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					DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 1

EXECUTIVE SUMMARY Dop Dop, Inc. is a “medium-scale” single-site hair salon located on a high traffic block in New York’s fashionable Soho area. The salon was opened November, 1996, and was immediately profitable on an operating basis (pre-financial charges). It has steadily grown revenues and operating cash flow since its opening. The salon rents 4,000 square feet of split-level (street level and basement level) space on a ten-year lease, which was converted from a former dance studio into an airy, well-lit and open space with dramatic interior design. The décor of the salon emphasizes the artistic theme of the surrounding Soho neighborhood of galleries, graphic design companies and shopping boutiques. The high two level walls have hand-painted treatments and dramatic lighting that display an ever-changing collection of art works from artists around the neighborhood. Regular “gallery openings” at the salon, in which local artists introduce their art at Dop Dop provide occasions for introduction of the artist as well as raise awareness in the neighborhood of the salon itself and often involve joint marketing programs. For example, at one such opening, Absolute Vodka sponsored the bar and cross-referenced invitee lists with Dop Dop and the artist. Dop Dop competes on the basis of recruiting and retaining experienced hair stylists with an existing and transferable clientele. Approximately 90% of new business is referral and existing clientele of new employees. Approximately 10% of new business is walk-in traffic. The number of hair stylists on the payroll has grown from eight at the salon’s opening to 12 today. Dop Dop management believes that the keys to attracting and retaining high-producing stylists is providing a collegial and energetic atmosphere in which the stylist can develop their skill-set to better serve their clients and encourage referral business. Because Dop Dop’s business plan places greater emphasis on the development of the stylist, including the stylist’s own marketing skills, it does not spend heavily on general marketing, publicity and advertising. By creating a “creative workshop” approach to the salon, Dop Dop has become a magnet for high-producing, experienced stylists with a well-established and growing client base, as well as inexperienced but highly promising assistants training to take on full stylist responsibilities. The current owner/operators, Ms. Jo Blackwell and Mr. Antony Sabatier are internationally known personalities in the salon industry, particularly with respect to hair coloring. The owners are frequent presenters and speakers at industry conferences around the country, and travel internationally to teach in salon exchange programs. The economics of a salon of this type can be very attractive since fixed costs are minimal, and average tickets in the area are high. In addition, Dop Dop places an emphasis on coloring, which is an especially high-margin product. In the third quarter of this year, the average ticket was $94.00 per customer. The gross margin per customer was $44.00 during the quarter (less stylist compensation and direct materials). Customers per week averaged 188 during this period. Fixed costs per week during this period (including rent, utilities and salaried staff was $3,230.00. Stylists are paid on a straight commission, generally 50%/50% with the salon, which is the industry standard. The initial build-out of the store cost was $342,000, which the owners believe, was a very attractive cost, and resulted from a special relationship between one of the investors and a general construction contractor.

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 2

It is projected that 10,000 customers will visit the salon in 1999. Projected visits for the years 2000 and 2001 will increase 4.5%and 6.5% to 10,450 and 11,130 respectively. The average price will increase in the year 2000 to $96.00 and in 2001 to $100.00. Dop Dop management believes it competes in the market for professional men and women willing to spend between $75 and $200 for a haircut and/or color treatment. This price point is in line with other high-end salons in New York. Management believes there are five salons within a half-mile radius of approximately the same size, price point and targeting the same clientele. The market for Dop Dop’s services is unlimited, and management believes that because the growth of its business is driven by the transfer of a stylists’ existing client base from his/her former employer, the physical proximity of competing salons has little to do with Dop Dop’s volume growth. Management believes that approximately one-third of the clients live or work in the immediate neighborhood of Soho. Approximately one-third work in the financial district of lower Manhattan, which borders the Soho market approximately half a mile to the south of Dop Dop. Approximately one-third of clients travel more than a mile to Dop Dop from uptown Manhattan and outside New York City. Clients working in the financial district will typically stop at Dop Dop on their way home from work, and proceed uptown, or will turn an appointment at Dop Dop into a lunch and shopping trip. The number of professionals working and living in the southern mile of Manhattan, which is Dop Dop’s target market, is so large as to make market share and penetration analysis meaningless. Dop Dop’s weekly revenues have grown steadily in each quarter as the size and quality of the staff goes through a process of continuous upgrade. Dop Dop has attempted to create stability in the staff at the expense of rapid volume growth, in an effort to promote a cohesive “team” atmosphere. This is a quite different approach than the majority of salons, particularly in Soho, which encourage less discriminate hiring, high volume and high turnover in stylists. Many of these salons depend more on walk-in business to cover prime location site costs. Dop Dop management has sought slower growth with greater stability in staff, which ultimately can withstand a future downturn in discretionary spending of walk-in prospects. The company is seeking $300,000.00 in financing to refinance. FINANCIAL HIGHLIGHTS
Act ual 97 % Act ual 98 % Proj. 1999 % Proj. 2000 % Proj. 2001 %

