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					Adam Hoeksema




                                 Adam Hoeksema




Children’ s Paradise   Page 2 6/14/2010
Adam Hoeksema




                               Table of Contents
Executive Summary

       Opportunity………………………………………………………………5

       Distinct Competencies or Solutions……………………………………..5

       Vision……………………………………………………………………...5

       M arket Potential………………………………………………………….5

       Return on I nvestment…………………………………………………….6

       Customer Value…………………………………………………………..6

       Benefit to Local Community and/or I ndiana…………………………...6

Problem……………………………………………………………………………7

Solution…………………………………………………………………………….7

Company Overview

       Company’s M ission……………………………………………………….8

       Business Goals…………………………………………………………….8

       Scope of Venture…………………………………………………………..8

       Customer Base…………………………………………………………….8

       Location of Operations…………………………………………………....9

       Future……………………………………………………………………....9

Product Overview

       Product…………………………………………………………………….11

       Competitive Advantage…………………………………………………..11



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               Efficiency………………………………………………………….11

               Price……………………………………………………………….11

               Differentiation…………………………………………………….11

M arket Analysis

       I ndustry…………….………………………………………………………12

       Target M arket....…………………………………………………………..12

       M arket Niche………………………………………………………………13

       Competition and Key Competencies……………………………………..14

       M arket Research…………………………………………………………..14

       Financial Forecasts………………………………………………………..15

       Growth Opportunities…………………………………………………….16

       Sales Projections…………………………………………………………..17

M arketing and Sales Plan

       Pricing………………………………………………………………………18

       Website……………………………………………………………………..18

       Promotion…………………………………………………………………..18

       Value………………………………………………………………………..19

       Rationale……………………………………………………………………19

Organization Plan

       Form of Ownership………………………………………………………..20

       Labor……………………………………………………………………….20

       M anagement Team………………………………………………………..20

Operations Plan

       Operational Priorities……………………………………………………..21

       Operational Techniques…………………………………………………..21

       Facilities and Equipment………………………………………………….21


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Financials

       Financial Assumptions……………………………………………………..23

       Break Even Analysis……………………………………………………….24

       I nvestment Opportunities…………………………………………………24



Appendices

       Appendix A: Start Up Costs…………………………………………….26

       Appendix B: Pro Forma Balance Sheet………………………………..27

       Appendix C: Pro Forma Cash Flow……………………………………28

       Appendix D: Year 1 Profit/Loss Pro Forma…………………………...29

       Appendix E: 5 Year Profit/Loss Pro Forma…………………………...30

       Appendix F: Competitor’s Weakness…………………………………31

       Appendix G: Entry Barriers…………………………………………....32

       Appendix H: Risk Assessment……………….…………………………33




Opportunity –


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     ● Each month, 201 million adults–about 94 percent of the adult US population–shop
        at shopping centers.
     ● The average American visits a shopping center 2 ½ times per month.
Only 42% of preschool age children, and even less of elementary school age children,
are placed in child care facilities. This means well over 50% of children are with their
parent or guardian during the day while they are trying to get shopping done. Instead
of finding a babysitter or driving to the nearest drop in day care when you need to go
shopping, Children’ s Paradise enables you to save time and money by bringing the child
care to you. By locating drop in child care facilities right in the mall, Children’ s Paradise
finds itself in an undeveloped market; however, there is a great opportunity to get in on
the ground level of this very opportunistic market. The largest drop in day care chain
in the country only has twenty-one locations, in malls and casinos across the country.
Children’ s Paradise can have three locations, generating a cumulative profit of over 1.2
million by year five.
Distinct Competencies or Solutions – Every day parents have to drag reluctant if not
angry children with them while they shop because it is too hard to find a babysitter that
can watch their kids when they need to shop, or the drop in day care is just too far away.
Children’ s Paradise provides a solution to this frustrating problem by allowing parents
with children ages 3 to 12 to drop their kids off in a safe, fun, and exciting environment.
Solutions that differentiate Children’ s Paradise from other drop in day care facilities
include:
        ● saving you time and money by bringing the child care to you
        ● allowing parents to visually check on their children at any time via their cell
             phones or check up booths located throughout the mall with live video feeds
             from the surveillance cameras
        ● giving parents pagers that allow Children’ s Paradise to contact them if there is
             a problem. Pagers will also include a barcode that corresponds to the barcode
             tag given to your child ensuring that only the parent will be able to pick up
             their children.
        ● application forms on the internet that the parent can fill out and then bring to
             Children’ s Paradise for their first visit to make check in faster and easier.
Vision –Starting right here in the heart of Indiana, Children’ s Paradise will begin to
transform the parent/child shopping experience forever. The first Children’ s Paradise
is targeted for Castleton Square Mall in Northern Indianapolis, but will soon expand to
venues such as the up and coming open air mall, Hamilton Town Center, Clay Terrace,
or Circle Center Mall all in the Indianapolis area. With the intention of going global
before year 5, Children’ s Paradise plans on having two locations up and running in the
Indianapolis area and one location in China running by year 5.
M arket Potential – According to what www.wikipedia.com calls “ notable” malls,
there are approximately 485 “ notable” malls in the United States. Therefore, the market
potential for the mall day care industry is approximately $500 million dollars per year
in the United States, assuming each of the 485 locations brings in revenue equal to that
of Castleton Square Mall. Ultimately, we believe that the growth of the shopping mall
industry in the United States is not strong enough to stay in the United States forever.
China currently is home to 6 of the 10 largest malls in the world1. Phenomenally, in 2004

