Starting and Managing A Business | PPT

STARTING
AND
MANAGING A
BUSINESS
by

Executive
Summary
• This report provides a detailed analysis of
opening up a Subway franchise in Paya
Lebar Quarter (PLQ) Mall which will be
opening in the fourth quarter of 2019.
• It is one of the most booming locations for
opening up a food chain as it will include
22,000 employees within seven minutes of
walking distance and other consumers
visiting the mall.
• The main goal of the business plan is to
propose the viability of investment in
franchising Subway and the report has been
pitched to Angel Investors.
• The target consumers of Subway will consist
of population between the age of 18-39
having moderate to high disposable income
and willing to leave a healthy lifestyle by

Business
Concept
• Subway is an American restaurant chain franchise
which sells salads and submarine sandwiches to their
consumers. It is one of the largest single brand chain
of restaurant and the largest operator in the global
market.
• It is one of the cheapest fast food chain for
franchising as it requires liquid asset of $30,000 and
net worth of ranging within $80,000 to $300,000
(Peterson, 2015).
• The company has been working diligently to improve
the sustainability of operations and products at
Subway.
• Subway has their unique selling proposition of eat
fresh to entice the consumers to purchase their
sandwiches as it is appealing towards people’s desire
of eating the best quality food. It helps in
differentiating their products from that of the
consumers (Alberts, 2015).

Goals and
Potential of
the
Franchise
• To reach the break-even point and start
earning within the first two years of
operation
• To achieve a return on investment of 20%
within the first two years
• To increase the market share of Subway by
15% within the first three years
• To increase brand awareness on the social
media platform to reach million followers in
Singapore
• To perform 10 event in the first year to
emphasise and promote the concept of fresh
and healthy eating among the consumers
• To expand franchise to increase capacity of
accommodation in Paya Lebar Quarter (PLQ)
Mall

Target
Market and
Needs
• The target consumers of Subway will consist
of population between the age of 18-39
having moderate to high disposable income
and willing to leave a healthy lifestyle by
developing healthy food habits. The
company also target kids and will use the
same menu for kids widely popular in other
countries.

Market
Size and
Trends
• The fast food industry is highly booming in Singapore
where the industry generated more than S$1 billion in
terms of operating receipts in the year of 2016.
• The insatiable appetite for fast food among the
population in Singapore has helped the growth of the
food and beverage sector.
• Even though the data from the past two decades
show that there has been 10% decline in the overall
food and beverage sector, the fast food sector has
grown by 29% during this period (Lim & Wei, 2019).
• However, the love for fast food in Singapore is still
high where McDonalds have 135 outlets, KFC has 86
outlets, Burger King has 50 outlets, Texas Chicken has
15 outlets and Long John Silver has 25 outlets.
• McDonalds have 40% share in the market followed by
KFC with 13%. Burger King has 4% share and Long
John Silver has 2% share in the market (Lim & Wei,
2019).

SWOT
Analysis
Strengths Weaknesses
Well-known brand in the
global market
Healthy, fresh and tasty food
Low operational cost
Oversaturated market
Lack of concern regarding
health issues among majority
of the population
Huge market share occupied
by McDonalds and KFC
Opportunities Threats
New market for healthy and
fresh food
No competitor offering
similar food products
Improving presence on social
media platform to increase
awareness among consumers
in Singapore
Events to improve awareness
among target consumers
Increase in labour cost due to
the lack of resources and
capital for scaling and
expanding at a rapid rate
Market saturation due to the
presence of big players in the
market

Marketing
plan
• The main product in the Subway menu is the submarine
sandwich along with products such as baked goods
(cookies, doughnuts and muffins), wraps and salads.
• The chain offers variety of sauces to their consumers
counting upto 8 in number, 6 types of bread and
various vegetarian and non-vegetarian options (Kraak
et al., 2017).
• In Singapore, the franchise will be keeping their
traditional menu while opening their franchise in Paya
Lebar Quarter (PLQ) Mall.
• Subway has always priced their products as premium
products when compared to their main rivals such as
McDonalds and KFC.
• The company charges higher prices for the quality of
their sandwiches having a low caloric content. Subway
has always been focused on providing the best quality
of food to their consumers which makes it necessary for
them to keep their prices higher (Kraak et al., 2017).

