Written by: Nate Trout, Mallory Casner, Natalie Mendez, and Alex Tueth
Table of Contents
Executive Summary
Description of Venture
Accessibility
Competition
Goals
Management
Organizational Structure
Partner Roles
Concluding Statement
Industry Analysis
History
Success Stories
Industry Size
Industry Developments
Demographics
Competitive Landscape
Survey and Tabulated Findings
Financials
Startup Costs
Balance Sheet
Statement of Cash Flow
Labor Budget
Income Statement
Marketing
Strategies
Pricing
Distribution
Promotion
Production
Product Forecast
Control Systems
Manufacturing Process
Store Layout
Design
Production Plan
Boba Tea Manufacturing Process
Baked Pretzels Manufacturing Process
Equipment
Inventory
Suppliers
Conclusion
Management and Legal Entity
Managerial Functions
Organization
Head of staff
Staff Members
Legal Entity
Partners Agreement
Management Structure
Risk and Contingencies
Management Goals
7 year Strategy
Appendix
Bibliography
Executive Summary
The Boba tea trend is growing internationally, and is steadily growing throughout the United States. Pearl Leaf Tea Company (PLTC) will be located near Millikin University’s at 130 S. Oakland Avenue, Decatur IL. PLTC plans to cater to the typical college student in order to surpass competition in the tea and coffee industry. It will accomplish this by providing a relaxed environment with amenities conducive to both studying and entertainment.
PLTC will be structured as a Limited Liability Partnership, which limits partners’ personal risk offers additional financial resources. PLTC’s Heads of Staff will manage the day to day operations with a number of employees. The business will design its marketing to reach its target market of Millikin Students through internet, radio, fliers, and social media.
Startup costs of $45,644.05 will be financed through personal contributions of $8,000 each. To finance the remaining startup costs, PLTC will take out a bank loan totaling $14,000.00, which will bepaid over a time period of 5 years. PLTC will generate $330,896.25 in sales with a cost of goods sold at 27%. PLTC’s miscellaneous budget of $10,000 will support any fluctuation is sales throughout the year.
In seven years, if PLTC has not acquired enough profits to start a corporation or if it will sell the company, and distribute the profits based on company shares within the business.
Mission Statement
Pearl Leaf Tea Company’s Vision is to ensure an unforgettable experience through great customer service, excellent products, and within the relaxing environment while spreading “culture in a cup” to the Decatur and surrounding areas.
Description of Venture
Pearl Leaf Tea Company (PLTC) is a tea shop offering Decatur a mix of Boba tea beverages and gourmet pretzels. PTLC will offer cold milk tea, blended tea, iced tea and fresh fruit smoothies. PTLC has decided to establish its business because it will provide a new and unique type of beverage to the Decatur community. Boba tea looks unlike most tea currently being sold in the Decatur area. It comes in a variety of forms, including milk teas, 100 % crushed-fruit smoothies, and iced tea. What separates Boba tea from regular tea are the tapioca Pearls blended throughout the beverage, as well as the chilled consistency that provides customers with a distinctive and refreshing tea experience.
Accessibility
PTLC’s location will be near Millikin University’s campus, making its primary target market Millikin students. Because of PTLC’s proximity, Millikin students will only be a short walk away, making our business easily accessible.
PLTC’s secondary market is the Decatur community, which will help provide business during the summer, when students are on summer vacation. During the summer hours PLTC will provide a cool and refreshing drink to the Decatur community and remaining students. In order to avoid a considerable drop in sales during this off season, PTLC will take an aggressive approach to marketing directed towards the Decatur Community.
Many college students seek out places for social gatherings, which is why PTLC will also focus on creating a space for college students to spend time in.
Competition
Competitors within the area are Starbucks, Coffee Connection, and Einstein Bagels. Starbucks is approximately five minutes away from campus. Coffee Connection is located three miles away, while Einstein Bagels is located on campus. Neither of these competitors offers Boba tea on their menu, providing PTLC a competitive edge in the area’s food and beverage market. Most tea is considered solely as a beverage, but PTLC’s addition of tapioca pearls and fresh fruit toppings will provide customers with a nutritious and filling snack. PLTC’s customers can take advantage of our entertainment sector as they relish a delicious sweet and salty snack. PTLC will provide entertainment for customers, including audio and video products. PTLC is committed to creating an upbeat and inviting atmosphere, so PTLC will also provide trendy and comfortable lounge areas, rather than seating designed for practicality.
Goals
- Offer high quality and refreshing Boba Tea to its customers
- Provide Decatur with the only business offering Boba tea
- Provide beverages that offer more health conscious options
- Deliver good service in a quick effective way
- Add diversity to the community
- Generate high profits
Management
Organizational Structure
The business structure of PTLC will follow a limited liability partnership between Nate Trout, Natalie Mendez, Mallory Casner, and Alex Tueth. Nate Trout will act as CEO, Natalie Mendez will act as VP of marketing, Mallory Casner will be VP of human resources, and Alex Tueth act as VP of accounting. PTLC has chosen this form of ownership because of the benefits it will bring to the partnership.