1American Studies at Eastern Connecticut State University

Shopping Mall Studies

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not one of those 6 malls was even in existence. The growth in the Chinese shopping mall
industry gives Children’ s Paradise an enormous growth opportunity. .
Return on I nvestment – Even with high start up costs and assuming year one only
produces half of our projected year two revenue, Children’ s Paradise will break even
shortly after month 18. Assuming growth rates of 2% after year two, which is equal to
the annual population growth within Children’ s Paradise market2, Children’ s Paradise
will reach a net income per year of over $400,000 by year four. Investors can expect a
20% to 30% annual return on their investment.
Customer Value – Children’ s Paradise provides the shopping parent with a high tech
and safe child care facility. With surveillance cameras connected to the internet, parents
can visually check in on their child at any point while they are shopping via their cell
phone. There will also be locations in the mall, for those without internet capabilities on
their cell phones, where they can check in on the little ones as they walk from store to
store. Not only will you be able to see your child, but if for any reason your child needs
you we will merely activate the paging device that every parent receives upon check
in and you may immediately come to pick them up. Parents can also reserve care in
advance to ensure that there is room for their children when they need it. Children will
finally be able to enjoy going to the mall while they play games, crawl through tunnels,
or watch good clean children’ s movies. The child is not the only one to reap benefits,
because the parent is now able to shop as long as they want with the peace of mind that
their child is safe and having fun. The parent will be able to get their shopping done
faster and easier than ever in their busy everyday life.
Benefit to Local Community and/or I ndiana – Children’ s Paradise will greatly
enhance the parent/child shopping experience. By providing a safe, fun, and stimulating
environment for children, Children’ s Paradise will allow the busy parent to get their
shopping done quickly in this fast paced world. Without the worry of keeping an eye on
their child or dealing with the dreaded question “ Are we done yet?” they will be able to
finish their shopping quickly and easily while their child is entertained in a safe friendly
environment.




The Problem

According to one Gallup Poll, not including grocery shopping, 54% of Americans go
shopping at malls, department stores, or other shopping centers at least several times
each month, 21% of those say they go at least once a week. The problem for many of
these shoppers is the annoyance of finding a time that they can shop with out dragging
their child along with them. Many stay at home parents are forced to bring their child
shopping with them because at the time they need to shop they have no one else to
watch their child for them. This results in an angry child—more often than not—and a
2   Market Research by Castleton Square Mall



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frustrated parent that can’ t get their shopping done in an efficient and headache free way.


The Solution

Children’ s Paradise solves both of these problems. By providing a safe, fun drop in child
care facility right in the mall, the child is happy with the games and play equipment that
keep them entertained, and the parent is happy because their child is not pulling on their
pant leg, every five minutes, asking if it is time to go yet.




                             Company Overview

M ission Statement – Children’ s Paradise provides a safe, fun, and efficient shopping
experience for both the parent and the child through quality staff members and an
effective security system, state of the art arcade games and playground equipment, and
easy check in and check out.

Scope of Venture – Children’ s Paradise is a short term, drop in child care service for
shoppers at high end malls. Children’ s Paradise will operate only during mall hours and
will only accept children that are checked in by their parent or legal guardian. The idea
is that parents will shop while their child is safely and happily spending time playing
games and exercising on the playground. The parent pays a set price per hour and then
the child has unlimited access to arcade games or playground equipment for no additional
charge. Children’ s Paradise will provide not only child care services, but also will rent
out facilities at night for birthday parties.



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Domestically Children’ s Paradise will operate in large, upper class malls across the
country. Castleton Square Mall in North East Indianapolis will provide the first location
for the implementation of a Children’ s Paradise. The five year goal for Children’ s
Paradise is to move from a purely domestic focused company to a predominately
internationally focused company. With the mall industry staying somewhat stagnant
in the United States the goal will be to implement Children’ s Paradise in high growth
markets such as China, India, and other explosive markets throughout the world.


Company Goals – The present and future goals of Children’ s Paradise include:
     Present Goals
        1 . Add value to the overall shopping experience by providing entertainment
            for the child while providing freedom and ease of shopping for the parent.
        2 . Generate an average of 25 children per hour for nine operating hours per
            day for ages (3-6) by end of year one.
        3 . Generate an average of 27 children per hour for four and a half operating
            hours per day for ages (7-12) by end of year one.
     Future Goals
        1 . Have 2 Children’ s Paradise locations in the United States by year 3.
        2 . Have first Children’ s Paradise implemented and operating outside of the
            United States by the end of year 4.

Customer Base – Our specific customer base is wealthy, urban, single child families,
with a stay at home parent. Our customers must have enough disposable income to pay
for the service, they must have a stay at home parent that has no choice but to bring their
child shopping with them, they must live in close proximity to large enough malls to
support a Children’ s Paradise, and preferably they may bring only one child shopping
with them so that they can afford the price of Children’ s Paradise.


Location of Operations – Initially Children’ s Paradise will be located in only Castleton
Square Mall, the largest mall in the state of Indiana, in North East Indianapolis, Indiana.
There will actually be a small office in the Children’ s Paradise facility so that Adam
can do the administrative work onsite and be available for customers at the same time.
Children’ s Paradise hopes to expand from the confines of Castleton Square Mall within
the first three years and even look for locations internationally to implement Children’ s
Paradise.

