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Chapter I BACKGROUND OF THE STUDY This chapter discusses the background of the study, its objectives and the scope and limitation. Introduction Food and beverage is very essential to mans life. It enables him to survive and maintain life. Aside from that, food and beverage also helps man to produce energy and stimulate growth. Being one of the basic needs of human being, food and beverage has become an industry. Many entrepreneurs see business opportunities with food and beverage. One of these is the establishment of coffeehouses around the globe. Coffee is a brewed drink prepared from roasted seeds, called coffee

beans, of the coffee plant. Due to its caffeine content, coffee often has a stimulating effect on humans. In addition to that, it gives several health benefits to coffee drinkers. Some of these are, drinking coffee cuts down the risk of liver cancer by almost half. Antioxidants in coffee are beneficial for many ailments like Alzheimer, Parkinson and type2 diabetes. Caffeine content in coffee acts by stimulating the brain and nervous system. It improves alertness and mental activity. Some people drink coffee to treat headaches and improve concentration. Some studies claim that antioxidants in coffee decrease the tendency to develop

depression. Drinking coffee also reduces the risk of gallstone disease and prevents stroke. Coffee also helps the liver improve its performance; it prevents the cirrhosis of the liver. Coffee is also beneficial for dealing with heartburn and osteoporosis. Coffee has been one of the most popular beverages next to water and tea. Many people had developed a habit of drinking coffee thus various coffeehouses had existed. Majority of coffeehouses that exist today do have a contemporary-styled ambiance which helps create youthful, modern, outwardlooking place. As the name suggests, coffeehouses focus on

providing coffee and tea as well as light snacks. Usually, pastries such as cakes and cookies are being served alongside with coffee. The sweet taste of cakes and cookies complements the strong flavor of coffee. Though most coffeehouses or cafes served cakes and cookies which are a bit costly, the proponents came up with the idea of instead having such; doughnuts can be served with coffee. Doughnut is a comfort food that is good for everyone because it relieve stress and makes you feel good. Doughnut is a food rich in carbohydrates that can increase energy. Due to the price constraints, some coffee lovers cant afford to drink coffee from cafes. Thats why instead of putting up a restaurant-like caf, the proponents consider having the food cart type store. With this, the proponents can be able to provide their target market with aromatic coffee drinks and tasty doughnuts in an affordable price that will satisfy their cravings.

Brief Background of the Study The establishment of coffeehouses can be traced back in Turkey where coffee was such an important item during that period. Turkish coffee was served strong, black and unfiltered. The idea of doctoring up one's coffee with cream and sweeteners came into fashion in Europe around 1529, when the first coffee house in Europe was established. Coffee establishments continue to spread and its popularity grows. The main reason people went to coffeehouses during early times was to conduct business meetings. Due to its popularity, many individual developed a habit of drinking coffee thus more coffeehouses existed. They did not only serve coffee, there are a few who also offered dinner menu. Nowadays, most coffee chains serve cakes and cookies along with their coffees. On the contrary, not all coffee drinkers can afford to take a sip at these cozy coffeehouses because of high prices of their coffees. Thats where the proponents get the idea of establishing a food cart type of store so that they can provide the target customers with an affordable aromatic coffee and a flavorful snack, doughnut.

Objectives of the Study The primary objective of this study is to determine the feasibility of Production and Establishment of Coffee and Doughnuts corner at Batangas State University ARASOF Nasugbu, Batangas. The specific objectives of the study are the following: 1. To put up a food cart type store for coffee and doughnuts at the BatStateU ARASOF. 2. To improve the quality of coffee and doughnuts being offered. 3. To have an established name in the local market.

Definition of Terms Coffee and Doughnuts corner. It is a food cart/stall that offers coffee and doughnuts. Coffeehouse. It is an establishment which primarily serves prepared coffee or other hot beverages. Compensation. It is a salary or wages that the employer pay to the employee for the work they perform.

Concoct. It is the act of making something by combining ingredients, to invent or to devise mixed beverage. Costly. It is costing a lot of money, or costing too much money; expensive. Depreciation. It refers to a fall of value, especially of an asset through wear and tear; an allowance for this deducted from gross profit. Entrepreneur. It refers to a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome. Espresso. It is a strong coffee brewed by forcing steam under pressure through darkly roasted, powdered coffee beans. Food cart type store. It is a type of store that is set up in one place to facilitate the sale and marketing of one product. Miscellaneous. Costs that are grouped tofether on a balance sheet because of a lower monetary value. Pastry. It is baked goods such as pies, tarts, or turnovers, made with paste of flour, water, and shortening. Satisfy. It is the feeling of a customer who has got what he wanted.

