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					Joy Bakery Reform Project




     Prepared Expressly for
          Ms. Liu Yan
           Chairman
       Board of Directors
          Joy Bakery




                              1
                                     Table of Contents


Part I Finding Probiern(s) . . . . . . . I
1. Current Business Analysis . . . . . . . . . . . 1
2. Focus Group Report . . . . . . . . . . . . . . 2
3. SWOT Analysis . . . . . . . . . . . . . . . . 4




Part II Deciding the Project objectives) . . 5
1. Objective SMART Analysis . . . . . . . . . . . 5




PartIII Planning the activities . . . . . . 6
1. Action plan 8 Activity Chart . . . . . . . . . . . 6
2. Cost Breakdown . . . . . . . . . . . . . . . . 8
3. Risk Analysis . . . . . . . . . . . . . . . . 9
4. Project Framework . . . . . . . . . . . . . . 11




PartIV Presenting Proposal for Project . . . . . . 12
1. Executive Summary . . . . . . . . . . . 12
2. Proposal . . . . . . . . . . . 12




                                                          2
Part I Finding Problern(s)


1. Current Business Analysis


Current state and business analysis


Joy Bakery is a corner shop run by Fangqun neighborhood committee, it is located in
the southwest street of Fangzhuang residential area. The shop mainly sells cakes,
bread, biscuits and offers cake delivery to nearby restaurants and online shoppers, on
top of that, it also keeps a mini market offering daily necessities to local residents. The
total floor space of the shop is 60 square meters. The shop used to be a mini
supermarket before taken over by the neighborhood committee. As the baking room
and cake displaying cases require only one third of the total floor space, therefore, the
mini market is retained.


At first sales in the mini market was not so bad because local residents had got used to
purchasing their daily necessities from the mini market. But things changed greatly
when a big shopping mall called Carrefour was opened in the center of Fangzhuang
area a year ago, as a result, the number of customers in the mini market dropped
sharply. In order to change this backward situation, the management team is
considering to carry out a reform project in the shop, within the program the mini
market will be replaced by a coffee restaurant offering hot and cold drink and stock
pot cuisine.




Financial performance


The financial performance used to be very good since the shop opened its business in
January 2000, but it declined sharply since last year. The revenue dropped to 300,000
yuan in 2001 by 45% from 550,000 yuan in 2000. Due to low turnover ratio of the mini

                                                                                         3
market and fierce competition imposed by other bakery shops, profit decreased by
50%, while costs rose by 5 % over last year. With a bank loan of RMB 250000 yuan,
the shop opened its business. By end of last fiscal year most of the loans have been
paid off.




Customer complains and unsatisfied requests




As the competition imposed by the big shopping mall Carrefour is much too great, it is
perfectly natural for customers to complain about the freshness and prices of
everything in the mini market. However, when customers want to enjoy a piece of
cake or a loaf of bread in the shop there is no place to entertain them. Through
chatting with customers, the following complains were gathered.


?The choices in the mini market are too limited.
?The groceries are not fresh and the price lacks competitiveness.
?There is no any drink available to go with cakes and bread.
?There are no tables and chairs for customers to stay in the shop.




Customer profiles




The majority of the customers are local residents, students and business personnel
from nearby schools and office buildings.




2. Focus Group Report


Focus groups

                                                                                    4
In order to source ideas for the reform project and get a clear and objective picture of
customers' needs, requirements and expectations, the management team organized a
focus group discussion in which 9 potential customers were invited.




   3 middle and high school students
   3 business personnel
   3 local residents


Formation of focus group did not take consideration of gender problem as it was felt
that there would be no significant preference in terms of food and drink between men
and women.


In addition to focus group discussion, 50 questionnaires were also issued to schools
and business buildings nearby as well as neighborhood community at random bases. A
list of possible and directed answers was given under each question to facilitate the
survey, this is because interviewees tend to have little patience in responding to
open-ended questions.