Future – The future of Children’ s Paradise rests largely on the idea of globalization.
The shopping mall industry in the United States, although growing, is growing very
slowly. As shoppers with children begin to do their shopping online, instead of endure
the annoyance of dragging their child along for hours on end as they do their Christmas
shopping, the United States mall industry seems to become less optimistic with each
passing year. In 1972, after 20 years of steadily expanding construction, the United
States had a total of 13,174 shopping centers. In the 1980s alone we saw the construction
of more than 16,000 shopping centers in the United States doubling the number of malls




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that had been built in the past 60 years.3 A Gallup poll showed Americans averaged four
trips to a regional or neighborhood mall per month. Children’ s Paradise wants to find
countries such as China in which this mall craze that took place in the United States
may repeat itself. If the old saying “ History tends to repeat itself” is true, the future
looks bright for Children’ s Paradise as we enter in on the beginnings of markets with
outrageous growth potential. China is already showing signs of a mall industry boom
touting figures such as having six of the world’ s ten largest malls all in China. These six
malls were not even in existence just three years ago in 2004. Here are a few facts from
the Seoul Times about the Chinese Mall Industry and the current boom that is taking
place:


           Retail sales in China have jumped nearly 50 percent in the last four years, as
           measured by the nation's biggest retailers, government data says. And with rising
           incomes, Chinese are spending their money on shoes, bags, clothing and even
           theme-park-style rides.4

           "We like this place a lot," said Ruth Tong, 27, an early visitor to the South China
           Mall here in Dongguan with her husband and 5-year-old son. "They have a lot of
           fun things to do. They have shopping and even rides. So we like it and yes, we'll
           come back again."
           "Forget the idea that consumers in China don't have enough money to spend,"
           said David Hand, a real estate and retailing expert at Jones Lang LaSalle in
           Beijing. "There are people with a lot of money here. And that's driving the
           development of these shopping malls."
           Big enclosed shopping malls, which came of age in America in the late 1970's
           and Europe in the late 80's, are sprouting up all over China. According to retail
           analysts, more than 400 large malls have been built in China in the last six years.




3   Wikipedia.com
4American Studies at Eastern Connecticut State University

Shopping Mall Studies

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                              Product Overview

Product – Children’ s Paradise is a strictly service oriented company. We provide drop
in child care for mall shoppers, and birthday party facilities for the general public.

Competitive Advantage – Children’ s Paradise feels that it has a competitive advantage
in three areas: Efficiency, Price, and Product Differentiation.

       Efficiency – Children’ s Paradise will save the customer’ s time by bringing the
       child care right where it is needed. Instead of finding a babysitter that can work
       on your schedule or other drop in child care that is out of the way, just bring your
       child to the mall and the check in time will take only minutes once you have filled
       out initial paperwork to become a member. Much of the needed paperwork will
       be available for customers to print off of the internet, and bring filled out on your
       initial visit to expedite the check in process.

       Price – While the price ($8 dollars per hour for 7-12 year olds, and $7 dollars
       per hour for 3-6 year olds) may initially seem like quite expensive child care,
       the customer must realize what they are really saving by using our service. By
       bringing the child care to you the amount of time spent under care is drastically
       reduced. The customer only pays for the time that they are shopping, rather than



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          paying for child care while they are driving to and from the mall. Also, and more
          importantly, the customer saves money by fulfilling their child’ s desire to go to an
          indoor playground such as Discovery Zone, which costs money, or their desire to
          go to an arcade such as Chuck E. Cheese where they are likely to spend as much
          or more money per hour on games, instead of paying one flat price per hour and
          playing unlimited games.

          Product Differentiation - Children’ s Paradise provides its customers a different
          kind of child care service. Essentially, the customer kills two birds with one stone
          as they drop of their child at Children’ s Paradise while they go shopping. Firstly,
          the parent is able to shop more peaceably and efficiently, while the child is
          entertained and burns some of that, seemingly, never ending energy. Our service
          also can be differentiated from the competition because it allows the parent to
          check on the child via live images over the internet with cell phones or check-up
          points located throughout the mall. Children’ s Paradise is also much different
          than most arcades, in the fact that the customer does not pay a price per game.
          One set price per hour is paid to get in and then the child can play as many games
          as their heart desires for no additional cost.




                                    M arket Analysis


The I ndustry – The shopping mall child care industry is currently not yet established.
Nationally, there is only a handful of day care services located right in shopping malls.
Similar industries such as day care services at a casino or resort are a bit more developed,
and have experienced success. Kids Quest a company that has twenty drop in child
care facilities at casinos across the country is by far the largest single drop in child care
company or chain. Kids Quest had a net income of over 17 million dollars last year
from only twenty different locations.5 Children’ s Paradise finds itself in the midst of
an advantageous trend. In an attempt to save consumers time and money, more large
shopping malls are being built each and every year allowing the shopper to get everything
they need, while making only one stop. Not only is the shopping mall industry
attempting to make shopping more efficient they want to make it an experience. With
attractions such as theme parks, IMAX movie theaters, bowling lanes, and even indoor
wave pools, the industry wants to make shopping fun. This is where Children’ s Paradise
comes into the picture. Children’ s Paradise wants to make shopping efficient, but at the
same time fun.

The industry is growing with more child care facilities popping up in casinos and a
few select malls across the country, but Children’ s Paradise is not satisfied with the

5   www.googlefinance.com



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minimal growth of the shopping mall industry in America. China is quickly becoming
the international center for large shopping centers. Incredibly, six of the ten largest malls
in the world did not even exist in 2004. All six of these new mega malls can be found
on the Asian continent. It is estimated that by the year 2009 seven of the ten largest
shopping malls will be located in China. Currently, the largest mall in the world is the
South China Mall which has over nine million square feet. Amazingly, as we speak two
malls are being built in China that will both surpass the South China Mall in size. The
new malls will both have over ten million square feet. To put this into perspective the
Mall of America, which is enormous by our standards, has only 4.2 million square feet.
The shopping mall industry in Asia offers a very enticing market for Children’ s Paradise
to enter with the incredible growth potential in these countries. Actual active number
of Chinese consumers that have the buying power to purchase top fashion items is 140
million people.6


           250 million people by 2010
           320 million people by 20157

Target M arket – The market for mall child day care services is estimated to be 500
million per year in the United States alone. With our eyes set on making a move to
Asian countries such as China, India, The Philippines, and Japan in the near future, the
market increases dramatically to say the least. Only 20% of the world’ s largest shopping
malls are located in the United States, and that number will significantly decrease within
the next few years. If Children’ s Paradise goes worldwide, as expected, the market is
immediately increased nearly five fold to 2.5 billion dollars per year.

