Business Plan: YummY - Der gesunde Fast Food Store

Executive summary

• Meaning of the company Yummy Yummy produces and sells power drinks that can replace a whole meal. Cursorily, a smoothie is a fruit drink with some extras, but after a closer view the customer gets all the minerals and vitamins he/she needs for a powerful day.

There already exist a few competitors in Switzerland but they focus on people who like to have a fresh drink in the hot summer and they do not use any extras for special occasions. Yummy will make the difference and gives the company a USP because Yummy focuses on other target groups: There are the business people who are always in stressful situations without much time and quick healthy meals. There are sports-aware people who do not have the chance to get a quick meal rich in vitamins and minerals away from their own kitchen. In addition, there are health-conscious people in general who will love the product.

• Background Within the last years, the expenses of private consumers for whole food products, for healthiness and for food consumption has continuously grown. More than ever, consumers look for quick and especially healthy solutions regarding to a balanced diet and the time aspect in the Swiss society today. In addition to that consumers are more worried about their well-being and therefore, Yummy has a great chance with its products.

• Problem In Switzerland, only very few competitors for smoothies exist. They offer a similar kind of this product for a wide range of potential customers. In contrast, Yummy tries to develop a new niche market which also means that the group of potential customers is comparatively small. But especially this will guarantee the success if Yummy gets a kind of monopoly and later it will steadily be the cutting edge.

• Expectations First, Yummy will start its business in Switzerland just in one city in the most auspicious districts. After a successful introduction, it is planed to build up a nation-wide operating chain. To avoid too high investments the company will introduce a franchise system like McDonald’s. The parent company will help to create the right image for the new market.

• Financing The expected turnover for the first year is amounted to 544,200 Swiss Franc. In the third year, the company realizes a positive net profit (3,088.26 Swiss Franc). Yummy will be present on the German and the Swiss market in big cities.

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Table of contents

  Executive summary  2

  Executive summary  2

Table of contents................................................................................................................. 3

1.  Introduction  5

2.  The purpose of the company and its management style  6

3.  Host country regulations and investments  7

3.1  Country risks  7

3.1.1  Political risk  7

3.1.2  Economical risks  8

3.1.3  Growth prospects  9

3.2  Rules applying to investment from outside  9

3.3  Other legal  issues......................................................................................................10

3.3.1  Dispute resolution 10  

3.3.2  Labor laws 10  

3.4  Tax considerations 11  

3.4.1  Taxable base 11  

3.4.2  Withholding taxes 11  

3.4.3  Tax rates for Yummy in Zurich 12  

3.5  Foreign exchange 12  

3.5.1  Foreign exchange risks and controls 13  

3.5.2  Transfer pricing and remittance issues 13  

3.5.3  Current and projected rates (USD to CHF) 14  

3.6  Overseas private investment corporation (OPI)C 14  

3.6.1  Subsidies 15  

3.6.2  Export 15  

3.6.3  Free trade zones 15  

3.7  Foreign direct investment (FDI) 16  

3.7.1  Turnkey project 17  

3.7.2  Factors influencing foreign direct  investment......................................................17

3.7.2.1  Supply factors 17  

3.7.2.2  Demand factors 18  

3.7.2.3  Political factors 20  

4.  Marketing plan 21  

4.1  Wots-Up-Analysis 21  

4.2  Market potential 24  

4.2.1  Public  infrastructure...........................................................................................24

4.2.2  Population GDP per capita GDP wealth distribution 24  

4.2.3  Developments in consumer spending 25  

4.2.4  Description of the industry (six external  variablesCCCCCCC..............................................26

4.4  Competition 27  

4.4.1  Porter s five forces 27  

4.4.2  Levels of competition 28  

4.5  Target group 28  

4.6  Marketing mix 29  

4.6.1  Product 29  

4.6.2  Price 29  

4.6.3  Promotion 30  

4.6.4  Place 31  

3  NA  

4.7  Marketing goals 31  

4.7.1  Level of the field of business 31  

4.7.2  Level of the company 32  

4.7.3  Level of the operation 32  

4.8  Strategies 32  

4.9  Sales plan 33  

5.  Financial plan 35  

5.1  International capital budgeting 35  

5.1.1  Net present value 35  

5.1.2  Payback period Bailout payback 35  

5.2  Internal external sources of investment capital 35  

5.3  View of costs 36  

5.4  Cost price calculation 36  

5.5  Balance 38  

5.6  Exploitation estimate 39  

5.7  Liquidity estimate in Swiss Franc 40  

5.8  Liquidity estimate in Euro 40  

6.  Conclusion 41  

  Books  42

  Publications  42

  Electronic sources 42  

8.  Appendix 46  

Appendix A:  Switzerland s world competitiveness for infrastructure  2004......................46

Appendix B:  Age structure Switzerland 47  

Appendix C:  Switzerland s international position in GDP per capita 2005 48  

Appendix :D  BIP 49  

Appendix E:  Lorenz curve of income for Switzerland 2001 50  

Appendix F:  Gini indices for Switzerland 2001 51  

Appendix G:  International comparison of Gini indices  2004...........................................51