Scope and Limitation The study focuses on the production and establishment of coffee and doughnuts corner. Instead of putting up a restaurant-like caf, the proponents are constructing a food cart type of store wherein coffee and doughnuts will be available. The proposed business includes both production and marketing of coffee and doughnuts. The doughnuts that the proponents are producing are deep-fried ones. Different flavored dips will also be available for the doughnuts. Customers may choose the dip they wanted and will also provide candy sprinkles to make it more attractive.

Chapter II MARKET STUDY This chapter deals with the marketing aspect of this study, the Production and Establishment of Coffee and Doughnuts corner at BatStateU ARASOF.

Objectives This chapter aims: 1. To identify the target customer, target market area and market share. 2. To gather more market information needed for marketing analysis. 3. To determine if there is a demand for the product the proponents are offering. 4. To develop the marketing programs and strategy to be used in promoting the products.

Research Method The proponents used the descriptive method in gathering data for the study.

Participants of the Study The respondents of the survey were students from BatStateU-ARASOF Nasugbu, Batangas who are also the target market of this study.

Data Gathering Instrument This study used survey as primary instrument in gathering data from the target market. The survey was conducted to know the perception towards the product. Interview is used to support the survey done. Please see Appendix A.

Data Gathering Procedure The permission from the Associate Dean for the approval of the feasibility study title was sought before conducting the study. In order to get the necessary data needed in the study, the proponents conducted a survey to the target customer. The proponents first got the total number of population of the target customer. The proponents wrote a letter to the University Registrar to get the total number of student enrolled at BatStateU ARASOF Nasugbu during the A.Y. 2010-2011. They used the Rule of Thumb Method by John Curry for them to determine the sample size that will be used in the survey. The proponents also prepared a survey questionnaire. The survey questionnaire made was checked by the adviser. The survey questionnaire was distributed to the respondents and had it answered by them. Interview was also done to support the data gathered. After the respondents answered the survey questionnaire, the proponents collected it and interpreted the data gathered that was used in the study.

Statistical Treatment of Data The statistical process utilized in dealing with the data gathered is the percentage method. The formula is presented as:

PERCENTAGE = _________Frequency_______ Total number of respondents

In getting the sample size of the total population, the Rule of Thumb Method by Dr. John Curry was used. An adequate sample of 3,891 students enrolled at BatStateU ARASOF for A.Y. 2010-2011 would be a random sample of 5% or 195 students. The table for Rule of Thumb Method is shown in Table 2.1. Table 2.1 Rule of Thumb Method Size of Population 0-100 101-1000 1001-5000 5001-10000 10000+ Sampling Percent 100% 10% 5% 3% 1%

Major Consumers of the Product The major consumers of the product were the students of Batangas State University ARASOF Nasugbu, Batangas.

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Demand The following data were gathered based on the survey done:
5% Respondents who are willing to patronize Coffee and Doughnuts corner Respondents who are not willing to patronize Coffee and Doughnuts corner

95%

Figure 2.1 Willingness of the Respondents in patronizing the Coffee and Doughnuts Corner 185 respondents answered they are willing to patronize the coffee and doughnuts corner. 10 respondents answered they are not willing to patronize the coffee and doughnuts corner. Based on the result of the survey conducted, there is a high demand for the coffee and doughnuts corner in the target market. Because of this, the proponents saw that there will be customers who are going to patronize the said business. The proponents also found out that the target customers liked the idea of drinking their coffee with doughnuts.

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Supply From the survey conducted by the proponents, it was realize that small number of competitors exist in the target place thus only few are offering coffee and doughnuts inside BatStateU ARASOF Nasugbu.

22% 22% 56%

Canteen (doughnuts) Canteen (coffee) other stores inside the campus (coffee)

Figure 2.2 Available Supplies of Coffee and Doughnuts Market Gap

5% Supply Market gap 95%

Figure 2.3 Market Gap for Coffee and Doughnuts The market gap analysis as shown in Figure 2.3 illustrates the unsupplied demand in the target market.

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Market Share The figure below illustrates the market share for coffee and doughnuts corner.

