Ghirardelhi Chocolates

Ms Sudha Chandran
Vijay Kumar
Ashutosh
Ms Anuradha

For:
Dr. S Vasudevan

Executive Summary

Ghirardelhi Chocolate Factory is a confectionery manufacturer franchisor with 30 stores in 4 states viz Mumbai Tamil Nadu, Bangalore and Chennai. It is in the business of premium chocolates and other confectionery products. The business believes that it should seek opportunities to continue to their growth by providing good quality, variety, comfortable store ambience and atmosphere. Market penetration will create strong name recognition, which is essential for the company’s expansion plan.

The management of Ghirardelhi Factory is the responsibility of the franchisee that commits to continue the growth of the business. This is part of an expansion strategy as the company always plans to open company-owned and franchised stores. The franchised stores enable the company to open more stores quickly with no capital investment. Our consumers are mainly corporate employees and impulse buyers,

Our business is proposing Metro Mall in Chennai as the next site location. This location has all the essentials needed for Ghirardelhi Factory to continue its tradition of selling chocolates to its target market,. Ghirardelhi Factory will continue to provide quality confectioneries to corporate.. The in-store demonstrations of chocolate are sure to satisfy the sweet tooth of our client base.

Ghirardelhi Factory Overview

In 1981, S. Vasudevan and his family in the sub-urb town of Delhi, founded Ghirardelhi
Factory, which has grown to be franchisor with 30 stores in 4 states viz Mumbai Tamil Nadu, Bangalore and Chennai. We aim to maintain the confectionary’s taste and quality, an inviting ambience with a distinctive aroma from in-store candy making stations, excellent customer service and their satisfaction, and being efficient in their operations. While implementing an expansion strategy, the company plans to open company-owned and franchised stores. The franchised stores enable the company to open more stores quickly with no capital investment. The company-owned stores provide a training ground for employees, such as district managers, and a testing ground for new products and promotions. They also provide a greater return to the company than the franchised stores. Market penetration will create strong name recognition, which will be essential to the company’s expansion plan.
As a confectionary manufacturer and retail operator, they produce around 300 chocolate candies, and create additional special chocolates for the holiday season. According to Candy Industry, “Almost 75% of Rocky Mountain Chocolate's sales come from its factory-made premium chocolates and confections, the remainder comes from franchise fees.” The main target market for Ghirardelhi Factory is tourists and people with enough spending power to consume luxury confections. Franchises are usually located where there are high levels of foot traffic to capture these consumers that are on vacation and may not have been able to have the Ghirardelhi Factory experience. Because the locations are such, the buying patterns that lead to sales revenue and its growth are impulse buyers. According to the VP of
Company Franchisee Description

