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Waterhousefoods_bizplan_ae

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					1. Executive Summary (Typically about 1 pg)
       Where are
                Location, partners employees
       Market Opportunity
                Survey said – bakery
                Area competition
       Distinctive Competence & Strategic Fit
                What a bakery brings (summary)
                What the space brings to the community (summary)
                Where want to go – location, partners, employees
       Financial Objectives
                Summary of key financial points current and direction moving forward
2.0 Background

2.1 Overview
Water House Foods (WHF) is a small, local bakery and confectionary company that uses local and
organic ingredients to produce artisan and specialty yeast breads, muffins, scones, cookies and
candy to customers in Lake Mills (LM), Wisconsin, and the surrounding areas. WHF is wholly owned
and operated by Shawn and Raelyn Rediske. Created as a limited liability company (LLC) in August
2008, it commenced operations with two employees and sold its products at the Lake Mills Farmer’s
Market.

After experiencing overwhelmingly favorable market response at the Lake Mills Farmer’s Market,
WHF expanded operations to include wholesale and consignment sales at a variety of local and
regional customers. Following this continued success, WHF further expanded into retail sales by
partnering with Windsor Breads (WB), a custom-order bakery specializing in homemade sweet
breads, cookies, and muffins, that is wholly-owned and operated by Keith and Cheryl Ksobiech in
Windsor, Wisconsin; the Lake Mills retail store, named Windsor Breads-Lake Mills (WBLM), opened
on December 5, 2008, and, as of May 2009, had generated $____ in total sales. This business
agreement continued until May 2009 when the partnership was dissolved due to disagreements in
future direction and resulted in Shawn and Raelyn Rediske becoming sole proprietors of the retail
space named Water House Foods.

WHF’s strategy is to become the full service bakery for Lake Mills and surrounding communities.
This will be obtained by focusing on the following key objectives:
     Expand the existing retail space to include a fully-functioning kitchen and bakehouse, a
        deli, and an event space.
     Add five new part time employees to run the retail space, kitchen and bakehouse, and deli.
     Market aggressively to the local and regional area to build WHF brand identity and demand.
     Expand its wholesale and consignment business into a variety of local and regional
        businesses.
     Expand its product offerings to allow WHF to become a full-line bakery and deli, offering
        products that are complementary to its bakery and deli products, including oils and
        spreads, beer and wine.

Shawn and Raelyn Rediske provided funding for start-up expenses from their personal savings and,
as sales continue to grow, will provide future funding from net earnings.

2.2 Origins
Water House Foods is family-owned and built on family values, integrity, and lots of love. The
owners, Shawn and Raelyn Rediske, planted the seeds for WHF in their own kitchen, baking breads
and other goods for family members and friends. These family members and friends encouraged
them to begin selling their breads to specialty shops, restaurants, and other venues. In response,
the Rediskes put together a plan to market their breads at local and regional venues, starting with
Brick Street Market, owned and operated by Laura Jacobs-Welch in Delavan, Wisconsin. This
placement prompted the establishment of WHF, LLC, in August 2008. To produce its products, WHF
began renting the certified kitchen at the Rock Lake Activity Center, in LM, Wisconsin.

To tap into the local Lake Mills market, WHF began selling its products at the Lake Mills Farmer’s
Market. The LM Farmer’s Market is a popular and well-visited place for travelers to and residents of
LM and, according to a 2007 survey conducted by the LM Main Street Program, 76.9% of the survey
respondents regularly attend the LM Farmer’s Market. The LM Farmers Market proved to be an
excellent venue for WHF to sell its products and allowed them to get face-to-face with customers, to
find out exactly what they liked, and to get an idea of how much money they were willing to pay for
the specialty breads and other baked goods.

At the LM Farmer’s Market, WHF products met with overwhelming interest and sales growth. To
maintain this momentum, WHF sought wholesale and retail venues for its products.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
Wholesale: By leveraging the relationships that it had developed through the LM Farmer’s Market
and by directly marketing to a variety of local and regional businesses, WHF developed its wholesale
and consignment customer base by selling into the following locations
    The Wine Vineyard – Lake Mills, Wisconsin
    Rock Lake Activity Center – Lake Mills, Wisconsin
    Building 129 Too Coffee Station – Lake Mills, Wisconsin
    Brick Street Market – Delavan, Wisconsin
    Regent Street Market – Madison, Wisconsin
    Veronico’s Café – Burlington, Wisconsin

Retail: To open a retail operation, WHF partnered with Keith and Cheryl K____, owners of Windsor
Breads (WB). WB, established in 2004, is a family-owned custom order bakery operating in Windsor,
Wisconsin. They offer a full line of sweet breads, cookies, muffins and a limited line of scones,
dessert bars, coffee cakes and pies. With their established kitchen, brand, and product line, WB
worked with WHF to open Windsor Breads-Lake Mills (WBLM) at 110 East Lake Street, Lake Mills,
Wisconsin, on December 5, 2008. The retail space transitioned to Water House Foods in May 2009.
During this partnership time, WBLM generated ___ in total revenue and met a very positive response
from the LM community. To focus on the operation of WBLM, WHF decided to scale back its
wholesale business to two locations: Brick Street Market and Veronico’s Café.

