.5 – Operations and Processes

4.6 – Management of Raw Materials

4.7 – Simit Preparation

4.8 – Packaging and Charging

4.9 - Suppliers

4.10 – Processes

4.11 – Organization and Structure

4.11.1 – Mission, Vision and values

4.12 – Organization Chart and Human Resources

4.13 – Schedule

4.14 – Description of the Work Positions

4.15 – Gantt and Time Charts

4.16 – Training and Development Programs

4.17 – Motivation of Employees

4.18 – Dismissal Policies

43

4.1 – Location

A good location is a key factor for the success of the business, given that it directly affects

the competitive capacity of the company. Any business concept can fail or have great

success depending on the place where it is located, and in many cases, the location of the

business is one of the key commercial variables for the company.

Of all the factors to consider when opening an establishment, the most important to Simit

Shop are:

Transit of people: In a business with tight margins of benefit and where two of the

key elements for success are rotation (variety of products), and freshness, it is

essential that sales be as high as possible. Therefore, it is critical that the transit of

people to be high.

Proximity to workplaces: The concept of our Simit Shop is perfect for the people of

the area. Simit Shop is perfect for having a simit for breakfast, on the way to work,

for a short break or a quick and healthy bite. We can foresee that workers from

around the area, students, and passerby´s will be an important source for clients.

Proximity to a busy area of public transit: This is a strategy used by many food

chains around the world (Dunkin´Coffee). If the shop is located next to a metro

station or a frequently used bus stop, we could seduce many passerby´s to buy our

product, given the ease and speed of purchasing.

The proximity and availability factors regarding human resources are somewhat irrelevant,

given that the tasks to be performed in our shop are not at all specialized and do not require

a heavy or intense formation and training.

We have concluded that the shop has better chances of achieving a quick “in and out

service” for clients if the shop is rectangular or square, which would maximize the visibility

of all our product. It is important that the entry/exit door be particularly big, so the rotation

of clients if fluent and the visibility is increased.

The size of the shop will be consulted with an architect or engineer, so we can comply with

the minimum required space for the shop, machinery (ovens, refrigerators, etc.) and

sanitary services, determined by local laws or regulations (if any).

44

The areas that we understand that comply with the previous requisites are:

City Center: Commerce is highly concentrated and there are numerous passerby´s,

tourists, workers, metro stations, etc. If we are successful in seducing them into our

shop, our sales would have an important boost. The major problems we would

encounter are the renting costs, the availability of space, the ‘antiquity’ of the space,

etc.

Paseo de la Castellana: With a high population density given the numerous

amounts of office buildings in the area, there exists a high availability of more

“modern” spaces available, with large facades in most of the cases. It is a very

important avenue in the city and it fits correctly with our brand.

45

Gran Via and Malasaña: Another important area in Madrid. It is highly populated

due to the large amount of businesses, offices, and apartment buildings in the area.

It is also popular tourist destination, where both tourists and locals meet on a daily

basis. The area has recently become a favorite by both tourists and locals for leisure

activities, with a very exciting nightlife.

Ciudad Universitaria: Another option to consider is the bordering area of the

Ciudad Universitaria with Chamberi, a densely populated neighborhood in Madrid.

Considering that most students who attend the universities in the area live in dorm

rooms or the surrounding neighborhoods, locating our shop in the area would be a

good option.

46

Regarding the type of occupation of the shop, we have opted for a lease, as we do not have

the sufficient funds to buy a commercial space of these characteristics in any of the

previously mentioned areas.

4.2 – Neighborhood Analysis

We understand that the City Center provides the characteristics that best fit our

requirements.

City Center, Gran Via and Malasaña:

o The City Center is approximately 5.23 km², housing nearly 150,000 people.

o Monuments of the area include The Palacio Real, Puerta de Toledo, Palacio

de las Cortes, museums, El Rastro, etc.

o The area also hosts many commercial activities, with El Corte Ingles (which

also has a supermarket) and many of the stores belonging to INDITEX,

located around the area.

o In Malasaña, an estimated two hundred people pass by every fifteen minutes

during peak hours (morning – before beginning work, noon – during lunch

hours, afternoon and evening).

o Banks and ATM´s within the area:

BBVA

Santander

Bankia

Sabadell

Barkleys

Banco Popular, etc.

o The direct competition found in the area is substantial:

Traditional establishments:

La Mallorquina

Starbucks

Cafeteria Chocolateria Ricote

Rodilla

Casa de la Panaderia

47

Pans & Company

Papizza Romana

Restaurante Pacrep, etc.

Supermarkets:

Dia

Lidl

Carrefour

El Corte Ingles

Supermercados Vecino SL

Supermercados Coviran, etc.

o Traffic

Our selected location, in Malasaña, presents an average traffic per

thirty minutes of two hundred people.

4.3 – Distribution of Plant

An appropriate distribution will allow the company to organize the equipment and work

areas, resulting in a more satisfactory and comfortable place. The basic objectives to be met

by local distribution are:

- Unit

- Minimum flow and circulation

- Security

- Flexibility

It is also thought that having an accessible, transparent establishment to help us fend off the

negative image of pastries, allowing the customers to see from outside the distribution of

the store and the exhibited products.

Therefore, the establishment shall be rectangular, with a large glass window that allows

potential customers to see the inside of the shop and all the staff working inside. Similarly,

from the inside of the shop, it will be possible to see employees when they work on the

preparation table or oven when baking the products. In this picture, you can see the idea of

transparency that we want to transmit.

48

Prepared products also should be transparent and easy to access. In this manner customers

can see whole products and customize their simits easily. Following pictures should be a

good example for our shop.

49

4.4 – Detailed Plan of Distribution

The following areas of the premises are to be distinguished:

Ordering Area: This area will be the focal point of the shop. From the first step

inside, customers will be able to see every product on that area behind the

transparent plate made of glass until they reach the ordering area. In the following

image, the following layout is displayed.

Customization Area: Just before reaching the cashier, customers will find a small

area to customize their products. In this area, they can customize their simits with

different ingredients, such as cheese, ham, chocolate, chocolate, etc. They can

choose any of these products to place them inside of the simit. The additional

ingredients will be priced, and previously indicated.

Paying Area: In this area, customers pay for their products. One employee is going

to be the responsible of this area, in which the employee is able to see customers off

in a positive way, after packaging their products regularly. There will be also a

refrigerator and coffee machine just behind of the employee to complete customers’

orders with a drink (if ordered).

Storage Area: This area is needed to protect our ingredients and beverages.

Preparation and Baking Area: This area is where our employee prepares the

products. A big oven, deep freezer, dough machines, and a set of tables are going to

be needed for this area. This area will be visible from the main area of store, so that

customers are able to see the preparation of their food, which adds value to our

freshness and quality objectives.

50

Estimated approximate budget for the design and reform of the premises, which will

include bathrooms, exhauster, electrical doors, showcases, and adequacy of air conditioning

equipment is 45.000 €. Further details explained in financial plan.

4.5 – Operations and Processes

The business layout can be defined by the following operations: reception, storage and

management of raw material; preparation of the products and distribution on the premises;

customization of the simits, and cashier.

4.6 – Management of Raw Materials

Our simits require the following ingredients: Ingredients of the dough, fresh fruits, dried

fruits, drinks, and filler creams and sauces.

The ingredients of the dough, sauces, and the rest of the ingredients will be received by

agreement with the supplier, one time per week, at the begging of the day (before opening

the store at 8 am). The labor of the employees will be to receive the products and check that

everything is complete, sign the receipt, and, finally, setting all the products in place.

At the beginning of the day, when receiving the product and baking it, and at the end of the

day, the baker has to update the inventory for the store. A simple software will be used to

help us in the replenishment of our ingredients, at a minimum amount of safety stock. The

agreement with the supplier allows us to post orders two days before the delivery through

email or via the software.

Moreover, before opening the store early in the morning, we will receive the daily orders of

fruits and dried fruits, which will be paid weekly. Fruits should be washed and peeled

before putting them for sale.

Finally, the beverage supplier will also provide product one day per week. Again, this

provider will allow the order to be paid thirty days after delivery, therefore, employees will

only need to sign at each delivery. The sales person will be responsible for updating the

beverage inventory. Orders can be posted by email or by our software.

51

4.7 – Simit Preparation

The process starts when the baker has all the ingredients ready to mix.

- Preheat oven to 375 degrees.

- In a medium mixing bowl, mix together flour and salt.

- Make pressure on the dry ingredients with your fist, forming a "hole" in the middle.

- Add olive oil, melted butter, water, milk, and egg.

- Fold dry ingredients into liquids to form dough. This may take 10 minutes by hand.

- Once you have the dough, tear off pieces of dough making long, cylinder shapes.

Bring the tips of "cylinders" together to make a circle.

