Great American Cookies in China

Juyi Li (Jerry)-Louis Morris-Jessica Rogers-Alena Tatum

Group 2

Background

Founded by Michael Coles and partner Arthur Karp

First store opened in Atlanta, Georgia’s Perimeter Mall in 1977.

Founded on the strength of a generations-old family chocolate chip cookie recipe

Great American Cookies expanded in malls across the country

Developed a complete line of cookies and brownies, including our signature Cookie Cake product

Operates 300 stores in over 40 US states, Bahrain, Chile, Guam, Mexico, Puerto Rico, Saudi Arabia and the United Arab Emirates.

Strategy-Brief Flagship Store on Nanjing Road, Shanghai

• High Foot Traffic• Great visibility • Marketing and promotional

advantages

Food and Drinks Offered

• Chocolate Chip Cookie as signature cookie

• Regionalized favors• Red Bean• Green Tea• Sesame Seed

• Drinks• Coffee• Tea

Strategy-Brief Hands on baking experience

An opportunity for kids to participate in making and baking cookies

Couples and young adults to enjoy a baking experience

Distribution Hub for Micro Stores

Advertisement for Micro Stores

Extended Nighttime Hours

Company Owned

New Product Testing

Strategy-Hub Store Design

Interior view of flagship store.

Aiming to provide a classic baking experience as if the cookies are baked in the kitchen of an American family.

Micro Stores (x6)(Spokes)

Supplied through Distribution Hub

No Ovens

High Traffic Areas

Normal Hours of Operation

Franchise/Partnerships

Limited Menu (products that tailor to local tastes)

Strategy- Micro Stores

Strategy-Industry Facts

Cookie consumption market size in Shanghai alone is $98.71 million dollars.

Total market size

in China is $3.8B

Growth rate

projected to be

11% annually 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Avera

ge G

rowth

05

101520253035404550

15.647 17.41 19.37121.55423.96226.515

29.3232.423

35.85339.646

43.841

Growth Projection of Frozen Cookie and Cracker Products Shanghai

Strategy-Competition Major competition:

Mrs. Field’s Cookies (American)

Mr. Donut (Japanese)

Minor (supermarket based) competition:

Kraft foods Specific Brand, Oreo and Chips Ahoy!

Venerability of the Business Model

If Great American Cookie is successful in providing both a dining and baking experience for its customers, GAC does foresee our business model being copied

Strategy- Growth

Focusing in the 1st tier cities in China, i.e. Shanghai and Beijing

Providing franchising and licensing rights to Chinese partners who wish to open Great American Cookie to their locations in 2nd and 3rd tier cities.

All locations will retain the chocolate chip cookie as its signature cookie.

If the market allows, the 2nd and 3rd tier cities will also provide a baking experience for customers. However, if not, we will focus on just selling finished products

Strategy-CFDA

Great American Cookies will follow China Food and Drug Administration’s rules and regulations.

Furthermore, GAC will also never compromise the quality of our food by importing frozen dough and dry goods from the United States.

GAC will employ Jun He Law Firm to ensure that all food related regulations are met under Chinese Law.

Strategy- Changing Trends

Growing number of kids eating cookies and deserts

Growing number of families having disposable income

Growing number of adults willing to experiment with western cooking

GAC will still have to educate the consumer on a dessert eating culture, however, with the one child policy, young adults today are much more willing to eat sweeter tasting treats compared to their counterparts 20 years ago.

Marketing- TM

Target Market:

20-35 year old women

Students

Financially well-off

Children between 10-18 years old

Expats and general tourist trade

Market taste tests on a semi annual to annual basis

Surveys of the experience

Marketing- Branding

Giving the experience of a real American home

Branding Strategy

Recognizable logo: American Brown Bear, GAC apron, Blonde American Sales Girls

Establish an impression on children

Product Placement TV advertisements

Yao Ming

Zhang Ziyi

Marketing

Market Entry Strategy

Increase brand awareness Television- cartoon adverts

Nanjing Road Fridays Mainly foot traffic

Intensive Distribution- while still keeping quality

Importing goods from US, Japan and Australia

Management

Partners

Intellectual property

Employees

Lack of loyalty

Handling cultural differences

Government

Auntie Anne’s Example

Doesn’t help enforce litigation claims

Guanxi

A. Nanjing Road (Flagship/Distribution Hub)

B. Sichuan North Road (Spoke) (8 min)

C. Super Brand Mall (Spoke) (14 min) D. Zhangyang (Spoke) (24

min)