2.3 Current State
Currently, Shawn and Raelyn Rediske own and run Water House Foods. WHF produces at the Rock
Lake Activity Center certified kitchen. WHF continues to sell wholesale to Brick Street Street Market
in Delavan, Wisconsin, and to Veronico’s Café in Burlington, Wisconsin.

Additional detail on current state is included in Section 4.1.

2.4 Personal Background
Appendices A and B contain the resume and curriculum vitae of Shawn and Raelyn Rediske,
respectively, as of May 2009.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
3.0 Philosophy – Vision and Mission

3.1 Values
The following values guide WHF’s business:
     WHF provides high quality foods made with love and care – the energy and love that we put
        into our foods is passed on to those who enjoy them
     All WHF recipes have a story behind them – no story, we don’t make it! The recipes are not
        selected arbitrarily from random websites or common cookbooks – they are inspired by or
        provided by friends and family. The recipes are the ties that bind WHF together.
     WHF makes every effort to follow sustainable practices. This means that WHF
            o Uses whole foods, provided by local and organic sources, wherever possible – we
                know where our ingredients and the products that we sell come from.
            o Follows sustainable packaging and marketing practices, whenever possible.
            o Observes energy- and consumption-conscious practices in the shop, in the kitchen,
                and in all aspects of its business
     WHF seeks to capture the interest and imagination of its customers by maintaining a
        rotating menu to stay with in-season fresh and local ingredients, holidays, and fun
        occasions – you never know what we’re going to have next!
     WHF is a place to forge connections
            o WHF’s business direction and plan relies on the input and support of friends and
                family, informally known as the “WHF board of directors.” This business is as much
                theirs as it is Shawn and Rae’s.
            o WHF’s success relies on the forging of collaborative partnerships with other
                businesses and organizations – inside and outside of LM – and work those
                partnerships in a way that helps all partners grow.
            o WHF will be a strong member of the LM community by
                     Supporting local events
                     Supporting downtown growth
                     Helping to forge connections between local businesses and organizations
                     Being a community meeting place for local residents and visitors – a place for
                        people to meet, eat, and watch LM roll by
                     Being an education hub – a place for people to learn and grow

3.2 Mission
WHF’s mission is to forward the organic/local/sustainable movement by providing wholesome, tasty
foods made with organic and local ingredients, by striving to follow sustainable practices in all
aspects of its business, all while inspiring the involvement of friends and family and acting as a hub
for community-building and education.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
4.0 Situational Analysis

4.1 Current State
Water House Foods is a private company wholly-owned and operated by Shawn and Raelyn Rediske,
residents of Lake Mills, Wisconsin. The retail operation of WHF is also owned and operated by
Shawn and Raelyn Rediske. The retail space opened as Windsor Breads – Lake Mills (WBLM) in
partnership with WB (a private company wholly-owned and operated by Keith and Cheryl K_____,
residents of Windsor, Wisconsin.) WBLM opened on December 5, 2008, and dissolved in May 2009,
during which it had generated $____ in revenue. The building in which WHF (formerly WBLM)
resides is owned by ___, operated by Troy Kloss and Randy Stetson, residents of Lake Mills,
Wisconsin.

Between December 2008 and May 2009, WHF produced (at the Rock Lake Activity Center certified
kitchen) and provided WHF product to WBLM. WB produced (at the Windsor Breads kitchen) and
provided WB product to WBLM. WHF transported WB product from Windsor to WBLM. WHF and
WB shared the revenue from WBLM; the revenue split was 60% WB / 40% WHF.

The business arrangement between WHF and WB was as follows:
    WHF operates the shop and is responsible for all of the expenses accompanying, including
       procurement of beverages and additional products.
    WHF produces all WHF product at the Rock Lake Activity Center and transports to WBLM.
    WB produces all of the WB products at the WB bakery.
    WHF transports all of the WB products to WBLM.
    WBLM revenues are split 60% WB / 40% WHF and are paid on a weekly basis, calculated
       Saturday through Friday.
    WHF receives 100% of baking class and event revenues.

As of May 2009, Shawn and Raelyn Rediske have full ownership and operational responsibilities for
the WHF retail space. This business arrangement between WHF and WB as been dissolved and WHF
will not have any ties to Windsor Breads moving forward.

WHF is a bakery and coffee shop that offers the following products (more detailed product offering
information is included in Section 5.8).
     WHF products (produced at the Rock Lake Activity Center in Lake Mills, Wisconsin, using
       local and organic ingredients) including a variety of yeast and beer breads, muffins and
       cupcakes, scones, and candy.
     Beverages including coffee, tea, sodas, juices, and water.
     Additional products including locally-produced honey and organic maple syrup.

In addition to the products offered at the retail space, WHF runs special events at the Rock Lake
Activity Center, including baking classes for five to twelve people. WHF also hosts special events at
the retail space, including swing dancing sessions, small musical concerts featuring local musicians
and LM middle and high school talent, small art shows featuring local artists and LM K-12 talent.

The current business arrangement between WHF and _Troy&Randy_ operates as follows:
    WHF pays _Troy&Randy_ a monthly rent of $400 for use of the WHF retail space location at
       110 East Lake Street.