- Place circle on greased cookie sheet.

- Brush with milk. Sprinkle sesame seeds on top. Repeat with remaining dough.

- Bake for 30 minutes, or until simits become golden brown and crispy on top.

4.8 – Packaging and Charging

The cashier will collect the products from the customer and place them inside one of our

Simit Shop bags (if the customer has ordered a beverage, it will only be handed to them

inside a cup if the beverage is warm, or in its own bottle, can, etc. if the beverage is cold).

Cashier will proceed with check-out, charging the correct amount to the customer.

As we want to create a “good service” and warmth image, our cashiers will be obligated to

wish the customer a good meal and day.

4.9 - Suppliers

For our six main ingredients, we found the following suppliers:

Flour

52

Atlanta is a Spanish company located in Leganes (Calle Ramón y Cajal, 2, Leganés

– Madrid), which specializes in the sale of foods and beverages for hotels,

restaurants, etc. They provide their services in the entire peninsula and most

European countries.

Harissa is a Spanish company founded in Madrid (Camino de Puenteviejo, s/n,

Arganda del Rey – Madrid) with more than 30 years of experience. They specialize

in the fabrication and commercialization of different types of flour.

Vaper Foods is a Spanish company located in Madrid (Calle Los Metales Nº 1B,

Humanes de Madrid) which specializes in the elaboration and commercialization of

frozen foods, and exotic Latin American ingredients.

Yeast

AB Mauri (Villarubia – Córdoba) is a division of the Associated British Foods,

which is one of the biggest groups worldwide for baking and pastry goods. AB

Mauri is one of the biggest suppliers of yeast in Spain. (http://www.abmauri.es/)

53

Salt

Given that the amount of salt in our products is not large, the purchase of salt can

take place in any supermarket in Madrid.

Grape Molasses

Azucarera is a Spanish company founded in 1903. They are leaders in the

production, commercialization and distribution of white and brown sugar. They

offer a wide variety of products, such as molasses.

Sesame Seeds

Located in Valencia, Coralim Aditivos distributes sesame seeds to hotels,

restaurants, and bakeries in Spain.

Sucesores de Arturo Carbonell S.L. is a Spanish company founded in Murcia, 1965.

Its main activity is the sale of dehydrated products, such as garlic, onion, lemon, etc.

White, golden and black sesame seeds are also amongst the products they offer.

54

Given that we will offer beverages in our shop, the following options will be

considered:

Coffee

Illycaffe produces and sells excellent quality coffee all around the world, since

1933.

Valdecoffee is a Spanish coffee company founded in Madrid. They also offer coffee

makers, coffee grinders, tea, and chocolate powder.

Villa Real Café is a Spanish company settled in Madrid, which specializes in the

production and commercialization of coffee. The offer ground coffee beans, coffee

capsules, and top quality teas.

55

Tea

Unilever is an international company that operates in 190 countries. Unilever

operates over 400 brands, Lipton Teas being one of them.

Nectaran is a Spanish company that, since 1989, dedicates its operations to

importating and distributing all types of teas, infusions, and accessories for the

consumption of tea.

Mineral Water and Soda

Dispedia is a Spanish company that specializes in the commercialization and

distribution of beverages in Madrid. Their product portfolio includes beer, wine,

water, milk, juices, sodas, coffee, tea, etc.

56

The Coca-Cola Company is an American multinational beverage corporation and

manufacturer, retailer and marketer of nonalcoholic beverage concentrates and

syrups.19

19 http://en.wikipedia.org/wiki/The_Coca-Cola_Company

57

4.10 – Processes

1. What

a. Simits – 160 to 185 daily.

2. How

a. Recipe provided.

b. Baked in one of our six oven-type options at 200 degrees Celsius.

i. Can be Electrical, Gas-Filled, Wooded Gas-Filled, Wooded, Mobile,

and Bistro.

3. When

a. Everyday

i. Two or three batches of simits per day.

ii. We would start early in the morning, at 6 a.m. The preparation of our

ingredients for our three sets during the day would take us an

approximate time of two or three hours, given that we will prepare

the recipe for all of them in the morning.

b. FIFO methods.

i. First In, First Out – We will offer fresh product every business hour

of the day.

4. With what

a. Ingredients.

i. Flour – 12 kilograms

ii. Yeasts – 375 grams

iii. Water – 18 kilograms (40 cups of water)

iv. Salt – 375 grams

v. Grape Molasses – 3 kilograms

vi. Sesame Seeds – 500 cups

b. Machinery

i. Selected oven type.

5. How much

a. 180 to 200 daily, high quality Simits.

6. Who

a. Described in our Human Resources report.

58

Total Quality Management

TQM process is quite simple due to the size of our company. We will focus in our clients,

working on continuous improvement so to offer the highest quality of products and

services, which we ensure will enrich the experience of our customers at The Simit Shop.

Our TQM consist in:

- Customer Oriented: The customer ultimately determines the level of quality. No

matter what an organization does to foster quality improvement training employees,

integrating quality into the design process, upgrading computers or software, or

buying new measuring tools, ultimately, the customer determines whether the

efforts were worthwhile20.

The Simit Shop will allow customers to select and customize their products. Also,

customers will be involved in the entire process, making the experience very

personal.

- Continuous improvement: The major thrust of TQM is continual process

improvement. Continual improvement drives an organization to be both analytical

20 TQM, http://asq.org/learn-about-quality/total-quality-management/overview/overview.html

TQM

FOCUS ON THE CUSTOMER

CONTINUOUS IMPROVEMENT

QUALITY IMPROVEMENT

INVOLVE EMPLOYEES

59

and creative in finding ways to become more competitive and more effective at

meeting stakeholder expectations.

The company will continuously seek ways to improve our approach and

communication with customers. This process will allow us to get closer to our

customers’ expectations.

- Quality improvement:

We assure the quality of our services by reassuring our employees´ skillset per

position within the company. Continuous training will improve their customer

service skills.

We assure the quality of products by properly handing our raw materials, and

carefully preparing our Simits until they are out of the oven.

- Involve the employees: All of our employees work in the same direction, towards

common goals. Total employee commitment can only be obtained after fear has

been driven from the workplace, when empowerment has occurred, and

management has provided the proper environment. High-performance work systems

integrate continuous improvement efforts with normal business operations. Self-

managed work teams are one form of empowerment.

60

4.11 – Organization and Structure

4.11.1 – Mission, Vision and Values

Our company´s mission is to satisfy clients by offering unique, fresh, and high-quality

bakery products.

A great service is the goal set by the company in order to successfully accomplish the

client´s satisfaction on their experience. Therefore, we will take care of every single detail

to fulfill client´s needs regarding our products and services.

Our long-term objective is to become the leader company in the alternative bakery food

sector in Spain, and to become a trademark.

To achieve our mission and vision we will apply the following values:

- Leadership: convince workers to believe in their company´s mission to transmit the

same sensation to our clients.

- Commitment to quality: we will use the best raw material to make healthy products

that will be easy to eat and easy to digest.

- Professionalism

- Offer a wide variety of products

- Human resources dynamism

- Loyalty: We´ll keep competitive prices.

- Ecologic commitment: recycling and handle remains responsibly.

In summary, mission, vision and value must integrate between each other to accomplish the

company´s objectives.

4.12 – Organization Chart and Human Resources

All the functions of the company have to be according to our mission, vision and values

which were already defined; but, have special importance on some areas, such as Human

Resources, which has to be developed with full integration according to these principles.

61

The organization chart of the company, designation of roles, and allocation of work are

made according to the labor score from the bakery industry and pastry making by21

collective agreement.22 The salary levels are based on the same agreement of 2013, the

updated version, at industry average.

Graphic #1

Source: Own elaboration

As we can see, the organization chart of the workers is related to of a traditional PYME,

without some middle managers and with the accumulation of work for the founder of the

company, as we explain later.

4.13 – Schedule

As we will be located near the city center of Madrid, we are going to work with an

uninterrupted schedule from 6:00 am to 10:00 pm. For this reason, we going to need two

work shifts from 8 hours each one. The store is going to open every day of the week.

The first work shift will start at 6:00 am, in order to have enough time to prepare our

products and be ready to open at 8:00 am. The reason for this schedule is to try to capture

all those potential customers who are on their way to work or educational facility at the

beginning of the day. The time before opening is required, in order for us to receive all the

materials necessary and for the preparation of our products.