Before we get too far ahead of ourselves let’ s start with what we know. Castleton Square
Mall is the primary location for the first Children’ s Paradise. Castleton Square Mall is
the largest mall in the state of Indiana. The trade area consists of over 800,000 people
and is located in one of the fastest growing areas in the country. Hamilton County is the
18th fastest growing county in the United States. Not only is Hamilton County growing
faster than most counties in the United States it also has an average annual household
income of $77,000, putting Hamilton County as the 15th wealthiest county in the country.
Placing Children’ s Paradise in Castleton Square Mall puts it in a high growth potential
environment along with an area that has money to spend on a service like mall child
care.8
At Children’ s Paradise we want to cater to the busy parent that doesn’ t have the time to
send their child to a day care across town when they need to run to the mall for a couple
hours. Children’ s Paradise really targets stay at home parents that have their kids with
them all day and don’ t get a time to get needed shopping done. By locating the child
care right in the mall the parent can quickly and easily drop off their child in a safe fun
environment while they get their shopping done faster and easier.

Customer needs met by Children’ s Paradise:

6American Studies at Eastern Connecticut State University

Shopping Mall Studies
7   www.southchinamall.com
8   Castleton Square Mall Market Research


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          ●   shopping efficiency
          ●   ability for drop in child care
          ●   ease of location
          ●   ease of check-in and check-out
          ●   reliability of safety
          ●   trustworthiness shown through use of (security cameras, check up sites
              located throughout mall, live video feed via internet, and beeper system)

M arket Niche – Children’ s Paradise wants to serve the sector of the market that does
not need or want full time child care, but may need a chance to go shopping without
the hassle of dragging their kid around with them. We are looking to locate Children’ s
Paradise in large, preferably, upscale malls where the customers are likely to have the
money to be able to pay a little extra for the ability to enjoy their shopping experience
more. Children’ s Paradise wants to allow for the unexpected turns in everyday life. If
you need to go shopping and you can’ t find a baby sitter at that time you won’ t have
to change your plans because Children’ s Paradise allows for drop in care. Children’ s
Paradise also wants to attract customers with only one child, as the price of having more
than one child watched at a time can become quite significant. Children’ s Paradise can
not lower its prices enough to allow a family with three children to have their children
watched at a reasonable price and still make the kind of profit that is wanted. The main
family type will be one to two child families. This is where China comes into the picture.
In the urban areas of China, where a Children’ s Paradise would be more likely to be
implemented, the average family size is 3.2 members compared to 4.5 in the rural areas
of the country.9 We believe China’ s small urban family size can really impact the ability
for Children’ s Paradise to make a maximum profit by charging the full price rather than a
discounted price for families with more than one child.

Competition and Key Competencies – Children’ s Paradise, as a drop in child care
facility, faces competitors such as Kids Quest who for the most part only offers drop in
child care at casinos. Kids Quest also has a location in the Mall of America. They are
by far the most established and profitable drop in day care company in the United States.
Other than Kids Quest most other drop in day care’ s across the country only operate in a
handful of locations, none of which are located on the North East side of Indiana.

Key competencies that differentiate Children’ s Paradise from other drop in day cares
include:
       ● Ability to save time and money by bringing the child care to the customer
       ● Security systems that allow your child to have fun while being watched by
         staff, and even parents via cell phone internet access, or check up stations
         throughout the mall.
       ● Pager that allows staff to contact parent immediately if problem arises.
       ● Two - way walkie - talkie’ s that parent can rent if they want the ability to talk
         to staff at any time while shopping to verbally check in on child.
       ● Application forms on the internet that the parent can fill out and then bring to
         Children’ s Paradise for their first visit to make check in faster and easier.


9   www.wikipedia.com


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M arket Research

Castleton Square Mall Trade Area Market
         Currently, there are approximately 140,000 children ages 3 to 12 years old.
         The trade area is growing at a rate of 2% annually
         The trade area has an average household income of $77,000
         The trade area includes Hamilton County which is the 18th fastest growing
         county in the country.10

On average there are about 20 to 25 children between the ages of 2 and 4 playing in the
current play area at Castleton Square Mall on a weekday afternoon.

On average there are about 30 to 35 children between the ages of 2 and 4 playing in the
current play area at Castleton Square Mall on a weekend afternoon.



South China Mall Market
       There are 10 million people in the city of Dongguan where the South China Mall
       is located
       There are currently 1.2 million consumers with the buying power to shop at the
       South China Mall in the city of Dongguan
       There are 120 million people within 75 miles of the South China Mall, 38 million
       of those currently have the buying power to shop at the South China Mall.
The estimated number of visitors to the South China Mall
       Year one 3-5 million visitors
       Year two 7-9 million visitors
       Increasing at a rate of 40 to 50% per year11

In urban Chinese cities the average family size is 3.2 people. This means that most
families only have one child allowing for Children’ s Paradise to charge full price for a
majority of their customers, rather than giving discounts to families with several children.