Market Share
2% 4% 5%

Canteen Bite 'n Sip Unsupplied Market Gap 89% others

Figure 2.4 Market Share for Bite n Sip As presented in Figure 2.4, the proposed business gathered 5% of the market share because it can provide unsupplied market in the

SWOT Analysis SWOT Analysis is another strategic planning method that can was used to evaluate the Strengths, Weaknesses, Opportunities and Threats of a business. For this study, offering coffee and doughnuts with an affordable price is one of its strengths. Moreover, the students and the employees of BatStateU ARASOF drink coffee. With these, the proponents choose to establish the proposed

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business inside the university. However, being a newly established one, the business may not be patronized because it is not well known. On the other hand, having few competitors inside the campus, the business has the opportunity to have more customers. In addition, the Coffee and Doughnuts food cart/stall is the first inside the university thus the target customers can be attracted to buy the proposed business products. Because only few offer coffee and doughnuts inside the university, there is a good chance that the target customers will patronize the food stall/cart. Though only few

competitors exist in the target place, these competitors do have a well established reputation in the business and that can be a threat to the business. Since the store is a food cart/stall type, it would be quite difficult for the proponents to deal with unexpected weather conditions such as heavy rain and flood.

Marketing Strategies The following are the marketing strategies used in the study: 1. Product Strategy Doughnuts and Coffee is the main product of this food stall. Different flavored dips are also available for the doughnuts. Customers are free to choose the dips they want and they can also choose the

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toppings for their doughnuts. In addition to that, different coffee preparations like hot, iced and blended is also available in the proponents stall. (See Table 2.2 and 2.3 for the menu list). 2. Place Strategy The food cart or food stall will be located inside the Batangas State University ARASOF Nasugbu, Batangas. 3. Promotion Strategy The proponents will administer several promotional activities so that target customers will know that Bite n Sip already exists. Posters will be placed around the campus and flyers will be distributed to the target customers. The proponents will also give some promos such as free tasting to the customers. Furthermore, for every purchase of a large size blended coffee, customer will have a free doughnut. The promo will only last for one week on its opening week. Word-of-mouth will be also considered as one of the promotional strategies since it has become one of the effective ways of getting a business known. 4. Price Strategy Bite n Sip formulated the prices based on the costing done by the proponents. The doughnuts price is Php 10.00 each and for the mini

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bite size is Php 5.00 each. The coffees price ranged from Php 25.00 Php 55.00 depending on the kind of coffee that the customer will order. Table 2.2 Menu List for Coffee Beverages Product List Size and Price

Hot Coffee
Black Coffee Cappuccino Moccaccino

Small
Php 30.00 Php 28.00 Php 30.00

Medium
Php 35.00 Php 30.00 Php 35.00

Iced Coffee
Mocha Igloo Caramel Igloo Coffeemilk Igloo Strawberry Igloo

Medium
Php 30.00 Php 35.00 Php 30.00 Php 30.00

Large
Php 40.00 Php 40.00 Php 35.00 Php 35.00

Blended Coffee
Strawberry Ice Storm Cookie Ice Storm Mallow Ice Storm Caramel Ice Storm Chocolate Ice Storm

Medium
Php 45.00 Php 45.00 Php 40.00 Php 45.00 Php 40.00

Large
Php 55.00 Php 50.00 Php 45.00 Php 50.00 Php 45.00

Table 2.3 List of Doughnut Flavors Doughnuts Flavor Dip Flavors Chocolate Strawberry Milk Caramel Mocha Add-Ons Candy Sprinkles Nuts Mallows Cookies Size and Price Doughnut Mini Bites Php 9.00 Php 5.00 Php 9.00 Php 5.00 Php 9.00 Php 5.00 Php 9.00 Php 5.00 Php 9.00 Php 5.00

Php 1.00 Php 1.00 Php 1.00 Php 1.00

Php 1.00 Php 1.00 Php 1.00 Php 1.00

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Chapter III TECHNICAL STUDY This study explains the technical aspects of the proposed business which includes the description of production process, production schedule as well as the machineries and equipments needed in the production.

Objectives This chapter aims: 1. To give the technical description of the product. 2. To describe the process of production and the business process flow. 3. To determine how the product could be produced at a highest possible quality level with minimum cost. 4. To identify the equipment, tools and devices that will be utilized in the production process. 5. To present/develop the design of the food cart.

Description of the Product The main products of the business are coffee and doughnuts. The proponents will offer coffee based beverages. There will be a variety of coffee blended drinks that the customers are free to choose from. Espresso will be used

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as the main ingredient for the coffee blends. Aside from ice cold coffee, hot coffees are also available in the food stall/cart. On the other hand, doughnuts are deep fried flour mixture and they are served with different flavored dips and sprinkles. Coffee and doughnuts can be a perfect pair for breakfast or snack.

