Marketing

Three months EndedMarch 31

$ thousands 2011 2010 Change

Net sales revenue 8,802 10,545 (1,743)

Big Rock is losing money – Why?

• Decline in sales

• Value brands

Distillers competitor analysisBeer Units/

CaseSize (ml)

Base Price

Warsteiner Premium (Germany) 12 341 26.80

Big Rock – Grasshopper - Craft 12 341 24.13

Big Rock – Honey Brown Lager - Craft 12 341 24.13

Big Rock – Alberta Genuine Draft – “Value”

15 341 24.19

Lucky Lager – Labatt 12 341 19.38

Labatt Blue 12 341 22.98

Kokanee - Labatt 12 341 22.98

Great Western Lager, Pilsner, etc. 12 341 22.49

Coors Light 12 341 22.59

Budweiser – Labatt 12 341 22.98

Sleemen Clear 12 341 22.00

The marketing mix

• Products/Services

• Pricing

• Place

• Promotion

Operations

Location

• Four potential locations

• Clients, atmosphere and competition

Belgo Metropolitan Grill Unicorn Pub Dakota Bar and Grill

Flames CentralChicago Chophouse Zen 8 Earl’s

Detailed operations

• Hours – Lunch and dinner

• Menu and foodSpecialty menuFresh local ingredients

Floor plan

Human Resources

General Manager

Manager Kitchen Manager – Lounge

Chef

Cook

Prep Cook

Dishwasher

Bartender

Server

Hostess

General Manager

– Kitchen Manager – Lounge

Chef

Cook

Prep Cook

Dishwasher

Bartender

Server

Organizational chart

Finance

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Sales

Beverage 459,900 492,093 526,540 568,663 614,156 669,430

Food 3,942,000 4,217,940 4,513,196 4,874,251 5,264,192 5,737,969

TOTAL 4,401,900 4,710,033 5,039,735 5,442,914 5,878,347 6,407,399

COGS

Beverage 65,700 69,971 74,519 80,107 85,915 93,003

Food 1,971,000 2,099,115 2,235,557 2,403,224 2,577,458 2,790,098

TOTAL 2,036,700 2,169,086 2,310,076 2,483,332 2,663,373 2,883,102

Gross margin 2,365,200 2,540,948 2,729,659 2,959,582 3,214,974 3,524,297

Gross Margin % 53.7% 53.9% 54.2% 54.4% 54.7% 55.0%

GM % - Food 50.0% 50.2% 50.5% 50.7% 51.0% 51.4%

Gm % - Beverages 85.7% 85.8% 85.8% 85.9% 86.0% 86.1%

Operating Expenses

TOTAL 1,839,512 1,952,294 2,072,238 2,205,687 2,347,911 2,506,763

Net Profit/(Loss) 525,688 588,653 657,421 753,895 867,063 1,017,534

Five year divisional analysis

Net Profit/(Loss)

525,688

588,653

657,421

753,895

867,063

1,017,534

DCFs 498,678

529,718

561,204

610,493

666,060

741,487

TOTAL DCFs 3,607,641

Start-up costs (2,500,000)

NPV 1,107,641

WACC 5.416%Dividend Yield 5.53%

Weighted-Average Interest Cost 4.23%

IRR 16.78%

Payback Period 3.97years

Does it make financial sense?

Questions?

Financial assumptionsASSUMPTIONS

Sales Growth COGS Efficiency Factor Spoilage 5%Year 1 5% Year 1 0.50% (annual, % of COGS)Year 2 5% Year 2 0.50%

Year 3 6% Year 3 0.50% Discount RateYear 4 6% Year 4 0.75% 5.416%Year 5 7% Year 5 0.75%

(per year) Salary Growth

Inflation 2% (real, annually) 4%(annual)

Rental Commission dividend yield is 5.53% (per google finance) 5.53%

% of sales 2% Weighted-Average Effective Interest Rate (2011'Q1 report, page 6 of 19)4.23%

Sales per day

Food $ 10,800.00 (based on 180 tables sold per day, @ 3 customers per table) Debt/Capitalization(per same report) Q1 8.60%

Beverages $ 1,260.00 (based on 180 beverages sold per day) page 8of19 Q4'10 9.20%

Average 8.90%COGS per day

Food $ 5,400.00 Debt 3208 8.75%

Beverages $ 180.00 Equity 33452 91.25%

Total Capitalization 36660

Average Selling Price Average Daily Sales WACC 5.416%

Food $20/customer Food 540 customers

Beverages $7/beverage Beverages 180 customers