Ghirardelhi Factory, is committed to its expansion of their franchise system as well as providing dedication and product excellence. From 2009 through 2012, Ghirardelhi has been rated in the “Franchise 500.” They pride themselves on providing excellent support services for those who are interested in joining the team. In order to be part of this experience, some additional franchise information is provided.
Fees
The franchise fee is Rs 75,000 for the initial five-year term. The total investment required to open a Ghirardelhi Factory is between Rs 2,00000 and Rs 5,00000, depending on store size and location. Franchisees pay the company royalties that are equal to 5% of monthly gross sales and a marketing fee equal to 1% of the monthly gross sales. There is no fee charged for the Ghirardelhi Factory, Inc. manufactured products sold in the store, although there is a 10% royalty charge on products purchased from outside vendors or products produced in the store.
Support and Training It is required that the franchisee completes a seven-day comprehensive training program that includes store operation and management at the headquarters located in Chennai. Some topics include, but are not limited to: customer service, merchandising, pricing, cooking, inventory, quality standards, and record keeping. Training continues through the opening of the store as well as ongoing support to make certain a complete understanding of all areas of business. You are also provided with a business format to control operations. Some of these forms include, but are not limited to: daily sales, payroll control, and accounting format to produce financial statements. Conferences, seminars, and workshops are held yearly to assist in the ongoing training.
Earnings
Ghirardelhi Factory,. does not guarantee earnings. However, they feel that the success of a store is dependent on the management of expenses and the time put into it will reflect earnings. Rocky Mountain has strong brand awareness and marketing techniques that, in the past, have proved to be successful. They have created a recipe that will give you the opportunity to achieve your business goals.
Industry
A demand for chocolates has risen over the past few years. Preferences are shifting to higher-end, more luxurious products. Those with higher levels of disposable income, baby-boomers for instance, are a major target tourist market in Chennai and yearn for these "affordable" luxuries. Ghirardelhi Factory embodies the idea that luxury, gourmet indulgence can be consumed on a relative budget”. As long as consumers with higher levels of disposable income continue to be a core target market, the trend towards bette r chocolates should not decline within the franchise. Consumers will not move backward in terms of preference and taste, especially if what they desire remains attainable. Along with the ability and desire to purchase quality confections is the trend towards healthy eating and living. Ghirardelhi Factory can appeal to a fitness-savvy market by “promoting the evidence found that sugar has a calming effect in both children and adults and may be positively associated with mental performance and mood.” The preconceived impression many people hold that chocolate and the like are unhealthy and should be consumed with caution should not be a barrier Ghirardelhi Mountain needs to consider. Given the evidence to the contrary of these detrimental issues concerning consumption of sweets, the company can use this information to their advantage by educating the customer and in turn, change their habits to benefit Ghirardelhi Factory.
Candy Industry believes that “concerns with obesity and dietary fat will inevitably continue and the introduction of reduced-calorie and reduced or non-fat products will increase, with new ingredients being the key. Pack and portion sizes are expected to decrease favoring consumption of smaller servings. Organic confectionary will also increase in presence.” Although the core consumer of Ghirardelhi Factory are tourists who mainly purchase to fulfill a temptation or passion, Ghirardelhi Factory will need to adapt to this trend in order to remain competitive and continue to attract consumers because the confection industry will greatly expand from penetrating this market that is becoming more and more interested in a nutritious, healthy lifestyle. Flavors are also becoming universal, so tourists from other countries and regions would not be excluded from Ghirardelhi Factory’s customer base. The industry can expect to see increased use of exotic, tropical flavors-which are perceived as both refreshing and healthful, as indicated by Candy Industry. Another major challenge and concern is an adequate supply of good quality cocoa at a reasonable price, at least for the immediate future. Candy Industry claims that climate, fungus, socioeconomic, and political forces have led to a decline in cocoa production in Brazil. This will affect the chocolate industry in multiple ways. Prices of the originally quoted “affordable-luxuries” might increase due to these pressures. Along with the challenge of a shaky cocoa industry, Candy Industry reports “impulse buying will decline with the shift to grocery, home shopping television channels and computer purchasing and away from smaller shops.” Ghirardelhi Factory may or may not feel the effects of this shift based on the implication that tourists would rather make purchases for the over-all experience rather than purchase through a channel that does not deliver some sort of gratification, such as a grocery store. The US confectionary market grew by 1.3% in 2005 to reach a value of $25.5 billion (Appendix A). The confectionary market consists of cereal bars, chocolate, gum and sugar confectionary. The leading revenue source for the US confectionary market is the chocolate sector, which generated total revenues of $13.2 billion in 2005, equivalent to 51.9% of the overall market value. The International Cocoa Organization (ICCO) estimates that global chocolate sales were US$74 billion in 2006. In inflation-adjusted terms, that dollar amount represents more than a 20% increase over 5 years. Overall chocolate sales last year rose just 5% to an estimated $15.3 billion. In 2010, the market is forecast to have a value of $27.7 billion, an increase of 8.3% since 2005. According to DataMonitor, the US accounts for 26% of the global confectionary market’s value. Western Europe consumes the largest share of chocolate products (45%) compared to the U.S. where 20% of global chocolate sales are made (Appendix B). DataMonitor explains that the primary distribution channel in the US confectionary market is convenience stores, which distribute 29.8% of the market’s value. Supermarkets and hypermarkets distribute a further 28.5% of the market’s revenues. Chocolate candy boxes or bags greater or equal to 3.5oz account for 36.7% of the US Chocolate Confectionary Segment (Appendix C). This strengthens the argument that impulse buying, as mentioned earlier, will decrease and move toward grocery store purchases. However, Ghirardelhi Factory should not make dramatic efforts to compete in this area since their positioning of franchises are geared toward the tourist population and distinguishes itself amongst other confection products by being sold in franchise stores.
Product, Place, Price and Promotion Ghirardelhi Factory is a in the confectionery manufacturer. Their products consist of truffles, caramel apples, clusters, mints, creams, boxed chocolates, sugar-free confections, and hot cocoa mixes with recipes created by their own chocolate makers. This process differentiates them from the competition. Ghirardelhi Factory strives to develop the best candy by using supreme chocolate and ingredients. Among the benefits of chocolate consumption are: the taste of it and the effects on the person, it has caffeine, and it has several substances that have resulted beneficial for the heart.
RMCF produce their own product and sell it through different channels such as retail stores, Internet, wholesaling, mail orders and fundraising. They do not need to rely on middlemen since they develop their own chocolate in house.
Price of chocolate varies per store and franchisees. In general they will sell at prices ranging from $14.90 to $24.00 per lb. Their box chocolates range from $49.50 to $18.50 and a pound of their special assortments are $18.50. Candy apples and dipped strawberries are only available at retail stores. Promotion is minimal for Ghirardelhi Factory. They are not advertised on any medium. RMCF relies on the location of their stores and foot traffic for name recognition in addition to word of mouth.
Competition
Ghirardelhi Factory faces indirect competition in the confectionary industry from Hershey Foods Corporation; the leading company within the US confectionary market holds a 24.3% share. Mars, Inc. accounts for a further 18.7% of the market’s value, combined they command 43% of the entire market (Appendix C). Hershey Foods, the 112-year-old company synonymous with the sweet treat, is plunging into the premium chocolate market by buying Scharffen Berger Chocolate Maker. Mars, whose brands include M&M's and Milky Way, is about to launch Ethel’s, a gourmet chocolate line. It ranges from traditional truffles to trendy treats inspired by cocktails such as cosmopolitans. They're sold in a chain of cafes with plush chairs that Mars launched in Chicago last spring. These products have the potential to be marketed in the grocery store environment just as their counterparts are now being marketed.