Kids Quest had a net income of 17 million dollars in 2006 with 21 existing locations.
This is a net income of approximately $800,000 dollars per location per year. This is
approximately 50% more income per location than Children’ s Paradise has projected ofr
the first 5 years of operation.12




Financial Forecasts



1   Castleton Square Mall Market Research
1www.southchinamall.com
1   www.googleFinance.com


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Assumptions - Using information from a survey taken at Castleton Square Mall we came
up with the following assumptions:
       60% of people that bring their children to Castleton Square Mall come at least
       once a month.
       40% of people that bring their children to Castleton Square Mall come more than
       once a month.
       60% of people that bring their children to Castleton Square Mall spend between
       one and two hours at the mall per visit.
       40% of people that bring their children to Castleton Square Mall spend between
       two and three hours at the mall per visit.
       50% of people that bring their children to Castleton Square Mall say they would
       not ever use a drop in day care service at the mall.
       40% of people that bring their children to Castleton Square Mall say they might
       use a drop in day care service if they could be assured that it was safe.
           ○ We will assume that a quarter of the people that said maybe will actually
                use the child care service.
       10% of people that bring their children to Castleton Square Mall say they would
       definitely use a drop in day care center if available.
       65% of the people that said they may use a drop in child care service said they
       would be willing to pay $8 per hour per child.
       35% of the people that said they may use a drop in child care service said they
       would be willing to pay $7 per hour per child.

We will assume that the average price charged per hour per child will be set at $7.50.

We came up with the number of children that would likely use Children’ s Paradise by
taking the number of people in the Castleton Square Mall trade area and then taking our
estimated percentage of children between the ages of 3 and 12 in the market area. From
there we used the percentages found from our above survey to come up with an estimated
number of children and the length of time they would spend per visit. Ultimately, we
come up with a number that produces an average of approximately 40 children per hour.
We think Children’ s Paradise can legitimately average 40 children per hour for several
reasons:
                   1 . If we average 40 children per hour at Children’ s Paradise our net
                       income per location will be very close to the average net income of
                       a Kids Quest location.
                   2 . Whether we use the total number of annual customers at Castleton
                       Square Mall or if we use the total market size and multiply by the
                       number of times the average customer visits per year based on our
                       survey we end up with an average number of children per hour
                       within a difference of only 3 children.
                   3 . One specific Kids Quest location at the Palms Casino Resort in
                       Las Vegas, Nevada has a capacity of 46 children which means that,
                       again, this location likely has similar average children per hour
                       numbers as our projections.

Basically we have used checks and balances and several different methods to come up
with a number of approximately 40 children per hour on average. This number really


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jives well with all the information we have from surveys, market research, and our
competition’ s financial success.

Growth Opportunities – One of the brightest aspects of Children’ s Paradise is its
potential for growth. Castleton Square Mall is currently undergoing a large building
project that will add several thousand square feet to the mall. Just as Castleton Square
Mall is growing in physical size its trade market is also growing at an astounding rate.
The trade area includes Hamilton County the 18th fastest growing county in the nation.
According to Castleton Square Mall’ s own market research the project a growth rate of
over 2% annually until at least 2010. There is also an interesting growth opportunity
for Children’ s Paradise to add another location in the up and coming open air mall,
Hamilton Town Center. This mall would be located right in Hamilton County, which has
huge growth potential. It also could prove to be a more lucrative venture for Children’ s
Paradise than Castleton Square Mall because the lease price is approximately 10% lower
than the lease price at Castleton Square Mall.

Again, the obvious growth potential in China poses a future for Children’ s Paradise in the
global economy.


Sales Projections

Dates of significant sales milestones
   ● Year 1 - $650,000+ in sales from one location
   ● Year 2 - $1,000,000+ in sales from one location
   ● Year 4 - $2,000,000+ in sales from two locations




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                        M arketing and Sales Plan

Pricing – Customers of Children’ s Paradise not only pay for child care service while
shopping, but they are paying for an experience that will leave your child begging not
to go home yet. With the quality staff and safe environment customers are getting the
best of the best of child care service. For one child pricing will be at a rate of $8 per
hour (ages 7-12) and $7 per hour (ages 3-6). The superiority of safety and quality along
with the large amount of disposable income in Children’ s Paradise target market, allows
for a rate of seventy-five cents higher per hour, for our older age group, than our largest
competitor Kids Quest. At the Mall of America Kids Quest charges a flat $7.25 per hour
per child without a decrease for multiple children of the same family.13

Pricing for birthday parties will be set at $10 per person. The price will pay for having
the party room and arcade room or playground area to themselves and having unlimited
access to arcade games or playground equipment. A party at Chuck E. Cheese costs
$10.99 per person. That price includes pizza and drinks, but does not allow for unlimited
games, as the price of a party at Children’ s Paradise does.

Website – Children’ s Paradise will operate a website that will function mainly as a key
to ease the check in/membership process for a customer’ s first visit. Needed paperwork
for membership will be available for customers to print off and fill out prior to their first
visit. Any needed informational forms that can be submitted via the internet will also be
available to fill out to make the check in process run quickly and easily. The website will
also provide the user the ability to reserve dates and pay for birthday parties.

