Waffle Empire Huá fū dìguó 华夫帝国

Marketing Plan

Jennifer Gaultiere, Scott Shafer

Working to Give Matthew Holguin

December 4th, 2014

2

Table of Contents Executive Summary…………………………………………………..……………………3

Introduction…………………………………………………………….…………………………..4

Situation Analysis…………………………………………………..………………………..4

Market Summary…………………………………………………..………………………….5

Market Breakdown…………………………………………………..………………..6

Market Analysis…………………………………………………………………………..6

Market Needs…………………………………………………..……………………………6

Market Trends…………………………………………………..………………………….7

Market Growth…………………………………………………..…………………………7

Product Offering…………………………………………………..……………………………9

SCOT Analysis…………………………………………………..…………………………………10

Competition…………………………………………………..……………………………………..11

Keys to Success…………………………………………………………………………………..11

Market Strategy and Tactics…………………………………………………….11

Mission…………………………………………………..………………………………………..12

Target Marketing…………………………………………………..……………………12

Positioning…………………………………………………..……………………………......12

Marketing Mix…………………………………………………..………………………….12

Market Research…………………………………………………..………………………….13

Financials, Budgets, and Forecasts

Financial Objectives…………………………………………………..………………14

Break Even Analysis…………………………………………………..………………15

Sales Forecast …………………………………………………..………………………….16

Marketing Expense Budget…………………………………………………….18

Contribution Margin…………………………………………………..…………..…19

Controls…………………………………………………..……………………………………………….19

Contingency Planning…………………………………………………..…………...…..20

Critical issues…………………………………………………..………………………….….……21

Recommendations…………………………………………………..……………….………22

Appendix…………………………………………………..………………………………….…………23

3

Executive Summary It is the mission of Working To Give to offer creative, unique and quality products and services to generate maximum profit for the sole purpose of giving back to others. With this in mind Waffle Empire, a subsidiary, aims to carry out this same mission. The purpose of this report is to present our suggested product and marketing plan for Waffle Empire, based on the marketing research we have conducted. Waffle Empire is a food cart exclusively inside Downtown Disney that will provide delicious waffle sticks accompanied by a dipping sauce. Waffle sticks will come in a variety of flavors and dipping sauces, with various combinations that create a beautiful array of waffles on display. Some of the flavors available include, the Pizza Waffle, Chocolate Cookie, Cheesy Jalapeno and Oreo cookie. There will also be seasonal options such as the Pumpkin Cookie. The cost for one unit of waffle sticks and one dipping sauce is $0.92. We will be selling our product for $5.70; this leaves a profit of $4.78 per unit. Shanghai is one of the world’s largest financial centers, and forecasted to become one of the world’s leading cities, growth in shanghai opens the opportunity for more growth within Downtown Disney and Waffle Empire. Waffles have become more popular in Shanghai, which prepares the market for our waffle sticks. Waffle sticks with dipping sauces are in the introductory phase of the product life cycle, leaving huge growth opportunities. Waffle Empire has an extremely low start-up cost, making it much easier to break even early in the business. We need to sell 3,435 units in one year to reach our break-even point. However, limited marketing options available due to Disney’s regulations may cause a struggle to build brand equity within a different culture, competing with Disney products. Our objective is to position Waffle Empire as the most delicious and desired convenience food at downtown Disney. The Marketing strategy will seek to achieve this by developing a customer base, generating repeat business, and winning over the Disney Cast Members. The tactics to achieve this include $1 off coupons, and discounts for Disney Cast Members. Waffle Empire will differentiate itself from other food karts with outstanding customer service, competitive prices, variety of flavor options, convenience, and customer loyalty programs. To assess the performance of Waffle Empire we will monitor revenue, expenses, repeat business and customer satisfaction. This will allow us to make changes that will continue to ensure that Waffle Empire makes a profit, does not overspend, and maintains the quality and customer standards set in place. Our ultimate goal is to provide a product that will not only sustain itself but also produce enough in profits to contribute a substantial amount back into the community as all Working to Give companies aim to accomplish.

4

Introduction The purpose of this report is to present our suggested product and marketing plan for Waffle Empire, based on the marketing research we have conducted. The following report contains research on China, Shanghai, Disneyland, and the market for waffles in Shanghai. Research methods used were Internet articles, websites, statistical reports and primary sources from a Chinese student. Research was taken into consideration when developing our product, company, prices, marketing strategies and financial information. Because W2G operates in Downtown Disney, it is important to ensure that our product will produce a large enough profit to not only maintain operation in Disney, but also to generate enough profit to donate half and reinvest the other half. The following assumptions based on research were used in the making of this report:

Assumed that there will be a 6.25% growth increase in the market Assumed that the “Disney Economy” will be similar to that of the U.S. Disney where

guests are willing and ready to spend more money once inside the resort. Assumed that there will be no direct customers selling our exact product. Assumed that Waffle Empire will be given a prime location within Downtown

Disney Assumed that all guests will be operating in Chinese currency. Assumed that we will be able to generate at least $500,000 in profit Assumed that there will be at least 10 million guests at Disney Shanghai in the first

year. Assumed that Disney Shanghai will succeed and do very well in its first year, the

success of Waffle Empire depends on it.

