Sky Bakery/Drinks

Jose Negrete
Wei-Yu Liao

Sky Bakery
18455 E. Colima Rd.
Rowland Heights, CA. 91748
(310) 341-5271
(310) 354-5472 www.skybakery.com Confidentiality Agreement
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1. Executive Summary 5
2. Company Description 6 2.1. Mission and Objective 6 2.2. Management Team 7 2.3. Location and Geography 7 2.4. Development Stage 9 2.5. Product and Services 9 2.6. Financial Status 10
3. Management and Organizational Structure 11 3.1. Overview 11 3.2. Management Team Background 11 3.3. Human Resources Management 12 3.4. Training Program 13
4. Industry Analysis 13 4.1. Size and Growth Trends 13 4.2. Maturity of the Industry 14 4.3. Vulnerability to Economic Factors 14 4.4. Seasonal Factors 15 4.5. Technological Factors 15 4.6. Regulatory Issues 15 4.7. Supply and Distribution 15 4.8. Financial Considerations 16
5. Target Market 16 5.1. Demographics 16 5.2. Geographic 18 5.3. Lifestyles/Psychographics 19 5.4. Purchasing Patterns 19 5.5. Buying Sensitivities 19 5.6. Size and Market Trend 20
6. The Competition 20 6.1. Section Overview 20 6.2. Advantages over Competition 21 6.3. SWOT Analysis 22 6.4. Barrier to Entry 23 6.5. Future Competition 23
7. Marketing and Sales Strategy 23 7.1. Overview 23 7.2. Servicing the Customer 23 7.3. Market Strategy 24 7.4. Strategic Alliances 25 7.5. Location Strategy 26 7.6. Pricing Strategy 26 7.7. Sales Forecast 26
8. Operations 27 8.1. Facilities 27 8.2. Site Analysis – Rowland Heights 27 8.3. Project Timeline 28 8.4. Equipment, Small wares and Food Inventory 28 8.5. Leasehold Improvements 28 8.6. Food Production and Processes 28 8.7. Equipment and Technology 29 8.8. Inventory Management 29 8.9. Order Fulfillment and Customer Service 30 8.10. Research and Development 31 8.11. Capacity Utilization 32 8.12. Disability Regulation 32 8.13. Insurance 32 8.14. Permits and Licenses 32
9. Exit Plan 33 9.1. Risk Evaluation 33 9.2. Exit Plans 34
10. Financials 34 10.1. Introduction 34 10.2. Financials 35 10.3. Financial Statement Assumptions 35 10.4. Detail Start-Up Costs 36 10.5. Human Resource Projection (5 Year Projection) 38 10.6. Consolidated Income Statement (5 Year Projection) 39 10.7. Monthly Income Statement (12 Months, Year1) 40 10.8. Balance Sheet (5Years) 41 10.9. Balance Sheet (12/31/2008, Year 1) 42 10.10. Statement of Cash Flow (5 Years) 43 10.11. Statement of Cash Flow (12/31/2008, Year 1) 44 10.12. Break-Even Analysis (Year 2 Projection) 45

1. Executive Summary

With continued growth in the popularity of Cakes and Drinks in Southern California, consumers are increasingly scrutinizing Bakeries and Drink stores which can provide a tasty and healthy cake or drink that will not hurt the budget.

This business plan is being made to local or commercial bank investors from whom we seek initial financing of $100,000. Our goal is to carve a niche in which Sky will specialize in custom cakes and drinks. Within the last three years there have been significant increases in demand for these bakery/ drink products. This concept is especially timely, as the major competitor Amazing Cakes is located more than 20 miles away and is targeting consumers in Orange County.

Sky will make its products available with the fundamental goal of providing convenient delicious and healthy cakes/ drinks with a fast turn around time as an alternative to cakes purchased at local shopping centers which are plain and without flavor. Products we will serve include 17 unique cakes and custom made cakes for weddings or any type of occasion. In Addition, Sky features over 20 unique drinks including flavored teas, milk teas, coffee, blended beverages, smoothies and juices.

Sky is targeting teens which congregate in the shopping center after school and on weekends. Our secondary markets include adults shopping with children. Our Third market will be people who are willing to pay a little more on a cake that will be customized to any shape or ingredients specified by the customer. We intend to strategically place ourselves in a shopping center were we will increase turn around time through superior management. Our major advantage over some of the competitors is our ability to provide freshly prepared, high quality food in a speedy manner. Competitors such as Amazing Cakes have a high level of quality, but have difficulty providing quick service. Additional advantages include our location in which the management is reluctant to place another food source offering a similar product.

Operations for Sky will begin January 2008, in the Pacific Plaza Shopping Center located at the corner of Colima Rd and S. Jellick Ave. The initial capital of $100,000 sought will be supplemented with additional capital from the principles that will be operating the business. Investors will receive and ROI of 8.125%. The financial statements contained herein, detail the allocation of the initial funds, as well as projections on income statements, cash flows and balance sheets for the first five years of operations, for the Rowland Heights location. Financial projections are based upon 6-12% per year growth rate. In formatting these projections, information was obtained from the national baking association and from historical shopping center data.