Description of Production Process The flow chart below presents the production process.
START

Preparing of Ingredients

Dissolving of yeast

Combining of ingredients

Kneading of dough

Fermenting of yeast

Cutting of dough

Frying of doughnuts

END

Figure 3.1 Flow Chart for the Production of Doughnuts

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The ingredients (milk, sugar, salt, egg, melted butter, vanilla, cake flour, all purpose flour and the baking powder) will be first prepared and then dissolve the yeast and sugar in half of the milk, set aside. In a bowl, combine all purpose flour and cake flour to make the flour mixture needed. In a separate bowl, mix the remaining milk, sugar, salt, egg, melted butter, vanilla, half of the flour mixture and the baking powder. Add the yeast and continue adding the flour until mixture doesnt stick the sides of the bowl. Transfer the dough to a working table and knead, adding in remaining flour for dusting, until smooth and elastic. Place in a greased bowl and allow rising for 30 minutes - 1 hour or until double in bulk. Roll out the dough and mold it into circle. Leave to rest until sizes of doughnuts double. Heat oil in a deep fryer. Fry doughnuts until golden brown. Dust with sugar or dip with your favorite flavors available at the food stall/cart. For the production of coffee based beverages, the flowchart on the next page shows the process to be executed.

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START

SELECTION

HOT

COLD

BLACK COFFEE Espresso Making Serve END

FLAVORED Espresso Making


Pour Steamed Milk

ICED Espresso Making Pour Milk Add Ice Add Espresso END

BLENDED Espresso Making Prepare Blend Put in a Glass Add Whip Cream END

Add Flavor END

Figure 3.2 Flowchart for Production of Coffee based Beverage The customer will choose what kind of coffee he/she will buy. There are two kinds of coffee the customer can choose from, hot or cold. If the customer prefers to have hot coffee, he/she can choose from black coffee or the flavored one. For black coffee, espresso will be first made then it is ready to be served with sugar and creamer. On the other hand, if the customer wants to have a flavored hot coffee, espresso will also be made first then steamed milk and

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flavorings will be added. Moreover, if the customer wants to have cold coffee, he/she can choose between iced and blended coffee. For iced coffee, espresso will be first made. After that, milk will be poured and flavoring will be added along with ice and the espresso. If the customer prefers to have blended coffee, while the espresso is being made, other ingredients such as sugar, milk and flavorings will be prepared. After the preparations of the ingredients, it will all be blended together with the espresso. When it is smoothly mixed, pour it in the glass, add whip cream and toppings.

Production Schedule The production of doughnuts will be scheduled at four in the morning (4:00AM) weekdays. The proponents will produce 6 dozens or 72 pieces of doughnuts per production schedule. While coffee drinks will only be made in the food cart/stall upon order of the customer.

Machinery and Equipment In producing and establishing the coffee and doughnuts corner, the proponents need to use different machinery and equipment.

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Table 3.1 List of Machinery and Equipment NAME Espresso Maker Blender Deep Fryer Ice Cooler TOTAL:
*Source: www.sulit.com

QUANTITY 2 2 1 1

PRICE PER UNIT Php 8,000.00 3,000.00 6,000.00 1,900.00

TOTAL AMOUNT Php 16,000.00 6,000.00 6,000.00 1,900.00 Php 29, 900.00

Factory Tools and Devices Aside from the equipment that will be used in the production, different tools will also be needed in the production process. Table 3.2 List of Factory Tools and Devices NAME Measuring Cups Mixing Bowl Tray Weighing Scale Tong Doughnut cutter Kneading Table TOTAL:
*Source: www.sulit.com

QUANTITY 1 set 2 3 1 2 1 1

PRICE Php 178.20 309.15 139.50 500.00 50.00 160.00 1,500.00

AMOUNT Php 179.00 619.00 419.00 500.00 50.00 160.00 1,500.00 Php 3, 427.00

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Furniture and Fixtures Since the proponents will have a food cart/stall type of store, only few furniture and fixture will be used. A chair for the storekeeper will be placed in the store area. In addition, a food showcase will also be positioned in the food cart/stall. This will serve as storage and display area for doughnuts in order to maintain its freshness. Table 3.3 List of Furniture and Fixture NAME Monobloc Chair Food Showcase TOTAL:
*Source: www.sulit.com

QUANTITY 1 1

AMOUNT Php 150.00 7,500.00

TOTAL Php 150.00 7,500.00 Php 7,650.00

Raw Materials Almost all of the raw materials needed in the production of coffee and doughnuts are available in the grocery or public markets. The primary ingredient needed in the production of doughnuts is flour such as All Purpose Flour and Cake Flour. Others are yeast, sugar, milk, butter, egg, salt, vanilla, baking powder and oil. For the production of coffee based beverages, the raw materials to be used are grinded coffee, ice, chocolate sauce, sugar and other flavorings