Demographics The population of Mission Valley, where the Fashion Valley Mall is located is of 12,027 according to the 2000 Census and the estimated population as of January 2007 was 17,109, which represents a growth of 42.3%. Due to it’s size, it is divided into two neighborhoods, Mission Valley East and Mission Valley West which is where Fashion Valley Mall is located. It is considered am important entertainment and shopping center for San Diego. This population is based on the number of people that live in the County of San Diego versus the zip code where the Fashion Valley Mall is located. Mission Valley’s trade area’s population total in 2000 was 597,047 and it estimated to be 639,072 by 2011 (Appendix E).
We also took into consideration the European population because chocolate is a successful industry in Europe. According to Daniel Workman, Germany is at the top of the list of highest chocolate consumption per person in 2005 with 24.51 lbs of chocolate per person. Our site location has a population of 1,358 of German ancestry (Appendix G). Tourism is the third economic force of San Diego. According to the 2007 San Diego Tourism Outlook, there was an estimated 27.9 million visitors traveling to San Diego in 2006. There are two types of visitors: the day visitors that travel from surrounding areas to visit the local attractions such as Sea World, San Diego Zoo, and Old Town, then there are the overnight visitors that lodge in hotels and stay for longer than one night which is considered the hotel segment. This is the segment that is having the strongest growth. These are the tourists that stay for more than a day and usually go out and explore the city, therefore creating the high foot traffic that Ghirardelhi Factory aims for when locating their stores. According to the San Diego Convention and Visitors Bureau, the total spending by visitors to the County of San Diego should grow at least 6.0% to 6.5 billion from 2006 (Appendix D).
Store Location/Characteristics Mission Valley is an attractive place for many tourists and visitors due to its centralized location and the accessibility to others areas in the County. There are nearly 4.4 million square feet of retail space and it’s within this area that the Fashion Valley Mall is located. Mission Valley is within minutes of San Diego’s main attractions: Sea World, Old Town, Qualcomm Stadium and Downtown. It is also home to the Town & Country Resort and Convention Center located only 2 minutes or 0.8 miles from the Fashion Valley Center Mall.
The Simon Property Group, who offers long-term and short-term leasing, owns Fashion Valley Mall. Fashion Valley Mall offers complementary retailers to Ghirardelhi Factory such as the AMC Theatres for consumers who want to have something sweet while watching a movie, or A Pea in the Pod, which targets pregnant women who tend to have cravings for chocolate. The retail site is located next to Macy’s, a very high traffic department store that serves as one of the anchors to this mall. The competitive retailers located within the mall are See’s Candies and Godiva, both located on the 2nd level of the mall. They are located within 3 stores away from each other. Our proposed space is located on the 1st floor next to Macy’s and Limited Too which are both directed to female shoppers, and women love chocolate.
The County of San Diego business climate is one that shows no signs of slowing down. Along with tourism, San Diego counts with a rising number of employees in manufacturing and military/defense. Another important economic factor in San Diego is it association with the San Diego Bay, which is one of the five most important ports in California.
All business within the county of San Diego should be in compliance with the San Diego Municipal Code: Chap03Art03Div01 and Chap03Art03Div10 in addition to the Fashion Valley Mall tenant criteria manual.
Retail Trade Area Analysis/Site Selection The trading area for our site extends from south to downtown San Diego, east to El Cajon and into the North County communities of San Diego. Fashion Valley Mall benefits from the solid growth in population in the San Diego area. It is projected that by 2011 the trade area population will reach to 1.2 million (Appendix I).
The average household income for our trade area is $54,904 and the average household income for our zip code is $51,368. The geo-demographic segments in the Fashion Valley Mall trade area are Young Digarati, Young Influentials, Suburban Sprawl, New Beginnings, Home Sweet Home and Gray Power which combined have a median household income of $325,404 and are of diverse ethnicity (Appendix E). We are proposing the Fashion Valley Mall for the next Ghirardelhi Factory. The mall is located at 7000 Friars Rd. in the city of Mission Valley in California. Selection of location was based on the number of visitors this mall receives, which is almost 12 million a year. Being the largest mall in the County of San Diego it is spread over 1.7 million square feet. The mall offers stores that no other mall in San Diego does such as Neiman Marcus, Bloomigdale’s, Saks Fifth Avenue, and Nordstrom. Among the benefits that justify our decision are the demographics in the trade area, in addition to the accessibility to the mall. It is conveniently located near a number of interstates such as I-8, which connects the mall to beach communities as well and routes connecting it to Downtown San Diego. Fashion Valley Mall is very accessible as it is conveniently located off Highway 163 at Friars Road West. Parking structures are on all sides of the mall and it is free. They also offer valet parking in front of Pizzeria Uno. Additionally, there is a large public transit terminal, which includes bus and trolley service. These factors were very important for our decision, as our target markets are tourists. Our proposed site has high visibility, as it would be located outside of Macy’s on the 1st level. Adjacent tenants include Limited Too, Sony, Tiffany & Co., Zales and Lane Bryant. The mall is also surrounded by hotels and is minutes away from the Town and Country Resort and Convention Center. It is a two level mall with convenient parking and most important, family friendly. The retail location we have selected is situated on the 1st level on the left hand side of Macy’s (see Appendix). We feel confident that our site selection will attract the high foot traffic of the mall. According to the 2000 Census Bureau, there are 6 confectionery and nut establishments within our trade area (Appendix J).
Retail Marketing Strategy Based on RMCF’s growth opportunity in the marketplace to provide factory-made premium chocolate and confectionary goods, the marketing objectives consist of establishing a unique brand identity, maximizing brand awareness, marketing across specific target markets and increasing customer satisfaction through consistent service and product quality.