2. Company Description

The start up store will be called Sky Bakery/ Drinks and will be located in Rowland Heights, California as a type S business, licensed to conduct business in Los Angeles California. There will be two owners of the business, Jose Negrete and Wei-Yu Liao. In addition, investment capital will be sought for 50% of the start-up and initial operating expenses. Ownership of the business will be divided between the initial officers of the company (listed above) and the venture capitalist(s) providing the needed 50% of the necessary funds.

1. Mission and Objective

The mission statement of Sky bakery/drinks will be as follows:

Sky Bakery aims to be a cornerstone in the community creating a neighborhood atmosphere where customers feel comfortable and become instant regulars. To serve the public, give more tan is expected and to make a small piece of the world a happier place.

The objective of Sky is to serve the freshest, highest quality and best tasting baked cakes and drinks by using the freshest ingredients, state of the art equipment and offer the friendliest service.

We aim to become on of the most recognized Bakeries in the Los Angeles and Orange County areas. We have a goal of becoming a profitable business within 2 years of operating and meet financial goal by maintaining a controlled growth and by controlling expenses.

2. Management Team

The top management responsibilities of Sky will be as follows:

Jose Negrete Chief Executive Officer (CEO)

Responsibilities include management of day to day operations and marketing

Wei-Yu Liao Vice President of Operations and Head Baker

Responsibilities include Human Resources, Purchasing, and Baking

Through a combination of a strong management team, a solid business model, and exciting market demanded products will allow Sky to quickly gain market penetration.

3. Location and Geography

Sky will be located at 18455 E. Colima Rd., Rowland Heights, CA. 91748. This location was chosen for its location in a shopping center and it proximity to local High Schools and easy access to the 60 Freeway.

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4. Development Stage

Sky is a start business that will produce cakes and drinks. A lease is currently being negotiated for the Rowland Height location. It is anticipated that negotiations will be completed by November 1, 2007. The Pacific Plaza shopping center is managed by the Johnson group.

Sky was founded by Jose Negrete and Wei-Yu Liao on November 7, 2006. Wei-Yu was the original founder by bringing the idea to Jose’s attention and from there we developed this business plan to try to bring the business from paper to real life.

5. Product and Services

Sky Bakery provides customized baked cakes and drinks to consumers. Special considerations are made for all requests.

Sky features an extensive menu to meet all our customers' preferences. Sky features over 17 unique cakes and able to custom make any type of design. In Addition, Sky features over 20 unique drinks including flavored teas, milk teas, coffee, blended beverages, smoothies and juices.

Unique Cakes

– White Silk – Coconut Italian – White Chocolate Mousse – Piskota with Pistachio – Chocolate Mousse Cake – Speckled Walnut Chocolate Torte – Chocolate Raspberry Mousse – Cappuccino Bavarian – White Forest – Marble – Strawberry Vanilla Mousse – Peaches and Cream – Blueberry Peach – Red Velvet – Spanish Almond Torte – 3 Leches Cake – Chocolate Fudge

Drinks:

– Boba Milk Tea – Milk Tea – Green Tea – Black Tea – Blended Beverages – Coffee

6. Financial Status

Sky is expected to cost approximately $145,000 as a turn key operation. Working capital will require an additional 55,000, which would provide day to day capital to operate the store for 2 years under a worse case scenario projection. Sky is expected to become profitable in the second year of operation. First year income before taxes can be found in the financial pro forma analysis seen later in this business plan.

Sky is expected to experience 6-12% per year sales growth during the first five years of operation. The growth will not require additional capital expenses, the store will be designed and equipped to support $500,000 per year in sales.

3. Management and Organizational Structure

1. Overview

The initial founders of this business will participate in the day to day operations of the business. Mr. Negrete will serve as the President. His responsibilities will include the management of day to day activities, and marketing. Mr. Liao will serve as the Vice President. His responsibilities will include purchasing, operational start-up and human resources.

In addition to the normal management, external consultants will be necessary in order to provide detailed expertise in areas that may not be covered fully by normal management, The business will consult with a law firm which specializes in business law, and insurance firm which deals with business liabilities, and the banking firm which is providing the business with some of its start-up funds.

2. Management Team Background

Sky has assembled an experienced team to help with the deployment and implementation of Sky Bakery/Drinks. The founders’ Jose and Wei-Yu have spent numerous hours researching and analyzing data to insure this business is a success.

Sky’s Executive Management and Leadership

Jose Negrete, Manager (CEO)

Mr. Negrete is a graduate of DeVry University, in Pomona California, with a BS degree in Network and Communication Management. Mr. Negrete also earned an MBA in Business from Keller Graduate School of Management. Mr. Negrete has worked over 5 years as a vice president of a small chain of privately owned restaurants were he mastered both Marketing and Communications skills.

Wei-Yu Liao, Chief Baker (Vice President)

Mr. Liao is a graduate of DeVry University, in Pomona California, with a BS degree in Computer Information System and an MBA in Business from Keller Graduate School of Management. Mr. Liao has worked in a bakery for 5 years as the chief baker and has been in the baking industry for over 10 years.

Lucy Hamilton, Baker Assistant

Lucy Hamilton has worked as a baker for over five years and will be the assistant baker. Her responsibilities will also include the management of the bakery shopping list.

3. Human Resources Management

Hiring Policies and Practices

Sky will publicize all of its available job openings in local newspapers classified ads, signs on the premises, and on an internet homepage. All relevant skills necessary in order to fulfill work duties shall be included in the advertisement. Listed below are the operational positions available, the purpose, responsibilities, and qualifications.