The current business arrangement between WHF and the Rock Lake Activity Center operates as
follows:
      WHF pays Rock Lake Activity Center a monthly rent of $200 for use of the certified kitchen
         at 229 Fremont St. in Lake Mills, WI.

In addition to the retail business conducted by WHF, WHF also currently sells WHF product
wholesale to Brick Street Market in Delavan, Wisconsin, and to Veronico’s Café in Burlington,
Wisconsin.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
5.0 Marketing Summary

5.1 Marketing Overview

Water House Foods targets consumers who are health conscious folks and who care about taste and
quality. It also values a concern for the environment by offering products made from local and
organic ingredients. These ingredients are better for the consumers’ health, taste better than
commercial mass-produced products, and help the environment by using local distributors.
Within this target market, Water House Foods has identified three market segments of particular
interest to its operations. The two of these segments are Lake Mills residents who are either: (i) those
that live on the lake and have higher disposable incomes, thus are more likely to frequent a bakery,
and (ii) traditional, small town residents, slightly older than the average population, who enjoy
specialty types of foods. The third segment consists of the tourists that influx the Lake Mills
summer population. With the personal income of residents in Lake Mills exceeding the state and
national income rates and with tourism trends having a large economic impact in the Lake Mills
community, WHF has sought to align its vision with the needs and tastes of the local market.

5.2 Lake Mills and Jefferson County Market Survey
In 2007, Lake Mills recorded a population of 5,429 residents and the population continues to grow.
The following sections discuss demographic, income, and tourism details about the Lake Mills and
Jefferson County market. WHF has used this information to develop its business plan, understand
the market and its needs, and target its growth to meet and exceed these market needs.

5.2.1 Income and Tastes
Table 5-1 shows a 10-year tracking of personal income in Jefferson County. As can be seen,
Jefferson County has slightly exceeded state and national growth in personal income over the past
decade.

Table 5-1 Personal Income Trends Jefferson County, Wisconsin, 1996 - 2005
              1996     1997   1998    1999    2000    2001     2002    2003            2004     2005
 Jefferson
              1,587 1,707     1,848 1,955 2,121 2,178 2,11             2,268           2,372    2,503
 (millions)
 Index        100%     108%   116%    123%    134%    137%     139%    143%            149%     158%
 Wisconsin
              122      129    139     145     154     159      153     168             176      184
 (billions)
 Index        100%     106%   114%    119%    126%    131%     134%    138%            145%    151%
 US                                                                                            10,22
              6,512 6,907     7,416 7,796 8,422 8,717 8,873 9,150                     9,716
 (billions)                                                                                    1
 Index        100%     106%   114%    120%    129%    134%     136%    141%           149%     157%
Source: U.S. Dept. of Commerce, Bureau of Economic Analysis, Regional Accounts        Data, Local Area
Personal Income

Lake Mills is located on a major interstate highway, between Milwaukee and Madison, Wisconsin’s
two largest metropolitan areas. As Madison and Milwaukee have grown, commuters have moved to
the Lake Mills area. This increase in commuter population has brought residents with higher
incomes and more metropolitan tastes into the Lake Mills community. These consumers also tend to
be more health-conscious and more interested in preserving the environment, two characteristics
that WHF targets with its focus on producing products made with local and organic ingredients and
on sustainability.

5.2.2 Tourism
In addition, Lake Mills is a popular destination for many tourists. Many of these tourists originate
from Chicago, Milwaukee, and Madison. An analysis of tourism trends in Jefferson County,
prepared by the Wisconsin Department of Tourism, indicates that the economic impact of tourism
has wide-reaching effects, to include the following:
     Jefferson County ranks 25th in the State for traveler spending




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
         Travelers spent an estimated $134 million in Jefferson County in 2006 – a 10% increase
          over the previous year
         Fourteen percent of all expenditures were made in the winter, which amounted to $18
          million; 18% were made in the spring ($25 million); 44% in the summer ($59 million) and
          24% in the fall ($33 million)
         Traveler spending in 2006 supported 3,464 full-time equivalent jobs – an increase of 10%
          over 2005

5.2.3 Main Street Program Survey
Recently, the Lake Mills Main Street Program1 conducted a market analysis and survey in order to
determine what types of businesses consumers wanted to see open in Lake Mills. Approximately
3500 surveys were sent to residents of Lake Mills, and 545 surveys were answered and returned.
This survey indicated that 52% of the respondents would patronize a bakery if one were to open in
downtown Lake Mills. In fact, respondents further stated that a bakery was one of the top three
businesses that they wanted to see in the Lake Mills area.

5.2.4 WHF Farmer’s Market Survey
To further understand the market’s specific bakery needs and wants, Water House Foods conducted
a small survey of its customers at the Lake Mills Farmer’s Market. The WHF Farmer’s Market
Survey was e-mailed to 75 participants and all participants responded. There were five multiple-
choice questions pertaining to the customers’ buying trends and each question included a section
for “written” comments. The purpose of the survey was to determine how often consumers
purchased breads, what types of breads they most often purchased, what specialty items (such as
scones, muffins and cookies) they were interested in purchasing, and how much they were willing to
pay for each item. The results of this survey support the findings of the Lake Mills Main Street
Program survey that the community desires a bakery in the downtown area. It also indicates that
the consumers of Lake Mills want a variety of product options. Table 5-2 details the statistical
results of the WHF Farmer’s Market Survey. Figure 5-1 summarizes the purchase frequency data
from the survey.

