#3: CPG and Food Service Models
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1 Food Business Entrepreneurial Training Academy #3: CPG and Food Service Models Alameda County SBDC Dublin Library April 10, 2017
2 Thank you to Our Sponsor
3 Today s Class Consumer Packaged Goods Models ($2.7tr) Food Service Models ($783B) Similarities Differences How to navigate and manage USP
4 Concept IDEA Document the idea in a short concise sentence or two (#1) Are you simply more healthy than Jamba Juice or are you a cleanse juice bar? Are you a meal replacement or are you a treat?
5 Square One Create the mission and vision of the business. Ultimately these will each be 20 words or less, but for now ramble on. Make them a paragraph or so. What you do want and what you do not want it to be.
6 Consumer Packaged Goods
7 Let s scale back.. You and CPG Artisan or Independent food companies- opportunity Start-up costs $30-100k More of a business than food Ramp up requires ~ 1 year, 1.5 and 2.5 years Vision is integrally important here Paths and Roadways success and common misconceptions
8 CPG Financial Model Customer: Consumer (end user), Retailer, Distributor, Wholesaler Price vs cost Fewer line expenses than food service but bigger COGS Line Loss/Buy backs Fixed Production Costs Labor Variable Production Costs G & A Marketing and Communications
9 CPG Sales Margin % Vary Low Medium High Manufacturer/Importer Distributor Retailer
10 CPG Financials Internal Gross margin Usual Range Desired Target Selling Price: 100% 100% 100% 100% Cost of Good: (40%) (50%) (60%) 40% Gross Margin 60% 50% 40% 60% G and A 16% 13% 10% 10% Selling: 7% 7% 7% 7% Trade Promotions: 15% 10% 8% 12% Marketing: 6% 4% 0% 6% Interest: 6% 6% 6% Profit Before Taxes: 10% 10% 10% 19%
11 Common challenges I have a passion for xyz and everyone says I should start a company. Lack of research and understanding Growth models- Up to $30k you are probably making the product and running the company ~$50k you need help ~$90-110k- everything shifts Branding is critical! Financial projections are imperative
12 The Product Develop a prototype test it; collect data Determine the market and the market form Determine batch size for commercial operation Consult a process authority for scale Formula changes with size Testing ph, water activity etc. Will take several attempts Re-determine the cost of ingredients
13 The Product Who wants this product and why? You mentioned women that work at Google etc. who are craving healthier food. Write about this a bit. Competitors spell this out a bit more What are you offering that they are not? And what is the most basic value-add that your product brings to the market?
14 Operational Plan An Operational Plan is about efficiency, making money, saving time, finding success and keeping it Who does what when provides an avenue to success so you provide something great Job descriptions ambassadors, sets tone and culture. Get employee buy-in; they must know what success is. Prep and par sheets Recipe books- Jambalaya, tamales, bouillabaisse, Caesar salad Goal setting S.M.A.R.T
15 Production Where? - Commercial kitchen, pilot plant, co-packer, home - How many can the machine produce per hour? - How many units do you need to sell to break-even? Storage space Decide when and how your production schedule works Produce it
16 Labels Product and business name Determine applicable regulatory requirements (FDA food labeling guide) Invest in your labeling! Health claims Nutrition labeling Bar Code $750-$1000
17 Product: COGS When you introduce a new food product/menu item you can calculate the food cost by costing the recipe Gather all the ingredients and their prices Calculate the cost of each ingredient Total the cost of the recipe Determine the serving size for the recipe Find the cost per serving
18 Distribution Consider a brick and mortar, a movable store front (food truck or cart) as opposed to a delivery service. What are the implications of each and how will that alter the outcome? Consider city permits for each business model Determine necessary equipment for each business model
19 Food Service 5 sectors of food service: Fine dining restaurants Catering and meal delivery Fast Casual and cafes QSR- Fast Food Institutions
20 Restaurants and Cafes Start with a stylistic or type idea Develop a comprehensive concept from that idea Develop a model that serves all of the above Much more interactive with your audience (end user) Faster moving than CPG Many variables- people and food 15-20% profit margin- if all goes well
21 Historic Model Restaurant Model Fixed Costs 30% COGs 30% Labor 30% Profit 10%
22 Start-up Options Buy a closing business Used equipment Infrastructure pre-built Goodwill- potentially Buy a Franchise Proven Business model Infrastructure- systems & guidelines Marketing Build-out Starting from scratch Customized
23 Keys to Success Experience- it s priceless Objective critical thinking Stamina Vision and drive- do you naturally love it? Qualitative and Quantitative thinking Great food! Great staff!
24 Pre-Opening Revisit opening funds and expenditures During pre-opening: Finalize human resources and such Training manuals and procedures Operations Lay out and placements Cash handling procedures Hire an accountant separate out bookkeeping from accounting Launch marketing campaign
25 Financial Planning Balance Sheet: Overall state of the business Assets = Liabilities + Equity Income Statement or P & L Statement: Income and Costs; Gross vs. Net Allows you to see groups which is very helpful Cash Flow Statement: Specific measure but shows an idea of the future.
26 Break-even Calculation Breakeven Point = Fixed Costs/(Unit Price - Unit Variable Costs)
27 The real deal. Relationships, connections and follow-through Trial will become the single most important business objective and that means. Sampling
28 Branding A brand is a promise that exists in the mind of the customer Invest heavily here. Hire a professional. Branding is more than a logo and a graphic design Brand positioning what is your price point? What would you consider a frequent user?
29 Requirements City: Business License Fire Prevention/Inspection Industrial Waste Water Discharge Permit Land Use/Zoning County: Fictitious Business Filing Weights and Measures Permits Processed Food Registration Requirements FDA for labeling and nutrition
30 Q&A/Wrap Up
31 Course Syllabus Course 1: Defining Your Concept (04/03) Course 2: Operating Models (04/05) Course 3: Food Business Models (04/10) Course 4: Understanding Costs (cash/profit) (04/12) Course 5: Marketing and Communications (04/17) Course 6: Operations (04/19) Course 7:Financial Projections (04/24) Course 8: Legalities and Resources (04/26) Course 9: Funding Your Company (05/017) Course 10: Business Plan (05/03)
32 Appendix Consumer Packaged Good- Innovation Report 2016 Profit Margins for Restaurants html Consumer Packaged Goods
#1: Defining Your Concept
Food Business Entrepreneurial Training Academy #1: Defining Your Concept Alameda County SBDC Dublin Library April 3, 2017 Thank you to Our Sponsor Local SBA Ecosystem Partnership and Hosting We are the
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