Sky will provide applicants and employees with opportunities based on ability, accomplishments and initiative. Under the policy of equal employment opportunity, employment decisions and personnel actions are based on job related criteria and not factors such as race, color religion, ancestry national origin, sex, age, disability medical condition, veteran status, marital status or other protected characteristics.

Equal opportunity will be observed will respect to all employment practices including recruitment, job assignment, training compensation, layoff, termination and social and recreational programs.

The complete organizational Structure can be seen in Appendix B

4. Training Program

In order to help new employees acclimate to the working environment and current employees adapt to ever changing working conditions, Sky is dedicated to an initial orientation and ongoing training program.

New employees will receive an orientation tour of the Sky work environment, following guidelines.

□ A general overview of operations □ An employee guidebook □ Introduction to equipment operation and maintenance □ Introduction to food preparation steps

Sky believes in developing individuals by providing opportunities for them to use their acquired job skills. These skills will include:

□ General store operations □ Developing interpersonal skills □ Conflict management □ Teamwork, Work in Process (WIP), and Just In Time (JIT) □ Customer service techniques □ Managing diversity in the workplace/ Valuing differences □ Building trust

4. Industry Analysis

1. Size and Growth Trends

Sky is well positioned as a new exciting entry into the Bakery and Drink market. The bakery and drink market has shown substantial growth and shows no signs of slowing. Research has also shown that as the Consumer Price Index increase, consumers have more disposable income, and are more likely to spend more time and money in shopping centers( where Sky will be located) and spend more on purchased food. Standard and Poors predicts a strong gain in disposable income, up to 4.7% in the next year.

Bakeries have been dominated during the last 15 years by Grocery stores (e.g., Albertsons, Vons, etc...) Drinks have dominated by Starbucks and other major franchise drink stores. Through marketing errors and a lack of a parent company that would promote growth and focus on their served market, other competitors have been allowed to share in their market share. Sky will be one of the competitors that will target consumers who want a one of a kind cake for a special occasion or a drink that can be customized to fit the consumers taste.

2. Maturity of the Industry

Bakery and Drink sales have increased consistently during the last 10 years, largely to the fact that the two income family wage earners and single parent wage earners who have less time for preparing baked goods and drinks. Bakery and Drink stores who offer fresh ingredients and high quality products will thrive in the niche market of shopping centers. Individuals’ venues have operated in theses locations, but because of a lack of consistent quality and not having the ability to market their name, have seen limited growth.

3. Vulnerability to Economic Factors

The economy is predicted by most to remain at a slow steady growth rate through 2011. Inflation and unemployment are low, and this offers the most stable economy seen in decades. A downturn in the economy is not foreseen but the possible impact must be explored. Sky locations in shopping areas would be subjected to possible declines in sales because of overall traffic and decreased shopping sales. This downturn would be tempered by the fact that people would stop indulging on drinks and bakery goods.

4. Seasonal Factors

Seasonal factors do play a key role in purchasing Weeding cakes and cakes in general. Shopping centers generally have the smallest sales in January and February, with each month accounting for 5% pf annual sales. Sales begin increasing through the summer and peak November and December which accounts for 9.5% and 12.5% of annual sales respectively. See the pro forma analysis later in this business plan for sales generation on a month basis.

5. Technological Factors

Technological factors only play a role in equipment availability that allows Sky to become more productive, reduce cost and increase sales. Examples of this are the computerized cash registers that allow for immediate real time sales and inventory of the store with the use of a computer and a modem. The use of other efficient equipment such as ovens, blenders, mixers, ice makers and Boba machines will help control costs to allow the facility to become more efficient and improve profitability.

6. Regulatory Issues

Sky will follow the rules and regulation associated with standard statues that regulate businesses in the state of California. In addition, Sky will abide by the regulations of the Los Angeles Fire Authority, Los Angeles Health Department, Rowland Heights Planning and Building Department and other agencies that may regulate the activities of Sky.

7. Supply and Distribution

Sky will obtain products from the following sources: Sysco Inc., Coke a Cola Inc. Sysco will supply most of the ingredients to prepare the recipes of the products. Coke will supply all the beverage fountain products. A Japan based company will supply Sky all marked items such as cups, napkins, and cake boxes. Other local vendors will be used to purchase fresh fruit and vegetables as needed.

8. Financial Considerations

Initial start-up costs of Sky will be approximately $145,000 as a turn key operation. Working capital will require an additional 55,000, which would provide day to day capital to operate the store for 2 years. This will equip the location to support sales in the amount of $500,000 per year, which should be sufficient to operate with no additional working capital for at least 5 years. Investment capital will be sought for the initial $145,000. The investors will retain equity in the business until the loan is fully paid by the end of year 5.

The Founders Mr. Negrete and Mr. Liao will be investing $50,000 each of there own money totaling $100,000.

5. Target Market

1. Demographics

Statistics show a steady increase in food sales for off premise use in the last few years, as is evidence by the following chart:

|Food Sales by Shopping Center (in billion of dollars) |
|1999 |2000 |20001 |2002 |2003 |
|314.6 |316.0 |321.6 |336.5 |350.4 |

Source: US Dept. of Agriculture, Economics Research Service, Food Marketing Review, 1999-2003

Sky Bakery/ Drinks will target the 14 to 20 age group. Since Sky is going to be located near several High Schools, a drink store is often a hotspot for teens to congregate after school. This age group is found to make up a major portion of the mall population after 2:30 p.m. on weekdays, as well as throughout the entire weekend. This trend has increased with the rising number of dual parent employment obligations.