The change of shifts will take place at 2:00 pm, which we hope will be an easy and

comfortable schedule for our employees. Although the store is closed at 9:00 pm, the

employee has to stay there until 10:00 pm, so to clean the premises, count the money

earned and make the inventory of the dough and beverages. By closing at 10:00 pm and

21 http://www.cve.es/cve2011/wp-content/uploads/2011/05/CCP-PANADERIA-2011-2012-2013.pdf 22 http://www.cgt-cyl.org/descargas/valladolid/VA-Confiteria-Pasteleria-Bolleria-

Reposteria%20Industrial.pdf

ASSISTANT

OWNER

BAKER

SUPERVISOR

62

starting the first shift at 6:00 am, we avoid paying extra for a night shift (after 10:00 pm and

before 6:00 am), according to the collective agreement previously mentioned.

4.14 – Description of the Work Positions

Carrel, Elbert and Haffiel (1995) highlight that the description of the work positions is the

process by which the direction controls systematically the works, obligations and

responsibilities of the workers of the company.

a. Job title: Manager

Departments

o All departments.

Functions and responsibilities

o The owner is going to be responsible of all the administrative labors of the

company, which include:

- Updating the accounting books.

- Controlling and maintaining the relationships with the suppliers.

- Designing the advertisement and promotion for the company.

- Managing the Human Resources, contracts, and salaries.

Tools and resources

o Office equipment, such as laptops, telephones, etc.

Required Skills

o Business skills: University Degree in Business Administration, or related.

o Experiences if they have, but it’s not really important because is a small and

new company.

Availability

o Full time.

Salary

o 1.500€ a month.

63

b. Job title: Baker

Departments

o Production

Functions and responsibilities

o Prepare the dough for the simits.

o Responsible for preparing all the products for sale.

o Employee has to handle the flow of trays between cashier and new

customers.

o Employee supervises simit customization.

Tools and resources

o All of the equipment and the raw material needed for the elaboration of our

simits: Refrigerator, oven, and other kitchen instruments required for

production.

Required skills

o The baker has to be a professional in this field, with an official title that

proves it. Food processing license is required.

o Experience in this field: Minimum of one year.

Availability:

o Full time: Considering that we are going to offer fresh and soft products, our

baker have to stay full time in the store and keep making the simit during the

day.

Salary:

o 750.00 € a month.

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c. Job title: Assistant

Departments

o Production.

Functions and responsibilities

o Assisting the chief baker in the preparation of our simits.

o Preparation of the product display and customization ingredients.

o Responsible for the customization of simits.

o Direct contact with clients.

o Responsible for cleaning the premises.

o Receiving beverages and assuring purchase order is correct.

o Baking of products – assistance.

Tools and resources

o All the material necessary to garnish and customize the Simits.

Required skills

o Slight knowledge about the sector, taking into account that the baker could

train during the first weeks on the job.

o It is necessary to have the food processing license.

Availability

o Full time.

Salary:

o 900.00 € a month.

65

d. Job title: Supervisor - Cashier

Departments

o Sales

Functions and responsibilities

o Opening the premises – Closing the premises.

o Responsible of charging the customers, bagging the products, registry count,

bag inventory, and assisting the bakers when required.

o Responsible for receiving the raw materials for our products.

o Inventory of all products.

Tools and resources

o Cash register.

o Bags, napkins, and cups.

o Computer.

Required skills

o Certified higher education.

o Slight knowledge about the sector

o Computer skills

o Basic Accounting skills

Availability

o Full time: considering that He/she are helping all over the day to sale the

Simits.

Salary

o 1,150.00 € a month.

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3.15 – Gantt and Time Charts

Delivery Day

67

Ordinary Day

68

3.16 – Training and Development

Our employees will receive specific training regarding the good practices of food handling

and hygiene, acceptable working apparel, personal hygiene, and habits during the

manipulation of food. The technique used to produce our simits is not complicated, but for

quality reasons, each employee involved in the production of our simits will receive a

training session on how to produce simits from scratch.

Our employees will also receive a training session regarding proper conduct in the

workplace, with fellow employees, and with customers.

3.17 – Motivation of Employees

Our Training and Development are a good source of motivation for employees. We

understand that some employees want to learn new skills and gain experience, in order to

grow professionally, therefore, our training and development programs will be continuous.

Personal Development Plans – Each employee has a specific role but different

characteristics, therefore, each employee should have a personal development plan.

Coaching and mentoring will be recognized by the company, as well as greatly appreciated

by the employee in hand.

Rewards and Recognition – Recognition is a good way to compensate an employee´s good

performances. It is greatly appreciated when peers and managers publicly recognize one´s

efforts. As our shop requires at least six employees per day, the best performing employee

per month will be rewarded with an “Employee of the Month” internal award.

Communication – Our staff members need to know they are valued and understood. We

understand that good communication between employees and the shop manager is crucial

to all of them working productively. We hope to reinforce positive behavior, so any

opportunity to converse and provide positive feedback will be welcome.

3.18 – Dismissal Policies

Our dismissal policies will be based on several factors. Negative behaviors and actions

during work hours, such as assault and battery, dishonesty, drug and alcohol use, lateness,

theft, etc. will not be tolerated in our company.

69

Other broader terms, such as breach of company policy or problematic conduct will receive

different types of warnings, given the nature of the problem. At first, a verbal warning will

suffice. If the employee continues causing problems with the other employees or within the

premises, three written warnings will be handed. The third being the final one,

communicating termination of employment.

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CHAPTER 5: Legal

Structure

5.1 – Social Object

5.2 – Business Model

71

5.1 – Social Object

We offer a highly nutritious and tasty snack that combines the exotic recipes of Turkey and

the premium ingredients from Spain for very affordable prices!

5.2 – Business Model

The business model consists on the production and commercialization of a very traditional

and popular Turkish recipe of bread. The name of this product is Simit, which is a circular

bread encrusted in sesame seeds. Simits can (and will) be customized with ingredients from

both Turkish and Spanish culinary culture.

Product and Services:

In this part, it is mandatory to specify and list all the products and services the company is

describing in the value proposition. In this case, it is focused only on Simits:

• Simits: Circular bread encrusted in sesame seeds.

Extra Products:

• Beverages

• Extra ingredients for customization.

Gain Creators:

In the Canvas Model, for our Simit case, consumers only have to buy and (if willing)

customize our product with the variety of ingredients we will offer.

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Our product is also a highly nutritious and tasty, of high quality, and an affordable

alternative to the traditional meal.

Pain Relievers:

Describes how the product creates value and eliminates negative emotions, undesired costs,

and situations that can risk costumer’s experience. In our case, the customer will consume a

nutritious and very tasty product at an affordable price.

Customer Jobs:

Related to the needs of the customers, our customers will:

• Adventure into different styles of fusion cuisine (Turkish and Spanish,

initially).

• Consider Simits as an option for a quick, healthy, and affordable meal.

Customer Gains:

In customer gains, it is necessary to consider all those benefits that the customer is going to

receive by eating a one of our products. We consider the following benefits are gained:

• Obtaining high value and high quality food for a low cost.

• Tasty and Nutritious.

• The possibility of customizing their Simits with the products they desire.

Customer Pains:

For customer pains, it is necessary to consider the elements that can negatively affect our

product, causing low satisfaction or no satisfaction at all. Due to the usability and

specificity of the product, there are two important elements to consider as customer pains:

• Breaking the culinary barrier in Spain.

• Association of our product with Kebabs.

Simit as a Unique Product

• New product in Madrid, Spain.

• First mover advantage.

• The clients will be able to customize their Simits with a variety of

international and Spanish ingredients. Adaptable.

• Affordable, nutritious, tasty, and innovative.

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Why in Spain? – Comparison with other countries

COUNTRY ADVANTAGES DISADVANTAGES

SPAIN

- New Product

- Easily Adaptable to

any eating habits.

- Acceptable in the

Spanish eating habits.

- Cheap

- Tasty and Nutritious.

- Realistic expansion

possibilities

- Turkish people willing

to invest in bakery

products in Europe.

- Advertisement of the

product.

- Make the Spanish

market know and try

the Simit.

COLOMBIA

- New Product

- Cheap

- Tasty and Nutritious.

- Not easy to merge with

the Colombian eating

habits.

- Bread is not a regular

consumption product.

- Other products (arepas)

preferred over bread.

GUATEMALA

- New Product

- Cheap

- Adaptable.

- Tasty and Nutritious.

- Consumption habits.

- Intense competition.

- Other products (maize

tortilla) preferred over

bread.

TURKEY

- People know it and like

it.

- Part of the traditional

Turkish diet

- Competition.

- Traditional product, not

innovative.

- Barriers of entry by

other franchises.

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Expansion Projection

Based on the information found on bread (and other bakery products) consumption,

industry growth, business opportunities, etc. we have concluded that Madrid is the ideal

city to open our shop, due to:

- Acceptance of international cuisine.

- Large potential market, computed by local and international individuals.

- Familiarization of the environment.

- High bread consumption.

- Eating habits.

- Living lifestyle.

- Important touristic destination.