Situation Analysis Working To Give is a company dedicated to raising money for the sole purpose of giving back to others. It embodies the spirit of a non-profit organization while operating as a for-profit organization. Half of Working To Give’s profits are given away while half are reinvested back into the company to continue growth of the business. Working To Give LCC is the parent company for many businesses, including Legendairy Gelato and California Circuit House. The corporation invests 50% of its business profits back into the company and gives 50% away to charity. The corporation already owns churro and kettle corn carts at Downtown Disney in the US. Our mission is to find a product that can be sold just as efficiently as churros and kettle corn in the new Downtown Disney opening in Shanghai 2015. The Disneyland Park gives us a wide base of customers that are ready and willing to spend their money. Our product needs to be convenient for customers, appealing to the eye and unique.

5

Market Summary China’s population contains over 1.35 billion people and Shanghai has 24 million people. 1330 million people live within a 3-hour trip of Shanghai.2 Government officials in China expect at least 7.3 million visitors to Shanghai Disney in the first year. 3 The middle class resident of the shanghai area has about $12,000 (¥73,815.00) in disposable income per year. Urban Chinese residents have about $3,000 (¥18,453.75) in disposable income a year. That may not seem like a lot but cost of living is much cheaper in urban China so $3,000 is fairly good compared to having only about $280 (¥1,722.35) in disposable income for those areas in 1980. 4

Source: China Market Research Group: China has been trending towards more western foods in the past few decades. Companies such as Pizza Hut and McDonalds have done well in China. Several restaurants do sell waffles in China and Hong Kong Disneyland serves mickey themed waffles in its park, so waffles would not be a foreign concept to the Chinese people and would most likely do well as a food cart item.

1 "WPR." Shanghai Population 2014. Web. 26 Oct. 2014. 2 "Disney's Shanghai Bet." CNBC. N.p., Apr.-May 2011. Web. 26 Oct. 2014. 3 "Shanghai Disneyland Project Breaks Ground at Last." BBC News. BBC, 04 Aug. 2011. Web. 26 Oct. 2014. 4 NEW YORK (CNNMoney) -- As China's Economy Has Exploded over the Last 30 Years. "China's Middle-class Boom." CNNMoney. Cable News Network, 26 June 2012. Web. 26 Oct. 2014.

6

Market Analysis Potential Customers

Growth Year 1 Year 2 Year 3 Year 4 Year 5

Local’s 6% 7,500,000 7,950,000 8,427,000 8,932,620 9,468,577 Tourists 6.5% 2,500,000 2,662,500 2,835,562.5 3,019,874 3,216,165.8 All numbers are assumptions based on growth rate of Hong Kong Disney,5 as well as the Shanghai projected amount of visitors6, projected number of guests7 and number of visitors of the World Expo. 8

Market Needs The Disneyland Resorts are busy and full of hungry tourist and regular visitors. Guests at the park are on their feet for the entirety of their stay which can lead to dehydration and hunger. This creates a market need for easy to consume food and drinks. Guests want to buy something they can enjoy while they explore the park. Customers also want to feel like they have a variety of flavors and options to choose from. Due to the high prices throughout the Disney Resort, guests want their chosen product to be not only delicious but also pleasing to the eye. Since the park is located in Shanghai, our product needs to be something that is not often found in China, but something that Chinese people are open to and tourist would enjoy as well.

5 "Related Images." Hong Kong Disneyland Posts Record-breaking Performance in Fiscal Year 2012. N.p., n.d. Web. 22 Nov. 2014. 6 "Most Viewed." Shanghai Visa Plan 'set to Boost Visitor Numbers'|Politics|chinadaily.com.cn. N.p., n.d. Web. 22 Nov. 2014. "Shanghai Airports – International Airports near Shanghai." Shanghai Airports – International Airports near Shanghai. N.p., n.d. Web. 22 Nov. 2014. 7 "Shanghai Disneyland Expects 30 Pct More Tourists." - Xinhua. N.p., n.d. Web. 22 Nov. 2014. 8 "Facts and Statistics of World Expo 2010 Shanghai China." The Official Shanghai China Travel Website. N.p., n.d. Web.

Diet Restrictions15%

Can't affort to spend

5%

Potential Customers

80%

Market Breakdown

7

Market Trends As China’s middle class grows so does their consumer spending output. On average consumers are spending 18 percent more every year and that trend is likely to continue as more people enter the middle class. 9 China’s population does seem to like western comfort foods, companies like U.S. based Yum! Brands, which own KFC and Pizza Hut, currently have a 40 percent share of China’s fast-food chain market. McDonald’s is second with 16 percent market share.10 Europe and America currently make up the two largest areas for snack food consumption at a combined 291 billion but the Asia-pacific market for snack foods is growing in the developing regions like China, which currently have 46 billion in annual snack food sales. 11 Snack foods in general have become more accepted in Chinese culture with its continued economic growth and westernization. With many Chinese entering the middle class, eating between meals has now become common practice. This is due to a busy lifestyle and the many western snack foods that have now become commonplace in China, such as popcorn which has seen widespread success in China.12

Market Growth The snack food market in China has seen increased growth in the last few years. In 2012 China had 12 billion in snack foods sales, which was up 44% since 2008 and is expected to see continual growth. 13Specific products such as the cookie market have seen excellent growth in China with sales reaching 38 billion Yuan in 2012 which is up 53% from five years before. China is increasingly accepting foreign foods and will become the world’s largest consumer of imported foods by 2018. While the meat and dairy market make up a large portion of imported foods to China the sweets market is somewhat underdeveloped but is expected to grow. 14 The disposable income of China’s middle class continues to grow seeing a 10.9 increase from 2012 to 2013. The growth rate of Shanghai where the Disney Park will be located has