The income range for young teens is often as low as the allowance they are given to as much as a part time minimum wage job after school. The overall target income of teen families is below the $65,000 level. Because of the lower income range of young adults, it is important to emphasize a menu that is inexpensive and yet tasty enough to draw this group’s interest.

Sky Bakery/Drinks second target group will be engaged couples, Adults from ages 20 to 55. Since this is a major group which inhabits the shopping center during the morning and evening hour’s small samples will be made available for consumers to taste our unique cakes.

Additional target groups will include are local businesses who visit the shopping center to eat at the food court over their lunch hour.

Sky chose to launch its Bakery/Drink store in Rowland Heights do to its population of 48,553 and has a population distribution as follows:

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The median income for this city is $52,270 (year 2000) and has a 14-20 age group of 7,040 persons and 20-55 age group of 22,819 persons.

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2. Geographic The location of our business will be located in the Pacific Plaza Shopping Center located at the corner of Colima Rd and S. Jellick Ave, which is one of the most heavily populated sections of Rowland Heights. Being that this area is a suburb of Los Angeles is of the heaviest populated areas in the United States. Los Angeles population is presently 9.5 million and is expected to grow to 9.8 million by the year 2009. Rowland Heights population is presently 48,553 and expected to grow by the mild warm climate lends to pleasant walking or driving weather to local malls and shopping centers year round. In this part of the county, the average person spends the least amount of time at home than any other state in contiguous United States. This leads to a population that spends more time eating outside the home than in their homes.

3. Lifestyles/Psychographics Typical lifestyles of the after-school crowd are spent watching an average of 6 hours of TV per day or after-school sports. The option of going to a shopping center with a few dollars often appeals more to these kids where they grow interpersonal relationships with their peers and maybe meet that new special person. Psychographics of this crowd lend to a product that appeal to latest trends that peak the interest of this ever-changing group. The colorful, clean, fast and practical presentation of our product is easy to carry containers will appeal to the fun seeking teens.

The growing Hispanic influence and culture in Southern California is especially effective market for Sky to operate. On of our unique cakes called Tres Leches is going to appeal to our Hispanic consumers.

4. Purchasing Patterns

One of the benefits of our products is that transactions are made on cash only basis that reduces accounts receivable. The sales can occur daily depending upon the variety of menu options which appeal to our target market. This variety, plus the range of menu selections such as our Drinks and unique cakes will lead to the same customer returning day after day if not twice a day.

5. Buying Sensitivities

Because of the high cost of living in the Southern California area, the other trend is that Drink/Bakery goers are seeking low priced establishments where they can get the most value for their dollar. There is also an increased trend to find healthier products due to the increased knowledge concerning foods that cause cancer and heart disease. Although inexpensive, tasty products top the list for Cake/Drink goers. A business that markets a healthy menu has definite drawings power over typical drink/cake stores. Adding the health feature as one of the many product features can capture a group of the population that is more health conscious. This is why Sky will emphasize its healthier aspects by its use of alternative sweeteners to sugar and butter.

6. Size and Market Trend

Population growth and ethnic growth are another positive aspect of the market growth expected to support our Drink and Cake Store. Overall population in Los Angeles is expected to grow by 300,000 by the year 2009. The estimated ethnic percentages of the population for the year 2007 in Los Angeles county is 47% Hispanic, 34% White, 11% African American and 8% other. The result is an overall increase of the Hispanic population by 3% and a decrease in the White population by 3%. Growth of the age group from 14 to 20 is expected to grow by 25,000 by the year 2009

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6. The Competition

1. Section Overview

Sky will be located in Pacific Plaza Shopping Center. Competing with Sky will be Drink and Cake vendors in the area. These include the following:

Cakes

□ Albertsons

□ Vons

□ Food 4 Less

□ Ralph’s

□ Amazing Cakes

□ J.J Bakery

Drinks

□ Starbucks

□ Lollicup

□ Privately owned Tea, Coffee and Boba stores

Sky is not in direct competition with the majority vendors but is trying to target a niche where customers will rather purchase a cake that is custom designed. The above mentioned competitors do offer a little bit of customization but they do not go out of there way to custom design a cake to a specific picture or drawing. This is the where Sky stands apart from the competition.

Other competition will come from Starbucks and Lollicup who offer some of our drink creations. Sky will distinguish itself from these competitors by having an attractive area for drinking and an opportunity to purchase a piece of cake to go with there particular drink.

2. Advantages over Competition Sky will offer a variety of menu items that will appeal to those customers wanting custom creations. Our strategy focuses on serving a niche market with quality goods. We are determined to become a part of the community - an establishment that becomes as much of the community as a church or local grocery store. To achieve these goals, we will provide the following: □ Friendly, neighborhood-feel atmosphere. □ Quality baked/drinks goods for everyone to enjoy at a fair price. □ Special menus that show the ingredients in our products to allow the customer to customize the order.

