A SAMPLE BUSINESS PLAN FORSMALL FOOD BUSINESSESRodney B. HolcombAssociate Professor, Dept. of Agricultural EconomicsBrowning Endowed Professor of Food Science, Food & Agricultural Products CenterPhilip KenkelProfessor, Dept. of Agricultural EconomicsBill Fitzwater Endowed Chair for Cooperative StudiesLinda Blan-Byford(Former) Business Planning and Marketing AssociateFood & Agricultural Products CenterOklahoma State UniversityJanuary 2006
Why Develop a Business Plan?In the book The Entrepreneur’s Manual, Richard M. White, Jr. states thatbusiness plans are “road maps” for business creation: “You identify your origin, select adestination, and plot the shortest distance between the two points.”True, a business plan is essentially a blueprint for a business. However, it alsoserves many other purposes: A business plan is a detailed blueprint for the activities needed to establish a business(i.e. the details of a product or service, the market for that product or service, and themanagement of the business providing that product or service). A business plan is also the ‘yardstick’ by which a business owner measures success inmeeting stated goals and objectives. Also, a business plan is a tool for obtaining a loan from a lending agency, or forattracting venture capital.What Does a Business Plan Look Like?There is no standard format for a business plan, but there are many commoncomponents of a business plan: Executive Summary (providing a general overview of the plan’s main points) Table of Contents (Brief) Background and History Business Goals and Objectives Description of Products/Services Market Description/Assessment Competition Assessment Marketing Strategies Manufacturing Plans Pro Forma Financial Analysis Contingency PlansMany business plans will also include appendixes with additional informationrelated to the business, its operations, its owners/managers, marketing/promotional plans,etc.Of course, the best way to illustrate a business plan is to provide one. Thefollowing plan for a completely fictional business is used for a monthly entrepreneurworkshop at Oklahoma State University’s Food & Agricultural Products Center, entitled“Food Business Basics: A Guide to Starting Your Own Food Business.” This mockbusiness plan focuses on a whipped topping business, but the format is appropriate forany small food business.
Business PlanFancy’s Foods, LLC.2409 Oak Hollow DriveAntlers, OK 74523(580) 298-2234Keith BeanMarianne BeanDecember 1, 1998
Executive SummaryMarianne and Keith Bean have been involved with the food industry for severalyears. They opened their first restaurant in Antlers, Oklahoma in 1981, and their secondin Hugo in 1988. Although praised for the quality of many of the items on their menu,they have attained a special notoriety for their desserts. After years of requests for theirflavored whipped cream toppings, they have decided to pursue marketing these productsseparately from the restaurants.Marianne and Keith Bean have developed several recipes for flavored whippedcream topping. They include chocolate, raspberry, cinnamon almond, and strawberry.These flavored dessert toppings have been used in the setting of their two restaurants overthe past 18 years, and have been produced in large quantities. The estimated shelf life ofthe product is 21 days at refrigeration temperatures and up to six months when frozen.The Beans intend to market this product in its frozen state in 8 and 12-ounce plastic tubs.They also intend to have the products available in six ounce pressurized cans. Specialattention has been given to developing an attractive label that will stress thegourmet/specialty nature of the products.Distribution of Fancy’s Foods Whipped Dream product will begin in the localsoutheastern Oklahoma area. The Beans have an established name and reputation in thisarea, and product introduction should encounter little resistance.Financial analyses show that the company will have both a positive cash flow andprofit in the first year. The expected return on equity in the first year is 10.88%
Table of ContentsExecutive Summary . 2Background and History . 4Description of Products . 4Market Description . 4Competition. 5Marketing Strategies . 5Manufacturing Plans . 6Financial Projections. 6Income Statement . 7Cash Flow Analysis . 11Balance Sheet . 12Financial Ratios . 13Contingency Plans . 14Appendices . 15Letters of Endorsement . 15Resumes of Management . 15Product Labels . 15
Background and HistoryMarianne and Keith Bean have been involved with the food industry for severalyears. They opened their first restaurant in Antlers, Oklahoma in 1981, and their secondin Hugo in 1988. Although praised for the quality of many of the items on their menu,they have attained a special notoriety for their desserts. After years of requests for theirflavored whipped cream toppings, they have decided to pursue marketing these productsseparately from the restaurants.Description of ProductsMarianne and Keith Bean have developed several recipes for flavored whippedcream topping. They include chocolate, raspberry, cinnamon almond, and strawberry.These flavored dessert toppings have been used in the setting of their two restaurants overthe past 18 years, and have been produced in large quantities. The estimated shelf life ofthe product is 21 days at refrigeration temperatures and up to six months when frozen.The Beans intend to market this product in its frozen state in 8 and 12-ounceplastic tubs. They also intend to have the products available in six ounce pressurizedcans.Market DescriptionThe flavored whipped toppings that Fancy’s Foods will market will fall into twodistinct categories: Dairy products and gourmet/specialty foods. This business plan willlook at these two markets separately.Dairy Products: While the overall consumption of dairy products in the UnitedStates declined from 1972 to 1994, the market has seen a slight increase in the past fouryears (Census of Agricultural Products, 1998, USDA). Dr. John Moore of the Universityof Florida expects the consumption of dairy product in the United States to continue amodest increase of 1.5-2% per year, which is significant in this 268 billion annualmarket. This is attributed in part to more sophisticated processing techniques which haveincreased the variety of dairy products available, as well as the increased awareness ofthe benefits of a calcium rich diet (Moore et al, 1998).Gourmet/Specialty Products: Kalorama Information LLC, a market researchfirm based in New York, indicates that the gourmet/specialty foods market will continuea fast paced growth well into the next decade. This 39-billion domestic industry hasdoubled since 1992, and is expected to continue double-digit growth through 2002.While demographic information indicates that this sector of the industry is strongest inmetropolitan areas, there are also growth opportunities in smaller communities.Packaging and point of purchase marketing efforts are especially important in thismarket, and special attention will be given to these aspects of Whipped Dream.