Promotion – By locating our facility right in the mall we are basically assured a
general promotion to our entire potential market. Initially Children’ s Paradise is mainly
concerned with attracting customers that are at the mall anyways; therefore, our entire
potential market is introduced to Children’ s Paradise as they see signs for it in the mall,
or walk by our check up stations, or walk by the facility itself. This keeps promotional

1   www.kidsquest.com



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costs low since nearly all the promotional activities will take place in the mall. Our
goal is to attract current mall customers into using our services rather than promoting
to people that usually go to another mall. Our three main promotional activities will
include:
    ● Promoting opening day with banners and signs in the mall for a time before we
      actually open to let the mall shoppers know about the new service soon to be
      available.
    ● Have a short explanation of what Children’ s Paradise is and what service it
      provides at the check up centers that are located around the mall.
    ● Pass out flyers before opening day to mall shoppers with children as they leave
      the mall.
Value – Children’ s Paradise provides the shopping parent with a high tech and safe child
care facility. With surveillance cameras connected to the internet, parents can visually
check in on their child at any point while they are shopping via their cell phone. There
will also be locations in the mall, for those without internet capabilities on their cell
phones, where they can check in on the little ones as they walk from store to store. Not
only will you be able to see your child, but if for any reason your child needs you we
will merely activate the paging device that every parent receives upon check in and you
may immediately come to pick them up. Parents can also reserve care in advance to
ensure that there is room for their children when they need it. Children will finally be
able to enjoy going to the mall while they play games, crawl through tunnels, watch good
clean children’ s movies or even grab a quick snack. The child is not the only one to reap
benefits, because the parent is now able to shop as long as they want with the peace of
mind that their child is safe and having fun. The parent will be able to get their shopping
done faster and easier than ever in their busy everyday life.
Rationale – Children’ s Paradise is priced slightly above the competition to cover the
extra cost associated with the technology implemented in the security system. The video
cameras producing live feeds via the internet cause the price to rise somewhat, but the
system allows the customer to feel completely at ease leaving their child at Children’ s
Paradise. The ability to check up on their kids through live video feeds and the ability to
be contacted at a moments notice is the quality of service that we feel we need to provide
even if that means the price is 25 to 75 cents higher per hour than our biggest competitor.




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                              Organization Plan

Form of Ownership – Initially Children’ s Paradise will operate as a LLC.

Labor - There will be several full time and part time employees working on staff. Based
on the number of children at Children’ s Paradise at any given time there will have to be a
different number of child care attendants. The state has different standards that say how
many caretakers a child care must have per child. According to state law any employee
responsible for caring for children at a for profit child care must have a high school
diploma and at least be 18 years of age.

M anagement Team – The needed management team members must have these
qualifications:
   ● There will be a need for someone with experience in running a child care and
        working on keeping Children’ s Paradise running in accordance with state law.
                        Before Opening Day
                                    ○ $50,000/year
   ● According to state law there must be one employee working at least 50% of the
        time that the child care center is in operation. This employee will be designated
        as the director and must have at least a 2 year associate’ s degree in early
        childhood education.
                        Before Opening Day
                                    ○ $40,000/year
   ●    There also must me a lead caregiver which must also have at least a 2 year
        associate’ s degree in early childhood education.
                        Before Opening Day
                                    ○ $40,000/year
   ● There will be a need for a manager of the second Children’ s Paradise. Must
        have a four year degree in business management or accounting and 5 years of
        experience in business.
                        Month 18
                                    ○ $50,000/year
   ●    There will be a need for a member of management to concentrate on getting
        the Children’ s Paradise established in China. Must have 5 years experience in
        international business.
                        Month 24
                                    ○ 60,000/year




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                               Operations Plan

Operational Priorities – The operational objectives for Children’ s Paradise include:
  ● Keeping the check-in and check-out process time no longer than five minutes
  ● Having the capability to host two separate birthday parties at once ( one using the
      arcade room and one using the play area )
  ● Keeping contact with the parent only moments away in case of emergency
  ● Keeping children of older ages (7-12) separated from younger children ages (3-6)

Operational techniques used to maximize profit include:
  ● Arcade portion of Children’ s Paradise only open from 2:30 pm until 7 pm each
      night while children ages (7-12) will be out of school.
  ● Keeping close records of average amount of children on any given day so not
      to have too many or too few staff members present according to the legal state
      requirements of child to staff ratio.
  ● Separate party rooms so that two parties may take place simultaneously, one ages
      (3-6 using play area) and one ages (7-12 using arcade area).

Facilities and Equipment – According to state law there must be at least 35 square feet
of play space open for each child at all times. This means that the maximum number of
children to be in a Children’ s Paradise at the current proposed size is approximately 80
children. A Children’ s Paradise will consist of the following activity areas:



Activity                        Square Feet
Arcade Area and Play Area          2350
Offices/Check in Check out          350
Party Room Area                     940
Storage/Restrooms                   360
Total                              4000

Leasing at Castleton Square Mall will cost $57.25 per square foot. The lease cost
per year for a 4000 square foot area is $229,000 at Castleton Square Mall. The lease
price includes Utilities, Mall Security, Mall Parking, Taxes, Snow Removal, and Mall
Promotions.

Equipment includes:
   ● 20 Arcade Games – $120,000



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   ●   650 sq. ft. Play Area - $69,500
   ●   3 computers - $5,000
   ●   Payment and Check In/Out system - $7,500
   ●   Security System - $14,000
   ●   Pagers - $5,000
   ●   Tables for Party Room - $5,000
   ●   Separating Walls - $5,000
   ●   Miscellaneous - $5,000
   ●   Phone System -$500
   ●   Office Desk - $300




                                   Financials

Financial Assumptions


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       ●   Assume average rate of $7.50 per hour per child.
       ●   Assume average of 40 children per operating hour.
       ●   Assume two parties per night for 350 nights per year.
       ●   Assume an average of 20 people per party.
       ●   Assume a rate of $10 per person for parties.

The price assumption comes from the fact that at the Mall of America the Kid’ s Quest
Child Care provides a similar service for $7.25 per hour. We believe we provide a better
service, with faster check in and check out, along with superior security and ability to
contact parent immediately if a problem arises.