3. SWOT Analysis Sky Bakery/Drinks Strengths: Innovative concept in geographic area Target location has large resident and employee base Flexible menu can change with needs of customer Price Our Weaknesses: Specific orders of cake may lead to higher cost for customer Custom cakes are more expensive than normal cakes Our opportunities: Growing segment in the cake industry Only bakery in area to make custom design cakes Our Threats: Our Small size and start-up position limits our resources Target audience may not see value concept Other bakeries can copy concept

Direct Competitor J.J. Bakery Strengths: Established name and reputation Chain bakery enjoy economies of scale in purchasing, marketing, management Their Weaknesses: Menus target Little selection for customer May be difficult to alter ingredients of cake Their opportunities: Regional advertising program allows for aggressive advertising Their Threats: Failure to capture growing market

Direct Competitor Amazing Cake Strengths: Reputation Been in magazines for great creations Their Weaknesses: Up to two month wait time Customers need appointment Location Their opportunities: Have a great customer base Expanding Their Threats: Competitors will come into market and steal competition

4. Barrier to Entry

The shopping center has the goal of providing customers with the widest variety of services and goods available in order to draw business from competing shopping centers. With this goal in mind, they will not be leasing to any other vendor offering similar menu items to the shopping center. This provides a barrier of entry to any like business entering into competition with Sky.

5. Future Competition

Statistics have shown that the majority of market share in the Bakery and Drink business is obtained by the “mega chains” that possess the brand recognition (i.e. Starbucks, Lollicup, Albertsons, Vons, etc.). In the future, it is possible another one of these large chain businesses could move into the shopping center. This would pose a large amount of competition, and could result in a reduction of market share.

7. Marketing and Sales Strategy

1. Overview

Sky will be the leader in making cakes and drinks by using fresh ingredients in the preparation of the recipes, preparing all menu items at the store and giving the customer exceptional fast and friendly service. Sky will be constantly evolving and flexible to allow and incorporate changes in menu items and service to meet the customer expectations. Sky will distinguish itself from competitors by offering customers custom designed wedding or special occasion cakes. Sky will be able to replicate any type of picture or design into a form of cake.

2. Servicing the Customer

Sky has developed a profile of what constitutes customer needs. We believe that the customer will be enticed into buying our product because we:

□ Provide products will speed, convenience and pleasant customer service.

□ Provide great tasting, fresh baked cakes and drinks that are reasonable priced and quality products

□ Offer Customers a full satisfaction guarantee that the products offered will meet or exceed their expectations.

□ Provide these functions in a rustic decorated vibrant décor.

□ Develop and promote Sky in the community as a good neighbor business, sponsoring youth sport teams and other community programs.

□ Are affiliated with influential wedding planners, to develop custom wedding cakes.

3. Market Strategy Our marketing survey and research data indicates that the optimal target group for our drink and cake products are going to comprise of the following groups: 1. Male and female population with ages 14 – 20 and 20 – 55. 2. Mothers/Fathers and children for households with yearly incomes below $65,000. This comprises the majority of Parent and children who frequent the shopping center during morning hours. 3. Local businesses/employees who visit the shopping center to eat at the various restaurants next to ours. 4. Tourist who visit family and friends.

In order to attract these target groups, we will promote our product by

□ Los Angeles Times Newspaper - Due to the centralization of the target market and proximity to metropolitan areas, the local newspapers will be the strongest advertising offense for Sky. We are going to advertise on Friday’s in the Calendar section and in the Food section Wednesday.

□ Advertisements will be placed in local newspapers to promote products and will offer limited coupons to promote the product. The coupon will be used to initially promote Sky initially, on a limited basis only so customers will not associate our product with those with constant coupon campaigns.

□ Flyers will be distributed to the local recreation facilities for the attraction of customers as well as sport teams such as baseball, softball, basketball, soccer to offer specific discounts to player. Such discounts would be for “player of the game award. “Sportsperson of the game, best leader of the game “and other similar awards.

□ Local Penny Saver Magazines would have promotional items that would include coupons for discounts on selective menu items as well as an advertising portion in the magazine.

□ Product sampling will be offered in the store to promote select menu items.

□ Yellow Pages- sky will place a full marketing ad in the wedding cake section, drink section, and cake section of the Yellow pages.

Product loyalty and customer retention will be established by:

□ Offering promotional cards that would enable the customer to obtain a free product after a specified number of purchases.

□ Student discount cards that would be offered to promote our largest Drink target group, males and females aged 14-20 years old.

□ Full satisfaction guarantee policy would be posted, would be posted and follow up would be done via surveys.

□ New cake would be offered every month to coincide with the month’s theme.

4. Strategic Alliances

A strategic alliance will be forged with local wedding planners to allow Sky the opportunity to present there portfolio of cake design to the customer. This type of promotion will allow coupes to sample and custom design there wedding cake while getting a discount for having Sky create there magnificent creation.

5. Location Strategy

Sky will be targeting Teenagers and Adults from ages 14 to 55. The location is valuable because they offer high foot traffic for product visibility, minimal build out costs, reduced operating costs and ease of operation. Shopping Centers also provide for promotional marketing activities such as Christmas, Easter, Ethnic holidays and more. Shopping centers provide a safe, secure, and friendly environment to buy groceries and shop.

6. Pricing Strategy

While we will offer a unique concept, it will also be essential that Sky’s pricing strategy fit within the competitive market in the Rowland Heights area, and within the expectations of our target

In keeping with this concept, our research has shown that most other area restaurants have a large selection of Drinks that fall into the price range of $1.99-3.99. A few of these establishments offer slices of cake for about $2.75-3.50. A few area restaurants also offer cakes in the $25.00- 500.00 price ranges.