Our preliminary studies show that Andalucía, Catalonia, and Valencia are other

communities with presented high bread consumption, large potential markets, and

important touristic destinations. These are important factors that motivate our decision to

enter these communities in the future.

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Value Chain

Suppliers

The suppliers of the raw materials necessary to produce and create our Simits and

customized options are: flour, sesame seeds, oil, eggs, ham, cheese, etc. For these type of

suppliers, we are going to use a contract of no adhesion, as it is the most appropriate for us.

Also, all parties will be able to negotiate the terms that are more favorable for their

interests.

Suppliers of beverages: sodas, coffee, natural juices, beer, and tea. For these types of

suppliers, contract of adhesion appear to be the most appropriate, taking into account that

we are going to negotiate with companies that have standard prices.

Product Development

Given that we are going to be producing fresh food products, we will start by describing the

steps that are required, starting from the licenses and permits required by the company (that

sells food products) to selling our products to the final consumer.

SuppliersProduct

Development

Marketing and sales

Distribution Consumption

76

Licenses and Permits

If the SME or entrepreneur opts for the traditional way of starting a commercial activity in

Spain23, certain licenses and permits are required to serve food to the public. Aside from the

Economic Activity License previously described, the following licenses are required:

Authorization for food handling and sale of prepared meals for consumption on site.

(Ordenanza de Comercio Minorista de la Alimentación)

Certificate of Urban Compatibility.

Environmental License.

Planning Permits24, etc

The premises must oblige with the requisites provided by the Sanitary Inspection Agency

(Registro General Sanitario de Empresas Alimentarias y Alimentos - RGSEAA). If the

premises are designed to have a seating area, the fire brigade must be contacted, in order to

establish the seating capacity, and, in case of any emergency, establish an evacuation route.

These licenses and permits must be placed in open view, preferably behind the till.

Once the licenses and permits are obtained, the following Laws, Regulations, Directives,

Loyal Decrees, and Collective Agreements will be respected:

Reglamento (CE) n° 178/2002 del Parlamento Europeo y del Consejo, de 28 de

enero de 2002, por el que se establecen los principios y los requisitos generales de la

legislación alimentaria, se crea la Autoridad Europea de Seguridad Alimentaria y se

fijan procedimientos relativos a la seguridad alimentaria.

Directiva 2001/95/CE del Parlamento Europeo y del Consejo, de 3 de diciembre de

2001, relativa a la seguridad general de los productos.

Directiva 2001/95/CE del Parlamento Europeo y del Consejo, de 3 de diciembre de

2001, relativa a la seguridad general de los productos.

Reglamento nº 852/2004 del Parlamento Europeo y del Consejo, de 29 de abril de

2004, relativo a la higiene de los productos alimenticios. Este Reglamento deroga la

Directiva 93/43/CEE del Consejo, de 14 de junio de 1993, relativa a la higiene de

los productos alimenticios.

Real Decreto 1801/2003, de 26 de Diciembre de 2003, sobre seguridad general de

los productos. Transpone la Directiva 2001/95/CE del Parlamento Europeo y del

Consejo, de 3 de diciembre de 2001.

23 Statement of Responsibility is still not a common practice in Spain. 24 Only applicable if the premises require structural changes.

77

Ley 11/2001, de 5 de julio, por la que se crea la Agencia de seguridad Alimentaria. •

Real Decreto 709/2002, de 19 de julio, por el que se aprueba el Estatuto de la

Agencia Española de Seguridad Alimentaria.

Real Decreto 2207/1995, de 28 de Diciembre de 1995, por el que se establece las

normas de higiene relativas a los productos alimenticios. A través de este Decreto se

transpone la Directiva 93/43/CEE, de 14 de junio de 1993, relativa a la higiene de

los productos alimenticios.

Real Decreto 202/2000, de 11 de Febrero de 2000, por el que se establecen las

normas relativas a los manipuladores de alimentos.

Real Decreto 3484/2000, de 29 de diciembre, por el que se establecen las normas de

higiene para la elaboración, distribución y comercio de comidas preparadas.

Real Decreto 1334/1999, de 31 de julio, por el que se aprueba la norma general de

etiquetado, presentación y publicidad de los productos alimenticios.

Real Decreto 145/1997, de 31 de enero, por el que se aprueba la lista positiva de

aditivos distintos de colorantes y edulcorantes para su uso en la elaboración de

productos alimenticios, así como sus condiciones de utilización.

Ley 7/1996, de 15 de enero, de Ordenación del Comercio Minorista.

Ley 31/1995, de 8 de noviembre, de Prevención de Riesgos Laborales.

Packaging and Labelling

Packaging and Labelling must meet the standards required by the following decrees:

- Real Decreto 1334/1999, de 31 de Julio de 1999, por el que se aprueba la Norma

General de Etiquetado, Presentación y Publicidad de los Productos Alimenticios.

Transpone la Directiva 2000/13/CE del Parlamento Europeo y del Consejo, de 20 de

marzo de 2000.

- Real Decreto 930/1992, de 17 de Julio de 1992, por el que se aprueba la norma de

etiquetado sobre propiedades nutritivas de los productos alimenticios. Transpone la

Directiva 90/496/CEE del Consejo, de 24 de septiembre de 1990.

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Employee Contracts

Our employee contracts will be of undefined time limits. (contratos de tiempo indefinido

ordinario), which is a type of contract that is arranged without establishing time limits on

the provision of services, in terms of the duration of the contract. Upon signing the contract,

employees will acquire the status of permanent full-time workers.

If the contract is signed for more than one year, the party wishing to terminate the contract

shall notify the other party a minimum of 15 days prior. Considering the cause of the

termination of the contract, the employee will or will not have the right for compensation.

In case of dismissal, the employee will have the right of compensation according to the

“Real Decreto Ley 3/2012”.

Commercial Lease

Based on the Titles I and IV of the “Ley de Arrendamientos Urbanos” (Urban Leasing), any

agreements reached and deemed convenient can be signed as long as they are not violating

any law.

Marketing and Sales

The contract we will use to hire marketing experts will not be long-term, mainly because

we are going to use the Turkish Embassy´s Commercial Counselor and other online

marketing strategies.

Advertising with flyers, free tastings, fairs, etc. we will hire a company using a temporary

contract (can go from one week, or a full month depending on the success of the

campaigns). “Contratos de Obra” or “Contratos de Servicio Determinado” are the most

fitting.25

Using mass media (radio, local newspapers, billboards, etc.) should be another option for

us. We are going to make an agreement with a communication agency for the better and

more regular use of these options.

25 http://www.empleo.gob.es/es/informacion/contratos/contenidos/obraoserv.html

79

Distribution

The distribution of the Simit will be done by the employees of the Simit shop in the

facilities and for this matter is necessary to make a contract with the employees in order to

determine their functions, responsibilities, benefits, salary etc. In this regard the contract

will be an “Indefinite Contract” this type of contracts Are presumed held indefinitely and

full time, unless proven otherwise stating their temporary nature or character of the part-

time services in case of non-observance of the written form where required.26

Insurance

One of our priorities for our startup business is to cover all the possible risks due to external

factors such as environment, weather, a third party etc. For that matter we will need to

protect our business, employees and finances with a variety of insurance policies.

Coverage for property damage

- Fire and other damage

- Water damage to the insured property

- Troubleshooting and repair of pipelines

- Breaks: Windows, windows, mirrors, signs and windows

- Sinks and fixed sanitary equipment

Theft Coverage

- Theft and damage from this cause

- Cash and checks

- Goods carried by the insured employees and customers inside the property

- Replacing keys and locks

Suffered internal damage machinery, appliances and electronic equipment

- Internal damage suffered by machinery, appliances and electronic equipment

Personal Injury

- Personal injury suffered by the owner or holder of the trade and its employees

(Death, Permanent Disability, Permanent Total Disability, etc.).

26 Ministerio del empleo y seguridad social,

http://www.empleo.gob.es/es/informacion/contratos/contenidos/indefinido.htm

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Transportation

- This insurance has to be in consideration in case we decide to acquire a vehicle for

the company or in case we begging to deliver the simits, to protect our merchandise,

employees and the other people that may be involve in case of an accident.

Partners and Contributions

The founding members of the society are going to be composed by four partners: Eren

Kongu, who is going to have the majority capital and is going to work in the company,

and three capitalist partners.

Eren Kongu, founding member and worker of the company. Resident of Madrid,

where the company is going to be located, and where it will establish the

administrative headquarters.

- Contribution to capital: €45.000

Rafael Gonzalez, capitalist partner for the company. Resident of Madrid.

- Contribution to capital: €15.000

Pamela Gutierrez, capitalist partner of the company. Resident of Madrid

- Contribution to capital: €12.500

Daniela Uribe, capitalist partner of the company. Resident of Madrid

- Contribution to capital: €12.500

The initial capital is going to be of €85.000, higher than the minimum required €60.000.