With so many chocolate outlets in the San Diego trade area, it is crucial to differentiate RMCF from its competitors. Consumer perception is the key factor in building brand equity. If a customer perceives RMCF products and services to be unmatched to those of its competitors then they will be more willing to pay the premium price for the products. Although RMCF stores are located in high traffic trade areas, it is imperative to first maximize brand awareness to potential customers because they will be more willing to enter a store if RCMF is at the top-of-mind for premium chocolate. Marketing across specific targets markets will increase the opportunity to deliver information to the customers who will be interested in making a purchase of RMCF chocolate. By clearly defining our segments, RMCF will have a cost advantage over its competitors. The final objective is to increase the level of customer satisfaction. This can be achieved through a high level of customer service delivered consistently across its staff. Accomplishing these objectives will secure a sustainable competitive advantage for RMCF for many years. Our marketing team has identified the following marketing strategies based on the marketing objectives: position Ghirardelhi Factory as the premier upscale facilitator of premium chocolates and confections, build brand equity through top-of-mind awareness and increasing customer loyalty with specialized CRM programs. In today’s marketplace, there is an overwhelming amount of competition for chocolate and confectionary goods. With both low-end and high-end brands varying from Ghirardelli, See’s Candies, Godiva, and Hershey’s, it is critical to develop a strong marketing position that will reflect RMCF’s high standard of products and services. “The basic approach of positioning is not to create something new and different, but to manipulate what’s already up there in the mind, to retie the connections that already exist.” (Rise & Trout, 2001). To simply connect RCMF and premium chocolates will have a positive influence to the customer’s willingness to purchase or recommend RMCF to friends and family. On a tactical level we recommend implementing the following: building a strategic alliance with an upscale retail store and generate a buzz with a grand opening at Fashion Valley Mall, as well as advertising on the San Diego Union Tribune. By implementing a strategic alliance with a popular upscale retailer, both parties will achieve a mutually beneficial relationship. As the upscale retailer and RMCF both develop marketing campaigns, it will help to build awareness for companies. This will give an opportunity for existing customers to learn more about their affiliate’s partners and help to drive sales. Partnering with Burberry would suit RMCF because it will help solidify RMCF’s position in the market place. Since Burberry is a franchise, creating this strategic alliance through contract would be possible. In addition, RMCF and the retailer can provide special offers or incentives for customers to make purchases at both retail stores. An example may be to offer one free caramel apple with a $50 purchase at Burberry. There are many approaches to coupon promotions, but the most important objective is sending the message that RMCF is an upscale product. Another way of increasing awareness is to stage the grand opening of RMCF at the Fashion Valley Mall. Ideally, the best time for a grand opening of RMCF is before Valentine’s Day with a target date to consider of January 15, 2008. By opening on this specific date, it will give customers enough time to purchase gift items for that special partner, friend, or family. The fact that Mother’s Day, Father’s Day, and graduations will follow shortly thereafter will make for a profitable first quarter of operations. By using direct marketing through mail, we can direct our efforts to customers who live in the nearby trade areas (92108 zip code) because they have a great percentage of making a purchase. Being that this is our primary trade area, we anticipate that 60-70% of these customers will be our base. According to analysis obtained through Simply Maps, there were 1,725 households who purchased boxes of chocolate in the 92108 zip code in the past 6 months (Appendix K). The success of the grand opening will generate a buzz for future customers to this location. Although it is customary for RMCF to provide samples, it would be an advantage to offer it not only at store locations, but also at upscale venues such as hotels and tourists areas. Since each chocolate manufacturer has its own distinct choice in flavor, it would be wise to prove to the customers that RMCF is the cream of the crop. Providing small samples is a cost efficient method of advertisement compared to the cost of advertising in radio and TV. This method can reach a mass audience and have a trickle effect because of the ability to pass the message by word of mouth. Advertising for the local newspaper is another tactic that will be implemented for the upcoming months in anticipation to the grand opening in January. According to the San Diego Union Tribune, the cost in advertising space for what we plan to accomplish will be $912. This includes exposure in the San Diego Union Tribune specifically in the central region of San Diego. The days that our grand opening will be advertised are Thursdays and Saturdays bi-weekly for 2 months. Our final initiative is to focus on a customer loyalty program, which is designed to gain customer retention. We believe the 80/20 rule will apply in this market because 20% of all chocolate lovers will make repeat purchases consisting of 80% of the total sales. So keeping the customer satisfaction high is key. Delivering a positive experience and consistent quality for our clients is important. This can be achieved by consistently training the sales staff and chocolate makers. In addition, providing a discount card or membership card can help initiate a CRM program. By collecting information about the customer, RMCF can directly target them by direct mail or E-mail. By sending them a promotion on their birthday, anniversaries, or special holiday such as Valentines, the customer may show appreciation and decide to make a purchase.
Financial Plan It is the goal for Ghirardelhi Factory (RMCF) to become the leading chocolatier in the U.S. as well among their competitors. As a RMCF franchise store, we share the same ideals in becoming a leading chocolate retail store. In order to accomplish this, we chose the location of Fashion Valley Mall in San Diego, CA to be the next franchise location. This mall fits the criteria of RMCF, and we feel that it will be a profitable location where RMCF can also increase their brand image. For the Fashion Valley Mall location, we assume that approximately $500,000 will be needed as start up costs.
For this financial plan, we assume that there will be no major changes in the short or long term profitability of the Fashion Valley location. This includes any equipment used in the RMCF store, as well as any of the products we sell. We also assume that all increase in percentages, in sales, cost of goods sold, payroll, etc. is in accordance with historical trends of different sources (Appendix L). All assumptions for the projected profit and loss analysis are based on historical data taken from various sources including the RMCF Annual Report, RMCF franchise packet, Reuters, San Diego local and California state official websites.
Break-Even Analysis For the Break-Even Analysis, it is assumed that all profits and losses will stay consistent to the profit and loss analysis (Appendix M).
|Break-Even Analysis |
| | | |
|Monthly Revenue Break-Even | |$27,821.16 |
| | | |
|Assumptions: | | |
|Average Percent Variable Cost | |45% |
|Estimated Monthly Fixed Cost | |$15,247.16 |