Promotiona
l Activities
• Subway has been diligent and aggressive with their
promotional strategies and their slogan Eat fresh will
be used while opening up a franchise in Paya Lebar
Quarter (PLQ) Mall.
• It emphasises on the fact that all their products are
cooked from fresh ingredients and freshly baked. The
franchise will use both traditional and digital
promotional content to promote their products in
their market (Kraak et al., 2017).
• ). In case of traditional market, the company will
distribute their flyers, pamphlets and brochures.
Hoardings will be placed at prime locations to attract
the consumers in the mall (subway.com, 2020).
• In terms of online market, the franchise will provide
discount offers to clients by advertising promotional
offers on social media pages. The brand will also
launch a promotional campaign depicting their
concept of eating fresh and living a healthy lifestyle.

Manageme
nt Design
• The major gap identified is the offerings of the
company at premium prices which does not sit well
with the consumers in Asian countries.
• Singapore’s population is highly sensitive to price
changes along with leadership issues which is the
reason that it has been unable to keep up with the
trends in the market (Taylor, 2018).
• The organisation offers fresh and highly quality food
to the consumers but the major aspect of the eating
fast food is the taste and likeability of the product.
• Therefore, the company will have to accommodate
tasty as a factor into their product positioning to
promote that their product healthy, tasty and fresh.
Moreover, due to providing fresh and quality
products to the consumers, developing a local
sourcing is tough for the company which increases
their operational cost (Taylor, 2018).

Legal
Responsibil
ities and
Obligations
• Subway will have to apply for planning permissions by
notifying the local authority about their location of the
store and the operational areas. Subway will also have to
adhere to the code of practice of environmental health
which will ensure that the company follows sustainable
measures to run their product without causing harm to the
environment (Singaporelegaladvice.com, 2019).
• However, there are other legal obligations and
responsibilities to be followed by Subway and they are as
follows:
• Applying for the food shop license
• Sign a tenancy agreement
• Hiring of staffs
• Reviewing the fire certificate of the property owners
• Importing food ingredients
• Setting up local sourcing of food ingredients
• Applying for liquor license and halal certification
• Registering for paying GST

Income
Stateme
nt
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Gross revenue $1,025,00
0
$1,045,50
0
$1,087,32
0
$1,152,55
9
$1,244,76
4
Cost of goods sold $351,250 $358,275 $372,606 $394,962 $426,559
Gross margin $673,750 $687,225 $714,714 $757,597 $818,205
Other revenue [source] $0 $0 $0 $0 $0
Interest income $0 $0 $0 $0 $0
Total revenue $673,750 $687,225 $714,714 $757,597 $818,205
Operating expenses
Sales and marketing $83,000 $84,660 $88,046 $93,329 $100,796
Payroll and payroll taxes $220,000 $224,400 $233,376 $247,379 $267,169
Depreciation $51,200 $52,224 $53,248 $54,272 $55,296
Maintenance, repair, and overhaul $7,500 $7,650 $7,800 $7,950 $8,100
Total operating expenses $361,700 $368,934 $382,470 $402,930 $431,360
Operating income $312,050 $318,291 $332,244 $354,667 $386,844
Interest expense on long-term debt $0 $0 $0 $0 $0
Operating income before other items $312,050 $318,291 $332,244 $354,667 $386,844
Loss (gain) on sale of assets $0 $0 $0 $0 $0
Other unusual expenses (income) $0 $0 $0 $0 $0
Earnings before taxes $312,050 $318,291 $332,244 $354,667 $386,844
Taxes on income 17
%
$0 $0 $0 $0 $0
Net income (loss) $312,050 $318,291 $332,244 $354,667 $386,844
Cumulative income $312,050 $630,341 $962,585 $1,317,25 $1,704,09

