Magos Millennium Project PlanMagos Millennium Project PlanIntroductionIntroduction

(English Version)

The “Magos Spirit”The “Magos Spirit”The word “Magos” originates from the Greek and refers to the priestly caste and tribe of the Medeswho were said to be able to interpret dreams. The word was also used for any enchanter or wizard.

InHellenism is started to be used as an adjective, meaning “magical.” The plural form “magi” thenentered the English language in ca. 1200 and was used to refer to the Magi from the New Testament(the book of Matthew) and only after the late 14th century, was borrowed from Old French to mean“magician” or “magic” (in the singular).

The word “Magos” was used to represent our company as a sort of “magician” who constantlyconcocts creative and imaginative foods and beverages. Although we make a variety of espresso-based beverages, we also offer a wide selection of fusion drinks, snacks, baked goods,panini/sandwiches and gelato ice cream that make up our menu. With an efficient managementsystem, customized CRM methods, a diverse menu of foods & beverages, upscale and comfortablestore interiors and a continuous effort to meeting the needs of the consumer, the “Magos Spirit”represents our commitment to our customers and our role as a “market leader” in the industry.

OverviewOverview

2000 August Grand opening of first retail location inside Samsung Homeplus (Ahnsan location)

2001 September “Magos” (take-out coffee concept) becomes incorporated2nd generation specialty espresso coffee company becomes incorporated

2001 August Joint partnership with Samsung Homeplus to have Magos take-out style kiosk espresso coffeeshop within each Homeplus location

2003Opened 20 locations within large-scale discount retailers (eg. Samsung Homeplus, Carrefour)and within Samsung subsidiary companies (eg. Samsung Electronics)

2004/2005/2006 Operating stores also inside Lotte Mart, Wal-Mart and Nonghyup Hanaro Currently developing partnership stores with Dipping Dots Ice CreamMagos became incorporated in the U.S. and opened its first location in ChicagoOperating stores in GS Caltax Gas Station as Standard Channel Shop ModelEstablishing Solomon GT as affiliate co. of Magos to import coffee bean and raw materials

OverviewOverview

2007Joint partnership with “Play Time” to develop and establish specialized Kid’s CaféEstablishing Gallery Café in “Haeri Art Village”

2008/2009Establishing Internet Shopping Mall “Coffee Prince(www.coffee-prince.co.kr)”Establishing Flower Café in “Song Tan” area

2010/2011/2012Opened 100 locations within specified business area including large-scale discount

retailers, department stores, universities, gas stations, and public buildings, etc. - As multi-shop concept: kids Café, Gallery Café, Flower Café, Bakery Café, Book Café, Deli, and Cyber Café, etc. (Shop in Shop store concept) - Operating Catering Service, Training Center, M&E Rental Service, and Internet

Shopping MallMagos became incorporated in Vietnam and opened its first location in Ho Chi Minh cityOpening stores and operating an extension Barista traning class & lecture in some

universities

Business DomainBusiness Domain

Chain OperationChain Operation Affiliations with Large-scale Discount

Retailers and B2B Simultaneous openings Coffee & multi-shop set up Coffee tenant

Brand Image Establishment

Franchise Kiosk / Table Shop

Low investment, high return Best taste Low price Differentiated interior concept Efficient management system

Estimated 100 store locations established before end of 2012

Current Global Alliances with Large-scale Discount Retailers, Canterbury, etc.

ConsultingConsulting Interior & Exterior Verification of Commercial Rights Management Analysis Support Tax-related Support Man-Power Pool Financing Support

SupplierCoffee & Tea

Canterbury CoffeeInterior ConstructionMachine, Equipment & AppliancesRelay Delivery System

Magos Vision (Business Expansion)Magos Vision (Business Expansion)Phase 1 (~ 2011)Phase 1 (~ 2011)

Business Infrastructure Development- Management system- Differentiated interior design concept- Most viable cost/investment model

Franchise Business- Magos “know-how” experience &

support- Strategic B2B cooperative partnerships- Economically viable network

establishment

Foreign Market Entrance- Establishment of U.S. corporation- Channel shop open

Phase 2 ( ~ 2012)Phase 2 ( ~ 2012)

Business Diversification- Complex store & themed shop

development- Operation of internet shopping mall- Double-business store management

concept development- New business development:

catering/movable carts/self-serve stores

Competitive Edge as Market Leader- Establishment of viable profit model- Assurance of a differentiated brand