SALES - Salon Retail

660,952 30,072 691,024

96% 4% 100%

791,190 33,270 824,460

96% 4% 100%

870,750 47,709 918,458

95% 5% 100%

1,016,825 52,480 1,069,305

95% 5% 100%

1,124,054 57,728 1,181,782

95% 5% 100%

GROSS PROFIT

476,943

69%

542,666

66%

621,806

68%

682,535

64%

740,360

63%

NET INCOME (LOSS) ($7,447)

-1%

$43,665

5%

$94,294

10%

$76,594

7%

$86,041

7%

T ot al EBIT DA

20,993

78,153

128,751

119,061

125,665

Ending Cash

$

(400)

$

(2,499)

$

17,970

$

68,064

$ 124,400

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 3

MARKETING ANALYSIS Dop Dop’s target market is professionals aged 25-60 who live or work in the Soho area or in the financial district of lower Manhattan. The market potential is unlimited. Because Dop Dop clients, in fact, come from all over Manhattan, only the theoretical referral base of its roster of stylists limits the market. There are approximately 1,250 hair salons listed in the Manhattan yellow pages, which indicates to management that the hair salon business in New York City represents at least a quarter of a billion dollars in sales per year. Within this market, Dop Dop believes it is priced within the top quartile in terms of price point, reflecting the experience of its stylists, the time and attention paid to each client as soon as they walk in the door and the high-end location. Salons with higher price points are typically the most expensive salons, those found on Madison Avenue with celebrity status promoters, high publicity and advertising expenses, and higher rent expenses. These salons also cater exclusively to the very wealthy client, and often include general spa facilities. Dop Dop’s services are limited to hair care and makeovers. Services offered include haircuts ($75), color ($70-$190), color correction ($200 and more), relaxers ($70), perms ($70-$175), conditioning treatments ($20-$50), hair extensions ($200 and more), eyebrow arching ($15), updo’s ($55-$100), makeup ($50-$75), and blow-dries ($40-$60). Dop Dop also sells approximately $1,250-$1,500 per week in retail product sales. These products are purchased wholesale from Kerastase Paris, Long Island Salon Service, J.T. Salon Systems, Four Star, and Millenium. The gross margin on such sales is typically in the range of 50%. Dop Dop does not heavily promote retail product sales as a profit center in itself, but recommends the products it believes are the highest quality and in the best interests of the client. In 1996, Ms. Blackwell entered into an agreement with Artec and Texture Line, one of the leading hair product lines in the haircare industry. Ms. Blackwell was chosen to be on of Artec’s three international hair color directors to represent Artec at industry shows and teaching exhibitions. Dop Dop’s only advertising is a small ad in Time Out NewYork magazine, a high-circulation weekly, read by the salon’s target audience. However, Dop Dop believes little salon business is generated by large distribution advertising, and so it is reluctant to expend significant cash on such advertising. Instead, Dop Dop has been featured in a wide range of general interest magazines, wide circulation beauty magazines and industry magazines as one of the leading hair salons in Soho. This publicity has come at no expense to Dop Dop, and has been based solely on the reputation created by Ms. Blackwell and Mr. Sabatier. (see Management below) In 1998 and 1999, Dop Dop was featured in articles in Vogue, Marie Claire, Time Out New York, Soho Style, American Salon, Modern Salon, and Marcel Magazine (Japan).