Projected Profit and Loss Analysis
Sales
As a company, RMCF has been consistently expanding and increasing company revenue over the last 5 years. When looking at the trailing 12-month revenue for RMCF in the 2007 Fiscal Year, RMCF is competitive with both the Sector and the Industry that the company is in.
Management Effectiveness Ratios Three ratios that are widely used throughout all business and industries are Management Effectiveness Ratios. These three ratios determine if company management is effectively and efficiently utilizing company resources to run the business and generate revenue.
These three ratios are the ROA, ROI, and ROE, and all numbers taken in the trailing 12-month period. According to Reuters, in all three ratios, RMCF is doing extremely well compared to the Sector, Industry, and the S&P 500. This means that RMCF management understands and is aware of their resources, and is using it to their advantage (Appendix M).
Return on Assets In 2007, with a net income of $1.33 million and total assets of $18.88 million, RMCF was able to generate a 25.30% ROA, and 28.67% in the TTM period. This shows that RMCF is able to use the assets that they have in order to generate a greater return. RMCF ROA also far exceeds sector, industry, and the S&P 500 with returns of 6.71%, 11.13%, and 8.69% respectively.
Return on Equity Return on Equity measures the return on a company using the equity generated from Owner’s Equity. With a ROE of 36.73%, it shows that RMCF is able to give shareholders a profitable return. It will also be able to assure shareholders of the company that the company is a solid investment. RMCF’s ROE compared to the sector industry, and S&P 500 also excels.
Return on Investment Return on Investment is a way for company’s to measure the return on long-term investments. For RMCF, the ROI is 35.04 showing that in terms of the long term, RMCF Management is making sound, effective decisions. Again comparing RMCF ROI to other aspects, RMCF again surpasses averages.