Appendix H:  Consumer spending over time 52  

Appendix I:  Expenses for health 52  

Appendix J:  Expenses for organic food 53  

Appendix K:  Possible locations for Yummy stores in Zurich 54  

Appendix L:  Location near the central station 55  

Appendix M:  Locations near working places and gyms 55  

4  NA  

1. Introduction

Nowadays, people all over Europe are influenced by food scandals about BSE, pesticides in vegetables, and pork. People are set thinking especially by consuming meat because of hormone treatment and antibiotics. Furthermore, topics such as obesity, too much sugar, and cancer causing substances that are caused by preparing meals are often discussed. Because of this, there is a trend towards a healthier and more conscious nutrition. In addition, people do not have much time for meals and look for “fast” food with vitamins and minerals as a result. But actually, there is no special offer that meets the customers’ expectations except salad. Therefore, the company Yummy tries to fulfill this need by offering smoothies (fruit drinks) that replace a whole meal.

People who think about nutrition are usually women and educated people like business people. That is why Yummy concentrates on certain target groups.

A smoothie is an American product and concept. Because of the Americanization and other well-known examples such as McDonald’s, Starbucks, and Dunkin Donuts you can see that American business ideas have been introduced successfully out of America. Especially the franchise system has proved its worth for this kind of business as the company Yummy has already recognized in Germany.

The listed characteristics above apply especially to Switzerland and therefore, Switzerland has become the target country. This assignment describes a business plan for entering the Swiss market. The following section of the assignment is about the purpose of the company and its management style. Then, the host country regulations are examined. The fourth section describes a marketing plan and the fifth section contains a financial plan. Finally, a conclusion discusses the feasibility of the project.

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2. The purpose of the company and its management style

The purpose of Yummy in Switzerland is to open up a new niche market. Therefore, Yummy starts its business by opening three stores in Zurich. The primary goals are gaining customers and establishing the products and the brand on the market successfully. On the long-run, Yummy wants to build up a nation-wide operation chain with a franchise system in Switzerland.

To determine the management style for the company, the author uses Geert Hofstede’s five cultural dimensions: power distance, individualism versus collectivism, masculinity versus femininity, and uncertainty avoidance. For Switzerland, masculinity is the highest ranking dimension at a value of 70. This means that there is a higher separation between the values of Swiss men and women. The

men are more competitive and assertive in comparison to the women. Individualism is the second highest dimension at a value of 65 and implies that the Swiss are independent and take care of themselves. At a value of 58, uncertainty avoidance is the third highest dimension. This dimension indicates that the Swiss population is not afraid of unusual situations and does not need strict rules and regulations. The lowest dimension is power distance at 34 which reflects that the power of the society is distributed relatively equal. 1

As a result of Hofstede’s examination, Yummy in Switzerland should have low hierarchies and the manager positions are preferably occupied by men. Each employee knows his/her area of responsibility, so there is no need for strict rules (cooperative management style).

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3. Host country regulations and investments

3.1 Country risks

The Swiss Confederation was founded in 1291 as a defensive alliance among three cantons. In succeeding years, other localities joined the original three. The political and economic integration of Europe over the past half century, as well as Switzerland's role in many UN and international organizations, has strengthened Switzerland's ties with its neighbor countries. However, the country did not officially become a UN member until 2002. Switzerland remains active in many UN and international organizations, but retains a strong commitment to neutrality. 2

The low country risk of Switzerland is closely linked to the stable political development and especially to the government’s view on international investments and loans. Switzerland is very attractive to foreign investors like Yummy, which will establish a long term business as well as the company will create new jobs.

3.1.1 Political risk

The political risk of Switzerland is low 3 (see chart below), since the decision-making is based on consensus-building, and the main characteristics of Swiss politics are balance and continuity. The constitution sets out the federal relationship between the government and the cantons. There are 20 full cantons and six half-cantons, and each has its own government and parliament. The cantons are divided into a total of 2,915 communes. Responsibility for legislation rests with the lowest level of government deemed appropriate, and consequently, the cantons and communes enjoy extensive powers in some areas. The cantons and communes raise taxes, administer their area and elect their own parliaments.

The Federal government is formally only responsible for defense, foreign and economic policy, and any responsibilities not formally allocated to government by the constitution are taken on at cantonal level. Although its influence is slowly growing, only 30 percent of total public expenditure is spent at federal level. 4

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3.1.2 Economical risks

The economical and commercial risks for Yummy in Switzerland are low 5 , since Switzerland is a prosperous and stable market economy with low unemployment, a highly skilled labor force, and a high per capita GDP. Switzerland ranks high in the Economic Freedom Index of the Heritage Foundation, shown in the table below. Although Switzerland is not pursuing full EU membership in the near term, in 1999 Bern and Brussels signed agreements to further liberalize trade ties. 6 Switzerland is attractive for Yummy Smoothies, because it has maintained a degree of bank secrecy and has kept up the Franc's long-term external value. Reflecting the economic conditions of Europe, GDP growth dropped in 2001 to about 0.8 percent, to 0.2 percent in 2002, and to -0.3 percent in 2003, with a small rise to 1.8 percent in 2004 and 2005. 7 Even so, unemployment has remained at less than half the EU average. 8