E. Yuyuan Commercial City (Spoke) (9 min)

F. Hunihai Zhong Lu (Spoke) (10 min)

G. Xujiahui (Spoke) (18 min)

Location

Total Route Supply Time (A-G): 1 hour 12 min

Locations Represent Major High Traffic Areas

(Shopping, Dinning, Etc…)

Location

Flagship Store

Strengths High Traffic Area

Located in Key Shopping Area

High Visibility

Takes Advantage of Surrounding Attractions

Provides an Experience and Lasting Impression

Weaknesses High Real Estate Costs

Large Square Footage Requirement

High Staffing Costs

Business Success Relies in Larger Part on Flagship Customer Impressions

Location

Micro Stores (x6)

Strengths High Traffic Areas

Low Overhead Costs

Low Staffing Costs

Takes Advantage of Surrounding Attractions

Distance from Hub

Under Direction of Franchise Partners

Weaknesses Not as Visible as Flagship Stores

Limited Menu Items

Under Direction of Franchise Partners

Location

Set Realistic Goals

6 stores at the end of 3 years

Expand Beyond Initial Market Within 5 Years

Petition for Government Approval to Enter the Market

Continue to Dialogue to Stay Aware of Changes

Secure Proper Licensing/Meet any Regulatory Requirements

Establish Budget

Secure Adequate Funding

Execution

Begin Market Analysis

Assess Target Market

Develop Products Based on Local Tastes

Begin to Establish and Develop Strategic Partners

Local Partners

Established Businesses

Determine Store Location Availability and Cost

Execution

Secure Distribution Lines

Frozen Shipment of Goods (Basic Dough)

Machinery Shipments

Non Perishable Goods Shipments or In Country Purchase

Assess Workforce Requirements and Availability

Secure Material Sourcing As Required

Adequate Power & Water

Food Items

Potential Manufacture of Some Products in Country

Execution

Develop Store Design as Required

Set Date for Grand Flagship Store Opening

Establish Marketing Campaign

Execution

24 23 22 21 20 19 18 17 16 15 14 13 12Goal SettingGovernment ApprovalEstablish BudgetSecure FundingBegin Market Analyis

Assess Target MarketDevelop Tailored Product Offerings

Establish Pricing StandardsDevelop Strategic PartnersDetermine Store LocationsEstablish Distribution ChannelsAssess Workforce Requirements & AvailabilitySecure Material Sourcing As Required

Real EstatePowerWater

Food ItemsIn Country Product Support

Finalize Store Desgin and LayoutFlagship

Mirco StoresSet Date for Grand OpeningBegin Grand Opening Marketing Campaign

MONTHS UNTIL FLAGSHIP STORE OPENING

Execution

11 10 9 8 7 6 5 4 3 2 1 0Goal SettingGovernment ApprovalEstablish BudgetSecure FundingBegin Market Analyis

Assess Target MarketDevelop Tailored Product Offerings

Establish Pricing StandardsDevelop Strategic PartnersDetermine Store LocationsEstablish Distribution ChannelsAssess Workforce Requirements & AvailabilitySecure Material Sourcing As Required

Real EstatePowerWater

Food ItemsIn Country Product Support

Finalize Store Desgin and LayoutFlagship

Mirco StoresSet Date for Grand OpeningBegin Grand Opening Marketing Campaign

MONTHS UNTIL FLAGSHIP STORE OPENING

Execution

Initial Cookie Dough and Frozen Products Sent From the United States to Storage Warehouse for Immediate Distribution to Flagship Store

Non Perishables Purchased in House or Sent With Frozen Products- Cost Dependent

Local Adaptations Added to Dough and Desert Products as Needed

Product Decoration and Design Conducted at Flagship Store

Supply Chain

Daily Distribution from Hub Store of Finished Cookie/Dessert Products and other Perishable Items (Soft drinks) to Micro Stores via Ground Transportation (Conducts Resupply as Needed)