References

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Datamonitor (2005). Confectionery in the United States. Industry Profile. Retrieved October 15, 2007 from http://mimas.calstate.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=16699411&site=ehost-live

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www.alexa.com/data/details/traffic-details/facebook.com?q=facebook

Demographics for 92108 Zip Code
Population by Gender and Age (2007) 92108
| |Total |Male |Female |Percent Female |Percent Male |
|Total Population |17,109 |8,318 |8,791 |51% |49% |
|Under 5 |1279 |649 |630 |49% |51% |
|5 to 9 |850 |428 |422 |50% |50% |
|10 to 14 |445 |222 |223 |50% |50% |
|15 to 17 |236 |109 |127 |54% |46% |
|18 and 19 |203 |108 |95 |47% |53% |
| | | | | | |
|20 to 24 |324 |167 |157 |48% |52% |
|25 to 29 |1391 |559 |832 |60% |40% |
|30 to 34 |2765 |1318 |1447 |52% |48% |
|35 to 39 |2293 |1224 |1069 |47% |53% |
|40 to 44 |1637 |834 |803 |49% |51% |
| | | | | | |
|45 to 49 |1343 |731 |612 |46% |54% |
|50 to 54 |965 |502 |463 |48% |52% |
|55 to 59 |879 |427 |452 |51% |49% |
|60 and 61 |320 |151 |169 |53% |47% |
|62 to 64 |378 |186 |192 |51% |49% |
| | | | | | |
|65 to 69 |422 |165 |257 |61% |39% |
|70 to 74 |377 |154 |223 |59% |41% |
|75 to 79 |417 |17 |240 |58% |42% |
|80 to 84 |316 |107 |209 |66% |34% |
|85 and older |269 |100 |169 |63% |37% |
| | | | | | |
|Under 18 |2810 |1408 |1402 |50% |50% |
|65 and older |1801 |703 |1098 |61% |39% |
|Median Age |37.3 |37.4 |37.2 | | |

Population by race, ethnicity and age (2007) 92108
| |Hispanic |White |Black |American/Indian |Asian & Pacific |Other |
| | | | | |Islander | |
|Under 5 |297 |663 |95 |1 |179 |44 |
|5 to 9 |179 |477 |61 |4 |66 |63 |
|10 to 14 |82 |223 |41 |5 |49 |45 |
|15 to 17 |68 |104 |20 |0 |27 |17 |
|18 and 19 |36 |109 |15 |1 |27 |15 |
| | | | | | | |
|20 to 24 |62 |164 |23 |3 |38 |34 |
|25 to 29 |267 |901 |56 |6 |81 |80 |
|30 to 34 |434 |1782 |82 |9 |360 |98 |
|35 to 39 |291 |1512 |99 |7 |294 |90 |
|40 to 44 |210 |1088 |126 |5 |140 |68 |
| | | | | | | |
|45 to 49 |199 |847 |118 |3 |116 |60 |
|50 to 54 |101 |683 |81 |9 |55 |36 |
|55 to 59 |85 |651 |41 |3 |77 |22 |
|60 and 61 |32 |228 |25 |0 |21 |14 |
|62 to 64 |42 |278 |32 |2 |13 |11 |
| | | | | | | |
|65 to 69 |58 |291 |25 |2 |34 |12 |
|70 to 74 |42 |277 |9 |3 |34 |12 |
|75 to 79 |48 |266 |19 |2 |68 |14 |
|80 to 84 |47 |217 |13 |0 |27 |12 |
|85 and older |27 |224 |6 |0 |11 |1 |
| | | | | | | |
|Under 18 |626 |1467 |217 |10 |321 |169 |
|65 and older |222 |1275 |75 |7 |174 |51 |
|Median Age |33.6 |38.5 |40.1 |37.5 |35.5 |33.9 |

Employed civilian population 16 years and over
|Occupation |Number |Percent |
|Management, Professional and related occupations |3,597 |48.1% |
|Service Occupations |895 |12.0% |
|Sales and office occupations |2,319 |31.0% |
|Farming, fishing, and forestry occupations |0 |0.0% |
|Construction,extraction,and maintenance |283 |3.8% |
|Production, transportation and material moving |390 |5.2% |
| | | |
|Industry | | |
|Agriculture, forestry, fishing and hunting, and mining |21 |0.3% |
|Construction |231 |3.1% |
|Manufacturing |520 |6.9% |
|Wholesale trade |150 |2.0% |
|Retail Trade |769 |10.3% |
|Transportation and warehousing and utilities |337 |4.5% |
|Information |450 |6.0% |
|Finance, insurance, real estate, rental & leasing |767 |10.2% |
|Professional, scientific, management, administrative and waste |1167 |15.6% |
|management services | | |

Household Income (real 1999 dollars, adjusted for inflation)
|Household by Income Category |April 1 2000 Census |January 1 2007 |Change % 2000 to 2007 |
|Less than $15,000 |840 |966 |15.0% |
|$15,000-$29,999 |1253 |1524 |21.6% |
|$30,000-$44,999 |1447 |1719 |18.8% |
|$45,000-$59,999 |1121 |1536 |37.0% |
|$60,000-$79,999 |821 |1269 |54.6% |
|$75,000-$99,999 |761 |1326 |74.2% |
|$100,000-$124,999 |327 |712 |117.7% |
|$125,000-$149,999 |142 |339 |137.7% |
|$150,000-$199,999 |105 |247 |135.2% |
|200,000 or more |70 |50 | |
|Total Households |6887 |9688 |40.7% |
| | | | |
|Median HH Income | | | |
|Adjusted for inflation (1999 $) |$44,000 |$51,201 |16.4% |
|Not adjusted for inflation (current|$44,000 |$67,587 |53.6% |
|$) | | | |