5 View Web site: < http://www.fita.org/countries/ch.html?ma_rubrique=panorama> 6 View Web site: 7 View Web site:

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3.1.3 Growth prospects

Growth has followed a slightly decreasing trend in 2005. The Swiss GDP growth rate was 1.7 percent in 2004 and 0.8 percent in 2005. The Swiss National Bank even anticipates economic growth of a little over 2.0 percent for Switzerland this year, which corresponds to the December forecast. 9 Switzerland is particularly open to international trade and has achieved its best result concerning external trade: exports have risen by 4.5 percent in 2005. The unemployment rate is low at 3.8 percent in 2005, and 4.4 percent in 2004. Switzerland enjoys one of the world's highest standards

of living and its economic stability is ensured. 10

3.2 Rules applying to investment from outside

In Switzerland, controls on inward investment and on the recirculation of profits or capital on disinvestment do not exist (laissez-faire attitude). However, the support for investments differs at federal and cantonal level. At federal level, only infrastructural investments and a few traditional industries in long-term decline are supported. The infrastructural investments, for example, are

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supported by subsidized loans up to 25%. In contrast, there is more official support at cantonal level. Some examples of support are assistance or subsidy with land or premises, waiving of work permit requirements, tax holidays up to 10 years, cheap energy and training subsidies. It depends on the canton what kind of privileges it offers. 11

3.3 Other legal issues

3.3.1 Dispute resolution

Although Switzerland is not a member of the European Union the political system can be compared to the German one.

3.3.2 Labor laws

In general, an employment contract must include the trial period that may not exceed three months and the period of notice. Furthermore, the contract does not contain any immoral or illegal tasks. In Switzerland, there are limited and unlimited employment contracts. In a limited contract the duration of the employer-employee relationship is defined and it cannot be terminated in advance. In an unlimited contract the duration is not determined and the contract can be terminated by both parties at any time. However, the period of notice must be kept. In some cases, the party who terminates the contract must explain his/her reasons for the decision.

In Switzerland, there is no statutory minimum wage. However, employers are supposed to pay a higher hourly wage for work at night, on Sundays and public holidays. At the moment, the principle of seniority determines the wages. However, this principle is more and more replaced by the payment of results. Generally, women’s wages are usually lower than men’s.

The maximum legal working time totals between 45 and 50 hours a week and depends on the position. Employees who are over 20 are entitled to a minimum of four weeks of vacation whereas employees up to their 20 th year are entitled to five weeks. The Swiss law (except Geneva) does not know maternity leave as the German law. There is a kind of maternity protection: In the first eight weeks after birth, the women are not allowed to work. The length of the employment relationship determines the wage payments during maternity.

In Switzerland, there are also professional trade associations or trade unions that represent the interests of their members. 12

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3.4 Tax considerations

Switzerland is a confederation of 26 cantons and taxes are levied at both the federal level and the cantonal or communal level. As a result, no average corporate income tax exists. The federal corporate income tax is imposed at a flat rate of 8.5 percent of taxable income, whereas the maximum effective rate is 7.8 percent. Cantonal tax rates vary widely: the local tax burden varies between 8 percent and 25 percent of pre-tax income. 13 The stamp duty levied when corporations are founded or when participation in Swiss corporations or cooperatives does not apply for Yummy’s business in Switzerland. 14

3.4.1 Taxable base

The calculation of taxable income is based on the financial results according to Swiss civil law (so-called "Massgeblichkeitsprinzip"). This profit and loss account may, however, be adjusted according to specific provisions in the tax laws. 15 Yummy Smoothies is subjected to Swiss corporate taxation, because the business will set up three permanent establishments in Zurich, Switzerland. A permanent establishment, according to domestic Swiss law, is a fixed place of business through which the business activity of the enterprise is wholly or partly carried out. Furthermore, the permanent establishment is a building or construction or installation site which lasts a minimum of 12 months. 16 In Switzerland, capital gains are generally taxed in the same way as ordinary income. The normal VAT rate is 7.6 percent and is therefore one of the lowest rates in Europe. 17 Reduced rates apply on agricultural goods (VAT of 2.4 percent) like milk, yoghurt, and fruits used in the production process of Yummy smoothies. If Yummy decides to import goods, the rate will be at 35 percent. 18 Import taxes, such as land taxes and wealth tax rate will not apply for Yummy in Switzerland.

3.4.2 Withholding taxes

Since there is no withholding tax on interest on private loans (incl. inter-company loans) Yummy is able to finance its subsidiaries in Switzerland through loans by the German Yummy Holding Company. Furthermore, there is no withholding tax on royalties in Switzerland. 19 Withholding taxes are only levied on dividends, interest on bank loans and bonds, but especially the issue of paying dividends might only apply after Yummy has conduced successful business in Switzerland after a time period of 5 to 10 years.

13 View Web site: < http://fita.org/countries/ch.html > 14 View Web site: 15 View Web site: 16 View Web site: 17 View Web site: 18 View Web site: 19 View Web site:

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