Bi-weekly Distribution of Non- Perishable Items (Napkins, Straws, Bags, etc…)

Cookie Cake Orders Distributed from Hub Store Only. Picked up at Hub or at Micro Store

Solicit Customer Feedback

Place Additional Orders for Products

Supply Chain

Feedback

GAC Sourcing Local Sourcing

Flagship Store

Micro Store

Micro Store

Micro Store

Micro Store

Micro Store

Micro Store

Local Distributor

Local Taste AdaptationsDesig

nFinish

Supply Chain

Start-Up FundingGrand Opening Marketing 5000.00Travel and Living Expenses While in Training 20000.00Cookie Ingredients 10000.00Other Opening Inventory 15150.00Architectural Fees 6750.00Furniture, fixtures Equipment & Décor 96750.00Signs 6000.00Prepaid rent & Security Deposit (3 months) 8010.00Leasehold improvements 68200.00Utility Deposits 3000.00Professional Fees 6000.00Computer System 5500.00Business Licenses, permits, etc 2500.00Insurance (3 months) 3500.00Additional Funds (3 months) 12000.00Total Startup Capital 268360.00

Table 1

GAC Financial Position

Revenues in excess of $6million for the past 3 years.

Multi-million dollar net income and cash flows for the past 3 years

Ratios

Recent acquisition of NexGen

Projections

Year 1 Year 2 Year 3Revenue from Franchise Fees 45000.00 45000.00Revenue from Royalty Fee 20355.30 42746.13Sales 393750.00 413437.50 434109.38 COGS 111037.50 116589.38 122418.84Net Sales 282712.50 296848.13 311690.53 Total Revenue 282712.50 362203.43 399436.66Advertising 5654.25 5936.96 6233.81Labor 107493.75 112868.44 118511.86Rent 32040.00 33642.00 35324.10Insurance Expense 14000.00 14700.00 15435.00Utilities 12000.00 12600.00 13230.00Depreciation Expense 19350.00 19350.00 19350.00TOTAL OPERATING EXPENSES 190538.00 199097.40 208084.77Operating Income 92174.50 163106.03 191351.89Other Start-up Expenses (Prior to Opening) 134460.00Interest 10734.40 10734.40 6734.40Earnings Before Taxes (53019.90) 152371.63 184617.49Taxes (18556.97) 53330.07 64616.12NET INCOME (34462.94) 99041.56 103993.63

Great American Cookies-ChinaProforma Income Statement

Projections Cont.

Year 1 Year 2 Year 3Assets Cash 131347.07 148481.12 102144.38 Inventory 25150.00 26407.50 27727.88Total Current Assets 156497.07 174888.62 129872.26 Furniture/Fixtures 96750.00 96750.00 96750.00 Accumulated Depr (19350.00) (38700.00) (58050.00) Net Furn Fixtures 77400.00 58050.00 38700.00Total Long Term Assets 77400.00 58050.00 38700.00Total Asets 233897.07 232938.62 168572.26

Liabilities Note Payable 268360.00 168360.00 0.00

Members Equity -34462.94 64578.62 168572.26Total Liabilities & Members Equity 233897.07 232938.62 168572.26

Great American Cookies-ChinaProforma Balance Sheet

Year 1 Year2 Year3Operating Activities Net Income -34462.94 99041.56 103993.63 Change In Inventory -25150.00 -1257.50 -1320.38 Depreciation Expense 19350.00 19350.00 19350.00Cash Flows from Operating Activities -40262.94 117134.06 122023.26

Investing Activities Purchase of equipment -96750.00 0.00 0.00Cash Flows from Investing Activities -96750.00 0.00 0.00

Financing Activities Change in Notes Payable 268360.00 -100000.00 -168360.00Cash Flows From Financing Activities 268360.00 -100000.00 -168360.00

Change in Cash 131347.07 17134.06 -46336.74Beginning Balance 0.00 131347.07 148481.12Ending Balance 131347.07 148481.12 102144.38

Great American Cookies- ChinaProjected Statement of Cash Flows

Conclusion

Location Selection

Tailored Local Flavors

Dinning Experience and Memories

Partnerships

Supply Chain

Proper Execution

Questions