A limited liability partnership will exempt each partner from liability that is out of their control, and offers a flexible management structure. The only disadvantage a limited liability partnership presents to PLTC is the ongoing state fees. However, these fees are not very costly and will be factored into the start-up costs for the business. The owners of PLTC are NateTrout, Natalie Mendez, Mallory Casner, and Alex Tueth. The chart below shows the division of ownership.
Partner Roles
As CEO, Nate Trout will be responsible for setting and maintaining an overall strategy and vision for PLTC’s success. He is also responsible for overseeing all other departments of the business, including, but not limited to: marketing, human resources and accounting. As VP of marketing, Natalie Mendez is responsible for market research, product development, advertising, and sales promotion. Mallory Casner is VP of human resources and will be responsible for putting together a team of employees, including cashiers, servers, and a management team. She will also be in charge of the hiring, training, and firing process. Alex Tueth will act as VP of accounting and will be responsible for maintaining a clear and accurate report of finances, in addition to yearly taxes and income statements for PLTC. After all costs are taken into account, each partner will receive equal profit distribution; however, any considerable overtime work will be taken into account during the time period worked.
Concluding Statement
Each position and persons involved have been carefully evaluated and fitted to the position based on their personal and professional skills that they hold. As for the general employees, we plan to hire mainly Millikin students. This will be beneficial for our business because we will be helping students as well as serving them and the public. The company will hire 6 student employees to work as cashiers and servers within the business, as well as 2 full time employees andPLTC will also inform Millikin students about job openings to help increase community involvement in the Decatur area.
Industry Analysis
History
Boba tea originated during the 1980s in a small tea shop located in Taiwan, with many owners claiming to be the founder. Due to the increased popularity in tea products and health awareness, the Boba tea business is booming. It is now one of the top selling tea products inAsia. Small Boba shops are located on every corner in Hong Kong and Taiwan. According to Boba Tea direct, an average store can sell 150-500 servings a day, and asuccessful store can average out over 1000 servings daily. The latter information indicates the future sales for PLTC, because it will be selling similar products as a new business, and will at first, fall into the 150-500 serving range. In the United States, the average cost of Boba tea typically ranges from 3-4 dollars. This average provides PLTC with an idea of what its’ prices should be within. The average cost to make a cup of Boba is 75 cents. This profit margin of between 2.25 dollars and 3.25 dollars demonstrates that Boba tea will be able to generate high profits for PLTC.
Success Stories
Entrepreneurial couple Evan and Kari Leong own Bubble Tea Supply Inc., located in Hawaii. Their business has continued to flourish after their first year of business with annual sales totaling 350,000. According to the Bubble Tea Supply Inc. website, the company is on track to sell one million units the next year. The Leong’s noted that catering the “local taste” of Hawaii helped increase their overall sales by ensuring strong customer satisfaction. PLTC will utilize survey results to cater to Decatur’s local taste as well.
Industry Size
Boba tea first had first started out as an Asian drink fad, but has mainstreamed into different countries, especially the United States. Boba tea has gained popularity in the major cities, especially those on the West Coast and East Coast. According to Bubbletea.biz, the trend has even spread to Chicago, expanding into suburban areas. Due to the lack of Boba tea shops in Decatur, PLTC will take advantage of Boba tea’s novelty and growing popularity.
Industry Developments
Since PLTC will be offering Boba drinks as smoothies and teas, industry research was conducted in both areas. According to the Tea Association of the USA, new flavors and products continue to develop because of increased consumer interest in the tea category, which is why the Boba tea industry expects an annual dollar increase in the area of 5 to 8%.The Boba tea market is on a constant rise, having become a top product in numerous shops and restaurants. The smoothie market has risen to $2 billion a year, up 80 percent from 2002.
With more people becoming health conscious the sales of fruity smoothies and health related drinks only continues to grow. Nationwide there are 4,000 smoothie shops standing. "With functional foods and beverages having a strong marketplace advantage, smoothies are in position to dominate the healthy beverages category. Smoothies are seen as a pleasant health treat, and this will continue to take the category far," said David Lockwood, director of Mintel Reports, in a company press release.
Just like smoothies, tea is also experiencing a growth. According to a statistical chart in 2009, 519 million pounds of tea were imported to the United States. The increase of tea drinkers has gone up due to an increase in health conscious consumers. Tea consumption will continue to increase as health-conscious consumers choose tea for its medicinal benefits. The American tea industry projects sales of $15 billion in 2012, a huge increase considering sales were only about $4.6 billion in 1999. These statistics demonstrate the opportunity for considerable profits by opening a specialty tea shop, such as PLTC. The company’s Boba tea products offers products that fits the growing demand for both unique and health conscious beverages.