9 "National Bureau of Statistics of China Annual Data." National Bureau of Statistics of China Annual Data. N.p., n.d. Web. 27 Oct. 2014. 10 "10 Growing Trends for the Chinese Consumer." CNBC. N.p., n.d. Web. 27 Oct. 2014. 11 "The Fastest-growing Snack Categories in the World." FoodBevcom RSS. N.p., n.d. Web. 27 Oct. 2014. 12 "Snacking An Emerging Trend In China." Snacking An Emerging Trend In China. N.p., n.d. Web. 27 Oct. 2014. 13 The Wall Street Journal. Dow Jones & Company, n.d. Web. 27 Oct. 2014 14 "World of Food Beijing - Powered by Anuga." World of Food Beijing - Powered by Anuga. N.p., n.d. Web. 27 Oct. 2014.

8

also seen growth on par with the national average. The area has a current GDP of 2,010 billion Yuan.15 China’s relatively undeveloped sweets market together with its massive population and their increasing disposable income means incredible potential for growth. Consumption of sweets/snacks is set to rise in the coming years.

Source: www.tradingeconomics.com, National Bureau of Statistics of China

15 "Top 10 Regions in China with Highest Disposable Income 2012." - China.org.cn. N.p., n.d. Web. 27 Oct. 2014.

9

Product Offering Waffle Empire will be exclusively offered in Downtown Disney Shanghai. Waffle Empire will provide delicious waffle sticks. They will come in a variety of flavors and dipping sauces. The various combinations create a beautiful array of waffles on display. Waffle flavors, toppings and dipping sauces are listed below:

Waffle Flavors: Maple Cheddar Cheese Banana Jalapeno Chocolate Chocolate Chip Red Velvet

Topping Options: Butter and Cinnamon Sugar Cookie crumbs Butter and Salt

Dipping Sauces: Cheddar Cheese Pizza Sauce Carmel Chocolate Maple Syrup Frosting Peanut Butter

Combination options: The pizza: Cheddar cheese waffle with Pizza Sauce Oreo Cookie: Chocolate waffle with frosting Chocolate cookie: Chocolate chip waffle with chocolate Cheesy Jalapeno: Jalapeno waffle with cheese sauce. Some Flavors would be seasonal to draw attention to the stand as well as create new interest in existing customers. Seasonal waffle flavors: Pumpkin Apple Cinnamon Chocolate Mint Strawberry Lemmon Blueberry Seasonal Combinations: Pumpkin cookie: Pumpkin waffle with frosting or caramel Peppermint Bark: Chocolate mint waffle with chocolate dipping sauce

10

SCOT Analysis The following SCOT analysis portrays the key strengths and challenges that Waffle Empire will face at Downtown Disney Shanghai. Strengths

Waffle Empire has an extremely low start-up cost, making it much easier to break even early in the business.

Operating partners of Waffle Empire are trained with Disney Cast members and follow the same customer service regulations; this raises the quality of customer service experienced at Waffle Empire.

W2G the parent company has a strong mission statement and values that drive the company, customers who know what the company stands for will be more likely to purchase.

Waffle Empire offers a unique product and exciting experience. Customers have the option of customizing the flavor of their waffle by pairing different waffles with different toppings and dipping sauces.

Challenges Limited marketing options available due to Disney’s regulations. Struggle to build brand equity within a different culture, competing with Disney

products. Opportunities

Waffle sticks with dipping sauces are in the introductory phase of the product life cycle, leaving huge growth opportunities.

Waffle Empire will have a prime location in downtown Disney, and will be exposed to high foot traffic, exposing thousands of people daily to waffle sticks.

Shanghai is one of the world’s largest business cities, and forecasted to become one of the world’s leading cities, growth in shanghai opens the opportunity for more growth within Downtown Disney and Waffle Empire.

Waffles have become more popular in Shanghai which prepares the market for our waffle sticks.

Threats

Competition from other dessert and food retailers in Downtown Disney Shanghai

The difficulty and problems associated with importation into China Waffle Empire relies heavily on the success of Disney in Shanghai, if Disney does

not succeed, Waffle Empire will likely struggle as well. Chinese food taste, will they like it?

11

Competition Operating a business in Downtown Disney gives us the advantage of a large amount of foot traffic. Disney Parks are usually oriented so that guests must walk through Downtown Disney in order to get to the park. Because Disney Resorts are large, there is a large amount of competition. Other carts and stores throughout the resort offer products such as churros, kettle corn, chocolate, Carmel apples, turkey legs, and ice cream. Because guests have a limited amount of money to spend, our competition also includes the shops that sell physical products; these shops have products such as sunglasses, Disney apparel, toys and much more. Another source of competition is the restaurants that are also placed throughout the resort. The restaurants offer food such as hamburgers, salads, pizza, sandwiches, desserts and drinks offered there. Some guests will prefer the sit down experience offered in a restaurant and the more hearty meal they will receive. Customers that chose our product are likely looking to fulfill a sweet or salty craving. They want convenient, easy to consume food that they can carry with them as they walk around the park. This means that our main source of competition is the other food carts and the Disney shops that sell convenient food.