INDUSTRY/COMPETITIVE ANALYSIS Management believes there are five salons in the Soho area that directly compete with Dop Dop. These include John Dellaria, Space, Oscar Bond, Aveda, and Devachan.

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 4

John Dellaria is a high volume salon on Soho’s busiest street. It is approximately three times the size of Dop Dop in square footage, and is the oldest established salon in the area. John Dellaria’s business plan is to hire as many stylists as possible, including those with less than one year’s experience and generate high volume. Its price point is approximately one-third lower than Dop Dop’s. John Dellaria generates more walk-in traffic because of its location. John Dellaria’s business model has been successful for it. It is the only salon in Soho with a high walk-in traffic. Dop Dop believes its artistic atmosphere and slower pace targets a more sophisticated clientele than clients targeted by John Dellaria. John Dellaria’s décor is stark modern and loud, rhythmic music creates an atmosphere of high energy. There has been very little transfer of stylists between Dop Dop and John Dellaria one way or the other since Dop Dop’s opening. Space opened shortly after Dop Dop, approximately half a mile from Dop Dop on Soho’s Western border on Sixth Avenue. Space spends heavily on publicity and has sought to cultivate an image of elitism and celebrity through heavy media promotion. Space was opened by four owner/operators, formerly with Aveda, and in the first two years sought to poach stylists from other downtown salons. Space suffered high turnover in staff initially, but has since changed its strategy by promoting more assistants from within. In the past year there have been no reports of aggressive poaching of stylists local salons. And it appears that Space has achieved a healthy volume of business. Aveda is a chain of high-end stores owned by Estee Lauder that combine retail product sales for facial and other beauty products with haircare and spa facilities. The Soho Aveda store is a large, three-story store on Soho’s busiest street. It does a high walk-in business as a result of its reputation and franchise, but it is primarily known as a retail store and spa, and its hair facilities are relatively small—about six cutting stations. Aveda’s stylists are not widely known, and there is little threat of Dop Dop clients or stylists being lost to Aveda. In fact, Dop Dop views Aveda as a good training ground from which it can attract promising stylists, and has in the past hired several former Aveda stylists. Oscar Bond. This year, one of Aveda’s top stylists opened his own salon about half a mile south of Dop Dop, in lower Soho. Management believes this salon most closely resembles Dop Dop’s business plan in mood and the attempt to cultivate a highly skilled team of stylists. Oscar Bond is a close friend of the owners of Dop Dop. They believe he has opened a somewhat smaller space, and currently has a staff of only about four stylists. Oscar Bond is on an off-street, and will also be cultivating an almost exclusively referral business, which Dop Dop’s management believes will take several years to develop. Dop Dop’s management believes it is on close terms with Oscar Bond and there is little risk of his poaching staff from Dop Dop. Devachan is on a heavy volume section of Broadway, approximately one and a half blocks from Dop Dop. The space is large and the salon promotes an image of “new age” massage and style. There has been little interaction with this salon over the years. They apparently have a largely walk-in clientele based on the salon’s heavy traffic location and little is known about the owners and staff in the local salon community. Total gross revenues at these salons is probably $5 million per year. However, as discussed above, the nature of the high-end salon business, which is a professional service and based