Cash Flow
Statement
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Operating activities
Net income $312,050 $318,29
1
$332,24
4
$354,667 $386,844 $1,704,09
6
Depreciation $51,200 $52,224 $53,248 $54,272 $55,296 $266,240
Accounts receivable ($10,250) ($20,910
)
($32,620
)
($46,102) $0 ($109,882
)
Inventories ($205) ($418) ($652) ($922) $0 ($2,198)
Accounts payable $3,513 $7,166 $11,178 $15,798 $0 $37,655
Amortization 0 0 $0 $0 $0 $0
Other liabilities 0 0 $0 $0 $0 $0
Other operating cash flow
items
0 0 $0 $0 $0 $0
Total operating activities $356,308 $356,35
2
$363,39
8
$377,713 $442,140 $1,895,91
1
$0
Investing activities $0
Capital expenditures $0 $0 $0 $0 $0 $0
Acquisition of business 0 0 0 0 0 $0
Sale of fixed assets $0 $0 $0 $0 $0 $0
Other investing cash flow
items
0 0 0 0 0 $0
Total investing activities $0 $0 $0 $0 $0 $0
Financing activities
Long-term debt/financing ($500,000
)
$0 $0 $0 $0 ($500,000
)
Preferred stock 0 0 0 0 0 0
Total cash dividends paid 0 0 0 0 0 0
Common stock 0 0 0 0 0 0
Other financing cash flow
items
0 0 0 0 0 0

Balance
Sheet
Assets Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Cash and short-term investments $133,000 ($10,693) $345,660 $709,058 $1,086,771 $1,528,911
Accounts receivable $512,500 $522,750 $543,660 $576,280 $622,382 $622,382
Total inventory $10,250.00 $10,455.00 $10,873.20 $11,525.59 $12,447.64 $12,448
Prepaid expenses 0 0 0 0 0 $0
Deferred income tax 0 0 0 0 0 $0
Other current assets 0 0 0 0 0 $0
Total current assets $655,750 $522,513 $900,193 $1,296,863 $1,721,600 $2,163,741
Buildings $80,000 $80,000 $80,000 $80,000 $80,000 $80,000
Land 0 0 0 0 0 0
Capital improvements $
26,000
26,000 26,000 26,000 26,000 26,000
Machinery and equipment $
150,000
150,000 150,000 150,000 150,000 150,000
Less: Accumulated depreciation expense 0 51,200 103,424 156,672 210,944 266,240
Net property/equipment $256,000 $204,800 $152,576 $99,328 $45,056 ($10,240)
Goodwill $0 $0 $0 $0 $0 $0
Deferred income tax 0 0 0 0 0 0
Long-term investments 0 0 0 0 0 0
Deposits 0 0 0 0 0 0
Other long-term assets 0 0 0 0 0 0
Total assets $911,750 $727,313 $1,052,769 $1,396,191 $1,766,656 $2,153,501
Liabilities Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Accounts payable $175,625 $179,138 $186,303 $197,481 $213,280 $213,280
Accrued expenses 0 0 0 0 0 0
Notes payable/short-term debt 0 0 0 0 0 0
Capital leases 0 0 0 0 0 0
Other current liabilities
Total current liabilities $175,625 $179,138 $186,303 $197,481 $213,280 $213,280
Long-term debt from loan payment calculator
500,000
$0 $0 $0 $0 $0
Other long-term debt $0 $0 $0 $0 $0 $0
Total debt $675,625 $179,138 $186,303 $197,481 $213,280 $213,280
Other liabilities 0 0 0 0 0 0
Total liabilities $675,625 $179,138 $186,303 $197,481 $213,280 $213,280
Equity Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Owner's equity (common) $
1,000,000
$1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Paid-in capital 0 0 0 0 0 0
Preferred equity 0 0 0 0 0 0
Retained earnings 0 0 0 0 0 0
Total equity $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000

Break Even
Analysis
Year 0 Year 2 Year 4 Year 6
-$800,000.00
-$600,000.00
-$400,000.00
-$200,000.00
$0.00
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
Year
income

Expected
Financial
Return
• The report has used the weighted average
cost of capital formula to identify the WACC,
valuation, IRR and NPV.
• WACC=ED+ E×rE+ DD+ E×rD ×(1−t)
• = 6.66%
• In order to calculate the IRR, it is essential to
identify cash in and cash out of the franchise
and the evaluation of IRR shows the
following results:
• NPV=t∑i=0Ci(1+IRR)i=0
• The internal rate of return for the current
project has been calculated as 67.28% per
annum which shows that the project is highly
viable and offers a great rate of return for
the investors.

Total
Capital
required
• Therefore, based on the analysis of the financials
including expenses and revenues generated by
Subway, it shows that the company requires a
funding of minimum of 0.5 million to smoothly
operate in Paya Lebar Quarter (PLQ) Mall.
• It can be seen that the franchise aims to maintain
a debt to equity ratio of 50% to ensure that they
are able to recover their investment as soon as
possible. However, with increase in investment
from Angel Investors it possible to improve the
liquidity of the franchise.
• Moreover, Subway is offering 30% stake to the
investor which results in 20% realisation of the
profit earned by the profit. It shows that the
investor will be able to realise their whole
investment in two years and start earning profits
from their investments.