Household by Type
| |Number |Percent |
|Total Households |6,695 |100.0 |
|Family households (families) |2,026 |30.3 |
| With own children under 18 years |590 |8.8 |
|Married-couple family |1,428 |21.3 |
| With own children under 18 years |337 |5.0 |
|Female householder, no husband present |384 |5.7 |
| With own children under 18 years |173 |2.6 |
|Nonfamily Households |4,669 |69.7 |
| Householder living alone |3,217 |48.1 |
| Householder 65 years and over |356 |5.3 |
| | | |
|Households with individuals under 18 years |661 |9.9 |
|Households with individuals 65 years and older |674 |10.1 |
| | | |
|Average HH size |1.72 | |
|Average family size |2.43 | |

A. United States Confectionery Market Value: $ billion, 2001-2005
|Year |$ Billion |% Growth |
|2001 |25.1 | |
|2002 |24.8 |-1.00% |
|2003 |25.0 |0.60% |
|2004 |25.2 |1.00% |
|2005 |25.5 |1.30% |

Source: Datamonitor
B. US Confectionery Market Segmentation II: % Share, by Value 2005
|Geography |% Share |
|Rest of the world |6.1% |
|Europe |50.5% |
|US |26% |
|Asia-Pacific |17.30% |
| | |
|Total |100.0% |

Source: Datamonitor
C. United States Confectionery Distribution: % Share, by Value, 2004
[pic]

D. United States Confectionery Market Share: % Share, by Value, 2004
[pic]

E. Population Growth 2000 - 2011
|Zip Code |2000 Population |2011 Estimated Population |
|92103 |30,186 |32,115 |
|92104 |47,688 |48,315 |
|92105 |72,994 |77,044 |
|92108 |12,027 |18,058 |
|92110 |24,149 |29,526 |
|92111 |46,821 |48,032 |
|92114 |66,837 |67,140 |
|92115 |56,883 |62,071 |
|92116 |33,080 |35,614 |
|92117 |51,203 |51,611 |
|92120 |25,553 |26,431 |
|92123 |25,217 |28,464 |
|92124 |30,187 |32,159 |
|92126 |74,222 |82,492 |
|Total |597,047 |639,072 |

Source: Simply Map 2007

F. German Ancestry Population in Trade Area
[pic]

G.
[pic]
Source: CIC Research, San Diego County Visitor Model

San Diego Tourism Performance and Forecast
| |CY2005 |CY2006 |CY2007 |2007-2006 % Change |
|Total Visitors (millions) |27.1 |27.9 |28.4 |1.8% |
|Overnight Visitors (millions) |15.9 |16.1 |16.3 |1.5% |
|Day Visitors (millions) |11.2 |11.8 |12.0 |2.0% |
|Visitor spending (bilions) |$5.8 |$6.1 |$6.5 |6.0% |
|Attraction Attendance |11.9 |12.4 |12.6 |2.0% |
|(millions) | | | | |
|Occupancy |72.3% |73.4% |73% | -0.5% |

San Diego Area Distribution of Hotel Rooms September 2006
[pic]

Hotels in proximity to Fashion Valley Mall
|Hotel |Radius in miles |Minutes |
|Fairfield Inn & Suites Mission Valley |1.2 |4 |
|Best Western Seven Seas |0.9 |2 |
|Hilton Mission Valley |1.5 |5 |
|Handlery Hotel & Resort |1.2 |3 |
|Mission Valley Resort |1.2 |3 |
|Comfort Suites Mission Valley |1.2 |4 |
|Doubletree Hotel SD Mission Valley |1.2 |4 |
|Residence Inn Mission Valley Hotel |1.8 |5 |

H.
ESRI Top Tapestry Segments
|Segment |Tapestry Segment |Median HH Income |
|27 |Metro Renters |$50,400 |
|39 |Young & Restless |$40,000 |
|23 |Trendsetters |$55,000 |

PRIZM NE Segmentation System
|Market Segment |Lifestyle Group |Median HH Income |
|04 |Young Digerati |$80,782 |
|02 |Young Achievers |$48,664 |
|27 |Young Influentials |$47,717 |
|30 |Suburban Sprawl |$49,233 |
|06 |Middleburbs |$48,885 |
|44 |New Beginnings |$30,994 |
|07 |Inner Suburbs |$32,233 |
|03 |Striving Singles |$33,096 |
|19 |Home Sweet Home |$65,625 |
|05 |Affluentials |$69,303 |
|01 |Midlife Success |$67,617 |
|21 |Gray Power |$51,053 |
|09 |Conservative Classics |$57,117 |