Questions
   How often do you visit Joy bakery?
    □ Quite often □ Once a week □ Seldom
   How do you feel each time you visit the shop?
    □ Satisfied □ Disappointed
   What do you think about the layout of the shop?
    □ Professional □ Same as others L1 Uncomfortable
   What do you like most about the shop?
    □ Food quality □ Flavor □ Price □ Service
   Your opinion about the prices the shop offers?
    □ Dear □ Fair □ Attractive


                                                                                      5
   What service do you expect if the mini market is replaced?
    □ A coffee restaurant E A fast food restaurant □ A tea house
   What is your idea about the future model of our coffee restaurant?
    □ Swing chairs □ Box seats □ Light music □ Dim lights
   What makes you feel disappointed when you come to the shop?
    □ Limited choice LI No seat L1 Lack uniqueness □ Poor service.
   Your suggestion about the business hours?
    □ Open until 12 pm □ Close at 10 pm as now
   Do you find the shop assistants helpful?
    □ Warm and friendly □ Pushy □ Cold
   Will you open your purse when our coffee restaurant is opened?
    □ Of cause □ Maybe □ No comment
   Do you regard coffee restaurant as an ideal place for spending time with friends?
    □ Yes □ No


Through focus group discussion and questionnaires, the management team gathered
a lot of constructive ideas and useful suggestions, at the same time, some complains
were also poured in.




Complains
The shop lacks its uniqueness. The mini market lacks attraction both in terms of price
and freshness of goods. There are no chairs and tables provided for the customers.
The shop assistants seem to be less skillful in providing service.




Suggestions




      Turning the mini market into a coffee restaurant is a fantastic idea but the
    price should be affordable.
   Box seat design is considered as the most favorable option for interior design.

                                                                                      6
   Dark glass window is to be applied to separate the noise from the street.
   Working hour should be a little longer.




3. SWOT Analysis


Strengths




   Situated in a street corner, the shop enjoys a very good location.
   Situated in the most densely populated residential area in Beijing.
   40 Square meter floor space is enough to run a coffee restaurant.
   Coffee restaurant helps promote the sale of cakes, bread and biscuits.
   To open a coffee restaurant does not need to inject a big capital and manpower.
   Rental of the shop is relatively low, only 30,000 yuan per year.




Weaknesses




   There is another bakery along the street. This imposes a fierce competition to Joy
    bakery.
   Coffee restaurant is a new type of business, no successful model to follow.
   Stock pot cuisine is a Cantonese food, locals may not be accustomed to it.
   The shop assistants are hard working but lack working experience in coffee shop
    and restaurant.




Opportunities


                                                                                     7
   The Video rental next door is going to open a net-bar, this will create business
    opportunity to the coffee restaurant.
   A public bathroom is situated across the street, people would definitely like to stop
    by at our coffee restaurant for a rest after having bath.
   There are three middle/high schools and several big office buildings nearby,
    students and business personnel are willing to spend time in coffee restaurants.
   There lacks a coffee shop or a teahouse in this area.
   Stock pot cuisine provides another meal choice for local customers.


?People like to gather with friends, establish and extend friendship in coffee
restaurants.




Threats




?Bakery business is now overly hot, most of bakery shops are in the decline.
?The other bakery along the street is also planning a remodeling.
?There might be complains from the neighbors if noise is made in the shop.
?The coffee restaurant may end up as a dating place for hooligans and that may bring
negative effect to the business.




Part II Deciding the Project Objective(s)



1. Objective SMART Analysis


Objectives

                                                                                       8
The general objective of the reform project is to make full use of the existing space
and resources available to obtain more revenue for the shop and promote the sales of
cakes and bread it offers. Meanwhile, new coffee restaurant will help create a coffee
culture in this area and provide local residents with a quiet place for gathering with
friends, establish new friendship, Stock pot cuisine provides a new meal choice for
locals. It is estimated that the shop would double its revenue by end of first fiscal year
upon finishing the reform project. According to the timetable, the whole project will
take one and a half month to complete. If a temporary wall is built between the bakery
and coffee restaurant during project implementation the bakery could continue its
operation while the reform is taking place.




Potential customer's analysis




We understand that everything has its limits, therefore, we are not looking at
targeting our service to every segment of the people. In China, people who are over 45
year's old seldom drank coffee, we don' t believe suddenly they would start to drink
coffee. So we are working on gearing our service to young fictive people, especially
students and business personnel from nearby schools and office buildings. With life
pace in big cities becomes faster and faster, more and more .people are aware of the
importance of psychological health. Chatting with friends over a cup of coffee is an
ideal way to relax one's mind.


Stock pot cuisine gives us another advantage. This cuisine is both nutritious and
healthy. The price range of four to fifteen yuan per meal is quite economical for the
students and business people. Local residents may also be attracted by its reasonable
price and flavor. Once the coffee ,restaurant is in place the shop will have a new name
- Joy Bakery Cafe.



                                                                                        9
PartIII Planning the activities




1. Action Plan & Activity Chart


Action plan


We plan to take totally six weeks to implement the whole project upon the project is
decided.