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 5

largely on the captive clientele of individual stylists, is less sensitive to the proximity of other salons. In fact, management believes there is a slightly positive impact of an increase in salons opening in close proximity to Dop Dop. Each new salon in the area brings with it stylists who attract their clientele into the area, in many cases from uptown or midtown locations. Once transferred to the Soho location, it is easier to transfer this business to Dop Dop as prospective stylists apply for employment at the salon. In 1999, Dop Dop hired six stylists and stylist assistants from competitor’s salons in the area. Dop Dop lost no stylists over the same period to poaching by its competitors. The Soho business area has been the most rapidly growing business community in New York City for the past twenty years. Garrett Aug Real Estate reports that over the past five years, commercial rates have increased 100%. Dop Dop’s location is on a medium-heaby traffic block at the gateway to Soho on its northern border with Greenwich Village. Directly across Houston Street on the salon’s north side is the famous Angelica Film Theatre, which draws large crowds of on a continuous basis. On the other side of Dop Dop, to the south, is Soho proper, with its high-end boutiques, art galleries and popular restaurants and bars. Within just the two square blocks surrounding Dop Dop new business openings since 1996 have included the new Marc Jacobs boutique. Marc Jacobs is one of the hottest fashion designers in the country today. He opened his flagship store directly across the street from Dop Dop this year and has been referring clients to the salon on a regular basis. Last year the famous new Mercer Hotel opened on the block and Dop Dop implemented an association of referrals to Dop Dop by the hotel staff. The Mercer Hotel also houses Soho’s only five-star restaurant, which is less than 100 yards from Dop Dop’s front door. The Haven spa on Mercer Street also sends referrals to Dop Dop. The Match Restaurant and The Merc Bar, two trendy and highly popular restaurants and bar/nightclubs, respectively, that are within thirty yards of Dop Dop’s front door provide constant traffic past Dop Dop’s front door. New boutiques on Dop Dop’s block this year include a Stephan Kelian shoe boutique and a Versani hand crafted silver jewelry boutique. Early next year a new Prada store is expected to open on the block as well. MANAGEMENT Jo Blackwell and Antony Sabatier are the dynamic force behind Dop Dop, a new Soho salon offering a unique, whole-vision approach to hair design. Their innovative style and passionate edge have the SoHo crowd buzzing. In a city where salons vie for top real estate and celebritypeppered rosters, Dop Dop, a New SoHo salon, is distinguishing itself in other ways. have taken the traditional, French idea of a salon as a meeting and discussion place, and built a unique, successful business around it. “I was raised in the salon tradition of Paris," says Sabatier, "where a salon is about a place to relax and meet friends. Dop Dop isn't just a place to get your hair done. Here, we give, artists the opportunity to be open and creative". The location in SoHo targets upscale artists, designers and Wall Street clientele. . Blackwell, reared in the Midwest, but with a passionate streak that reveals her Italian lineage, wanted to own a salon by the time she was thirty. She approaches hair design as an artist and cringes at the assembly line activity in many salons today. She believes that the Jean Louis David-type salons have killed the individuality and creative flair that used to dominate the

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 6

business. She decided to open Dop Dop in order to have a forum where hair design and art are oneWhile still in high school, Blackwell would save her money and take beauty classes in addition to her full-time schedule of college prep courses- Blackwell was not encouraged by her mother, who thought the business of beauty was, "Only for bubble-headed, bleached-blondes who chew gum and talk gossip all day long-" Blackwell, not easily discouraged, went on to train with Paul Mitchell, Vidal Sassoon, Jacques Dessange, and Trevor Sorbie among others. She was well on her way to the top of the profession by the time she was in her early twenties. While Black well was working in Houston, she caught the eye of John Dellaria who recruited her to take over his New York salon as artistic color director where she just completed a six-year stint. She is a color educator conducting seminars nationwide and has been the main-stage presenter at Hair Color USA and International Hair Color Exchange. When time permits, Blackwell is a hair stylist for major fashion shows including Carolina Herrara, Betsey Johnson, and Isaac Nfizrahi. Blackwell, one of the few females at the top of the industry, believes that women are more interested in reaching their goals through shared responsibility. As co-owner of the salon each of the stylists were hand-picked for the quality of their work, not for commercial exposure. Blackwell is overwhelmed by the well wishers who have been flooding the gallery, but most importantly for Blackwell is her mother's new appreciation for her profession as a hair designer. Antony Sabatier has been working side-by-side with Blackwell for six years. Bom in Paris, Sabatier trained with Jean D'Estres for three years completing a classical apprenticeship. He then worked for Jacques Dessange. Sabitier then traveled to gain international experience eventually settling in Mexico City for six years with Noel Serrat. By 1991, he moved to New York and worked at John Dellaria for six years. Sabatier, with long artist's hair and a dancer's build, sees the individual beauty in each of his clients and brings that out. He has been dancing for sixteen years and has always expressed himself through a creative medium. The same energy and passion he uses to choreograph a dance funneled to orchestrate the creative process and working environment of the salon. Sabatier has a natural ability to bring the artistic process out into the open; he provokes and stimulates the imaginations of the other designers. Ultimately he would like to incorporate the artistic flair of the neighborhood into the business with art exhibitions and fashion shows in the space. Sabatier believes that once you have learned the techniques in the business that it is your personality that then turns a hair cutter into a hair designer, Blackwell and Sabatier's vision to adhere to the artistic principles of hair design transcends the salon. Dop Dop is setting new lines in the hair design business.