Keys to Success Generate maximum profit in order to invest 50% back into the business and give

away the other 50%. Increase market share within Downtown Disney. Create brand awareness and generate a “buzz” within Downtown Disney. Increase profit margin of product. Increase transaction amount per customer. Impressive food quality and customer service. Constant innovation and creativity to introduce new flavors and products.

Marketing Strategy and Tactics The objective is to position Waffle Empire as the most delicious and desired convenience food at Downtown Disney. The Marketing strategy will seek to achieve this by developing a customer base, generating repeat business, and winning over the Disney Cast Members.

Waffle Empire will attract new customers through the visual display and appealing look of the waffles.

Waffle Empire will generate repeat business by giving customers a receipt with a $1 (¥6.15) off coupon with every purchase. Coupon will be valid for that same day.

Waffle Empire will win over Disney Cast Members by offering 50% off exclusively to cast members.

12

Mission It is the mission of Working To Give to offer creative, unique and quality products and services to generate maximum profit for the sole purpose of giving back to others.

Target Marketing Our target market mainly consists of tourist from the mainland-China, tourists from other countries, and normal Shanghai residents. Our waffle sticks can be eaten by any age group and are easy to consume. We want to target all age groups, and costumers that want to buy something easy to consume.

Positioning Waffle Empire will position itself as a high-quality, innovative and delicious snack at Downtown Disney Shanghai. Waffle Empire will differentiate itself from other food karts with outstanding customer service, competitive prices, and a variety of flavor options, convenience, and customer loyalty programs. Waffle Empire will distinguish itself from competitors:

Waffle Empire customer service and customer orientation will differentiate itself from other companies that do not place the focus on the customer.

Waffle Empire has used pricing strategies to determine the most profit-maximizing price, while maintaining a competitive edge.

Waffle Empire’s competitive edge is based on their unique product offering with flavors to satisfy every taste craving. Instead of exclusively offering desserts, or salty food, Waffle Empire will offer a variety of both.

Waffle Empire will distinguish itself from competitors with long lines and sit down atmospheres as Waffle Empire offers convenience and fast service.

Waffle Empire employs customer loyalty programs in order to secure a large customer following with repeat business.

Marketing Mix Product:

Waffle combinations such as The Pizza and Pumpkin Cookie will help establish creative options for customers

All combinations will be displayed on the front of the cart to attract customers Waffle sticks and dipping sauces will be presented in easy to carry containers with

dipping sauces attached to create convenience while customers walk around the park.

Waffle Empire will be written on the top of the cart as well as on the containers to help establish branding.

Place:

Our product will be sold exclusively at Downtown Disney in Shanghai.

13

Waffle Empire will be located in the middle of Downtown Disney where costumers will constantly be walking by.

Price: Disneyland is a place where people expect to spend their money. They know that

products will be priced higher than outside of the park therefore enabling us to charge more for our product.

There will be discounts for Disney Cast Members and promotional coupons only. Promotion:

Because Disneyland monitors us, we are limited in the promotion and advertisement we can do. We cannot legally put signs or advertisements, so we need to make sure our carts are being seeing and our product is spread through word of mouth.

Promotional measures will be taken as described in the marketing strategy.

Market Research Food Sales at Disneyland Operating revenue for each of Disney’s theme parks usually comes from four areas, admissions charges, merchandise sales, food and beverage, and other various fees such as stroller and locker rentals. From previous years sales it is known that about 24.5 % of revenue comes from food and drink sales.16 Food carts located throughout the park and Downtown Disney convenient to both Disney and the costumers. Convenience is known to be a consumer preference, which explains purchase behaviors and attitudes toward food and related services. Our food carts are fitting for costumers that do not want to sit down eat. They can purchase our products on the go and easily consume our product while exploring or while waiting in lines.

Shanghai Shanghai is located in the middle of China’s east coast and is one of the four most populous cities in China. The city has four different seasons with both sunshine and rain. The city is recognized as the economic leader in China, and is constantly improving. This is good news to the Disneyland resort and would benefit our food carts because we would have a wide range of customers and people coming in and out of the parks. Shanghai has seen a flow in domestic tourists and businesspeople that have boosted the city’s expanding population. More research on China is located in the Appendix. China’s Taxes Taxes are one of the most important sources of economic revenue for China’s Government. China has built up a tax system that adapts to the socialist market economy. This plays an important role in ensuring their revenue, and therefore promoting China’s fast economic growth.

16 http://thewaltdisneycompany.com/about-disney/company-overview

14

There are 25 types of taxes17 but the types of taxes that will affect Waffle Empire are sales taxes and customs duties. Customs duties will only affect us if we chose to import products to china.

Language There are two main languages spoken in China, Mandarin and Cantonese. However, a large percentage speaks English as well. People in Shanghai speak mostly mandarin. We will need to keep this in mind when creating menus and signs for the cart. This will also be important for hiring operational employees.

Price of Product: In order to determine the price of the product we needed to find out what would be considered normal in a Disney environment oversees. We found that Disney Hong Kong charges 50 Hong Kong dollars for one Mickey Mouse waffle within the park. Converted to Chinese Yuan this is ¥39.56. We wanted to come up with a price that was not unreasonably high, is competitive and a complete number of Yuan so cents can be avoided. We found that ¥35 Yuan was an even number, which converts to $5.70 American dollars. This is a price lower than what was charged in Hong Kong, but still competitively high. Because the profit margin is so large on the waffle and dipping sauce combination, adding an additional dipping sauce will only cover the expense. It will be ¥4 Yuan to add a dipping sauce, which is $0.65 American dollars.