7. Sales Forecast

Sales assumptions used in the proforma analysis found in the appendix section of this Business Plan entitled Financials were derived from formulation five year projected Income Statements based upon projected sales. The sales assumptions were generated by conducting head count surveys at the shopping center, as well as from historical data from the previous owner of Royal bakery.

In the proforma analysis, sales were distributed through the year using standard cake and drink sales, provided by the previous owner of Royal bakery. The projected sales are slowest during January – May and they increase in June do to wedding season and a steadily incline July – December for holiday seasons.

8. Operations

1. Facilities

Sky will open its doors in January 2008. The leased location is managed by the Johnson Group which is located in Orange County. The proposed store is 1300 square feet. See Appendix D for store layout. A major renovation will take place once the lease is signed and the store.

Sky Bakery/Drinks is a leased single unit designed to accommodate 15-seats. Sky's interior will be bright, airy and open, with a rustic decorating theme. A clear cake display case will showcase the current month's cake design. A portfolio of cake pictures and designs will be available for customers deciding to order a custom cake. Drink selection will be viewed by a display board that shows all different type of Boba Milk teas, green teas, black teas, Jasmine milk teas and ice/hot coffee drinks available to order

2. Site Analysis – Rowland Heights

Appendix D – shows the layout of the lease location, which will house Sky Bakery/Drinks. The lease price breakdown is as follows:

|Bakery Area |Square Feet |
|Customer Area | |
|General Seating |375 sq feet |
|Cashier |25 sq feet |
|Bathroom |100 sq feet |
|Total | |
|Non-Customer Areas | |
|Kitchen |600 sq feet |
|Refrigerator |200 sq feet |
| | |
|Total Area Needed | | |1300 sq feet |
|Minimum Space Required | |1300 sq feet |
|Lease Price Per Month | |$ 3,250.00 |

3. Project Timeline

The project timeline shows that the duration time from the approval to the grand opening is two months. The approval plan is scheduled for November 02, 2006 and the grand opening for January 01, 2008.

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4. Equipment, Small wares and Food Inventory

A list of the major equipment and quantities required can be found in Appendix E. Small ware and food inventory lists are noted.

The total cost of equipment, small ware, and food inventory is roughly $110,781

5. Leasehold Improvements

The building improvements and associated costs for the proposed store are going to be roughly $65,000.

6. Food Production and Processes

Sly will prepare all menu items and custom Cakes will also be prepared according to the customers specifications. The menu offers a wide variety of products tat will please most customers, from the ever so popular Boba drinks to our delicious unique cakes. The wide product offering utilizes most of the same ingredients to keep the cost of products and labor to a minimum.

Food ingredients will be obtained from Sysco Food Products. Sysco has a contract to supply the food items to Sky, having one main supplier helps to ensure that the quality of the goods is consistent throughout the Sky. Paper products will be purchased from a Japan corporation which will bear the familiar Sky brand on cups napkins, and cake boxes.

The Cakes and Drinks will be store in our refrigerator where the temperature will insure freshness of the product.

The Cake and Drink recipes are published for Sky use only, but are proprietary in nature, so it will not be included in this Business Plan.

7. Equipment and Technology

Sky will utilize state of the art restaurant equipment. An example would be our oven in which Sky is able to cook 12 full sheets of cake in 1 hour instead of cooking each one individually. This helps our baker prepare cake order in a more efficient manner and it allows the baker more time to decorate cakes.

8. Inventory Management

Two separate inventory areas will be defined:

□ Backroom – stockroom where bulk supplies are stored when they are received from the vendor.

o When items are receive from the vendor, they are entered into the backroom inventory

o Detailed inventory records for the backroom shall be maintained.

□ Front Counter – this is the front of the store (which the customer sees) where material for immediate use is stored.

o When items are needed at the front counter, they are first deducted from the backroom inventory, and then added to the front counter inventory.

o Detailed inventory records for the front counter shall be maintained.

In this manner, we will be able to have accurate inventory counts for our business. This will also permit us to see where shrinkage, if any, is occurring. When items are delivered, the store manager will perform the following activities:

□ Receive and verify all deliveries.

□ Log all orders received into the backroom inventory

□ Keep all delivery receipts in order for inspection.

□ Update the inventory count on each item.

Any undeliverable orders will be delivered the next day, or can be picked up from the vendor’s loading dock at a 5% discount.

9. Order Fulfillment and Customer Service

Orders will be processed by the staff located behind the counter. The Purchase Order will be an actual slip of paper with the particular order checked off. If it’s a cake order the customer will be given a time when they can come back to the store and pick up the cake. If the customer chooses one of our ready made cakes our staff can write a phrase on the cake at no extra charge.

Since the order slips are numbered, there will be an emphasis to complete the orders in numerical order so as to serve each customer in their proper order. Orders prepared incorrectly will cause inefficiency in operation as well as customer dissatisfaction. Therefore, improperly filled order slips will be pulled by the cashier, and kept in a “Miss” file and analyzed later by the manager. The manager will ensure that improperly filled orders are filed in the “Miss” file by the cashier. Continued the manger can analyze problems and appropriate actions taken or suggestions made to employees.