I.
Primary Trade Area Within 10 minutes driving time
|Zip Code |Population |Distance/miles |Distance/minutes |
| | | | |
|92108 |17,109 |0 |0 |
|92103 |30,186 |2.68 |11 |
|92110 |24,149 |4.7 |10 |
|92111 |46,821 |2.7 |10 |
|92116 |33,080 |1.11 |10 |

Secondary Trade Area Within 15 minutes driving time
|Zip Code |Population |Distance/miles |Distance/minutes |
| | | | |
|92108 |17,109 |0 |0 |
|92117 |51,203 |4.91 |14 |
|92120 |25,553 |4.12 |14 |
|92123 |25,217 |1.78 |12 |
|92104 |47,688 |2.3 |13 |
|92105 |72,994 |3.63 |15 |

Tertiary Trade Area Within 20 minute driving time
|Zip Code |Population |Distance/miles |Distance/minutes |
| | | | |
|92108 |17,109 |0 |0 |
|92114 |66,837 |6.86 |17 |
|92115 |56,883 |4.00 |16 |
|92124 |30,187 |8.2 |17 |
|92126 |74,222 |12.8 |18 |

J. Confectionery & Nut Stores within trade area

|Zip Code |Establishments |Radius/ Miles 1st location |Radius/Miles 2nd location |
|92103 |2 |2.2 |3.0 |
|92108 |2 |1.7 |in mall |
|92110 |1 |2.7 | |
|92111 |1 |5.1 | |

K. Number of Households buying boxed chocolates

|Zip Code |# HH bought boxed chocolates |
|92103 |3,904 |
|92104 |4,574 |
|92105 |4,683 |
|92108 |1,725 |
|92110 |2,308 |
|92111 |3,693 |
|92114 |3,745 |
|92115 |4,694 |
|92116 |3,578 |
|92117 |4,366 |
|92120 |2,353 |
|92123 |2,111 |
|92124 |2,384 |
|92126 |5,273 |

[pic]
L. Financial Plan

|Profits and Loss |
| | |FY 2008 |FY 2009 |FY 2010 | |
|Sales | |$375,242.80 |$401,134.60 |$428,812.90 | |
|Direct Costs of Good | |$149,385.70 |$159,692.60 |$170,711.40 | |
|Other Production Expenses | |$0 |$0 |$0 | |
| | | | | | |
|Cost of Goods Sold | |$149,385.70 |$159,692.60 |$170,711.40 | |
| | | | | | |
|Gross Margin | |$225,857.10 |$241,442.00 |$258,101.50 | |
| | | | | | |
|Gross Margin % | |60.2% |60.2% |60.2% | |
| | | | | | |
|Expenses | | | | |
| | | | | | |
|Payroll | |$88,680.00 |$90,454.00 |$92,263.00 | |
|Sales and Marketing and Other | |$7,978 |$4,368 |$1,968 | |
|Expenses | | | | | |
|Depreciation | |$0 |$0 |$0 | |
|Leased Equipment | |$0 |$0 |$0 | |
|Utilities | |$6,000 |$6,000 |$6,000 | |
|Insurance | |$2,400 |$2,400 |$2,400 | |
|Rent | |$60,000 |$60,000 |$60,000 | |
|Payroll Taxes | |$17,908 |$18,266 |$18,631 | |
|Other | |$0 |$0 |$0 | |
| | | | | | |
|Total Operating Expenses | |$182,966 |$181,488 |$181,262 | |
| | | | | | |
|Profits Before Interest and Taxes | |$42,891.10 |$59,954.00 |$76,839.50 | |
|EBITDA | |$42,891.10 |$59,891.10 |$76,839.50 | |
|Interest Expense | |$0 |$0 |$0 | |
|Taxes Incurred | |$10,722.78 |$14,988.50 |$19,208.88 | |
| | | | | | |
|Net Profit | |$32,168.32 |$44,965.50 |$57,629.62 | |
| | | | | | |
|Net Profit/Sales | |8.57% |11.21% |13.44% | |

M. Break-Even Analysis

|Breakeven Analysis |
|Ghirardelhi Factory |
|Fashion Valley Mall San Diego, CA |
| | | | |
| | | | |
|Cost Description |Fixed Costs ($) |Variable Costs (%) | |
|Variable Costs | $149,386 | | |
|Cost of Goods Sold | $149,386 |45.0% | |
|Inventory | |0.0% | |
|Fixed Costs | | | |
|Salaries (includes payroll taxes) | $88,680 | | |
|Advertising | $7,978 | | |
|Rent | $60,000 | | |
|Utilities | $6,000 | | |
|Insurance | $2,400 | | |
|Payroll Taxes | $17,908 | | |
| |
|Total Costs | $332,352 | | |
| | | | |
|Total Variable Costs | |0.5 | |
| | | | |
| | | | |
|Breakeven Sales level = | $333,854.04 | | |