Financials, Budgets, and Forecasts Financial Objectives

Sales Forecast: A. To reach adequate number of units sold in order to produce a profitable product

in Downtown Disney Shanghai.

B. 87,720 units sold from open date of December 15th 2015 until December 31st

2016 is our target goal to produce a sales revenue of $500,000

C. 10 million visitors are expected first year. If we secure 1 sale each from 5

percent of visitors this would equate to $2,850,000 (¥17,507,407.50) over a

year.

Contribution Margin: A. Our total cost for production of one unit is $0.92 (¥5.65), which includes one

order of waffle sticks and one dipping sauce.

B. Additional dipping sauce cups will be sold for an additional ¥6 ($0.98).

C. Our profit after unit cost is $4.78 (¥29.36) per sale.

17 "China Tax System - Tax Is the Most Important Source of Fiscal Revenue of China." China Tax

System - Tax Is the Most Important Source of Fiscal Revenue of China. N.p., n.d. Web. 01 Dec. 2014.

15

Break-Even Analysis: A. Total fixed cost equates to $16,419.72 (¥100,865.52) per year.

B. We need to sell 3,435 units over the course of a year to reach our break-even

point.

C. Cost of an employee manning the cart for 16 hours of park operation time for

365 days a year at minimum Shanghai wage of ¥17equals ¥99,280 ($16,161.62)

per year.

D. If we sell 108,100 units then our profit would be $500,298 (¥3,077,007.80).

Our ultimate goal is to provide a product that will not only sustain itself but produce enough in profits to contribute a substantial amount back into the community as all Working to Give companies aim to accomplish.

Break-even Analysis The break-even analysis represents the sales amount that is required to cover total costs (both fixed and variable). Since Working to Give is already planning on operating food carts in Shanghai Disney and will have employees producing food items in their kitchen, we feel the cost of paying those employees making the products will be shared with the other working to give stands. Therefore are employee cost covers 1 employee operating the stand at all working hours of the park. 8am to Midnight based on Disneyland hours. We will also have the cost of the waffle makers plus addition units to cover broken units as well as the cost of producing each unit of waffles.

Employee(s) at cart pay of ¥17 ($2.77) per hour for 16 hours per day = ¥272

($44.28). For 365 day coverage of the cart this would be ¥99,280 ($16,161.62) per

year.

The waffle makers we found that produce the size and quality mini waffle sticks we

feel is needed for our business idea cost $25.8118 (¥158.55) per unit. We feel having

10 units would cover any unexpected issues that may arise with the devices. $25.81

for ten units equals $258.10. (¥1,585.50)

Our waffle unit cost is $0.92 (¥5.65).

Total fixed cost= $16,419.72 (¥100,865.52)

Based on this information our calculations have determined we would need to sell 3,435 units per year in order to reach our break-even point. If we sell 108,100 units then our profit would be $500,298 (¥3,077,007.80).

18 "Babycakes Waffle Stick Maker." Amazon.com: : Electric Waffle Irons: Kitchen & Dining. N.p., n.d.

Web. 30 Nov. 2014.

16

In order to cover the cost of the cart stand employee(s) of one employee for 16 hours of park operation for a 30 day month, we would need to sell 278 units a month to reach break-even and if we reach are target of 7,310 units per month we would make $33,613 (¥206,482.98).

Sales Forecast Sales forecasting is a combination of research on our target market, economic and financial calculations and product knowledge to produce a calculated “gestimate” of future projections of sales. In cases of new products or ideas in new avenues of untested waters (China) this can be problematic and this forecast is meant to be a guideline to where we see our product potentially going as opposed to a definitive roadmap. The following details

17

were used in order to project our sales forecast for Shanghai Disneyland which is scheduled to open on December 15th 2015.19

All US Dollar to Chinese Yuan exchange rates are based on 11/29/2014

calculations.

1. Our current product, 1 order of waffle sticks plus 1 dipping sauce will be sold for

$5.70 (¥35 Chinese Yuan or known as the Renminbi). We chose ¥35 because we felt

it was a reasonable price for our product to be sold in the Disney Park as well as it is

an amount that can easily be exchanged between vendor and customer based on the

paper money value currently in China. ¥5, ¥10, and ¥20 are commonly used

amounts in Chinese Yuan.

2. Based on new estimates made by Disney and China, Shanghai Disney is expected to

host 10 million visitors in its first year of business.20

3. Our product is based on an item that has an established track record in the US and

there are some places in China that do offer waffles, so we feel our product will not

be seen as an extreme foreign product and will not encounter much resistance upon

opening.

4. Various trends in Chinese leisure and holiday activity were studied in order to

project estimated highs and lows per month of activity in the park.

5. Past working to give food carts have been considered successful with an income of

$500,000 (¥3,071,475) and we have structured our forecast to convey similar

results.

Calculations In order to reach a target goal of $500,000 (¥3,071,475) in sales, our product selling at $5.70 (¥35) needs to sell 87,720 units per year, this is less than .09% of target market. This comes out to 7,310 units per month, 1,827.5 per week and 261 units a day. In monetary numbers this comes out to making $41,667 (¥255,958.30) a month, $10,416.75 (¥63,989.57) a week, and $1,488.10 (¥9,141.32) a day. Unit sales amount will fluctuate per day and month, however we feel 261 units a day is a reasonable quote that can be met on a consistent basis. We expect a large number of our sales to occur during the before noon time and the evening hours, and we believe sales will be stronger in colder months, however we do believe our vast array of waffle flavors and the increase in park attendance during the summer months will mean that we will see a limited drop in product purchases. With an estimated attendance first year of 10 million visitors we would need 0.88 % of visitors to purchase our product to achieve our target sales.