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such as strawberry syrup and caramel syrup. The Raw Materials presented in the table below are good for 20 days of production. Table 3.4 Raw Materials for Doughnuts and Coffee Raw Materials Cake Flour All Purpose Flour Baking Powder Sugar Yeast Vanilla Extract Milk Salt Egg Butter Cooking Oil Water Chocolate Sauce Condensed Milk Coffee beans Strawberry Sauce Caramel Sauce TOTAL Quantity 1 sack/ 25 kilos 1sack/ 25 kilos 1 bag 1 sack/ 35 kilos 1 bag 2 liters 5 liters 1 pack 1 tray 20 bar 1 gallon 1 gallon 1.5 liters 3 cans 5 kilos 1.5 liters 1.5 liters Amount Php 1,040.00 1,040.00 65.00 2,100.00 150.00 90.00 325.00 10.00 120.00 440.00 500.00 25.00 270.00 105.00 1,500.00 250.00 270.00 Php 8,300.00

Indirect Materials Indirect materials were also used in order to make the production with the good service possible. For the production of doughnuts, the proponents used

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different toppings to enhance the taste of the doughnuts. The customers are the ones who will choose the dips they want. Moreover, another indirect material to be utilized is whipped cream, chocolate sauce and marshmallows which will serve as the coffee drinks toppings.

Indirect Material Whipped Cream Mallows Crushed Cookies Nuts Paper Bag Clear Cup and Paper Cup Lid Straw and Stirrer Sugar and Creamer Sachet Tissue Paper TOTAL:

Quantity 5 bottles 1 bag 1 bag 1 bag 100 pcs. 400 pcs. 200 pcs. 200 pcs. 2 packs 1 pack

Amount Php 1,250.00 45.00 55.00 35.00 40.00 1000.00 319.00 65.00 210.00 60.00 Php 3079.00

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Office Supplies The office supplies that will be needed in the food cart/stall are presented in the table below. Table 3.6 List of Office Supplies NAME Pens Record Book Folders Stapler Correction Fluid Staple wire Pentel Pen TOTAL:
*Source: www.nationalbookstore

QUANTITY 2 1 2 1 1 1 box 2

AMOUNT Php 5.00 53.00 5.00 55.00 33.00 7.00 34.00

TOTAL Php 10.00 53.00 10.00 55.00 33.00 7.00 68.00 Php 236.00

Miscellaneous The miscellaneous expense of the proposed business includes the emergency funds for the machinery and other emergency expenses.

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Promotion The promotional strategies that will be employed are posters and flyers. Tarpaulins will be printed and it will serve as posters that will be displayed in some visible areas in the campus. Flyers will also be produced in small sizes of papers and will be given to that target customers. This is one of the ways the proponents can inform their target customer that the product already exists. Aside from that, the proponents will also conduct promos which will only last for one week. This is upon the opening of the food cart/stall. Refer to Appendix K and L for sample poster and flyers.

Plant Layout and Plant Location For the plant layout, refer to Appendices B, C, D, E, F, G, H, and I. The food cart/stall will be located inside the BatStateU ARASOF campus. The proponents choose to have the food cart/stall placed at Mini Forest Park because many students spend their vacant periods in the said area. For the plant location, refer to Appendix J.

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Utilities Some of the utilities that will be used in the production are water, LPG, and electricity. Water will be used in cleaning the equipment as well as the tools and devices needed in the production. It will also be used as one of the materials in the production. Another is LPG which will be used in frying the doughnuts. Electricity will also be utilized. It will be used so that the equipment can function well.

Waste Disposal In view of the fact that the proponents are establishing the coffee and doughnuts corner inside the BatStateU ARASOF, it is important that it complies with the universitys requirement in terms of proper waste disposal. The proponents will provide two trash bins beside the food cart/stall this is to avoid littering of the cups and containers that are used by the customers. In addition to that, the proponents plan to recycle the plastic waste by selling it to a junk shop.

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Direct Labor Requirements Aside from the raw materials and indirect materials that will be utilized, direct labor will also be necessary. The proponents will employ a staff that will help them in running the business. The store keeper will be the one in-charge of attending to the customers and will also be trained in concocting different kinds of coffee beverages. The proponents will also train another staff in order to help them in the production of doughnuts.