Demographics
TheMillikin University (MU) community will act as PLTC’s primary target marker, with the Decatur community acting as the secondary target market. Millikin University has a population of 2,300 students, while Decatur has a population of 76,096 people, providing PLTC with a considerable opportunity for profit. Millikin University has 57% female and 43% male attending. Living in Decatur there are 53.2% females, while there are 46.8% males. Since both genders are prominent within the two communities, PLTC will focus on gaining both genders as customers through its marketing tactics. The average income of people living in Decatur is $39,773, compared to $58,823 an average person makes in Illinois, which played a key role in pricing its products at an accessible price.
Competitive Landscape
Although there are no other Boba tea businesses in Decatur, there are multiple key players in the general tea business including: Coffee Connection, Starbucks, and Einstein Bagels.
Competitor Matrix
Competitors / Tea / Boba Tea / Free Wi-fi / Accessibility for Millikin studentsCoffee Connection /
Starbucks / /
Einstein Bagels / / /
Pearl Leaf Tea Company / / / /
Coffee Connection is a local business offering a variety of food and beverages. Coffee connection provide a limited range of tea including: Chai, hot, iced, and tea latte. They also offer smoothies, though they are made with artificial flavors instead of real fruit that PLTC will offer its customers.
Starbucks is a major corporation with a well-established name. It opened in in 1971, and currently has 17,000 stores in more than 57 countries.Some minor competitors include McDonald’s and Burger King. The latter businesses offer specialty drinks in the form of frozen coffees and fruit smoothies. Despite having many secondary competitors in the area, PLTC will attract customers due to its novelty and unique tea offerings to the central Illinois
Einstein Bros Bagels is located on Millikin University’s campus in Shilling Hall. While they offer more coffee selection, they only provide customers with two options for tea.
Survey and Tabulated Findings
PLTC surveyed 50 people. 30 of these people were Millikin students, while the other 20 people were randomly selected on the streets outside the Millikin Campus. PLTC surveyed more Millikin students than Decatur residents because the Millikin community is its primary target market.
36%of students surveyed worked at least part-time throughout the year, demonstrating that students work during the school year to help pay for college. PLTC plans on hiring Millikin students on a work study program.
49 of the 50 people we surveyed have never tried Boba tea, showing that there is a market opening for PLTC in the Decatur and Millikin community. At least 70% of the people surveyed at drank tea at least occasionally, showing that there would be a demand for PLTC’s tea products.
64% of those surveyed reported a preference for a relaxing atmosphere. Due to this strong response, PLTC will provide a relaxing atmosphere for its customer, especially its college students who typically lead hectic lifestyles.
When asked about flavor preference in regards to smoothies, 30% reported Mango, 16% Watermelon, 14% Strawberry Banana, 12% Peach, and 8% Strawberry. The latter percentages help PLTC determine the inventory needed to purchase in flavored syrups, powders, and fruit based on the local taste.
Financials
Startup Costs: 1 month
PLTC will require $45,644.05 to begin operating for the first month. PLTC loan of $14,000.00 will cover the rest of the cost of startup. Although there are no direct boba tea competitors within the Decatur area, there are several different coffee and tea ventures in the Decatur area. Thus, PLTC location plays a crucial role in attracting its target market of university students. Our business will be located on Oakland Street, which will attract those living on campus and the area’s local residents as well. Rent for the building will total $750.00 per month, with renovations adding up to $13,070.81. The renovations budget includes new flooring, the addition of interior walls, and décor. Organizations will total to $1,500.00 for insurance and legal fees. PLTC will require new equipment to make the products, totaling $19,720.24. PLTC will also have miscellaneous money just in case PLTC forgets anything totaling $10,000.00.
Balance Sheet
PLTC balance sheet discusses the current assets it will take to open the business and what is expected after one year. Also it discusses the current assets that include cash, inventory, and prepaid expenses that total $16,449.19. PLTC long term assets include property and equipment, and leasehold improvements that total to $29,550.81. Each of the four PLTC owners will each invest in $8,000.00 into PLTC. PLTC will get a $14,000.00 loan from the bank to cover the rest of the cost of startup. After one year, in current assets PLTC predicts to have $96,261.85, which includes $91,521.61 in cash. PLTC plans to have $124,164.66 in total assets after the first year. After one year, PLTC predicts only to have $11,617.65 to pay on the loan PTLC borrowed. PLTC owners predict to have retained earnings of $80,547.01. After one year, PLTC plans to have $124,164.66 in total liabilities and owner’s equity.
Statement of Cash Flow: One year
PLTC will start out with $11,708.95 to cover unforeseen expenses during the first month of business. During the months of June and July PLTC will plan on having fewer customers, meaning, not much of an increase of cash flow. PLTC will balance this by having miscellaneous money used in emergencies situation. Our cash flow will grow throughout PLTC’s first year, resulting in an ending cash balance of $90,510.60.