Table 5-2 WHF Farmer’s Market Survey Results – Statistical Analysis
 Question                           Responses                  Response                         Percentage
                                                               Total
 Q1: How often do you buy bread?    Once per week              41                               59.4%
                                    Twice per week             23                               33.3%
                                    Three times per week       3                                4.3%
                                    More than three times
                                    Per week                   2                                2.9%

    Q2: What types of breads would you            White                         27              37.0%
    be                                            Wheat                         43              58.9%
    interested in purchasing?                     Sourdough                     43              58.9%
                                                  Herb & Onion                  19              26.0%
                                                  Sun dried Tomato &
                                                                                31              42.5%
                                                  Herb
                                                  Olive Rosemary                23              31.5%
                                                  Cherry Pecan                  16              21.9%
                                                  Rye                           14              19.2%
                                                  Pumpernickel                  10              13.7%
                                                  Seminola Sesame Seed          11              15.1%
                                                  Pita                          14              19.2%



1The Lake Mills Main Street Program is a non-profit organization that seeks to foster downtown revitalization
and promote economic redevelopment while preserving the heritage of the community of Lake Mills, WI.



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
 Q3: We are planning on using local               $6.00                         3    4.3%
 and organic                                      $5.50                         9    13.0
 ingredients to make the breads                   $5.00                         29   42.0%
 healthy, tasty,
 sustainable, and good for our planet.
 Using these
 higher-quality ingredients costs a little
 more, so                                         $4.50                         28   40.6%
 how much would you be willing to
 spend for a
 loaf of these breads?
 Q4: When would you be most likely to             Early morning (6-8)           14   19.4%
 stop at a                                        Mid morning (8-11)            18   25.0%
 bakery to buy breads (check top 1 or 2           Lunchtime (11-1)              7    9.7%
 time
                                                  Early afternoon (1-3)         6    8.3%
 periods)?
                                                  Afternoon commute (3-
                                                                                61   84.7%
                                                  6)
 Q5: What other types of foods, goods,            Muffins                       52   70.3%
 and                                              Scones                        23   31.1%
 services/events   would    you     be            Coffee cakes                  41   55.4%
 interested in
                                                  Cookies                       39   52.7%
 having in Lake Mills (check all that
 apply)?                                          Brownies                      30   40.5%
                                                  Croissants                    41   55.4%
                                                  Breadsticks                   27   36.5%
                                                  Croutons                      10   13.5%
                                                  Fudge                         18   24.3%
                                                  Toffee                        11   14.9%
                                                  Chocolates                    29   39.2%
                                                  Cheeses                       36   48.6%
                                                  Olive Oils                    31   41.9%
                                                  Olives                        20   27.0%
                                                  Sun Dried Tomatoes            12   16.2%
                                                  Coffee- Beans                 20   27.0%
                                                  Coffee - Drinks               31   41.9%
                                                  Tea - Loose leaf/bags         10   13.5%
                                                  Tea - Drinks                  13   17.6%
                                                  Handmade Soaps                13   17.6%
                                                  Fresh or Potted Herbs         22   29.7%
                                                  Local Artwork                 25   33.8%
                                                  Local Music                   17   23.0%
                                                  Bread Baking Classes          12   16.2%
                                                  Bread Baking Parties          11   14.9%




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
              Once per week                                      Twice per week
              Three times per week                               More than three times per week

      Figure 5-1 – Results of Water House Foods Market Survey conducted in the summer of 2008.



Regarding buying frequency, the survey suggests that the majority of consumers purchase bread
once per week. Many respondents stated that they tended to multiple loaves of bread from a high
quality bakery and freeze what they would not immediately use, because there was not a good
bakery nearby.

When asked about offerings and pricing, respondents identified sourdough and wheat breads as
preferred. The survey further suggested that an acceptable selling price for a loaf would be $5.00 or
less, depending on the size of the loaf. Many respondents suggested providing loaves of differing
sizes and pricing each size accordingly. Respondents also indicated that they sought muffins, coffee
cakes, cookies, croissants, cheeses, coffee, brownies, and olive oils. In the write-in portion of the
survey, many respondents also expressed a desire to purchase sweet rolls, danishes, donuts, soups,
and sandwiches.

Respondents indicated their preference for late open hours and hours on the weekend.


5.3 Market Problems
When WHF was established, it used the information in the previous sections to identify the key
market problems that exist in Lake Mills and the surrounding communities. These key market
problems include:
    1. No Bakery in Lake Mills
    2. No Coffee Shop in Lake Mills
    3. Limited Dining Opportunities in Lake Mills for Deli fare and foods made with local/organic
       ingredients
    4. Limited arts/entertainment and non-school educational activities in Lake Mills

5.3.1 Market Problem #1: No Bakery in Lake Mills
Recently, the Lake Mills Main Street Program2 conducted a market analysis and survey in order to
determine what types of businesses consumers wanted to see open in Lake Mills. This survey
indicated that 52% of the respondents would patronize a bakery if one were to open in downtown
Lake Mills. In fact, respondents further stated that a bakery was one of the top three businesses
that they wanted to see in the Lake Mills area. WHF was started, in part, to address this market
problem.