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Chapter IV MANAGEMENT STUDY This chapter discusses the management aspect of the proposed business. Objectives of the Study General Objective This chapter aims to develop a clear and precise identification of duties and responsibilities among the staff. It also tackles the flow of authority and manpower requirement. Specific Objectives This chapter aims: To identify and discuss the form of business ownership. To determine the organization structure and benefits to be given to the staff. To identify the duties and responsibilities of each member and personnel. To set organizational policies in order to have a harmonious working environment.

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Form of Business Operation The proponents prefer to have a partnership form of business. Partnership is deemed as an advantageous form for the proponents mainly because it is very much easy to establish. In addition to that, the capacity to raise fund for the proposed business is increased because partners can contribute more funds. The proponents can also combine their skills in order to have a wider pool of knowledge needed in the proposed business. With partnership, the proponents can have moral support for each other since they are business partners and it will allow a healthier brainstorming.

Organizational Structure

Manager
Storekeeper Production Staff

Figure 4.1 Organizational Chart The figure above shows the organizational structure of the business. It also shows the relative ranks and position in the business. Since the proposed business is a small one, there is no need of hiring more staff. For the smooth flow

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of the production process, the proponents will act as general manager, production manager and store manager.

Manpower Requirement The proposed business requires a manager, storekeeper and production staff. Position Title: MANAGER Job Description 1. Responsible for the management and operation of the store. 2. Maintaining an active customer service. 3. Preparing and reviewing the financial statements. 4. Checking the sales and inventory of supplies daily. 5. Planning of strategies needed to improve the business. Job Specification 1. Must have knowledge in business operation and management. 2. Strong effective communicator. 3. Demonstrates ability to manage and supervise a staff team. 4. Demonstrates ability to share skills and knowledge with others.

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5. Willing to multi-task. Position Title: STOREKEEPER Job Description 1. Attends to the needs of the customers. 2. Prepares coffee drinks and other beverages. 3. Maintains the cleanliness and orderliness in the store area. 4. Handles the everyday sales and profit. 5. Makes a daily sales report and inventory of supplies. Job Specification 1. With knowledge on established material handling procedures. 2. With knowledge on inventory control procedures. 3. With knowledge of the operation, adjustment, and maintenance of the equipment operated. 4. Has the ability to operate machines and related equipment to produce the desired results. 5. Has the ability to perform simple arithmetic calculations. 6. Has the ability to follow instructions. 7. Has the ability to write legibly. 8. Has the ability to communicate effectively with others.

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Position Title: PRODUCTION MANAGER Job Description 1. Helps the proponents in the production of doughnuts. 2. Maintains the cleanliness and orderliness in the production site. Job Specification 1. Has the ability to follow instructions. 2. Knowledgeable with the basics of baking.

Compensation The proponents will compensate the staff/employee depending on the scope of the duties. The store manager and the production staff will be given Php 15.00 per hour each daily. For the general manager, he will be given Php 200.00 per business day. The salary of the staff will be given every 15th day and the last day of the month.

Benefits Since the proposed business is small and a newly established one, only few benefits will be given to the staff. Each staff, specifically the store manager and production manager will have a free meal during the time of their duty. The

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store manager will have a free lunch while the production staff will have a free breakfast. In the event that the proposed business expands, the proponents will have the ability to compensate the staff more. They will give back to their employees in terms of awarding them with more benefits.

Organizational Policies Like any other business establishments, the proponents constructed the following rules and regulations to be followed by the staff and employee.

General Policies 1. Every employee shall report to the work on time and should leave the work place at the proper time of dismissal. 2. Absence without official leave is not allowed by the authority. Employees should inform the Management about their absence a day before he/she leaves. 3. If the employee is absent for any apparent reason, the employee will not be compensated. 4. Every employee shall observe the wearing of proper working clothes and shall be properly groomed.

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5. Since the business is located inside the BatStateU ARASOF campus, the storekeeper shall also observe the proper dress code imposed by the University.

Administrative Policies 1. Every employee shall perform the duties and responsibilities efficiently and effectively. 2. Every employee shall keep in mind that he/she represents the business name. 3. If any of the equipment got damaged due to the staffs recklessness, the staff will be liable for the said damages. 4. In case there will be loss in sales; the storekeeper will be liable for the said loss. But, in case the sales exceed the actual amount it will be given automatically to the storekeeper.

Operational Policies 1. Satisfactory performance shall be observed in the workplace. 2. Every employee shall work 8 (eight) hours daily, from 8am to 5pm. In the case of the production staff, he/she will work at the time of the production only.