Critical
Risks
• Franchising is the one of most effective ways of expanding into
a foreign market but there are numerous drawbacks, risks and
challenges associated with it.
• Firstly, franchising may lead to the loss of the brand equity as it
operates differently in diverse locations. It implies that if
anything goes wrong in a franchise the whole brand will be
affected.
• A franchise uses the trademarks and brand name which implies
that franchises are responsible for upholding the reputation.
Carelessness among the brand franchise will lead to litigation.
• There are numerous compliance requirements suggested by
the regulatory bodies and it is essential to follow all the
requirements before proceeding with other activities.
• Therefore, employees need to be provided training and
development regarding the standards so that all the rules and
procedures are followed.
• Moreover, a franchise model requires a lot of investment to
ensure that the business is ready for expansion. Therefore, it is
necessary to utilise resources effectively as otherwise failure to
repayment results in losing of their collateral.

Alternative
courses of
action
• Therefore, instead of using a franchise model, the
company has the option of starting up a new brand with
fresh products changing the old menu items.
• The menu will be thoroughly designed accordingly to the
needs of the consumers to keep the healthy aspect and
fast food aspect.
• This amalgamation of two different journals can improve
the chances of success as the consumer segments in
Singapore are still not ready for a completely healthier
option.
• Therefore, it can effectively improve the sales of the
organisation by addressing a larger market share.
However, catering to a niche marketing can be a best
way of developing a blue ocean which can overcome the
saturation of the industry.
• Moreover, a proper project plan has to be developed
along with continuous evaluation of the project progress.
It will help in identifying the scope creep and rectify to
achieve the goals of the organisation.

References • Alberts, L. (2015). Subway: The freshest of them all. Retrieved
18 February 2020, from
https://medium.com/@lalberts6009/subway-the-freshest-of-
them-all-232342cdee6b
• Batkovskiy, A. M., Semenova, E. G., Trofimets, E. N., Trofimets,
V. Y., & Fomina, A. V. (2017). Statistical simulation of the break-
even point in the margin analysis of the company. Journal of
Applied Economic Sciences, Romania: European Research
Centre of Managerial Studies in Business Administration, 12(2),
558.
• Gürel, E., & Tat, M. (2017). SWOT analysis: a theoretical
review. Journal of International Social Research, 10(51).
• Kraak, V.I., Englund, T., Misyak, S. and Serrano, E.L. (2017). A
novel marketing mix and choice architecture framework to
nudge restaurant customers toward healthy food environments
to reduce obesity in the United States. Obesity Reviews, 18(8),
pp.852-868.
• Lim, J., & Wei, N. (2019). The Big Read in short: S’poreans’ love
for fast food. Retrieved 18 February 2020, from
https://www.todayonline.com/singapore/big-read-short-
sporeans-love-fast-food

Contd • Peterson, H. (2015). Here's what it costs to open a Subway
restaurant. Retrieved 18 February 2020, from
https://www.businessinsider.in/retail/heres-what-it-costs-to-open-
a-subway-restaurant/articleshow/46623986.cms
• Singaporelegaladvice.com. (2019). Legal Checklist for Setting Up
a Restaurant in Singapore | SingaporeLegalAdvice.com. Retrieved
19 February 2020, from https://singaporelegaladvice.com/law-
articles/set-up-restaurant-singapore
• statista.com. (2019). Singapore: foodservice market share of
Subway 2016 | Statista. Retrieved 18 February 2020, from
https://www.statista.com/statistics/724592/foodservice-market-
share-of-subway-in-singapore/
• subway.com. (2020). Retrieved 19 February 2020, from
https://www.subway.com/en-SG
• Taylor, K. (2018). 'Subway is dying': The biggest chain in the world
is being torn apart by internal battles - and some franchisees say
there needs to be a new CEO. Retrieved 19 February 2020, from
https://www.businessinsider.in/finance/subway-is-dying-the-
biggest-chain-in-the-world-is-being-torn-apart-by-internal-battles-
and-some-franchisees-say-there-needs-to-be-a-new-ceo/
articleshow/62572898.cms