2
 The Lake Mills Main Street Program is a non-profit organization that seeks to foster downtown revitalization and promote
economic redevelopment while preserving the heritage of the community of Lake Mills, WI.



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
Prior to WHF opening the retail space, Lake Mills did not have a bakery business in town; however,
it did – and still does – have a number of businesses that provided bakery products. Sentry contains
a full-line bakery, but its products tend to be mass-produced and packaged; additionally, Sentry’s
products contain preservatives that some customers find unattractive. In town gas stations and
convenience stores (Mobil, BP, Kwik Trip) all provide a limited assortment of bakery items; but all
are mass produced and produced with preservatives.

WHF has addressed the market problem of no bakery in Lake Mills by
   Opening the retail space at 110 East Lake Street
   Offering the WHF line of products, including scones, muffins, cookies, candy, and artisan
      and specialty, European-style yeast breads made using organic and local ingredients; these
      products do not contain preservatives and are packaged attractively for sale.
   Planning to add pastries, cakes, and seasonal baked good that made using organic and local
      ingredients and are baked fresh; in this way, WHF will expand its current offerings to
      develop a full-line bakery that will satisfy existing market needs and anticipate and adapt to
      future market needs.

5.3.2 Market Problem #2: No Coffee Shop in Lake Mills
Several coffee shops have recently opened briefly and closed suddenly in Lake Mills. __Cupputan__,
a coffee shop, ice cream parlor, and tanning salon based in Fort Atkinson, opened a location on
Lake Street in Lake Mills. The shop was open for about one year and closed in late summer 2008.
Based on the personal impressions of Shawn Rediske (Shawn was an infrequent customer at
_Cupputan_ and the informal discussions that Shawn and Raelyn Rediske have had with current
WHF customers who previously frequented __Cupputan__, this coffee shop failed to meet the needs
of its customers in the following ways:
      Service was poor. __Cupputan__ counter employees were typically high school students.
         These employees did not behave as though they had an ownership stake in the business;
         this was disappointing to local customers.
      Shop atmosphere was poor. The shop was cozy and quaint, but lacked any real character or
         space to allow customer get-togethers.
      Coffee quality was good; other offerings were limited. While the shop did offer some bakery,
         some sandwiches, some soups, and a limited range of ice cream products, these products
         were poorly advertised and not of distinguishing quality or unique character.

Another coffee shop, Building 129 Too (a relocation of a coffee shop that had been established, then
closed, in Waterloo (10 miles north of Lake Mills), by owner-operator __________) opened in Lake
Mills in late 2007 and closed in late 2008. This coffee shop, like _Cupputan_, provided a full line of
specialty coffees (from Ankora Roasters, a Madison coffee supply company), ice cream, sandwiches,
and soups. However, the location of Building 129 Too was poor, located on County Highway V, the
frontage road to Interstate 94, but was nearly 0.5 miles away from the on-ramp, forcing customers
to go out of their way to frequent the coffee shop. This made visits on their way to work or on their
way home from work inconvenient. Additionally, the on-ramp area is dominated by McDonalds, BP,
and Kwik Trip, all businesses that provide coffee. Customers of Building 129 Too have indicated to
Shawn and Raelyn Rediske that the shop atmosphere was very pleasing, that the food offerings were
tasty, but that the coffee quality was inconsistent and that the location was simply too inconvenient
for customers to make the effort to patronize the coffee shop. Further, Building 129 Too suffered
from ineffective advertising; many WHF customers were unaware of Building 129 Too during its
operation.

Currently, coffee can be purchased in Lake Mills in several locations:
    Sweet Lips Art Gallery offers a full line of coffees and specialty coffee drinks provided by
       Ankora Roasters (through an agreement with Building 129 Too). However, Sweet Lips is
       primarily an art store and the coffee traffic in Sweet Lips is limited (according to the owner,
       she currently sells less than 6 cups of coffee per day). Further, seating in Sweet Lips is
       limited and food offerings are likewise limited.
    Anne’s Café on the Square offers diner fare, including inexpensive coffee. This business is in
       downtown Lake Mills, in an excellent location on the commons, and is a favorite of Lake



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
         Mills residents. However, WHF customers have indicated to Shawn and Raelyn Rediske that
         the diner atmosphere and relatively low-quality food are unattractive.
        Local gas stations offer coffee (Berres Brother’s at BP and Karuba at Kwik Trip). While these
         locations meet the needs of customers looking for a convenient cup of inexpensive coffee,
         they do not provide seating or meeting space. Additionally, while they do offer a variety of
         foods, these are mass-produced and packaged, and filled with preservatives.
        McDonald’s offers coffee and specialty coffees. Like the gas stations, this location offers
         customers a convenient cup of inexpensive coffee, but they do not provide seating or meeting
         space. Additionally, despite the addition of health-conscious items to the McDonald’s menu,
         the food offerings at McDonald’s do not meet the needs of Lake Mills customers looking for a
         high-quality snack or meal.