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3. Every employee shall use mobile phones and other electronic communications and media devices properly and discreetly. 3. The store and production manager shall wear apron and hair net while performing their duties.

Legal Requirements Before the establishment of the proposed business, the proponents need to furnish the following legal requirements in order to start the business operations: 1. Municipal License 2. Regulatory Fees Mayors Permit CTC/Cedula Police Clearance DTI Registration BIR Registration Sanitation Fire Permit

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Generalization The proponents decided to have a partnership form of business wherein they will contribute an equal amount of money that will be used in the establishment of the business. Moreover, the said form of business will allow them to share their ideas and come up with better and sound decisions. This chapter also includes the compensation and benefits that will be given to the staff as well as the duties and responsibilities of each of them. In addition to that, the organizational structure of the proposed business is also presented in this chapter.

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Chapter V FINANCIAL STUDY This chapter discusses the financial aspect of the proposed business, the total project cost and financial assumption for the first five years of operation. This chapter will conclude if the proposed business is profitable or not.

Objectives of the Study 1. To determine the total project cost of the proposed business. 2. To identify the source of financing and the capital requirements that will be utilized in the proposed business. 3. To illustrate the financial statements and financial assumptions of the business for the first five years of operation. 4. To analyze the financial ratios of the proposed business.

Total Project Cost The total project cost of the proposed business is presented on the next page. It includes all the necessary components in order to complete the business operation.

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Table 5.1 Project Cost of Bite n Sip


Bite 'n Sip Project Cost Fees and Licenses Equipments Coffee machine Blender Deep fryer Ice cooler Food Cart Furniture and Fixtures Chair Food showcase Working Capital Materials Traveling Advertising Utilities Office supplies Tools and devices Wages Miscellaneous Total Project Cost Php Php 16,000.00 6,000.00 6,000.00 1,900.00 3,041.00

29,900.00 7,460.00

Php

150.00 7,500.00 110,752.82 2,160.00 750.00 480.00 870.00 1,427.00 9,000.00 360.00 Php

7,650.00

Php

125,799.82 173,850.82

The table above shows the total project cost of the proposed business. The working capital presented above includes all the expenses that will be incurred in the first month of operation.

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Capital Requirements The overall capital requirement needed for the proposed business is Php 160,000.00. The mentioned amount is enough to cover all the necessary expenses needed in the operation of the said business.

Sources of Financing In order to realize the proposed business, the proponents agreed to contribute cash amounting to Php 53,333.33 each for a total of Php 160,000.00 as starting capital to establish a business.

Financial Assumptions The assumptions are made by the proponents of the study. Increase in sales is resulted from the 3% increase in quantity and unit selling price per year. Cost of sales, like sales is increased annually. Expenses such as wages and depreciation remains fixed.

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Other expenses such as utilities, travelling and miscellaneous are increased by 3% annually.

Income tax expense is computed by having 30% based on income before tax.

Financial Statements The Financial Statements for the proposed business is presented on the next pages. The Financial Statements are for the first five years of operations. For the Financial Statements see page 42.

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43

44

45

Notes to Financial Statement 1. Statement of Sales. See page 47. 2. Statement of Cost of Sales. See page 48. 3. Expenses For breakdown of equipment, furniture and fixture see Table 3.1 page 21, and Table 3.3 page 22. Liabilities are composed of Income Tax Payable which is paid during on or before 15th day of April of the next year. The partners equity which is increased by a net income that is shared equally by all of the partners. Income is composed of sales or computation of sales, see Figure 5.1 page 41, and is increased by 3% annually in quantity and unit selling price. Expenses are composed of cost of sales see Figure 5.1 page 41, fixed (wages, depreciation and miscellaneous), and variables (cost of sales, income tax) which is increased by 3% annually. 4. Statement of Inventory. See page 49.

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5.Non-current Assets

Non Current Assets Equipments Food Cart Furniture and Fixtures Less: Accumulated Depreciation

1 29,900.00 7,460.00 7,650.00 1,511.00

2 29,900.00 7,460.00 7,680.00 3,022.00

3 29,900.00 7,460.00 7,680.00 4,533.00

4 29,900.00 7,460.00 7,680.00 6,044.00

5 29,900.00 7,460.00 7,680.00 7,555.00

6. Income Tax Payable The tax for the first three quarters has been paid and the remaining quarter will be payable on April 15 next year. 7. Statement of Changes in Partners Equity. See page 50. 8. Production Cost. See page 51.

