PIZZA TO GO, INC.
3215 Sturges St.
Pittsburgh, PA 15233
This plan relies on a proven name and business philosophy to propose the creation of a franchise takeout pizza store. The company does an excellent job of establishing the typical area these franchises are started in, then showing the proposed location to be identical. Ideas for capital cost reduction, as well as the proven success of the other franchises, solidifies this proposal's viability.
Pizza to Go, Inc. is a Pennsylvania corporation, having been incorporated in September of 1996, primarily for the purpose of selling pizza, salads, submarine sandwiches, and various other food products, as a licensed franchisee under the franchise name of "Mama's Pizza." The company presently maintains an office in Pittsburgh, Pennsylvania. The president and principal shareholder of the company is Robert Warren.
The company intends to open, over the course of the next three years, several franchised retail pizza establishments in the greater Pittsburgh, Pennsylvania area, with its first store scheduled to open in January of 1997. The company's primary thrust will be to locate each of its stores in newly developing, high density, residential areas, with little pre-existing competition. The company also will maintain high quality control standards, strictly adhering to the Mama's Pizza "formula," which has, to date, proven successful (Mama's Pizza has previously been voted the number 1 best tasting pizza in Pennsylvania). The company also will utilize mid-level pricing.
The name of the franchisor is Mama's Pizza Franchising, Inc., a Pennsylvania corporation formed in 1996 for the purpose of offering and selling Mama's Pizza franchises, and servicing, supporting, and administering all functions inherent in operating the franchise system. William A. Becker is the president, treasurer, director, and 50% shareholder of Mama's Pizza Franchising, Inc.
The names of Mama's Pizza predecessors are William A. Becker, Inc. and the Becker Group, Inc., both Pennsylvania corporations. William A. Becker, Inc. and Mama's Pizza Franchising, Inc. maintain their principal business address in Pittsburgh, Pennsylvania. Since its inception in 1990, William A. Becker, Inc. has been engaged in the ownership and operation of Mama's Pizza stores that specialize in the sale of pizza and other food products in the metropolitan Pittsburgh area. Over the last three years William A. Becker, Inc. has owned and operated two Mama's Pizza stores, located in nearby suburbs. There are presently eight additional franchised Mama's Pizza establishments in the metropolitan Pittsburgh area. Negotiations are pending for additional stores. Another company store is expected to open in January of 1997.
On November 12, 1996 the company did execute with Mama's Pizza Franchising, Inc. the Franchisor's standard franchise agreement with numerous amendments, deletions, and additions. Under the agreement, the company has a protected territory defined as a five-mile radius from each of its stores. Under the agreement, no other Mama's Pizza franchise or company store can be opened within this five-mile radius protected area. Furthermore, the company has negotiated and the agreement provides that the company has a 30-day right of first refusal anywhere within Washington and Westmoreland counties. This right of first refusal will allow the company, if it chooses, to "lock-in" these counties, thereby becoming and remaining the sole Mama's Pizza franchisee in such counties.
Finally, under the agreement, the company is required to pay an ongoing franchise royalty equal to 3% of gross revenues during the first year of operations and 4% thereafter. An industry wide review of franchise fees and royalties reveals that the Mama's Pizza royalty is substantially less than those found with competing pizza franchises.
The company is seeking financing for the express purpose of providing cash funding to allow (1) the acquisition of various machinery, equipment, and supplies and (2) the construction of its first retail pizza establishment.
The total cash financing sought for both the equipment and the "Build-out" is $90,000.
The company's initial store will consist of 1,600 square feet of retail space. Indeed, the company has executed a five-year lease with a five-year renewal option at an annual rent of $12.00 per square foot. This results in a monthly rent charge of $1,600, plus common area charges which are anticipated to approximate $300 monthly. The initial store will be located in a plaza consisting of 7 retail establishments. The plaza includes two other retail food establishments an Outback Steak House which can be described as an "anchor" and Bagel Factory. Neither the Outback Steak House nor Bagel Factory are considered to be direct competitors. Each of their product lines are substantially different and their markets are likewise different. The company is a takeout retail pizza franchise, while both Outback Steak House and Bagel Factory are essentially sit-down restaurants with different product lines. The remaining retail outlets in the plaza include Delta Florist, Century Cellunet, Airway Oxygen, and Benjamin Moore.
The company has examined in detail the geographic area consisting of a two-mile radius from the initial store to determine the extent of competition. It is apparent that little competition exists. The nearest retail pizza establishment west of the initial store is located in a town which is approximately five miles further west. In this town one will find a wide array of pizza establishments, including Little Caesars, Dominos, Pizza Hut, and Hungry Howies. The nearest competing business is approximately one quarter mile to the east and is a nonfranchised, independent pizza establishment known as Jack's Pizza. Approximately two miles to the east are Little Caesars and Papa Mario's. Approximately one and one half miles to the south is a Whatta Pizza. There are no competing pizza establishments within three miles to the north of the initial store.
The company's marketing thrust will be twofold. First, the company will be participating in and benefiting from the franchise wide marketing fund. Under the "agreement," each franchisee pays to the franchisor a marketing fee equal to $.10 per pizza box purchased. This amount is then forwarded to the franchisor by the box manufacturer and utilized for the benefit of the franchise. The advertising is not store specific and is geared toward promoting the franchise name and the franchise's product line as a whole. Second, under the "agreement," the company is obligated to expend 1% of its gross revenues on local advertising. However, the company fully expects to exceed the 1% requirement. Indeed, the company's marketing thrust will consist of fliers, discount coupons, and inserts as well as direct mail promotions.
With respect to packaging, it is important to understand that as a franchisee, the company will be licensed to utilize each and every one of the Mama's Pizza trademarks. Indeed, the "agreement" specifically requires that each of the franchisees strictly adheres to trademark packaging. This is common industry practice.
Editor's note: this plan also includes a Schedule C reflecting the probable pricing structure of each of the company's proposed products. This pricing is mid-tier and represents, in the opinion of the company, good value, when compared to the quality of the company's product line.
Schedule C is a pro-forma income statement, before depreciation charges, reflecting the company's anticipated cash flow generated by the initial store during the calendar year ending December 31, 1997.
|350 DOUBLE OVENS||15,000|
|3 DOOR PIZZA PREP TABLE||1,800|
|3 DOOR SALAD PREP TABLE||1,500|
|THREE COMPARTMENT SINK||675|
|TWO HAND SINKS (125ea.)||250|
|THREE 8' SS TABLES (275ea.)||825|
|ONE 6' SS TABLE||125|
|CAR TOP SIGNS||850|
|FAX MACHINE & CASH REGISTER||600|
|8' X 12' WALK-IN COOLER (INSTALLED)||5,300|
|DELIVERY AND SET-UP||750|
|COUNTERS & CABINETS||2,000|
|HOOD FOR MAKEUP AIR||2,000|
|MISC. LABOR & RELATED SERVICES||7,200|
|Sales-Pop & Bottles||1,800||1,854||1,910||1,967||2,026|
|Total Gross Income||40,400||41,612||42,860||44,146||45,471|
|COST OF GOODS SOLD|
|Total C.O.G. Sold||11,841||12,196||12,562||12,939||13,327|
|Maintenance & Repair||400||400||400||400||400|
|Rent - Office||1,900||1,900||1,900||1,900||1,900|
|Net Operating Income||6,572||8,509||9,959||10,422||10,900|
|Cumulative Net Operating Income||15,081||25,040||35,462||46,361|
|Maintenance & Repair|
|Rent - Office||0||1,975|
|Wages - Gross||1,354||3,000||3,000|