19 "Family Volunteer Day – Serving Communities in the Spirit of Thanksgiving." Disney Parks Blog RSS. N.p., n.d. Web. 27 Nov. 2014. 20 "Shanghai Disneyland Expects 30 Pct More Tourists." - Xinhua. N.p., n.d. Web. 29 Nov. 2014.

18

If 1 percent of visitors purchase our product, sales would equal $570,000 (¥3,501,481.50). A worst case scenario of only 0.5 percent of visitors purchasing one order each would equate to $285,000 (¥1,750,740.75). A highly optimistic forecast of 5 percent of visitors purchasing one order each would equate to $2,850,000 (¥17,507,407.50) over a year.

Marketing Expense Budget All numbers are assumptions based off the expectation that Waffle Empire will generate $500,000 profit and the growth rate projections of the market analysis. This is not a hard budget but rather a projection of what the numbers could be. Numbers would fluctuate depending upon how many customers took advantage of the promotional offers. These numbers are not factored into the Break Even analysis included in this report. For a break even analysis that includes these numbers, refer to the appendix.

Year 1 Year 2 Year 3 $1 off coupons $25,000 $31,876 $36,389.45 Cast Member Discount $12,500 $14,875 $16,933.59

Total Profit $500,000 $531,250 $564,453.13 Percent of Profit 7.5% 8.8% 9.4%

8,223

7,787

7,112

7,000

6,345

6,800

6,900

7,138

7,603

7,701

7,611

7,500

0 2,000 4,000 6,000 8,000 10,000

December

November

October

September

August

July

June

May

April

March

February

January

$500,000 Sales Forecast (First Year)

Units Sold Per Month

19

Contribution Margin Per Unit

For the individual unit production cost the only variable direct material and supply cost while wages are not calculated unless employees are being paid based on the number of units produced. (Shanghai hourly minimum wage is ¥17 [$2.77] for reference). Numbers are estimates based on research conducted. The per unit cost is as follows:

$9 (¥55.29) for 1kg (2.2 pounds) makes 24 full waffle stick orders.21

This equates to .375 or .38 cents (¥2.33) per waffle stick order. Our chocolate chip batch is our most expensive variable ingredients for other

batches will be cheaper.

o Chocolate chips are $41.99 (¥257.94) for 25 pounds, which equates to $1.68

(¥10.32) per pound.

o 1/4 pound makes 144 mini waffles.

o 15 mini waffles in cup

o 144/15 = 9.6 orders

o 9.6 x 4 = 38.4 orders

o $1.68/38.4 orders = .04(¥0.25) per order.

1 dipping sauce will be included with each order; are caramel dipping sauce is our

most expensive and will be used for the contribution calculation.

Caramel dipping sauce is $116.99 (¥718.66) for 48 pounds, which equates to $0.15

(¥0.92) per ounce. We intend to include 3 ounces per dipping sauce for a total of

$0.45 (¥2.76) for each dipping sauce cup.22

Custom design tray for serving the orders is $0.05 (¥0.31) per unit.

Our total variable cost per product unit comes out to $0.92 (¥5.65) per unit.

Therefor are contribution margin is:

Contribution Margin = (P) $5.70 – (V) $0.92 = $4.78 Contribution Margin = $4.78 (¥29.36)

Controls The purpose of Working to Give’s marketing plan is to guide the company’s planning and performance. The following will be monitored to assess performance.

Revenue: monthly and annually. o How is our profit margin? o Are our prices too high for the Chinese market-causing us to receive less

business and generate less revenue?

21 http://www.alibaba.com/product-detail/Waffle-Powder-Mix_166410533.html 22 "Great Western 16321 Caramel Apple Dip 6 #10 Cans/Case." WebstaurantStore. N.p., n.d. Web. 30 Nov. 2014.

20

o Are our prices too low compared to our competition- causing us to loose potential revenue?

Expenses: monthly and annually. o Can we find our resources cheaper elsewhere? o Do we need to cut one of the products (flavors) offered because of the

expense? Repeat Business. Which will be monitored by use of:

o $1 off receipt coupons. Customer Satisfaction.

o Do Customers like all of the flavors, which are their favorites? We will monitor this by:

Which Inventory is sold the quickest, and what is left over. Customer Surveys.

Contingency Planning Business Liquidity: In the event that the business lacks liquidity, Working to Give, will carefully examine their accounts to make sure we are financially stable enough to keep our carts going with a full stock of product and money to pay employees. Cash flow projections will also be reviewed to determine if unforeseen cash layouts and expenses are undermining the financial health of the enterprise.

Running Out Of Supply: Working to Give will carefully analyze expected sales, amount of product needed for sales, and make sure we have enough supply to last us every period. We need to have a warehouse or storage near the park with emergency product in case we do not foresee highly increased sales that would cause us to run out of product unexpectedly. Since our product can be frozen and stored for long periods of time it would be smart to have emergency product nearby and ready to go if needed.