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48

49

50

51

52

53

54

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Ratios Financial Ratios A. Profitability Ratio Profitability ratio shows the combined effects of liquidity, asset management, and debt on operating results. Table 5.2 Return on Investment Return on Investment 80% 87% 93% 100% 107%

Year 1 2 3 4 5

Net Income 128,581.26 139,213.79 149,446.07 160,313.82 171,856.11

Investment 160,000.00 160,000.00 160,000.00 160,000.00 160,000.00

Table 5.2 Return on Investment refers to the percentage of income that serves recovery from the original investment. On the first year, there is 80% return on the partners investments and there is a gradual increase in the succeeding year. This is an implication that the partner receives such percentage as a return to the investment contributed. To show the computation of the present value, please see Appendix N.

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B. Profit Margin Ratio Profit Margin ratio measures net income per peso of sales, it is computed by dividing net income by sales. Table 5.3 Profit Margin Ratio Year 1 2 3 4 5 Net Income 128,581.26 139,213.79 149,446.07 160,313.82 171,856.11 Sales 767,081.00 813,796.23 863,356.42 915,934.83 971,715.26 Profit Margin Ratio 16.76 : 1 17.11 : 1 17.31 : 1 17.50 : 1 17.69 : 1

Table5.3 Profit Margin Ratio refers to the ratio of net income for every peso of sale. For year 1, in every peso of sale 16.76% of it is its net income.

C. Liquidity Ratio Liquidity ratio shows the relationship of a firms cash and other current assets to its current liability.

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Table 5.4 Current Ratio Year 1 2 3 4 5 Current Assets 258,858.83 400,692.81 552,746.20 715,735.42 890,339.20 Current Liabilities 13,776.56 14,915.76 16,012.08 17,176.48 18,413.15 Current/Quick Ratio 18.78 : 1 26.86 :1 34.52 : 1 41.66 : 1 48.35 : 1

Table 5.4 Current Ratio refers to how much peso of current assets is to be paid for any peso of current liabilities. The table above shows that the proposed business is capable of paying its short term debts.

D. Stability Ratio Stability ratio proves that the business is stable by finding the debt to equity ratio; it is computed by dividing the total liabilities to total partners equity. Table 5.5 Debt to Equity Ratio Year 1 2 3 4 5 Total Liabilities 13,776.56 14,915.76 16,012.08 17,176.48 18,413.15 Total Partners Equity 288,581.26 427,795.05 577,241.12 737,554.94 909,411.05 Debt to Equity Ratio 4.77: 1 3.49 : 1 2.77 : 1 2.33 : 1 2.02 : 1

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Table 5.5 Debt to Equity Ratio of the proposed business as presented on the previous page shows that the business is a stable one and has the ability to pay its long term debt.

Generalization The proposed business has a total project cost of Php 173, 850.82. The proponents agreed to contribute Php 53,333.33 each; the said amount will be used as the capital for establishing the said business. In this chapter, the Financial Statements for the first five years of the business is also presented. Furthermore, financial ratios are also discussed and interpreted.

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Chapter VI Socio Economic Contributions This chapter discusses the social desirability of the proposed business and its contribution to the nations economy.

Contribution to Nations Economy The proposed business can contribute in the nations economy in several ways. One of these is, as a producer of coffee and doughnuts, the proposed business needs to buy raw materials from suppliers thus it also helps other business in gaining profits. Another is it makes available of the products to their customers which they need in a more affordable price. The proposed business also employs workers who can help them in the business. In that way they are able to give work opportunity to those who are unemployed. By establishing the business it becomes subject to several taxes which goes to the government and being utilize for construction of different infrastructures.

Employment Generation The proposed business will employ two staff who will help the proponents

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in the operation of the business. Since it is a newly established business the proponents will not employ a huge number of employees. But as soon as the business grows and the proponents plan to expand the business, there will be a need for more employees. Thus the proponents will hire additional staff. In that way, the proposed business can somehow help in reducing the unemployment rate in the community where the business is located.

Social Desirability The proposed business is socially desirable to the government, the customer and to its employees. With the taxes that the business will pay, the government will use the said funds in building infrastructure that will benefit the citizens. By establishing the proposed business, the proponents will be able to provide the target customers with products that will satisfy them. On the other hand, the employees that the proponents will employ will be compensated properly and will be given benefits that can somehow help them improve their way of living.

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Other Contribution Aside from the business contribution to the economy and its social desirability it can also contribute in other ways. The proposed business can contribute to the community where it is located by making the products available to its customers and it provides them with a wide selection of food to choose from. In addition to that, the business can also contribute in the environment by disposing the waste materials properly. The business will also promote the said environmental awareness to its target customers.

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