WHF has addressed the market problem of no coffee shop in Lake Mills by
   Opening the WHF retail space at 110 East Lake Street – a highly-visible downtown location.
   Offering competitively-priced Stone Creek Coffee and Rishi organic tea.
   Offering the WHF line of products - high-quality with no preservatives, packaged attractively
      for sale.
   Offering an attractive atmosphere with plenty of seating space to allow customer get-
      togethers and meetings.
   Planning to offer specialty coffees, additional bakery products and deli products (soups,
      salads, sandwiches).

5.3.3 Market Problem #3: Limited Deli, Local/Organic Food Dining Options in Lake Mills
Lake Mills contains a variety of dining options. The current list of restaurants and their typical
offerings are listed in Table 5-3.

Table 5-3 Lake Mills Dining
 Location                                         Typical Offerings
 Anne’s Café                                      Diner fare in a diner in a diner setting
 Blue Moon                                        Pizza, creole, full bar in a relaxed bar/restaurant
 Carp’s Landing                                   Pub fare in a pub setting
 El Mariachi                                      Authentic Mexican cuisine in a family restaurant setting
 Lake Mills Family Restaurant                     Diner fare in a family restaurant setting
 Lake Mills Golf Club Bar & Grill                 Pub fare in a golf club grill and bar setting
 McDonald’s                                       McDonald’s fast food chain
 Ming’s Garden Chinese Restaurant                 Hunan, Cantonese, Szechuan Chinese cuisine; dine-in
                                                  and take-away
 Pizza Pit                                        Inexpensive pizza; take-away
 Subway                                           Subway fast food chain – mass-produced sandwiches,
                                                  soups, salads
 Timber Creek Pizza Co.                           Pizza, subs and sandwiches, salads, and ice cream in a
                                                  family restaurant setting

While a number of these Lake Mills dining options offer soups, sandwiches, and salads, none of
them do so in a relaxed setting that looks out onto the Lake Mills commons. Further, none of these
locations offers specialty food options that include or are made with local or organic ingredients.

Another element that is missing from the existing Lake Mills dining options is outdoor seating that
overlooks the Lake Mills commons. Many customers of WHF have expressed a strong desire to have
this option available to them. WHF is currently petitioning to be allowed to add three bistro tables in
front of their space.

Additionally, while most of the dining establishments in Lake Mills offer take-away meals, few offer
options that allow the customer to enter the store, shop for homemade bakery, fresh soups,
specialty sandwiches, and walk out with a pre-packaged meal without calling ahead to order. None
of the existing dining options offer the combined convenience of grocery store shopping and
restaurant-food quality.



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Finally, deli options are limited in Lake Mills. Sentry provides a full-line deli, complete with pre-
made salads, pre-made soups, deli meats, deli cheeses. However, none of Sentry’s options include
products made with local or organic ingredients; also, the quality of the deli offerings is
commensurate with a grocery deli – no specialty options are available. Also, Sentry offers no bulk
food options that minimize packaging costs and environmental burden. A number of WHF
customers have expressed the strong desire to support environmental sustainability by purchasing
and consuming products made with organic and local ingredients and by having bulk shopping
options available in Lake Mills.

WHF addresses the market problem of limited deli, local/organic food dining options in Lake Mills
by
    Planning to offer specialty, homemade deli fare – soups, salads, sandwiches – in a relaxed
      environment overlooking the Lake Mills commons
    Planning to offer outdoor seating that overlooks the Lake Mills commons; 110 East Lake
      Street is uniquely suited to offering outdoor seating given the east-facing store front: the
      outdoor seating will receive good light throughout the day on most days in the early summer
      to late summer months.
    Planning to offer pre-packaged take-away family dinner options containing specialty soups,
      salads, and sandwiches, with many options including foods made with local or organic
      ingredients. Customers will be able to enter the store, select ready-made and pre-packaged
      meals from cooler displays in the store, and eat them in the store or take them home to
      share.
    Planning to offer specialty deli options, including deli meats, deli cheeses, bulk products,
      salads, soups, and sandwiches. Many of these options will be made using local or organic
      ingredients.
    Offering bakery produced with organic and local ingredients. Sustainability is a cornerstone
      of WHF and is central to its business philosophy and operations plan. WHF has already
      established a reputation at the retail space for being the go-to place in Lake Mills for
      specialty foods made with local and organic ingredients. WHF focuses its business strategy
      and operations on environmental sustainability by utilizing:
           o Recycling bin in the store for disposal of all recyclable materials.
           o Low output lights in the seating area.
           o Use of Energy Star rated freezers for product storage.
           o Merchandise bag re-use program, where customers who reuse or return their paper
               merchandise bags receive a $0.10 discount per bag.
           o Cloth bag program, where customers who purchase a reusable cloth bag receive a
               $0.10 discount on their purchase when they use the bag.
           o Merchandise bags, coffee cups, coffee cup sleeves, coffee cup covers, stir sticks all
               made from recycled materials.
           o Support of the buy local movement in Lake Mills by
                    Participation in the local CSA (community supported agriculture), which
                      allows community residents to own and work a portion of a nearby farm
                    Establishment of a periodic Kid’s Art Show where local K-12 students
                      produce artwork with an environmental theme and sell the art at WHF; the
                      proceeds from the sales are split between the students and donations to the
                      Buy Fresh, Buy Local (a division of the REAP program, based in Madison,
                      Wisconsin)

5.3.4 Market Problem #4: Limited Arts/Entertainment and Non-school Educational Options in
Lake Mills
Several Lake Mills locations offer musical, art, and theater entertainment. Carp’s Landing offers live
music on some weekends; this is a significant business draw for the restaurant. Musical acts that
have appeared at Carp’s Landing play amplified and driving rock-and-roll music. Recently, Carp’s
has introduced open-mike nights, where local musicians can perform in a live setting before a local
audience.