Electrical Service Interruptions Power outages are the most frequent type of man-made disasters. Statistics indicate that the average power outage lasts four hours, but could last for days. This should be concerning in case our product is stored somewhere where we lose electricity and could cause it to go to waste. We can consider securing access to a refrigerated truck that can be delivered to the site during an emergency. We can also have a number available of warehouse nearby that our product can be delivered to in case we need it. Power Outages can also interrupt the use of cash registers and credit card machines. We will make sure there will always be an alternative form of taking payment in case of an emergency.

21

General Emergencies We need to develop a plan for communicating with key people in your organization (Disneyland). Keep a list of emergency contact numbers with us at all times. Every cart should have easy access to contact security, emergency officials, and any sort of individual that would help in case of a hazard. Having a walkie-talkie connection or cellphone at every cart would be useful for our employees to communicate with our general manager in case anything is need or any questions need to be answered.

Critical Issues 1. Legal issues – China’s socialist based government have a vastly different legal

structure than ours and may pose challenges in running a business in China. In

China, bureaucratic tasks that have been simplified in America can be quite time-

consuming. Everything from opening a bank account, to registering your company,

to gaining product approval, can drag on for months. Inconsistent application of

regulations means that such processes are not always designed for your foreign

convenience.

2. Communication - could play a key issue as well. Names of items or concepts may not

translate well into Chinese culture, extra special care must be taken to make to a

product or business work within Chinese culture.

3. Business model - To succeed in China, our company must understand that we

cannot take the same business model, which works in America and simply apply it

to the Chinese market. We will need to adjust to a country that practices business

according to “Chinese characteristics” deeply related to its traditions. Due to these

differences, many Chinese business practices do not always conform to commonly

accepted international standards.

4. The Chinese people can be unaccepting of radically new ideas; our product needs to

be tailored for their market in order to be successful.

5. In a country that has a far lower expendable income we need to keep our product

cost of manufacturing and selling point down in order to stay profitable.

22

Recommendations We recommend that you rotate the flavors according to season, if certain flavors do

not sell as well as others- discontinue the flavor. We recommend that Waffle Empire will also offer beverages. During the warms

seasons offer bottled lemonade and soda. During the cooler offer hot chocolate, tea and apple cider. We also recommend that you always have bottled water available.

o Bottled Water is $0.25(¥1.54) a bottle. A Can of coke is $0.29(¥1.78) per can. o This creates a huge profit margin and allows employees to upsell customers.

It also allows people not interested in waffles to purchase from us. Contract with a specific company to manufacture and prepackage your dipping

sauces. Instead of buying dipping sauces from different companies that make the different flavors. This would help organize the inventory you are ordering and may open the door for further business adventures.

Hire Employees who are well versed in English, Mandarin and possibly Cantonese. To encourage customers to try all of the flavors, create a Stamp Card system in

which people receive a stamp for purchasing the different flavors. Once they have tried every flavor they get 1 free waffle.

Look into offering a gluten-free waffle to accommodate those with allergies. We recommend that as a second cart option, you look for someone to do sugar art. Look into the option of doing waffle dogs, a hot dog or sausage wrapped in a waffle

and served on a stick.

23

Appendix 1. Chinese economy China, which is a socialist controlled economy, is currently the world’s second largest economy by GDP and purchasing power only behind the United States currently. Over the last thirty years it has had consistent growth and is currently considered the world’s fastest growing major economy with an average growth of 8-10%. China also has a small but growing consumer market as well as being the second largest importer of goods.23 The coastal regions of China, such as shanghai, tend to be more industrialized. Inland areas tend to be more rural and agriculture based. 24 At the start of the 2010s, China remained the sole Asian nation to have a GDP (PPP) above the $10-trillion mark, along with the United States and the European Union. Since 1980, China has established special economic zones that spread successful economic experiences to other areas. The SEZs create a more free market-oriented society. The government of the People's Republic of China gives SEZs special economic policies and flexible governmental measures. This allows the SEZs to attract more business than the rest of China because they can apply an economic management system. SEZ policies:25 1. Special tax incentives for foreign investments in the SEZs. 2. Greater independence on international trade activities. 3. Economic characteristics are represented as "4 principles": a. Construction primarily relies on attracting and utilizing foreign capital b. Primary economic forms are Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises c. Products are primarily export-oriented d. Economic activities are primarily driven by market forces Shanghai is located in an SEZ, China treats SEZ’s as free market business and therefore china’s communist political structure will not affect business in Downtown Disney Shanghai. In 2024 China will become the world’s largest economy, according to the global information provider IHS Inc. NYSE:IHS. “Over the next 10 years, China’s economy is

23 Magnier, Mark. "Economists React: Surprising Signs of an Uptick in China’s Economy " The Wall Street Journal. September 23rd 2014. September 25th 2014 <http://blogs.wsj.com/chinarealtime/2014/09/23/economists-react-signs-of-uptick-in-chinas-economy-make-for-a-september-surprise/>. 24 "China" Forbes. December 2013. September 25th 2014 <http://www.forbes.com/places/china/>. 25 "Special Economic Zones of the People's Republic of China." Wikipedia. Wikimedia Foundation, 30 Nov. 2014. Web. 01 Dec. 2014.

24

expected to rebalance toward more rapid growth in consumption, which will help the structure of the domestic economy,”26

26 McGrath, J.J.. "China Will Be World’s Largest Economy In 2024: IHS" International Business Times. September 8th 2014. September 25th 2014 <http://www.ibtimes.com/china-will-be-worlds-largest-economy-2024-ihs-1681058>.