Customer service can be addressed by having a suggestion box placed next to the cashier Point of Sale (POS). A sign will clearly be displayed encouraging suggestion to be made on how the store can better serve the customer. Since most customers overlook suggestion boxes, one of the Manager’s duties will be to go to the seating area and interview specified sample customers each week. This could be done by offering a coupon for a free drink in exchange for a moment of the customer’s timer in commenting on the service they received and their satisfaction with the product. Suggestions will be compiled by the manager and corrections made or suggestions will be reported to employees.

Return Policy will be an easy exchange of the same item returned by the dissatisfied customer. The manager will be empowered to give extra special rewards based on the extent of their dissatisfaction.

10. Research and Development

Ongoing research will be done to determine what the products are needed to fulfill customer demand. Sources used for research will include:

□ Subscription to scientific, food and nutritional journals

□ Ongoing customer surveys

□ Quarterly research updates to management

□ Trendy magazines outlining current and future trends of our target markets.

□ Visiting competitors in order to continuously gauge our competition

Menus will continue to be evaluated to ensure appropriate products are offered. The following measure will be taken in development of future menus:

□ Study POS register printouts will provide information on which products sell best. Infrequently ordered items will be removed from the menu.

□ Experimenting with new menu items for a limited time to test market interest.

□ New products may have free samples given to test market interest.

11. Capacity Utilization

Order capacity deals with arranging our resources in order to maximize productivity and turnaround times so that customers are served quickly and efficiently. We believe that such services are essential in producing a loyal customer base.

Our target market is teens and adults from ages 14-55 in the Rowland Height and Los Angeles area. We expect that the number of customers will increase yearly by a certain percentage as the Sky name becomes well known in the area.

The following shows the maximum number of cakes Sky will be able to produce in a month and day basis with the supplies on hand.

|Maximum Production Capacity | |
| | |Day |Month |
|Plate |one plate |213 |5547 |
|8" cake |3 |640 |16640 |
|1/4 sheet cake |2 |427 |11093 |
|1/2 sheet cake |1 |213 |5547 |
|full sheet cake |0.5 |107 |2773 |

12. Disability Regulation

Health and Safety - Sky will be compliant with regulation mandated by the American Disabilities Act to make the store locations accessible for disabled individuals who are customers or potential employees.

□ The manager will be designated as the safety manager

□ The safety manger is responsible to conduct monthly inspection checklist will be followed along with a log of corrective actions taken.

In order to preserve the health and safety of individuals, the health department requires that all employees handling food be required to use wash and sanities hands.

Employees will receive training on how to properly operate equipment in a safe manner.

13. Insurance

Coverage of $1 million per incident and 3 million aggregate coverage will be carried through Allstate Insurance Co.

14. Permits and Licenses

County Business Licenses - These will include the following:

□ Sign Permit

□ Health Permit

□ Employer Registration

□ Fire Department/Fire Inspection Permits

□ Food Related Plan Checks

Business License – obtained from the city of Rowland Heights. The information on who to contact will be supplied by the Johnson Group.

Food Handlers’ Permits – as owner-operator, we will obtain one of these very early in our development process from the local health department. Each employee must obtain one as well before they can begin to function at Sky. The permits must be kept at the location should a representative from the Health Department come to review the location.

Occupancy Permit – Our local building inspector will issue this to us as construction ends and we are ready to begin business. They will be sure that we have compiled with all local building and safety standards. This must be in our possession before we open the business

9. Exit Plan

1. Risk Evaluation

Our highest risk is that of weak sales due to poor product planning for our target market. Our best defense is constant market testing and comparison of other food organizations in the same area. Removing poor sales items from the menu and testing new ones based on our market surveys should insure success in reaching our local target market.

Coupons, fancier signs that will catch the customer’s eye can also aid in poor sales.

Another major risk is inefficient and costly operations. Inability to service customers quickly and with high quality must be addressed by constant re-engineering and evaluation of equipment and operations. Items must be presented at the peak of freshness and cannot be served at anything less than that.

2. Exit Plans

We, the founders of Sky would like to assure you, the lender, that you will be able to recover your full investment in all possible circumstance. In support of this goal, we have crafted various exit plans in which you will be able to recoup your investment in us.

□ Sale - Individual entrepreneur may buy the business to operate our already functioning business. Termination of existing management and employees will be at the discretion of the new owner.

□ Close Operations – If the business faces four consecutive quarterly profit losses, we will sell all of the company’s assets and distribute them as necessary to fulfill our obligations. Of course this results in termination of the management staff and existing employees.

10. Financials

1. Introduction

The Sky Bakery is a for-profit entity will incorporate on Nov. 01, 2007 (Please refer to Sky Bakery’s operational timetable appendix), and the financial objective is to maximize profits for its investors.

The business will require an initial investment of $200,000. The principal have secured a lease on the property at 18455 E. Colima Road, Rowland Heights, California. Property development and lease improvements will start immediately after incorporation. Equipment and bakery paraphernalia will all be accumulated during that period and included in the cost of development.

2. Financials

Sky is expecting to finance $100,000 up front as owner investment and $100,000 from a loan. A $50,000 investment from Jose Negrete our Manager, and $50,000 from Wei-Yu Liao our chief baker. The $100,000 loan funding will be secured by Nov 01, 2007. This will be an interest bearing loan at a rate of 8.125%, paid on a five year schedule beginning in Nov 31, 2007.