81

Distribution of shares will be as follows:

Legislation

The specific legislation to elaborate the bakery products, we found in the Decree 496/2010,

de 30 de April, by which is approve the quality rule of confectionery, bakery, cakes and

pastries products. (B.O.E. 14.05.2010).

This decree refers to the security of food regulation in the European Union, applicable to

the sector. The decree also regulates the additives (preservatives, dyes, sweeteners...), the

labeling, and the advertising of this product

Other laws applicable to the type of establishment are:

- Decree 3484/2000 of December 29th which establishes the hygiene rules for the

production, distribution and trade of food prepared.

- Decree 1334/1999, of July 31st, for which the rule is approved for general labeling,

presentation and advertising of food products.

- Decree 145/1997, of January 31st, by which is approved the list for positive

additives other than colors and sweeteners to be use in the food processing, and

their conditions of use.

- Law 7/1996 of January 15thon Regulation of Retail Trade.

- Law 31/1995 of November 8th on Prevention of Occupational Risks.

- Collective agreement in the sector of the bakery, confectionery, pastries and trade of

the same province.

Own capital societies laws also apply to the company as:

53%

17%

15%

15%

Eren Kongu Rafael Gonzalez Pamela Gutierrez Daniela Uribe

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- Decree 1777/2004 of July 30th, approving the corporate income tax bylaw.

- Legislative Decree 1/2010 of July 2nd, by which is approved the revised text of the

Companies Act.

- Decree 1514/2007 of November 16th, approving the General Accounting plan.

Legal Structure

Given that our initial investment will exceed more than €3.010 and less than €120.202, and

the numbers of capitalistic partners are 4; required to form a “Sociedad Limitada”, this is

the legal structure we have selected.

Moreover, as we have mentioned in our SWOT analysis, the concept of the business allows

us (if successful) to begin franchising our brand “Simit Shop”. The “Sociedad Limitada” is

flexible on develop new business activities without modifying the social status of the

company.

During the first years, and with only one shop (sales point), our company will be

considered an SME.

The following information was retrieved from the government website named Invest in

Spain, website URL: www.investinspain.com.

In order to incorporate an SL, there are requirements as to the minimum share capital,

although in this case the minimum amount is 3,010.00€, this must be fully paid by

subscribers upon incorporation. The capital share is not divided into shares but into

"quotas" (participations), the main difference being that quotas are not securities as such.

Quotas are subject to restrictions on transfer and are not represented in certificates. An SRL

cannot be publicly quoted and cannot issue debentures.

An SL is typically used by businesses with smaller shareholdings. The rules and procedures

for operating this type of company (such as shareholders' decisions and management

through the board of directors) are generally more flexible than those applicable to

“Sociedades Anónimas”.

Legal formalities to incorporate an S.L.:

The new corporation in Spain will have to appoint an individual with a Spanish national

identity card number as its representative. If the individual is not Spanish, he or she will

have to apply for an alien identification number (NIE) as a first step.

83

Benefits of S.L.:

Liability of shareholders is limited to the initial share capital.

Your company has a legal existence separate from management and its

members/shareholders.

Minimum capital required relatively low, 3,000.00€, which once paid, can

also be used to finance investments or liquidation.

Only one shareholder is required, which may be an individual or

corporation.

Affordable establishment costs, excluding the contribution of capital.

Easier access to bank loans because this type of company shows a better

image.

Shareholders can retain anonymity; ownership and transfer of shares is

confidential.

Transfer of company shares may be utilized to transfer personal wealth.

Company Registration legally protects your company name against anyone

else forming a similarly named SL company in Spain.

Details of the company can be verified with trading partners.

Your company may be used to take over another company through a merger

or through purchasing assets of another company.

A company can purchase or be assigned the right to use a copyright, patent,

trademark, with a power to sub-license and subsequently exploit the

intellectual property right in various countries.

General steps to incorporate an S.L.:

1. Obtaining a certificate from the Central Commercial Registry stating that the

proposed corporate name is not being used by others;

2. Transfer of the corporate capital into a Spanish bank account open under the

name of the company;

3. Signature of a notarial deed of incorporation before a Spanish Public Notary, by

means of which the company's by-laws are approved and its governing bodies

appointed;

4. Payment of taxes on incorporation;

5. Registration of the notarial deed of incorporation with the Commercial Registry;

6. Registration of the investment with the General Directorate of Foreign

Investments

As a general rule, it takes 2-4 weeks to incorporate an S.L.

At this point, the S.L. will be legally incorporated, although, before opening for business,

the S.L. will have to complete other formalities with the tax and social security authorities,

as well as at the Ministry of Labor and the relevant Municipal Council.

84

Formalities to be completed with the tax authorities: (www.aeat.es)

Register for the tax on business activities (IAE): a local tax levied on business, professional

and artistic activities (companies starting business in Spain are exempt from this tax during

their first two tax periods).

When: 10 business days before starting business.

Where to submit documentation: Tax Office pertaining to the place where the business is

carried on.

Register for value added tax purposes (VAT): declaration of commencement, modification,

or cessation of business, which must be submitted for tax purposes by traders, professionals

and other parties required to pay VAT.

Documents to be submitted: official form 036, national identity card number or employer

identification number (for companies) and registration for the tax on business activities.

When: before starting business.

Where: Tax Office pertaining to the tax domicile of the company.

Formalities to be completed with social security authorities: (www.seg-social.es)

Register as an employer for social security and for occupational accident insurance

purposes: any trader who is going to hire employees must register for these purposes before

starting business. The trader obtains an employer social security number and takes out an

occupational accident policy to cover its employees.

Documents to be submitted: registration form for the company, identification of the

individual registering the company and the legal capacity in which he or she does so,

employer identification number, deed of formation or relevant certificate of registration.

When: before starting business.

Where: Social Security General Treasury pertaining to the company’s registered office. The

directory service of the Office of the Secretary of State for Social Security can be accessed

through this link, and provides contact information on social security offices by

autonomous community.

Register for and give notice of new employees for social security purposes: this is done by

the employer and is mandatory for all its employees.

Documents to be submitted:

Form TA-2

85

Employer: name or business name, contribution account code and applicable social security

program.

Employee: Name, last names, address and national identity card number, date started work,

photocopy of Spanish national health insurance card.

• Form TA-1 in duplicate, if the employee does not have a Spanish

national health insurance card because this is his or her first job (the

employee only registers once for his or her entire working life).

• Form P-1 in triplicate if the employee has dependents. (Electronic

Document Submission). To submit documents electronically, it is first

necessary to ask the General Social Security Treasury for permission to

access the EDS system.

When: before the employee starts to work.

Place: General Social Security Treasury pertaining to the registered office of the company.

Formalities to be completed with the Municipal Council:

The following formalities must be completed if a premise is going to be opened,

construction work is going to be done on it, or there is a change in ownership or type of

business.

Obtain an opening license: this evidences the compliance of the planned facilities with the

zoning legislation in force and with any applicable technical regulations.

Documents: standard form, photocopy of national identity card number; and taxpayer

identification number, photocopy of registration for the tax on business activities, plans of

the premises, construction license (license necessary to carry out any kind of construction

work on a premises, warehouse or establishment), and payment receipt.

When: before starting business.

Where: Zoning Department of the Municipal Council where the business is going to be

based.

Formalities to be completed at the Ministry of Labor and Social Affairs: (www.mtas.es)

Notify opening of workplace: notification to the labor authority of the opening of the

workplace where the business will be carried on, as well as of the resumption of business

following major alterations, expansion or changes in the workplace.

When: 30 days following the opening of the workplace or resumption of business.

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Where: Provincial Labor and Social Security Office.

Obtain and legalize employee registration book and labor inspection visits book: All

employers are required to have a visits book so that visiting labor inspectors can record the

necessary entries in it, and to keep the employee registration book in order and up to date,

by registering all employees when they start to work, in the case of enterprises that have

employees.

When: Upon starting business, in the case of the labor inspection visits book; when the

enterprise hires employees, in the case of the registration book.

Where: These books are dealt with by the Provincial Labor and Social Affairs Office

pertaining to the tax domicile of the company.

Ease of Doing Business – Spain

Source : The World Bank

87

Starting a Business

Spain is ranked 142nd in 2014 over 189 economies, downgrading six slots compared to

2013. The fact that many procedures are required to open a business might be considered

one of the main reasons. Furthermore, the total number of days required to register a

business is quite over average compared to other OECD countries. Another negative point

about the country is the high number of fees for legal or professional services.

Dealing with Construction Permits

Even though the number of procedures is below average of other OECD countries, several

days are required to build a warehouse. Besides, it is more expensive than the OECD

average that has to be paid for these procedures.