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Several Lake Mills businesses sell professional artwork. Sweet Lips sells a substantial variety of
visual artwork. Recently, it has also hosted a poetry reading by a regional author. Bruce Johnson
pottery sells specialty pottery made by Bruce Johnson, an artist and Lake Mills resident. Ephraim
Pottery sells specialty pottery made in a workshop that is housed in the same building as Sweet Lips
art gallery.

The Renaissance Theater hosts performances by the Penguin Players, a local theatrical troupe who
periodically performs popular plays and musicals in a renovated church on Madison Street, in Lake
Mills.

The Lake Mills Art Festival Committee hosts an annual art festival that draws regional artists to
display and sell their art in the Lake Mills commons for one summer weekend.

The Lake Mills City Band plays periodic summer concerts in the bandstand in the Lake Mills
commons. Additional musical acts also perform in the bandstand, periodically, at community
events, throughout the summer.

These existing activities show that Lake Mills residents and visitors have a real interest in
patronizing and participating in arts and entertainment. However, the current options are limited in
scope and timing. Aside from the existing art galleries and pottery shops, few activities focus on the
interactive display of visual arts. Amateur visual artists have virtually no options to display their
work in Lake Mills. Additionally, students – the next generation of professional and amateur artists
– can only present their art in their schools and in limited school-supported functions. WHF believes
that this is an untapped art market; recent activities held at WHF have shown that there is demand
for local amateur art:
      Since opening, $300 of local artwork has been purchased by customers of WHF.
      In April 2009, students sold $100 of their Earth Day themed artwork at a Kid’s Art Show.
      Additional Kid’s Art Shows are planned for May and June 2009.
      WHF is a silver sponsor for the Lake Mills Art Festival.

Further, while Lake Mills hosts some musical art, there exists no venue that is well-suited to
intimate musical performances by local or regional artists. WHF believes that this is another
untapped art market; recent activities held at and planned for WHF have shown that there is a
demand for live music:
     Carolers and traveling minstrels played in WHF in December 2008 during a series of winter
       community events.
     A local high school student quartet has played two small classical music concerts in WHF
       since March 2009.
     Celia concert scheduled for May 2009; this event has generated over $300 in ticket sales at
       WHF.
     Borderlands concert scheduled for May 2009.
     Keith Hampton (a local musician) concert scheduled for June 2009.
     Additional musical events planned for summer 2009.

Finally, no existing Lake Mills venues focus on poetry, prose, or non-fiction readings; several Lake
Mills residents are authors looking to shop their products locally. WHF believes that this is another
untapped art market; recently, WHF has hosted two local authors’ book signings. More events of
this type are planned for the future.

Beyond arts and entertainment, educational opportunities in Lake Mills are limited to local schools,
home school groups, and classes taught at the Rock Lake Activity Center. Since its conception in
August 2008, WHF has held six bread baking classes in the Rock Lake Activity Center kitchen that
have generated over $600 in revenue for WHF; two additional classes are scheduled for May and
June 2009. Based on this experience and the ongoing interest that WHF customers express in
participating in baking classes, WHF believes that the education market is another untapped
market in Lake Mills.




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Beyond baking classes, WHF has partnered with a variety of teachers to expand its educational
offerings. WHF has hosted violin playing lessons (taught by an award winning local high school
student), swing dancing lessons (taught by an award-winning local high school student), and
nutritional classes.

To further take advantage of the non-traditional education market, and to establish WHF as an
education hub for the Lake Mills community, WHF has planned the following educational activities:
     Additional bread baking classes, including adding advanced bread baking, after the kitchen
        is added at 110 East Lake Street
     Additional baking classes, focusing on sweet breads, muffins, cookies, scones, and pastries
     Science in cooking – classes where participants plan and prepare their own meal
     Science in coffee – classes where participants learn about coffee growing, harvesting,
        brewing, and tasting; partnership with Stone Creek Coffee
     Science in wine and food – classes where participants learn about wine types, regions,
        tasting, and pairing; partnership with The Wine Vineyard
     Science in beer and food – classes where participants learn about beer types, tasting, and
        pairing; partnership with Tyranena Brewing Company
     Sustainability – classes where participants learn about the buy local movement, the
        difference and impact of buying products that are conventionally produced and provided,
        and the importance and value of eating local and organic products
     Tutoring – providing a location for local students to gather for peer-provided and teacher-
        provided tutoring, in all subjects
     Before- and After-school study groups – providing a location for local school students to
        gather before and after school to study
     Book groups – providing a location for local book groups to gather


5.4 Market Segmentation and Buyer Personas
WHF has identified two major market segments: retail and wholesale. Initially, WHF split its
operations between selling retail at the Lake Mills Farmer’s Market and selling wholesale into a
variety of locations in the Lake Mills, Madison, and Delavan areas. With the opening of the WHF
retail store in Lake Mills, WHF decided to focus on its retail business and scaled back its wholesale
business. WHF currently maintains its focus on retail; however, future plans depend heavily on
wholesale customers.