(strong customer satisfaction & recognition)

Franchise Business Establishment- Differentiated management and

operation system- Profit opportunities in sub-business

creation and development

Phase 3 (2013~)Phase 3 (2013~)

Magos CI Assurance by Differentiation- Viable store interior and business model

Aggressive Entrance into Foreign Market- Entrance into Chinese & South-East

Asian market- Development of differentiated complex-

store concept

Strategic Alliances with Foreign Corporations

- Sales / skill / technology collaboration & cooperation

- Global network establishment

BUSINESS GOALSBUSINESS GOALS

Establishment of more than 100 stores Establishment of over 115 stores Establishment of over 150 stores

Store Opening Plan2010 2011 2012

Directly operated C/O 10 10 15

Franchise F/C 76 90 100

Chain Store Forecast 10 10 15

Sum 86 100 115

Sales Forecast

MAGOS Network Situation (based on 2011 figures)

1. Core StrategyAchieved supplementary value profit model for each individual Magos store (costcompetitiveness/profitability)B2B focused unit: achieved external recognition for financial scope and network development

2. Store Total Volume Distribution Situation: 100 stores opened• Large-scale discount retailers: Samsung Homeplus, Lotte Mart, Nonghyup Hanaro Mart,

Wal-Mart, Carrefour• Small-scale retailers: Samsung Super Express• GS Caltex Gas Station: strategically used as the standard model for partnerships

- Gas station focused entrance strategy• Road Shop: Dongdaemun, Echae Shopping Mall, Bundang Jeil Obstetrics & Gynecology, Suhcho

e-hospital, Goomi• Others: Suwon World Cup Stadium, Large Corporation Headquarters (Samsung SDS, Samsung

Electronics, etc), univercity student lounge, public building, etc.• Overseas: opened Chicago Channel Shop and incorporated Magos

expansion into the California region currently in development including other foreign countries

Core StrategyCore Strategy Introducing the new concept of a “rest” themed space:

creation of an “open” concept for take-out and kiosk type stores

Creating diverse products for a differentiated taste & style

Shift from traditional ready-made structures to customized multi-concept stores Achieved value added profit structure

One Stop/Total Service: each store has multiple products to offer consumers

Multiple business model concept was developed for profitability and turnover maximization

Organized management system is implemented to maintain a high level of service and high quality of product Accounting/ Inventory Management / Fixed Cost / POS System

System (Management): Standardization / Professional / Promptness Theme (Store Image): Compact/Upscale/Differentiated Product (Menu Items): High quality/Diverse/Differentiated/Unique

Magos Store DifferentiationMagos Store Differentiation

Differentiation focus direction for stores1. Complex Store Concept: offering diverse products at one location

Enhance customer needs through one stop service2. Themed café concept3. Multi-business model (2 shift) management and operation

(different service offerings at the same location depending on time)- high price/high profit = turnover rate X store hours- operational structure: multi-business concept implemented

eg. During day = Bakery and café structure During evening = Dining bar structure

4. Apply Italian style store concept with upscale and innovative interior/exterior design5. Product development & expansion (variety/differentiated taste/high quality)

Store Classification Store size: 1. Kiosk type

2. Table Shop type Store structure: 1. Booth type

2. Island type Store feature: 1. Coffee specialty store

2. Multi-product store Store theme: moving from pre-made structures towards customized structures

1. Coffee and Beverage Specialty Café2. Bakery Café3. Cyber Café (Internet Café)4. Customized structure café and Multi-product café

Continued …Continued …

Operation Structure Expected product offerings:

coffee beverages, yogurt beverages, fresh fruit juices, smoothies, ice flakes, assorted snacks (sandwiches, panini, muffins, cakes, bakery goods, etc), soft ice beverages, parfaits, wine beverages

Sales Price Level: lower costs than other similar competitors

Sales Structure: Take-out type selling(disposable paper cups and coffee mugs mixed together)

Interior Concept Interior design concept leaning towards an open store concept with an Italian-style standing bar

(refer to attached 3D and detailed store layout diagrams) Color Scheme: Bright burgundy with tinted windows, silver-tone steel like signage and marble tables Modern bar chairs that match the store interior and tables/chairs that are situated to create and