Getting Electricity

The number of procedures to obtain a permanent electricity connection is basically the

same as the average of OECD countries. However, especially with the raise of electricity

prices, it has become a big problem for most of the population.

88

Registering Property

The total number of days required to register property is about half of the OECD average.

However, the cost of this process is almost twice as much as the OECD average.

Getting Credit

The Credit System in Spain is as strong as other OECD countries. However, public registry

coverage is much higher than private bureau coverage.

Protecting Investors

Spain has a low strength of investor protection index, compared to OECD countries, with

five points.

89

Paying Taxes

Even though the total number of tax payments and preparing, filing, and paying hours are

below the OECD average, the total tax rate is higher than the OECD average.

Trading Across Borders

Spain has higher costs of export and import in comparison with the OECD average.

Enforcing Contracts

Average number of time to resolve a dispute is a bit lower than OECD average, and it costs

less. However, the number of procedures is higher.

90

Resolving Insolvency

The average time to close a business is 0.2 points below of OECD average. However, the

average cost of bankruptcy proceedings is %2 higher than the OECD average.

Business Reforms in Spain27

2014

Starting a Business: Spain made starting a business easier by eliminating the requirement to

obtain a municipal license before starting operations and by improving the efficiency of the

commercial registry.

Employing Workers: Spain reduced the maximum cumulative duration of fixed-term

contracts and increased the minimum wage.

2013

Employing Workers: Spain temporarily allowed unlimited duration of fixed-term contracts.

Trading Across Borders: Spain reduced the time to import by further expanding the use of

electronic submission of customs declarations and improving the sharing of information

among customs and other agencies.

Resolving Insolvency: Spain strengthened its insolvency process by making workouts

easier, offering more protections for refinancing agreements, allowing conversion from

reorganization into liquidation at any time, allowing reliefs of the stay under certain

circumstances and permitting the judge to determine whether an asset of the insolvent

company is necessary for its continued operation.

2012

Starting a Business: Spain eased the process of starting a business by reducing the cost to

start a business and decreasing the minimum capital requirement.

27 http://doingbusiness.org/reforms/overview/economy/spain

91

2011

Employing Workers: Spain reduced the notice period applicable in case of redundancy

dismissals.

Trading Across Borders: Spain streamlined the documentation for imports by including

tax-related information on its single administrative document.

Resolving Insolvency: Spain amended its regulations governing insolvency proceedings

with the aim of reducing the cost and time. The new regulations also introduced out-of-

court workouts.

2010

Paying Taxes: Spain relieved the tax burden on business by reducing the corporate income

tax rate from 32.5% to 30% and with efficiency gains due to the electronic filing and

payment system.

2008

Paying Taxes: Spain made it less costly to pay taxes for companies, by reducing CIT rates

Corporate Social Responsibility

Given that pollution rates in Spain have been increasing for the past decade, we will use

biodegradable and recycled paper bags.

We will also use electric ovens to bake our products to avoid producing toxic gases that

pollute the environment28.

The product that is not sold during the day, will be donated to charitable associations.

https://www.educo.org/

http://bamadrid.org/donaciona.asp

http://www.bamadrid.org/kilo.asp

One of the goals of Simit Shop is be involve in the community and with the community,

that’s why we have decided that in Madrid, as part of our CSR strategy, we are going to

involve ourselves and associate with Cáritas Madrid, which is the official body of the

church of Madrid, to promote, guide, coordinate and, where appropriate, to federate the

charitable and social action in the diocese.

Caritas has many ways in which a person, corporation or entity can collaborate, and as

Simit Shop, we are very interested in proper nutrition, and worried about nutrition issues in

today´s society. The lack of food and the lack of fair distribution of resources for the

benefit of everyone, especially of children and elder citizens that is why we believe that

28 http://sociedad.elpais.com/sociedad/2012/10/06/actualidad/1349552436_512916.html

92

becoming part of Cáritas donors and volunteers we can contribute in a more direct way and

reach more people.

Cáritas believes that “In situations of instability, prevention is important to avoid the danger

of exclusion, which is extremely important to develop activities with people who are in this

situation of vulnerability”. If we work hard on prevention, our business and the community

around it, we will work in improving their conditions and ours, as strong, healthy and out of

vulnerability zones the people of Madrid, it will reflect on the business and living

conditions.

We want to get involved in the community of Madrid and in the future in the community of

every of the places where Simit shop will be establish because we believe that contribute

constantly and strongly will build a better future.

Domain Name

The domain we have chosen for our website is www.simitshop.es, which is currently

available for 12.42€ per year.

93

CHAPTER 6: Financial &

Economic Plan.

Preface

6.1 – Three Years of Balance Sheet

6.1.1 – Assets

6.1.2 – Liabilities and Equity

6. 2 – Result Forecast – Three years

6.3 – Analysis of Ratios

6.3.1 – Liquidity Ratios

6.3.2 – Working Capital

6.3.3 – Debt Ratios

6.3.4 – Other Ratios

6.4 – Investment Analysis – NPV - IRR

6.5 – Payback Period

6.6 – Break-even Point

94

Preface

The main goals of the financial & economical part of the project are:

Proving that the project is economically viable.

Description of funding.

Reassure that Simit Shop is a profitable investment opportunity.

The interested parts for this information are mainly: Stakeholders. Anyone who wishes to

invest in the project.

The financial and economic plan is going to include our sales projections for three years in

a pessimistic, moderate, and optimistic scenarios, prevision of costs, financing sources list,

etc. The following analysis takes place in a moderate scenario.

6.1 Three Years of Balance Sheet

As we learned during the financial accounting classes during the master, the balance sheet

of the company is a document that reflects the financial situation in the company which

shows the sum of assets, liabilities and equities of the company.

6.1.1. Assets

Non – Current

These assets are mainly composed by all machinery and furniture of the premises, with the

value of our brand and all stocks that can be found at the premises and warehouse.

Electrical oven 9.000.00€

Freezing cabinet 3.478.00€

Refrigerator 1.800.00€

Fermenter oven 950.00€

Kneading machine 1.000.00€

Roll out dough machine 750.00€

Dough separate and rolling machine 1500.00€

Electronic stove 393.00€

Workbench 850.00€

Showcase : including cutters, utensils for the preparation of the masses, other items

and cleaning products and cash box 850.00.00€

95

Aluminum trays : 150.00.00€

Current

A current asset is any asset reasonably expected to be sold, consumed or used up

through the normal operations of the business within one year or one operating cycle

whichever is longer. Typical current assets include cash, cash equivalents, short-term

investments, accounts receivable, stock inventory and the portion of prepaid liabilities

which will be paid within a year.29

6.1.2 Liabilities and Equity

The liabilities of the company include:

- Outstanding loan from financier. In our case, we don’t have any debt because we

don’t need to use it

- Unpaid bills of suppliers for the following 30 days: As detailed below, the average

cost of supplies for the month of December is 1,050.00€, which would also

represent the approximate balance of the suppliers account at years end.

The equity will be constituted of the capital share of the company, and the results of

previous years.

Given these expected results and the accounting and fiscal regulations, the estimated

forecast balance sheet for the first year will be as the following table displays.

29 J. Downes, J.E. Goodman, "Dictionary of Finance & Investment Terms", Barons Financial

Guides, 2003; and J. G. Siegel, N. Dauber & J. K. Shim, "The Vest Pocket CPA", Wiley, 2005.

96

97

6. 2 – Result Forecast – Three years

Sales Forecast

According to the studies provided by Mercasa (State Public Company –

www.mercasa.com), the consumption of bread and other baking products are consumed

throughout the entire year (no seasonality), although statistics show that the months of

August, September, and July, the consumption of these products is lower than the average.

The mentioned data is shown in the following table.

Studies provided by the Ministerio de Agricultura, Alimentacion y Medio Ambiente

(Ministry of Agriculture, Food Consumption and the Environment), Portal de Salud

(www.madrid.org) and CEOPAN (La Confederación Española de Organizaciones de

Panadería) maintain that 32% of the total expenditure on food consumption in Spain during

2013 was spent in restaurants, diners, bars, etc. and stands at 32,025,000,000.00€, to which

5.7% is spent on bakery products, and 31.1% is spent on self-service or fast-service

restaurants, meaning that 11,785,200,000.00€ were spent in our market. Furthermore,

bakery products and prepared meals are bought daily by 95% of the population. 30

Our projections are calculated using a Market Based Sales Forecast. We want to base our

sales strategy on our customized products, therefore, we have assigned the following

percentage to each article:

30 Datos del Consumo Alimentario en España 2013 – Ministerio de Agricultura, Alimentación y Medio Ambiente

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Kilograms per Month

98

As explained in chapter three, given our chosen location (and traffic), using the average

percentage spent on extradomestic expenditure on food, and a selected market share of 10%

during peak hours (average ticket 4.81€)31 and 7% during non-peak hours (average ticket

2.41€)32, we have come up with the following daily sales projection per article for year one

in a moderate scenario, for both weekdays33 and weekends34.