By the end of week one
Design layout of the coffee restaurant. Sign contract with remodeling company.
Dispose stock and shelves from mini market.


By end of week two
Order new equipment and furniture. Start remodeling the coffee restaurant.


By end of week three
Recruit new staff and start training.


By end of week four
Check and accept remodeling work.
Delivery of new equipment and furniture


By end of week five
Install new equipment and furniture.
Publicize the opening of coffee restaurant.


By end of week six
Hold an opening ceremony.



                                                                                  10
Activity flow chart




Week 1       Week 2Week 3Week 4Week 5             Week 6
   Order new Delivery of Equipment new and furniture
           delivery of equipment and furniture




Design Start     Remodeling       Check &     Install new


layout &     remodeling       work     accept equipment


sign     of coffee    continues remodeling        and furniture
contract         restaurant       work


   Dispose                    Prepare stock               Hold    an
   stock     &                for running                   opening
shelves from                  coffee restaurant             ceremony
mini
market


   Recruit new        Staff training      Publicize the
   staff     and      continues             opening of coffeee and restaurant
   start training


2. Cost Breakdown




Remodeling: The purchase of building materials and the labor costs for -the
remodeling would cost RMB 10,000
   Labor costs        1,500

                                                                                11
    Lumber       1,500
    Paint   5,00
    Ceiling 1,000
    Floor   1,000
    Glass   500
    Lighting     3,000
    Cement & putty       500
    Glue & tools     500




Equipment and furniture: The cost of equipment and furniture for the coffee
restaurant would be RMB 29,000.
    Coffee machine       10,000
    Stock pot stove      1,000
    Tables and box seats 10,000
    Cutlery 1,000
    Disinfectant cabinet    1,000
    Stereo 3,000_
    TV 3,000




Budget: The annual increase in the operating budget would be RMB 16,000




Wages       15,000
Equipment Maintenance       1,000




TOTAL COST OF PROJECT




Initial costs:   Remodeling       10,000
Equipment 29,000

                                                                              12
---------------------------------------------------------
    SUB TOTAL.        39,000




Recurrent costs:      Operating Budget 16,000
-------------- - ----------------- -----------------------
TOTAL COST       55,000


3. Risk Analysis


As the saying goes "better safe than sorry", prior to implementation of the project, it
is necessary to look at the project from different perspectives. It is true that the
project might bring possible benefits to the shop but there are also potential risks and
dangers. We presume that the following three areas are where problems likely to
occur.


   People related:
-   The newly employed staffs may not live up to our expectations.
-   The neighbors next door may not be happy with the noises made during
remodeling especially during weekends.
-   Stock pot cuisine may not be welcomed by the locals.


   Time related:
-   The remodeling work may not get finished as originally planned and the furniture
may arrive later than the scheduled timetable, causing delay in opening the coffee
restaurant.
-   The landlord may shorten the period of lease or even worse, stop the lease
halfway.


   Product related:
-   The smell of paint may take longer to fade away and that may disturb the normal
operation of bakery.

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-   Something may go wrong with new equipment or the furniture may be of poor
quality.
-   Coffee restaurant may not cater to customer's real interests.


We understand if anything should go wrong or preconditions are immature, the
project would either be delayed or even failed. Through brainstorming process, we
decided to take the five measures to bring these potential problems under control.




   Contact more staff candidates as substitutes in case the employed staffs are not
    qualified.


   Invite an expert to supervise the remodeling work and control the quality of
    furniture.


   Build a temporary wall between bakery and coffee restaurant to enable bakery go
    on operation while remodeling of coffee restaurant is going on.


   Revisit the leasing contract with the landlord and have it notarized before project
    implementation.


   Leave certain amount of contingency allowance and additional fees for advertising
    and further promotion campaigns if coffee culture are hard to popularize.