The assumption of averaging 40 children per operating hour is based on several factors
that are explained under the first financial forecasts section above. These factors include:
information from surveys taken at Castleton Square Mall, information from market
research, and information from our competition and their financial situation.

The assumption that we will be able to attract enough parties to have two per night for
350 nights a year is based on the fact that the Chuck E. Cheese in the area is booked with
several parties everyday with many more on the weekends. We offer a similar service for
a cheaper price than Chuck E. Cheese and allow for thirty minutes longer than the hour
and a half parties that Chuck E. Cheese provides. An unlimited number of games can be
played once the initial price is paid per person.

The assumption that the average party will have 20 people is based on the fact that our
party rooms will only allow for a maximum of 35 people; therefore, keeping the average
party size down to a somewhat smaller sized party.

This price assumption comes from the fact that Chuck E. Cheese charges $10.99 per
person for their smallest party package, and $15.99 per person for the deluxe party
package. We want to provide a party service for less than our competitor, and provide
more privacy by allowing each party to have their own party room and either the arcade
or play area to themselves.




We believe that Children’ s Paradise will break even sometime during the second half of
year two.




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                          Operating Profit/Loss Forecast

                              Year 1       Year 2        Year 3        Year 4        Year 5
Revenue                    $663,890.00 $1,005,666.00 $1,669,556.00 $2,011,332.00 $2,675,222.00
Expense                    $761,484.67 $840,422.67 $1,513,907.34 $1,594,590.34 $2,019,820.01
Income Before Taxes        -$97,594.67 $165,243.33 $155,648.66 $416,741.66 $655,401.99


I nvestment Opportunities -

Children’ s Paradise needs approximately a $200,000 investment to have sufficient funds
for the first six months expenses which include: initial capital to pay salaries, payments
on equipment, and lease costs during the first six months of operation. After six months
we begin to make enough revenue to cover all of our monthly costs. We are looking for
two investors preferably, each investing $100,000. Children’ s Paradise will give between
a 20% and 30% annual return rate, with a payback period of 4 years.




                                       Appendices




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                         Appendix A: Start Up Costs




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Item              Amount
LLC Formation         150
Arcade Games       120000
Play Equipment      69500
Computers/
Phone/Systems          12600
Security/Check
Points/Pagers          19000




                 Appendix B: Pro Forma Balance Sheet


Year                                                0            1            2              3              4


Cash                                       200,000      709,235      943,172      1,510,926      1,928,772
Inventory                                       -            -            -              -              -
Accounts receivable                             -            -            -              -              -

Total current assets                       200,000      709,235      943,172      1,510,926      1,928,772

Gross property, plant & equipment               -            -            -              -              -

                                                        (35,367
Less accumulated depreciation                   -       )            (70,734)     (141,467)      (212,200)

                                                        (35,367
Net property, plant & equipment                 -       )            (70,734)     (141,467)      (212,200)


Total assets                               200,000      673,868      872,438      1,369,458      1,716,571




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Accounts payable                                         -   572,512      594,977       1,028,732        1,052,952
Bank notes payable                                       -        -            -               -                -

Total current liabilities                                -   572,512      594,977       1,028,732        1,052,952


Long-term debt                                  200,000      200,000      200,000       100,000                     -

                                                             (98,645
Shareholders equity                                      -   )            77,461        240,726          663,619
Total long-term debt and shareholders
equity                                          200,000      101,355      277,461       340,726          663,619


Total liabilities                               200,000      673,868      872,438       1,369,458        1,716,571




                      Appendix C: Pro Forma Cash Flow


Year                                                0            1            2                3                4


                                                        (98,645
Net income                                              )            176,106      163,265          422,893

Plus depreciation                                       35,367       35,367       70,733           70,733
Less increase in inventory                      -            -            -                -                -
Less increase in accounts receivable            -            -            -                -                -

Plus increase in accounts payable               -       572,512      22,464       433,756          24,220

Cash flow from operations                       -       509,235      233,937      667,754          517,846
Less investment                                 -            -            -             -                -
Cash flow from operations and
invests                                         -       509,235      233,937      667,754          517,846
Plus net new equity capital raised              -            -            -             -                -
Less dividends paid                             -            -            -             -                -

Plus net new long-term debt                200,000           -            -       (100,000)        (100,000)
Plus net new bank borrowings                    -            -            -              -                -


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Cash flow from ops, invests, and fin   200,000   509,235   233,937   567,754     417,846

Beginning cash balance                      -    200,000   709,235   943,172     1,510,926

Ending cash balance                    200,000   709,235   943,172   1,510,926   1,928,772




              Appendix D: Year 1 Profit/Loss Pro Forma




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                       Appendix E: 5 year P/L pro forma

   Adam Hoeksema
 Children's Paradise
 5 year P/L pro forma
                                Year 1        Year 2          Year 3          Year 4          Year 5
Sales
  Child Care Services           $610,290.00     $902,466.00   $1,512,756.00   $1,804,932.00   $2,415,222.00
  Party Rental                   $53,600.00     $103,200.00     $156,800.00     $206,400.00     $260,000.00
    Total Sales                 $663,890.00   $1,005,666.00   $1,669,556.00   $2,011,332.00   $2,675,222.00
Variable Costs (COGS)
  Labor                         $134,788.00    $192,216.00      $327,004.00     $384,432.00     $519,220.00
Total Variable Costs            $134,788.00    $192,216.00      $327,004.00     $384,432.00     $519,220.00
Allocated Fixed Costs             $3,500.00      $3,500.00        $7,000.00       $7,000.00      $10,500.00
Total Cost of Goods Sold        $138,288.00    $195,716.00      $334,004.00     $391,432.00     $529,720.00
Gross Profit                    $525,602.00    $809,950.00    $1,335,552.00   $1,619,900.00   $2,145,502.00