“open” and inviting area for customers Maximize lighting effects to create ambiance Create models for each type of store to use and implement on future stores

Store Opening & Operational StrategyStore Opening & Operational Strategy

1. Provide a quite and comfortable space for customers that enhances each store’s characteristicsFocus on creating a customer-friendly store image

2. Implement an “open” structure for customers to be easily invited into the store

3. Affordable priced menu (refer to full menu listing)

4. Take-out and multi-product store oriented structure: remove the focus on coffee and try to fulfill consumers’ diverse needs through a snack bar type structure -> one stop / total service

5. Product Menu (refer to full menu listing) Hotdogs/sandwiches/bakery goods/simple snacks Assorted coffee-related beverages/fresh fruit juices/ice flakes/ice cream, parfaits Smoothies, Boba (bubble) tea, simple healthy/diet drinks

6. Maintain high quality of freshness, cleanliness and taste, along with a constant development of new product offerings

7. Provide a high quality of customer service through a stylishly designed interior (implement a differentiated store concept)

8. Implement a systematic store management system that goes beyond the standard customer service level Implement POS Management, Store Employee Training, Head Office Store Auditing System to

regularly monitor customer satisfaction and store performance

9. Try to keep store openings and related contracted work (interior construction schedules, equipment installations, training schedules) on schedule

10.Implement customized store structures (multi-shop concept) for stores within partner company locations to maximize customer preferences and increase profitability

Magos Head Office Support for Store OpeningsMagos Head Office Support for Store Openings1. Location Validity Analysis

Population flow Viability Location Competition

2. Schedule Management and Total Service Support for Franchise Location Openings Interior, Equipment Installation, Construction Training (Operational & Food Handling): One month duration before and after opening

Product Recognition Operating Manual and Food Handling Equipment Maintenance Sanitation and Organization Store Operation

Basic marketing & sales information and accessories Business License and Registration Support

3. Continued Support New product development and support Employee sales training Basic ingredients/materials delivery (weekly basis) Seasonal events – maintenance and scheduling, item recommendations and POP materials

Check up on equipment condition/maintenance training Check up on store cleanliness, sanitation conditions and strict enforcement of product expiration dates Employee Service Behavior

4. Management Support Menu development Management Performance Analysis Employee Training Store Operation Management Support/Training Logistics System

[Note]Preparation for opening a franchise store location:- Approval ( Perishable Foods = 영업허가 -> regional government ministry, business registration -> regional tax office)- Store Employee Recruiting (2-3 people) : advertising- Determine pricing for each menu- Check store plumbing and sewage system- Organize an event for the store opening- After opening, do a store inventory check and order necessary materials (weekly amounts)

Store Opening Schedule Store Opening Schedule Task Date Description

Franchisor & Franchisee Meeting N/A Meeting regarding interior, necessary equipment installations, day-to-day activities

Purchase new setup equipment/materials Redefine interior concept Construction period Store plumbing/sewage layout checkup

Franchise Related Meeting D-35 Franchise Requirements Conditions

Design & Construction D-30 Decide on construction contractor (must implement Magos standard construction requirements)

Employee Recruiting Announcement D-30 Store Manager, Part-time Employees

Employee Recruiting Continuous Franchise: Perishable Food Handling Training, Medical History RecordsPart-time: Medical History Records

Franchise Contract Finalization D-25 Pay Franchise Fee of \ 3.3 million (VAT included)(copy of Resident Card, personal identification and stamp)

Necessary Equipment Delivery D-24 Espresso Machines, etc

Construction Contract D-20 Interior construction

Franchise Fee Payment (2nd payment) D-15 50% of [Total Franchise Amount – Franchise Fee]

Business Operating License D-10 Submit required documentation to government agenciesRegistration Fee: \28,000, License Fee: \10,000

Business License Registration D-9 Submit required documentation

Apply for Credit Card Machine D-8

Install Coffee Machines & Equipment D-5 Installation by third-party companies, Magos Head Office employee travel to location to help with installation

Store Setting D-4 Magos Head Office employee – helps with setting and organization

Pre-opening Training D-3 to D-1 Magos Head Office employee – handles training and standard manual procedures

Franchise Fee Payment (last payment) D-3

Store Opening D Day

Post- Store Opening Support D Day and D+3 Magos Head Office employee – helps with marketing and sales at store