Through careful calculation we think that the following three items should be added to
the total costs:


   Advertising    2,000 yuan per year
   Presents & souvenirs 2,000 yuan per year
   Contingency allowance     1% of the annual profit




                                                                                     14
  NARRATIVE         OBJECTIVELY SOURCES          OF ASSUMPTIONS
  SUMMARY VERIFIABLE           INFORMATION AND RISKS
       INDICATORS
GOAL or AIM To make full use         Customers Opinion survey 6 Set long         term
  of the existing feedback     months        after   business     strategy
  space to generate         opening the coffeeandbe prepared
  more revenue by           restaurant       for emerging
  opening a coffee                   problems
  restaurant.
PURPOSE or 1. To double the Income statement            Account book and Be flexiblewith
OBJECTIVES          revenue                  daily   sales new changes
       within one           records.
       year.        Counting   sales
  2.   To promote       figure by
       sales of cakes categories
       and bread
OUTPUTS New services on Number of Observations and                1. New staff
  offer,   these customers     andCustomers'         should be
include:         customer's general opinion to       competent and
- Hot and cold      satisfaction     the new service        honest
  drink                 2. Service
- Stock    pot              quality should
cuisine.   _     be constant
ACTIVITIES 1. Design layout 1. Sign contract Project schedule There              are
  noof the coffee       with   andinterruptions and
restaurant       remodeling    implementation        delays to the
2. Order new        company    diary. remodeling of the
  equipment and 2. Place orders              coffee restaurant.
  furniture         for equipment
3. Recruit new      and furniture
staff and start 3. Job      offers
  training              made   and



                                                                                        15
4. Check and             contracts
    accept               signed
    remodeling           4. Expert is
5. Install    new        invited to give
    equipment and           a     evaluation
    furniture      for
6. Promotion remodeling
work is carried 5. Leaflets are
out.     printed
    7.   Hold      an 6. Preparations
         opening                  are made for
         ceremony                 new business
                         opening
INPUTS        Human         Equipment and Financial City bank will be
2 additional staffs furniture        55,000 RMB as a willing to lend the
    Coffee machine          loan from city money
    Stock pot stove         bank.
    Tables and seats
    Cutlery
    Disinfectant
    cabinet




                                                                           16
Joy Bakery Reform Project




Proposal for Bakery reform




                             17
                               Prepared Expressly for


                                    Ms. Liu Yan


                                      Chairman
                                 Board of Directors
                                     Joy Bakery




PartIV Presenting Proposal for Project




1. Executive Summary


Joy bakery plans to reform its current mini market into a coffee restaurant, because
the mini market is kept loosing money.


After the reform the shop will have a bakery and a coffee restaurant under one roof
and provide a new recreation place to local residents.


The project will double the sales figure by end of first fiscal year and increase more
in the years to come.


                                                                                    18
The shop needs a loan of 55,000 yuan to carry out the remolding, purchase new
equipment and furniture as well as for the initial start up.


The coffee restaurant will definitely attract more customers and increase the revenue
and profit and improve the financial statement.


Once the coffee restaurant is in place the shop will have a new name - Joy Bakery
Cafe.




2. Proposal


Introduction




Joy Bakery, a street corner shop run by Fangqun neighborhood committee, mainly
sells cakes, bread, biscuits to local residents, It also keeps a mini market offering
daily necessities. The shop is located in the southeastern street of Fangzhuang
residential area. The total floor space of the shop is 60 square meters of which one
third of the space is occupied by the baking room and cake displaying cases while
the rest is the mini market.




                                                                                   19
The shop opened its business two and a half years ago. Currently it employs four
staff. Situated in a street corner and facing to the street, the shop enjoys a very good
location.


Problems and Solutions




Due to severe competition imposed upon by a big shopping mall - the Carrfour, sales
in the mini market declined sharply. Meanwhile, competition of bakery business is
now overwhelming especially in big cities like Beijing. How to survive the
competition, how to satisfy customers needs, how to tailor our service to meet
customers' expectations. With these questions in mind, the management team plans
to carry out a project to reform the mini market into a coffee restaurant offering hot
and cold drink and fast food - the stock pot cuisine so as to sharpen its competitive
edge.


Everybody knows that in Beijing most coffee bars are located in Chaoyang district
and that is a long way from Fangzhuang. If people living in Fangzhang want to,
spend their leisure time with friends in a coffee bar, they would have to spend about
half an hour's drive to get to the bar street in Chaoyang area. Few people like to take
half an hour's drive just for a cup of coffee. As there is no any coffee bar or similar
shop in this area to date, so our project of establishing a small coffee restaurant
would definitely fill in the gap, When the project is completed, the shop would have
two sections under one roof - a bakery and a coffee restaurant.


                                                                                      20
In order to understand customers' orientations, source new ideas and try to find out
customers' needs, requirements and expectations, as part of our preparation work, we
organized a focus group discussion and at the same time carried out a random market
survey. Through these activities we not only gathered a lot of useful ideas and
suggestion but also identified a lot of problems that exists in our business.