25

1.1 China’s middle class The growth of China’s developing middle class has caused huge economic changes and social transformation. It is projected that by 2022 more than 75 percent of China’s urban consumers will earn ¥60,000 to ¥229,000 Renminbi ($9,000 to $34,000) a year.27 Middle class households have an annual income of between $10,000 and $60,000 U.S. dollars28. The cost of living in China is different than in the U.S., causing income to be misleading. A household with a third of its income for discretionary spending is considered middle class. Research has estimated that China’s middle class is 300 million people; this is 25% of the population.

27 Barton, Dominic. "Mapping China’s middle class" Mckinsey&Company. June 2013. September 25th 2014 <http://www.mckinsey.com/insights/consumer_and_retail/mapping_chinas_middle_class>. 28 28 Luhby, Tami. "China's growing middle class" CNN Money. April 26 2012. September 25th 2014 http://money.cnn.com/2012/04/25/news/economy/china-middle-class/.

26

1.2 List of Waffles available and prices in shanghai. “Waffles are the new culinary black, suddenly blanketing Shanghai like so many cupcakes of yesteryear. Time Out rate the most popular pressed dough across the city”29

List from Time Out Shanghai:

1. Strawberry Waffle.

Waffle covered with fresh strawberry’s with whipped cream.

¥52 RMB at Maan Coffee.

2. Belgium waffle

Buttermilk flavor waffle served with maple syrup,

unsweetened whipped cream and sprinkled with slivered

almonds. ¥35 RMB at Zoo Coffee.

3. Premium waffle with salted butter caramel, pan-fried

banana and vanilla ice cream

Waffle served with caramelized banana and caramel sauce.

Optional Ice cream on the side. ¥40 RMB at O Delice!

4. Chocolate-Banana Waffle

Hot doughy waffle with whipped cream, fresh bananas, two scoops of chocolate ice cream,

chocolate syrup. ¥45 RMB at The Alchemist Cafe Bistro.

5. Salty Caramel with Vanilla Ice Cream Waffle.

Waffle with whipped cream, caramel sauce and whipped cream. ¥42 RMB at Mr. Pancake

House.

29 "Shanghai's Ten Best Waffles." Time Out Shanghai. N.p., 31 Mar. 2014. Web. <http://www.timeoutshanghai.com/features/Food__Drink-Food__Drink/18357/Shanghais-ten-best-waffles.html>

27

6. Belgian Waffle with Banana and Cream

Soft doughy texture topped with banana’s and cream. ¥45

RMB at De Refter. See picture below.

7. Chocolate Waffle.

Chocolate waffle with hot fudge, chocolate syrup, Oreo cookies, chocolate shavings,

whipped cream, chocolate ice cream and slivered almonds. ¥58 RMB at Mizzi Café.

8. Strawberry Field Waffle. Waffle with strawberry slivers and drizzled chocolate syrup and

served with ice cream. ¥55 RMB at StayReal.

9. Strawberry Waffle

Waffle with strawberry sauce, vanilla custard and strawberry ice cream. ¥30 RMB at

Westnine.

10. The Very Berry Waffle.

Waffle served with whipped cream, strawberries, blueberries and raspberries. Sided with a

scoop of chocolate and a scoop of strawberry ice cream. ¥56 RMB at Faneefface Coffee.

28

1.3 Break-Even Analysis Including Marketing Expense The break-even analysis represents the sales amount that is required to cover total costs (both fixed and variable). Since Working to Give is already planning on operating food carts in Shanghai Disney and will have employees producing food items in their kitchen, we feel the cost of paying those employees making the products will be shared with the other working to give stands. Therefore are employee cost covers 1 employee operating the stand at all working hours of the park. 8am to Midnight based on Disneyland hours. We will also have the cost of the waffle makers plus addition units to cover broken units as well as the cost of producing each unit of waffles. An additional marketing budget has also been incorporated into our analysis.

Employee(s) at cart pay of ¥17 ($2.77) per hour for 16 hours per day = ¥272

($44.28). For 365 day coverage of the cart this would be ¥99,280 ($16,161.62) per

year.

The waffle makers we found that produce the size and quality mini waffle sticks we

feel is needed for our business idea cost $25.8130 (¥158.55) per unit. We feel having

10 units would cover any unexpected issues that may arise with the devices. $25.81

for ten units equals $258.10. (¥1,585.50) (1)

Our waffle unit cost is $0.92 (¥5.65).

Marketing expense totals $37,500 (¥230,638.13)

o Variable Marketing expense per unit= $0.0188 (¥0.12)

Total Variable cost per unit= $0.9388 (¥5.77)

Total fixed cost= $16,419.72 (¥100833.50)

Based on this information our calculations have determined we would need to sell 3,449 units per year in order to reach our break-even point. If we sell 120,000 units then our profit would be $554,924 (¥3,407,788.28).

30 "Babycakes Waffle Stick Maker." Amazon.com: : Electric Waffle Irons: Kitchen & Dining. N.p., n.d.

Web. 30 Nov. 2014.

29

In order to cover the cost of the cart stand employee(s) of one employee for 16 hours of park operation for a 30 day month we would need to sell 278 units a month to reach break-even and if we reach are target of 7,310 units per month we would make $33,613 (¥206,482.98).

30