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Operating Expenses
 Marketing                        $3,265.00       $1,520.00        $3,040.00       $3,040.00       $6,305.00
 G&A                            $534,565.00     $557,820.00      $956,130.00     $979,385.00   $1,377,695.00
 Depreciation                    $35,366.67      $35,366.67       $70,733.34      $70,733.34     $106,100.01
Total Operating Expenses        $573,196.67     $594,706.67    $1,029,903.34   $1,053,158.34   $1,490,100.01

Non-Operating Income/
Expenses
Interest Expense                  $50,000.00     $50,000.00      $150,000.00     $150,000.00          $0.00
Income Before Taxes              -$97,594.67    $165,243.33      $155,648.66     $416,741.66    $655,401.99
Taxes on Income
Net Income After Taxes           -$97,594.67    $165,243.33      $155,648.66     $416,741.66    $655,401.99




                  Appendix F: Competitor’s Weakness

Competitor’s Weaknesses – Late in the month of February, 2007 the Kids Quest facility
in the Mall of America announced that it was closing its doors. Initially, this seems to be
a bad sign for Children’ s Paradise; however, after an analysis of the Kids Quest located
in the Mall of America several obvious problems can be found that likely attributed the
eventual failure of the business after nearly ten years. A couple of the major weaknesses
that the Mall of America Kids Quest had included:
                ● More so than any other mall in the United States the Mall of America
                    brings customers from literally all over the country. This is actually a
                    disadvantage for a drop in child care because if a family comes to the
                    Mall of America once a year they will likely just keep their children
                    with them instead of put them in an unknown child care. The problem
                    that the Mall of America Kids Quest had was that they could not
                    build trust with their community and customers because many of their
                    customers use the mall once a year or less.
                        ○ According to the Market Research done by Castleton Square
                            Mall 68% of their customers live within 30 minutes of the mall
                            which means they likely are repeat customers several times


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                         a year. This allows Children’ s Paradise to prove safe and
                         reliable to their customers in the community.
               ● Also the cost of equipment at the Mall of America Kids Quest was
                 substantially more than the projected cost of equipment for Children’ s
                 Paradise. Kids Quest reports that many of its new arcade games were
                 state of the art and cost between $20,000 and $25,000 per game. They
                 said that most locations had between $750,000 and $1,000,000 worth
                 of equipment. This cost of equipment is not easy to keep up with and
                 likely played a roll in the demise of the Mall of America Kids Quest.
                     ○ At Children’ s Paradise we are willing to assume that most kids
                         are not that picky when it comes to arcade games. They do
                         not need state of the art equipment to be happy. They will be
                         pleased with the level and quality of equipment similar to that
                         of a Chuck E. Cheese. Children’ s Paradise can get that level
                         of equipment for 3 to 4 times less than the average Kids Quest
                         arcade game.




                         Appendix G: Entry Barriers
Entry Barriers – There are two major entry barriers for Children’ s Paradise. Since
there is little to know direct competition in the area, the biggest problems that we face
are the start-up costs of a Children’ s Paradise and the liability issues of having a drop in
day care located in a mall. The start-up costs become fairly steep with the purchase of
approximately 20 to 25 arcade games, the purchase of indoor playground equipment and
the purchase of security system equipment. Most malls give an allowance to new stores
or businesses that move in to help with the start-up costs. Castleton Square Mall gives an
average of $20 per square foot which would cut out approximately one third of the start-
up cost. There will also be significant liability issues that come along with the ability for
a customer to “ drop in” . Insurance for drop in child cares is significantly higher than that
of a child care that has the same customers on a regular basis. To overcome this hurdle,
Children’ s Paradise plans on having any first time customer fill out paperwork, which
can be found on the internet, to become a member. By ensuring that every customer is
a member Children’ s Paradise can say that they have a known customer base which will
significantly decrease the amount of liability caused by a drop in child care.




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                       Appendix H: Risk Assessment

Risk Assessment– There are several areas that are a bit gray or involve some amount
of risk; however, we believe we can lessen that risk by practicing some of these simple
techniques if and when these issues come up.


Factor                                    Issue                                    Mitigation


Market Depression      When money becomes tight in general             The easiest way to combat this
                       households tend to reduce their level of        problem is to locate all Children’s
                       income used on unneeded services such as        Paradise in areas that have a
                       drop in child care.                             significant amount of expendable
                                                                       income.

Customer trust         It could be hard to gain the trust of the       The key is to make sure that our
                       customers since, like a normal day care, our    customer’s children have a fun
                       customers children will not be watched by       and safe first experience so that
                       the same child care attendant every day.        they tell their parents they want to
                                                                       come back. The more the child
                                                                       comes and experiences a good
                                                                       time the more willing the parent
                                                                       will be to bring them back.

Insufficient Sales     An over estimation of sales could really        Our best defense to over
                       change the timeline for many of our growth      estimating sales is to make sure
                       projections in terms of building a new          that sales projections are similar
                       Children’s Paradise in another Indiana          to what our competitors make, and
                       location and the move to China.                 research the market as best we
                                                                       can.

Competition from       Other child care facilities are significantly   We will offer drop in child care at
existing child cares   cheaper.                                        the mall which allows customers
                                                                       to spend less time driving from the
                                                                       mall to the other day care. This
                                                                       will allow for the child to spend
                                                                       less time at the child care which
                                                                       ultimately lessens the price of the
                                                                       child care.




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                                          We also provide a more exciting
                                          and fun atmosphere for the child.




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