31 Datos del Consumo Alimentario en España 2013 – Ministerio de Agricultura, Alimentación y Medio Ambiente 32 Own calculation, based on the average ticket provided in the Ministerio de Agricultura, Alimentacion y Medio Ambiente report on Food Consumption. 33 Estimated twenty two weekdays per month. 34 Estimated eight weekdends per month.

99

Based on the consumption quantities explained in the initial graph of the sales forecast, and

considering that the company will be new and it requires at least three months before our

brand is recognized and our products are purchased more regularly, the first three months

represent only 65% of the possible sales in January, 70% in February, and 75% in March.

The following tables display the estimated quantities sold per month for the first year of

business on a moderate scenario.

Quantities

The sales price per article were selected due to the industry average.

100

If we sell the previous quantities at the above mentioned sales prices, our billing per article

during the first year would be as displayed in the following table.

Billing

The idea of Simit Shop is to increase sales prices in accordance with the increases in costs

of raw materials. For the second year, an increase of 5% will be applied on all our prices.

For the third year, an increase of 5% will be applied for all our prices, in comparison to

year two. Our total billing for year one, on a moderate scenario, are calculated at

200,445.08 €.

Assuming that this growth is stable, and that our business is capable of capturing new

customers, the expected sales for our moderate scenario increase of at least 5% in the

following years. If so, the following year (second), the company would make an average

profit of 241,230.03 €, and on the third year, 265,956.11 €.

For the optimistic scenario, the company´s projected sales grow to at least 6% for the first

three years, and for the pessimistic scenario, an expected growth of at least 4%.

101

Cost Forecast - Variables

Our variable costs include: the raw materials needed for the production of simits and the

cost of beverages. The information regarding these costs were obtained by directly

contacting the suppliers and manually calculating an average.

In order to provide you with an idea of how much our variable costs of simit production

will be, we will use our calculated number of average sales per month and year.

Monthly Costs35

Yearly Costs36

The following tables breaks down the cost of each option of ingredient available for

customization. If the expected calculated amount of customized salty and sweet simits are

sold (during the first year), the additional yearly costs would be as follows:37

35 Average Monthly Costs stand at: 618.31€. 36 Calculation for year one. 37 The cost of salty simits is an average of the most expensive and least expensive combinations of ham and cheese, assuming the cost of 30gr per ingredient. The cost of sweet simits is assuming the cost of 100gr worth of chocolate.

102

The following tables breaks down the cost of each option of beverage available. If the

expected calculated amount of beverages are sold (during the first year), the additional

daily and monthly costs would be as follows:

For the first year, the total amount spent on beverages during the first year, given the

calculations, would represent 7,256.11 €.

103

The variable cost represented by vegetables and legumes (olives, tomatoes, onions and

iceberg lettuce) added by our customers to their salty simits, if we assume that each portion

of vegetable and legume will weigh 30grs, each article would have the following cost:

Assuming that only 30% of our salty simits will require vegetables and legumes, the

average variable cost for year one would represent 462.50 €, for year two 540.71 €, and for

year three 548.77 €, as the following table displays.

The final variable costs regard paper bags and napkins. Given that we are going to provide

a paper bag and napkin per purchase, and that each napkin costs 0.01 € and each paper bag

0.02 €, the variable costs for year one represent 1,148.38 €, year two 1,278.63 €, and year

three 1,451.98 €. The following table breaks down the expected costs per article per month.

104

The total variable costs, assuming a 2% increase in costs for year two, and a 3% increase in

costs for year three, sum up to 35,983.95 € for year one, 42,003.55 € for year two, and

44,770.63 € for year three, as the following table and graph display.

Furthermore, we have taken into account an additional 2% of variable costs, considering we

might experience some unplanned accidents when producing the dough and simits, or given

that we might experience the customer returns of our products, due to lack of satisfaction.

The 2% will be off the raw materials needed to make our products.

- €

10,000.00 €

20,000.00 €

30,000.00 €

40,000.00 €

50,000.00 €

Total Year One Total Year Two Total Year Three

Variable Costs Forecast

105

Cost Forecast – Fixed

Wages

As previously mentioned in the Organization and Structure section, the shop will require

two shifts of workers (five people as a daily total) plus the general manager. Considering

the wages included in the collective agreements and the extra wages, plus 23.6% that

represent social security, and the additional 2 wages paid in June and December, the costs

on personnel for year one would represent 109,880.40 €, year two 112,078.01 €, and year

three 115,089.00 €.

The following table displays the quantities monthly and per year:

Utilities

According to an estimation of our equipment and machinery supplier regarding the

consumption of electricity of our oven and refrigerator, and paying close attention to the

average of other businesses in the sector, the utility costs (energy, water, gas, etc.) are set at

approximately 620.00€ a month, averaging 7,440.00 € a year. Given the unstable and

dramatic rises of price in electricity, we calculate that for year two, utilities costs would

represent 8,184.00 €, and for year three 9,002.40 €.

106

Rent

The average price for rent in the streets around Malasaña, according to the size we require,

average at around 2,000.00€ a month. The total amount for year one would sum up to

24,000.00 €. We expect a 2% increase in rent for year two and a 3% increase for year three.

Website

The yearly price for a URL is set at 144.00 €. We expect a 2% and 3% increases for years

two and three.

Insurance

Insurance costs total 750.00 € on our first year of business. The insurance covers damages,

theft, damages to third parties, cessation of activities, personal accidents, special conditions,

etc. With estimated increases of 2% and 3% for the second and third year, the amounts

would be as follows:

Office Supplies

Office supplies do not represent a high investment in our line of business. For the first year,

we estimate a total amount of 35.00 € on office supplies, 36.00 € for the second year, and

40.00 € for the third year.

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Telephone Expenses

Given that we require weekly deliveries from our suppliers, we need to keep close and

repeated contact with them. For the first year of operations, we estimate 600.00 € on

telephone expenses, 660.00 € for the second year, and 720.00 € for the third year.

Repairs

Our repairs budget is not actually an expense, but it is rather an “emergency” budget in case

of broken machinery or any other unfortunate event, in order to continue operating as usual.

Total fixed costs for years one, two and three would be resumed as the following table

displays:

108

Marketing Expenses

To understand the individual cost per client, we must first explain how much traffic in front

of our store we have calculated per month. The following table explains that an average of

172,100 people walk by per month; 55,702 people are potential customers (32% - data

obtained from Food Consumption Report 2013); 4,829 people represent our average target

market share (9%); 1,207 people will repeat a purchase during an entire month (25%),

which would reduce the number of people on our market share to 3,622 people. If we

calculate that 40% of the 3,622 people who purchase per month are neighbors of the

surrounding area (who walk by the area more than one time a day), reducing the amount of

to 2,173 individual persons, who walk by more than once per day around the area.

The following chart illustrates the previous information.

We will base our marketing expenses on the 4,829 people who represent the average

number of individuals who purchase per month. Our offline marketing strategy will consist

on flyers, pop-up banners, and daily simit tastings. The reach all these clients, we

understand that we require at least 8,000 flyers, 1 pop-up banner every two months (which

will vary, depending on monthly promotions), and the cost of 500 simits during the first six

months. The following table displays the costs per unit of each of our marketing elements:

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Monthly costs of marketing would represent 237.90 € for the first six months, 157.90 € for

the last six months of the year. Final annual costs of marketing would represent an amount

of 2,374.80 €.

The cost of each customer per each flyer handed out, pop-up banner, and simit tasted would

for the first six months and the last six months of the year would be the following:

110

Marketing Activities Gantt and Time Chart

111

Amortizations

The amortization of our equipment will be realized with the linear method, amortizing to

the maximum possibility at the beginning, but always in accordance with the tax

authorities. The following table explains the amortization of our equipment for the first

three years:

112

Opening Costs

Opening costs are resumed in the following table:

113

6.3 – Analysis of Ratios

For this business plan, as consider ourselves an SME, and when referring to forecasts and

not actual data for the first three years of the project, we have opted to study only certain

liquidity and debt ratios, as well as working capital.

6.3.1 – Liquidity Ratios

Liquidity ratios are a class of financial metrics used to determine a company’s ability to pay

off its short-term payments. Generally, the higher the value of the ratio, the larger the

margin of safety that the company possesses to cover short-term debts.