CompetitionThere are several brands of whipped topping available in mainstream retailoutlets. In the grocery stores in the Antlers and Hugo area, all of the ready-to-eat varietiesare produced by large players, specifically Kraft and Sara Lee. There are also dry mixesavailable, but these are not direct competition for Whipped Dream. According to salesfigures at grocery outlets in Antlers and Hugo, approximately 65% of the national brandprepared whipped topping is sold in frozen tub form, while the remaining 35% is inpressurized can form.The strengths of these products are their market shares and distribution channels.They are available in virtually any retail grocery outlet, and have gained strong marketacceptance. They are also distributed with other refrigerated and frozen dairy products.Finally, they are priced at 1.29-1.89 per 8-ounce tub or 6-ounce pressurized can, anadvantage when compared to the suggested retail price of Whipped Dream.The weakness of these products is in the lack of variety. None of these companiesproduce or market a flavored topping. Several of the products are also classified as‘whipped topping’, but are actually not dairy based.Marketing StrategiesDistribution of Fancy’s Foods Whipped Dream product will begin in the localsoutheastern Oklahoma area. The Beans have an established name and reputation in thisarea, and product introduction should encounter little resistance. The managers ofPruett’s IGA and Gardiner’s Grocery in Antlers, as well as Pruett’s in Hugo, haveindicated that they are willing to carry the products. Their letters of intent andendorsement are included in the Appendix section. It is also important to note thatGardiner’s Grocery puts an emphasis on specialty food products in addition to standardgrocery items.After Whipped Dream’s debut in Antlers, Hugo, and surrounding towns, Fancy’sFoods intends to participate in the “Made in Oklahoma” Demonstration Programadministered by the Oklahoma Department of Agriculture and Pratt’s Foods in OklahomaCity. This program will enable the Beans to introduce Whipped Dream into theOklahoma City metropolitan area under more favorable market conditions. Fancy’sFoods also intends to enter the grocery and specialty markets in the Tulsa area in 2000.The Beans will rely heavily on in-store displays and demonstrations in southeasternOklahoma stores, as well as those in Tulsa and Oklahoma City. They will demonstratethe flavored topping in conjunction with fresh fruit during warmer months, and as atopping on gourmet coffee and hot chocolate in the cooler months.Special attention has been given to developing an attractive label that will stressthe gourmet/specialty nature of the products. A copy of the label is attached in the
appendices. Linda Byford, a business planning and marketing specialist at the OklahomaFood and Agricultural Products Research and Technology Center at Oklahoma StateUniversity assisted with developing the label, and conducted a focus group study toevaluate the image projected by the label as well as the packaging.Manufacturing PlansBecause Fancy’s Foods owns and operates two restaurants, they have facilitiesavailable to them for a certain amount of the production. Robert Battles, the PushmatahaCounty inspector for the Oklahoma Health Department, indicates that The Beans can usethese facilities to manufacture food available for retail sale provided that the productionoccurs while the restaurant is not open to the public.Fancy’s Foods has a 50-gallon high speed mixer, a pressurized tank in which theproduct can be gassed with nitrous oxide, and a 10-foot by 10-foot walk-in freezer,enabling them to both produce and store frozen tubs of Whipped Dream. This process isalready established on a commercial scale. They are in fact already making WhippedDream for use in their restaurant, and storing it in the freezer.Keith and Marianne feel that the specialty nature of the product will lend itselfwell to the pressurized can, and this was confirmed by the focus group conducted atOklahoma State University. To pursue that opportunity, Fancy’s Foods has contractedproduction of the pressurized 6-ounce cans with Farm Fresh, an Oklahoma dairyprocessing firm. A non-competition/non-disclosure agreement is in place, and a copy ofthis document is included in the appendices.Financial ProjectionsThe following pages include multi year projections for income, cash flow, balancestatement, as well as estimated financial ratios. These projections are for the WhippedDream division of Fancy’s Foods LLC only. Historical financial information on Fancy’sFoods restaurants is available upon request.
Fancy's Foods LLCPro Forma Income StatementJanuary 1999 - December 1999Net SalesLess: Cost of Goods SoldGross IncomeOperating ExpensesLaborUtilitiesInsuranceSales PromotionDelivery and TransportationMiscellaneousTotal ExpensesNet Income Before TaxesLess: Income TaxesNet Income After Taxes 240,450.00 182,000.00 58,450.00 12,000.00 3,000.00 2,400.00 12,000.00 6,000.00 1,500.00 36,900.00 21,550.00 6,465.00 15,085.00Assumptions:1 Net sales based on price of 2.29 perunit,24,000 units sold in Antlers2,000 units per month36,000 units sold in Hugo3,000 units per month45,000 units sold in Oklahoma City9,000 units per month for 5monthsSales estimates based on 5% market share for prepared whipped topping in eachmarket.2 Cost of goods sold includes ingredients, packaging materials, labels, and copacking expenses for canned product.3 No salary will be drawn by the owners/managers in the first year. All profits will bere-invested for new market entry and increased production.
Fancy's Foods LLCPro For