New services




The general objective of the reform project is to make full use of the existing space
and resources available to obtain more revenue for the shop and promote the sales of
cakes and bread it offers. Meanwhile, new coffee restaurant will help create a coffee
culture in this area and provide local residents with a quiet place for gathering with
friends, establish new friendship. Stock pot cuisine provides a new meal choice for
locals.


New features


After removing the mini market from the shop, a bakery and a coffee restaurant will
work parallel with each other in the shop. Once the project is completed, it will
definitely give our customers a brand new look.


                                                                                    21
?Box seats create an intimate atmosphere.
.?Dark glass windows separate the noise from the street, while dim lights add
romantic sense to the shop.
?Light music help customers feel relaxed and comfortable.
?Layout of new coffee restaurant should be fancy and trendy to attract young
people.




Advantages




What makes us finally decide to open a coffee restaurant instead of any other
business? Where we can tap resources available? Let us look at the advantages our
project enjoys.


?Situated in the most densely populated residential area in Beijing.
?The Video rental next door is going to open a net-bar, this will create business
opportunity to the coffee restaurant.
?A public bathroom is situated across the street, people would definitely like to
stop . by at our coffee restaurant for a rest after having bath.
?There lacks a coffee bar or a teahouse in this area.
?People like to gather with friends, establish and extend friendship in coffee
restaurants.
?The reform can take place while the bakery is going on business.
?The reform project does not need to inject large sum of capital and manpower.

                                                                                    22
?The remodeling requires only 5 to 6 weeks to complete.


Everything has its two side both positive and negative. It is true that the project has
many advantages but we are also fully aware of the difficulties, potential risks and
dangers that laying ahead of us. Our management team is a strong one, everyone has
a good education background and likes to learn new things. The most important is
that they are not only good at identifying and discovering problems but also
experienced in coping with new changes. So we have every confidence to believe
that by prioritizing customers' needs and requirements a loyal customer base will
soon be built in the near future.


Costing




The shop needs to borrow a loan of 55,000 yuan from the city bank to carry out the
remodeling of new coffee restaurant, purchase new equipment and furniture and
stock with new goods for opening the coffee restaurant.




Detailed cost breakdown




Remodeling: The purchase of building material and the labor costs for the
remodeling would cost RMB 10,000

                                                                                     23
Labor costs     1,500
Lumber     1, 5 00
Paint 5,00
Ceiling 1,000
Floor 1,000
Glass 500


Lighting   3,000
Cement & putty       500
Glue & tools 500




Equipment and furniture: The cost of equipment and furniture for the coffee
restaurant would be RMB 29,000.
   Coffee machine       10,000
   Stock pot stove      1,000
   Tables and box seats 10,000
   Cutlery1,000
   Disinfectant cabinet 1,000
   Stereo 3,000


   TV 3,000


Budget: The annual increase in the operating budget would be RMB 16,000

                                                                              24
Wages      15,000
Equipment Maintenance 1,000


Benefits




With mushrooming of bakery shops in big cities, most bakeries are on the decline.
By opening a coffee restaurant it not only brings more revenue to the shop but also
creates new business opportunities to the existing bakery. Once the coffee restaurant
becomes popular the number of customers will grow substantially in the bakery.
There is no doubt that Joy bakery will become a hot spot in this area and attract a
large group of loyal customers in the near future.




Sales figure will double by end of first fiscal year after implementation of the
project. With popularization of coffee culture and acceptance of stock pot cuisine by
the locals especially students and business personnel from nearby schools and office
buildings, our revenue and profit performance will have a big potential, in the years
to come.




Schedule

                                                                                   25
The reform project will start one week after getting approved and budget is made
available. Totally it will take about six weeks to complete, with four weeks for the
remodel work, two weeks to get staff trained, one week to make the final preparation
for the opening.




The way ahead




I firmly believe that reform project would surely bring the shop with more revenue
and at the same time cater the needs and requirements of local residents and students
and business personnel from nearby schools and office buildings. The main
advantage is that there are no bars, coffee shops and teahouses around this area. Our
new coffee restaurant would definitely attract young customers who like establishing
and extending friendship in a quiet and romantic place over reasonably priced drink
and nutritious food. It is very likely that Joy Bakery Cafe will become a spotlight in
Fangzhuang residential area.




I would appreciate if you could find time to read this plan and negotiate a time for
discussion with me at your earliest convenience. It would be my great pleasure and

                                                                                    26
also my obligation to explain any details or provide additional information that you
may need. Kindly let me informed when it is the earliest possible time for me to
come.




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