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 7

DANIEL M . SIERCHIO, CPA ________________________________________________________________________
100 West Main Street Suite 316 Lansdale, PA 19446 215-368-9687 Fax 215-631-9151

Shareholders and Directors Dop Dop Inc. 170 Mercer Street New York, NY 10012 Dear Partners Shareholders and Directors: I have compiled the accompanying Projected Statement of Operation for Dop Dop Inc. for the Twelve Months ended December 31,1999 and December 31, 2000 and December 31 2001. This projection was compiled as result of discussions with management. I have not audited or reviewed the accompanying projection and accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the company's position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.

Sincerely,

Daniel M. Sierchio, CPA November 5, 1999

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 8

DOP DOP INC Statement of Actual and Projected Expenses For the period ended December 31, 1997 through December 31, 2001
Act ual 97 % Act ual 98 % Proj. 1999 % Proj. 2000 % Proj. 2001 %

SALES - Salon Ret ail

660,952 30,072 691,024

96% 4% 100%

791,190 33,270 824,460

96% 4% 100%

870,750 47,709 918,458

95% 5% 100%

1,016,825 52,480 1,069,305

95% 5% 100%

1,124,054 57,728 1,181,782

95% 5% 100%

COST OF SALES:

214,080

31%

$281,795

34%

$296,652

32%

$386,770

36%

$441,422

37%

GROSS PROFIT

476,943

69%

542,666

66%

621,806

68%

682,535

64%

740,360

63%

GEN. & ADMIN:

486,085

70%

491,869

60%

$554,328

60%

$602,116

56%

$649,995

55%

NET OPERAT ING INC (9,141) (LOSS) OT HER INC. (EXP) Cont ribut ions Ot her Income (3,022) 5,479

-1%

50,797

6%

67,478

7%

80,419

8%

90,366

8%

(1,148) -

(1,148) 35,034

(1,500) 1,000

(2,000) 1,000

T OT AL OT HER

2,458

0%

(1,148)

0%

33,886

4%

(500)

0%

(1,000)

0%

NET INC (LOSS) BEFORE (6,684) T AXES INCOME T AXES: St at e Corporat e t ax Cit y Corporat e t ax 163 600

-1%

49,649

6%

101,364

11%

79,919

7%

89,366

8%

325 5,658

325 6,745

325 3,000

325 3,000

T OT AL INCOME T AXES 763

5,983

1%

7,070

1%

3,325

0%

3,325

0%

NET INCOME (LOSS) ($7,447)

-1%

$43,665

5%

$94,294

10%

$76,594

7%

$86,041

7%

Management has chosen to Omit all Disclosures

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 9

C ost of Goods Sol d COST OF SALES: BEGINNING INVENT ORY Purchases Salaries & Wages St ylist s ENDING INVENT ORY T OT AL COST OF SALES