Personnel - The employment staff and management of Sky Bakery will consist of 7 full time employees including manager/baker, chief baker, two bake helper, a chare, and two front desk sales.

3. Financial Statement Assumptions □ Sales are predicted to grow at an annual rate of 6-12%, growth will be based on gradual increase in baking capacity.

□ Inflation, interest rate fluctuations and other uncontrollable economic factors were already built-in on the 5 year pricing schedule.

□ The following are the revenue structure based on year 3 projection Regular Cake Sales: 18.79% of total sales Custom Cake Sales: 24.81% of total sales Wedding Cake Sales: 53.72% of total sales Beverage Sales: 2.68% of total sales □ Cost estimates were obtained from competitors and industry average.

□ Cost allocation Materials included Baking and Beverage ingredients Insurance expense increase $50 per year Advertising expense increase 5% per year Supplies: Selling is 80% of total supplies, Manufacturing is 20%. Utilities: Selling is 40% of total utilities, Manufacturing is 60% Telephone: Selling is 95% of total cost, Manufacturing is 5% Gross Margin percent is comparable to the industry average

4. Detail Start-Up Costs

All legal and professional services were estimated to complete within 200 hours or an equivalent of two month service. Fees were matching California’s actual rates. A summary of required professional help are as follow:

Lawyers / Attorneys: Will handle all legal contracts and negotiations, give advice on all legal requirements and act as Sky Bakery’s behalf in obtaining various permits and licenses. Will also assist in employee contracts.

Accountants: Will assist in development and installation of the accounting system, audits and reviews.

Designers: Will formulate designs that will complement the layout of bakery. They will also coordinate all necessary codes and regulations, so that bakery’s operation will open without problems from the municipal regulatory bodies.

Other Consultants: These experts will help by providing important advice on all aspects of the business like promotion, advertisement, etc.

Machines and kitchen equipment costs were obtained from a 2006 edition of Consumer Buyer’s Guide and confidential sources from competitors. Rent and other utilities were actual quotes from Management Company. Leasehold improvement estimates was obtained from a reliable source working with one of our main competitor in the area.

|Start-Up Cost | | | |Quantity |Unit Price |Total Expense |% |
| |Lease deposit |(2 months) |2 |$3,250 |$6,500 |4.51% |
| |Lease expenses (5 year lease) | | | |2 |$3,250 |
| |Cash on Hand | | | | |
|position |1 |2 |3 |4 |5 |
| |Monthly|Yearly |Monthly |Y|Monthly |Y|Monthly |
| | | | |e| |e| |
| | | | |a| |a| |
| | | | |r| |r| |
| | | | |l| |l| |
| | | | |y| |y| |
| | | |Sky Bakery | | | | |
| | | | |
| |ASSETS | |
|Current Assets | |
| |Cash in Bank |46,492 |
| |Inventory |317 |
| | |Total Current Assets |46,809 |
| | | | |
|Fixed Assets | |
| |Equipments/Layout Improvements |82,057 |
| | |Less Accum Depreciation |(27,026) |
| |Office Furniture & Equipment |2,502 |
| |Less Accum Depreciation |(1,580) |
| |Total Fixed Assets |82,175 |
| | | | |
| | |Total Assets |128,984 |
| | | | |
| |LIABILITIES | |
|Current Liabilities | |
| |Sales Tax Payable |2,097 |
| | |Total Current Liabilities |2,097 |
| | | | |
|Long Term Liabilities | |
| |Loan From Others |81,630 |
| |Interest Due |1,481 |
| | |Total Long Term Liabilities |80,149 |
| | | | |
| | |Total Liabilities |82,246 |
| | | | |
|Shareholders Equity | |
| |Paid in Capital-Stock |100,000 |
| |Retained Earnings |(53,262) |
| | |Total Shareholders Equity |46,738 |
| | | | |
|Total Liabilities & Shareholders Equity | 128,984 | 5.
| | |Cash Flow Projection | | | | |
|Cash Receipts |
| | | |
|Customer Analysis Counts for Pacific Plaza Shopping Center |
| | | |
|November |
|Date Taken |Time Taken |Traffic in 5 minutes |
|11/9/2006 |10:00 AM |45 |
| |11:00 AM |61 |
| |11:30 AM |65 |
| |12:00 PM |75 |
| |1:00 PM |50 |
|November |
|Date Taken |Time Taken |Traffic in 5 minutes |
|11/17/2006 |10:00 AM |42 |
| |11:00 AM |50 |
| |11:30 AM |60 |
| |12:00 PM |70 |
| |1:00 PM |53 |
|November |
|Date Taken |Time Taken |Traffic in 5 minutes |
|11/25/2006 |10:00 AM |58 |
| |11:00 AM |70 |
| |11:30 AM |75 |
| |12:00 PM |88 |
| |1:00 PM |82 |
|December |
|Date Taken |Time Taken |Traffic in 5 minutes |
|12/4/2006 |10:00 AM |28 |
| |11:00 AM |33 |
| |11:30 AM |48 |
| |12:00 PM |60 |
| |1:00 PM |55 |
|Nov-06 |
|Date Taken |Time Taken |Traffic in 5 minutes |
|12/10/2006 |10:00 AM |45 |
| |11:00 AM |59 |
| |11:30 AM |71 |
| |12:00 PM |79 |
| |1:00 PM |77 |

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