2015 2016 2017

Total Current Assets

44,78

75,14

102,22

Total Current Liabilities

Current Assets - Inventory

43,81

72,75

99,52

Current Liabilities

Current Assets - Inventory

43,81

72,75

99,52

Current Liabilities - Deferred

Revenue

As you can see, we should not have any difficulty paying our short-term debts due to our

high liquidity ratios. However, we can consider reducing these ratios in the future, so we

can use our cash more effectively.

114

6.3.2 – Working Capital

Working capital is the difference between current assets and current liabilities. This gives

us an idea of the total of the current assets being financed with equity, and not with debt.

There is no optimum value for working capital, but it is recommended that it always

remains positive. That is to say, the ideal situation is that current assets should always be

higher than current liabilities, so that there are enough assets to cope with the short-term

debt of the company.

6.3.3 – Debt Ratios

Debt ratios are very useful to analyze the quantity and quality of the company's debt. To

analyze the debt situation of the company, debt ratios, autonomy, and quality of debt were

calculated.

2015 2016 2017

Total Liabilities

0,02

0,01

0,01

Total Assets

Total Liabilities

0,02

0,01

0,01

Total Equity

As the previous table displays, our debt ratios are really low, due to enough funding. We

find no necessity in taking a loan.

115

6.3.4 – Other Ratios

The following ratios were also calculated for this business plan:

2015 2016 2017

Gross Income

0,82

0,82

0,83

Net Sales

Operating Income

-0,10

0,16

0,21

Net Sales

Net Income

-0,10

0,12

0,15

Net Sales

Net Income

-0,30

0,30

0,30

Total Assets

Net Income

-0,31

0,31

0,30

Total Equity

Cost of Goods Sold

35,39

16,71

13,81

Inventory

Accounts Receivable

3,16

4,35

5,80

Net

Sales/365

Net Sales

2,98

2,50

1,93

Total Assets

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6.4 – Investment Analysis – NPV - IRR

The NPV is the difference between the present value of cash inflows and the present value

of cash outflows. The NPV is used in capital budgeting to analyze the profitability of

an investment or project. It is therefore a measure of the net return, and, if it is positive, it

means that the project recovers the initial investment and generates profit.

On the other hand, the Internal Rate of Return or IRR is a measure of the annual gross

return on per monetary unit invested in the project. Our estimated NPV and IRR after a five

year period:

As you can see from the previous tables, with a positive NPV and a high ratio of IRR, the

company can be considered profitable.

6.5 – Payback Period

Payback period shows us the length of time required to recover the cost of investment. For

our project, we can reach our payback point in April 2017.

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6.6 – Break-even Point

Breakeven is the point at which gains equal losses. In order to calculate breakeven point,

this formula is used:

Fixed Costs/Price - Variable Costs = Breakeven Point in Units

According to our calculations, our general breakeven point is displayed in the following

table:

According to this table, we are reaching breakeven points in same years.

*Product-based three years breakeven analysis can be found in our annex section.

118

CHAPTER 7: Conclusions

7.1 – About the bakery Sector

7.2 – About the commercial plan

7.3 – About operations and processes

7.4 – About the organization and company structure

7.5 – About the financial and economic plan

119

Conclusions

This chapter will provide the main conclusions that we have reached in the different steps

of our business plan and our personal appreciation regarding our work. It will be a

summary of the most important key points of The Simit Shop business plan.

7.1 – About the sector

• After two decades of uninterrupted decline, consumption of bread in Spain is again

on the rise. According to the official statistics of the Ministry of Agriculture, Food

Consumption and the Environment, consumption has increased at 1.8% yearly for the past

three years, and indices foresee consumption will keep increasing. Provided the entire

research and analysis done for this project, we conclude that The Simit Shop arrives at the

key moment, due to the current situation regarding the bakery product industry.

• Consumers of bakery products in Spain tend to consume most during breakfast,

lunch, and supper.

• Quick, in and out food services have become a tendency preference for food and

bakery consumption in Spain.

• The 41% of the total bakery products in Spain are bought in supermarkets or

hypermarkets, contrary to specialty or boutique bakeries. The reason for this is mainly

because industrial frozen dough is cheaper and requires no time for preparation. This trend

has had a negative impact on the quality of the products, which is now causing consumers

to demand higher quality, regardless of prices.

• The bakery market can be segmented into different arenas, such as specialty

bakeries, traditional bakeries, and artisan bakeries, among many others. This segmentation

is an opportunity for The Simit Shop to enter and compete with the other concepts in all the

arenas previously mentioned.

120

7.2 – About the commercial plan

• We have segmented our market to a group of medium-high purchasing power males

and females.

7.3 – About Operation and Processes

• The best location to locate the Simit Shop is around the City Center of Madrid, in

Malasaña, due to the fact that this area is approximately 5.23 km², housing nearly 150,000

people. The area also hosts many commercial activities, with El Corte Ingles and many of

the clothing stores belonging to Inditex, located around the area. In other hand, the

premises will have a rectangular distribution and measuring approximately 100m2.

• Our suppliers of flour, Yeast, Grape molasses, sesame seed and beverages will be

from Spain in order to contribute with the economy, and have a strong relationship with the

environment where we are settled. Our suppliers make weekly deliveries.

7.4 – About the organization and company structure

• The company will incorporate a “Sociedad Limitada”, with 4 capitalistic partners

and an initial investment of €85.000. During the first years, and with only one shop (sales

point), our company will be considered an SME, therefore will enjoy legal benefits.

• Our company´s mission is to satisfy clients by offering unique, fresh, and high-

quality bakery products. Our vision is to become the leadeing company in the alternative

bakery sector in Madrid, and to become a trademark. The values that we will implement

and we will try to transmit to our customer are leadership, commitment to quality,

professionalism, and loyalty.

• Opportunities will be given to people without specific experience, although we will

require them to have some knowledge of the industry and a food handling license.

• The concept of our Simit Shop is very exciting, as we wish to combine the exotic

flavors of a Turkish bakery with the exquisite tastes of Spain. Our shop design will be a

combination of a traditional and modern style, which will house the warm colors of Turkey.

We will run an extensive working schedule, allowing us to cover all the important food

consumption hours during the day.

121

7.5 – About the financial and economic plan

• The Simit Shop is economically and financially viable; the company reaches the

breakeven point end of the first year. Also, the company reaches payback point and

recovers the initial investment in April 2017. Positive NPV and high IRR numbers are also

another positive indicators about the project.

• Debt ratios are very low, meanwhile liquidity ratios are quite high. The company

won’t have any cash problems and will recover liabilities with current assets easily and

safely if something extraordinary does not occur. There is no need to fund The Simit Shop

with high debts.

• Due to our high margins, there is an opportunity for quick growth after reducing

initial cost of first year. Opening new shops or franchising options can be considered in the

long-term.

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Limitations

123

Limitations

During the development of our business plan, we faced various and different limitations

that are needed to take into account when reading this paper in order to understand our

approaches, analysis, and projections.

1. Costs: Raw Materials

Local suppliers refused to give information regarding their sales prices.

Online suppliers demand information of an already established company.

Handicapped our calculations for variable costs during the initial analysis.

Most information regarding our costs was obtained from MercaMadrid.

2. Sales Projections

We had difficulties calculating the sales projections during the initial stages

of the process, due to the lack of information on the actual traffic around the

area.

The problem was easy to solve, but time consuming. We made a headcount

of the area surrounding the premises for various days during different weeks.

3. Financial Projections

It was impossible to reach inflation rates for 2016 and 2017. We based our

calculations on current inflation rate and tried to purify that effect of the

crisis helped by statistical data. For that reason, 2% and 3% inflation rates

are used for the aforementioned years. Possible price increases of utilities

are excluded from this assumption because price-rising is independent from

inflation and a 10% markup is assumed every year.

124

Bibliography

125

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126

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127

ANNEX

1. Legal Society Comparison – SL vs. SA

2. Application for Certification

3. Example of Flyer

4. Example of seasonal Pop-Up Banner

5. Financial Tables – Moderate Scenario

6. Financial Tables – Pessimistic Scenario

7. Financial Tables – Optimistic Scenario

128

1. Legal Society Comparison – SL vs. SA

129

2. Application for Certification

130

3. Example of Flyer

131

4. Example of seasonal Pop-Up Banner

132

5. Financial Tables – Moderate Scenario

- Profit and Loss Statement

- Cash-Flows

- Balance Sheet

- Break-Even Points

- Payback

133

Profit and Loss Statement & Future Projections

134

135

Cash Flows

136

Balance Sheet

137

Break-Even Points

138

6. Financial Tables – Optimistic Scenario

- Profit and Loss Statement

- Balance Sheet

- Ratios

139

Profit and Loss Statement

140

Balance Sheet

141

Ratios

142

7. Financial Tables – Pessimistic Scenario

- Profit and Loss Statement

- Balance Sheet

- Ratios

143

Profit and Loss Statement

144

Balance Sheet

145

Ratios