Act ual 97

Act ual 98

Proj. 1999

Proj. 2000

Proj. 2001

4,430 49,239 164,842 (4,430) $214,080

4,430 74,185 208,030 (4,850) $281,795

4,850 81,867 215,205 (5,100) $296,822

5,100 113,304 273,715 (5,350) $386,770

5,350 125,106 316,666 (5,700) $441,422

GENERAL & ADMINISTRATIVE: Advert ising Salaries & Wages Officer's Salaries Leased Equipment Bank Service and Credit card Charges Depreciat ion Expense Amort izat ion Expense Dues and Subscript ions Rent Educat ion Ut ilit ies Insurance- Healt h and Disabilit y Insurance Int erest Expense Legal, Account ing & Professional Licenses and Permit s Office Expense Repairs and Maint enance Supplies Expense Out side Services Miscellaneous T axes - Payroll T axes - Ot her Payroll processing Print ing and Reproduct ion Refunds T elephone T rash Removal T ravel an Ent ert ainment T OT AL GENERAL & ADMINIST RAT IVE

Act ual 97 9,360 92,689 130,007 7,646 13,698 14,494 1,304 253 76,716 1,738 15,794 5,585 12,385 11,879 8,050 0 4,860 4,122 13,418 380 4,016 36,710 2,236 3,391 6,156 275 6,631 609 1,681 $486,085

Act ual 98 9,570 128,438 61,213 5,975 15,881 16,288 1,304 289 85,564 125 18,616 19,458 10,528 10,912 6,750 88 999 753 38,384 301 4,952 36,363 3,761 4,399 1,330 381 4,653 965 3,630 $491,869

Proj. 1999 9,524 127,889 118,697 585 17,168 16,288 1,304 246 80,409 2,000 17,424 20,944 12,064 9,794 9,666 193 750 398 39,958 4,032 10,767 35,998 5,669 4,355 901 421 4,903 623 1,361 $554,328

Proj. 2000 10,000 162,659 125,000 1,000 19,988 17,000 1,304 500 82,821 3,000 24,166 1,000 13,000 20,838 10,000 300 1,000 1,500 40,000 4,000 1,000 43,761 1,200 5,294 2,000 1,000 6,035 750 2,000 $602,116

Proj. 2001 15,000 188,183 125,000 1,000 22,090 18,000 1,304 500 85,306 4,000 26,708 1,000 14,000 16,995 10,000 500 1,000 2,500 40,000 5,000 1,000 49,099 1,200 5,940 3,000 1,000 6,670 1,000 3,000 $649,995

Management has chosen to Omit all Disclosures

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 10

C AS H FLO W Act ual 97 Opening Balance Cash 13 $ Act ual 98 (400) 17,592 (59,732) (3,625) 43,665 $ (2,499) $ 94,294 17,970 $ 76,594 68,064 86,041 $ 124,400 $ P roj. 1999 (2,499) 17,592 (91,417) $ P roj. 2000 17,970 18,304 (44,805) $ P roj. 2001 68,064 19,304 (49,008)

add Depr & Amrt . $ 15,798 Less:P rincpl. paid capit al expend. Net Income Ending Cash $ (7,121) (1,643) (7,447) (400)

EARNINGS BEFO RE INTERES T, TAXES , DEPREC IATIO N AND AMO RTIZATIO N

Act ual 97 Net Income add:Depr. & Amrt . Int erest T axes T ot al EBIT DA $ (7,447) 15,798 11,879 763 20,993

Act ual 98 $ 43,665 17,592 10,912 5,983 78,153

P roj. 1999 $ 94,294 17,592 9,794 7,070 128,751

P roj. 2000 $ 76,594 18,304 20,838 3,325 119,061

P roj. 2001 $ 86,041 19,304 16,995 3,325 125,665

Management has chosen to Omit all Disclosures

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 11

DOP DOP INC.
170 Mercer Street New York, NY 10012

BUSINESS PLAN

Page 12


				
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