5.4.1 Retail Market Segment
Since opening the retail space – at 110 East Lake Street, Lake Mills, Wisconsin - on December 5,
2008, WHF has identified six key retail customer types:
     Lake Mills Residents
     Lake Mills Businesses and Organizations
     Students and Schools
     Commuters
     Business people
     Seasonal Residents
     Visitors

Each of these different retail customers requires different mixes of the WHF product offerings. When
planning business growth, WHF continues to assess the needs of these different customers and
targets expansion into those areas explicitly requested by current customers and into those areas
that meet the unspoken wants and needs of current and anticipated customers.

This section, starting with Table 5-4, details the known and anticipated wants and needs of the
seven different retail customer types. The next section discusses wholesale customers.




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Table 5-4 Retail Customer Wants




                                                                                                                                                                 Bulk Products
                                                                                          Light Dinner

                                                                                                         Beer & Wine
                                                                            Light Lunch




                                                                                                                                       In-store get
                                  Beverages




                                                                Breakfast




                                                                                                                                       togethers

                                                                                                                                                      Catering
                                                                                                                              Events
                                                       Breads
                                              Treats




                                                                                                                                                                                 Herbs
                                                                                                                       Deli
Retail Buyer Type
LM Residents                X                 X    X     X                    X             X              X           X       X           X           X           X              X
LM Buz and Orgs             X                 X    X     X                    X             X                          X                   X           X
Students & Schools          X                 X          X                                                                     X           X
Commuters                   X                 X          X                                  X                          X
Business People             X                 X    X     X                    X             X                          X                   X           X
Seasonal Residents          X                 X    X     X                    X             X              X           X       X           X           X                          X
Visitors                    X                 X    X     X                    X             X              X           X       X
Note: Blue items to be added with             expansion.

5.4.1.1 Lake Mills Residents
Since WHF opened WBLM (currently WHF retail space), Lake Mills residents have been the store’s
primary customers. Lake Mills residents include
            Families
            Retired individuals
            Working Individuals

These residents fall into two broad categories. The first are the in-town residents. These residents
tend to be older, with lower expendable income, holding more traditional expectations of bakery
product offerings and environment (for example, donuts and conventional pan loaves of bread,
displayed in lit glass cases). The second are the lakeside residents. These residents tend to have
higher expendable income, exhibit higher expectations for food quality and offerings with more
progressive tastes (interested in organic products, gourmet offerings), prefer specialty coffees, and
express a greater interest in having a comfortable meeting space with an upscale atmosphere.

In a recent survey of Lake Mills residents conducted by the Lake Mills Main Street Program, when
asked what business the town needed more than any other, over 52% of the respondents indicated
that they wanted a bakery.

Many of the Lake Mills resident current customers were introduced to WHF during the 2008 LM
Farmer’s Markets, where Shawn and Raelyn Rediske sold breads and treats. The relationships
developed during these Farmer’s Markets formed the initial customer base for; these customers
continue to be very important to WHF.

In the   time that the store has been open, Lake Mills residents’ habits at WHF have focused on
          Purchasing breads for lunches, dinners, and family get-togethers.
          Purchasing treats.
          Purchasing beverages, especially coffee.
          Using WHF as a space for meeting friends, church groups, business associates and family.
          Participating in the events that have been hosted by WHF.

The additions planned for the WHF business have been primarily a response to requests from these
customers, particularly lakeside residents:
    Add specialty coffees
    Add pastries, cakes
    Provide smoke-free dining on light meals with deli fare.
    Offer wine and beer by the glass
    Offer take-away light meals
    Add events including music, art and education



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        Offer fresh herbs
        Offer bulk products, including oils, spreads

5.4.1.2. Lake Mills Businesses and Organizations
Another important component of the customer base for WHF has been owners and employees of
Lake Mills businesses and organizations, particularly those businesses located in downtown Lake
Mills. Examples of consistent business customers in the downtown area include:
     Wine Vineyard
     Dutch Designs
     American Family Insurance
     CV Hair Company
     Hardware Store
     Rose Gallery
     Huska CPA
     Sweet Attorneys
     Solutions
     2 Shores Car Company
     Lake Mills Leader

The owners and employees of these businesses are patrons of WHF. In addition, these businesses,
bring clients to WHF for business meetings and direct clients to WHF for treats and coffee.

Members of Lake Mills’ organizations are also key customers of WHF; they patronize WHF
individually and meet in the store in groups. These include:
     Main Street Program
     Local church groups
     Local book clubs
     Relay for Life
     Jefferson County Arts Committee
.
The expansion of the existing store will allow WHF to better serve these customers by offering
     Light meals
     Deli fare
     Catered events
     Additional meeting space


5.4.1.3. Students and Schools
Another important group of customers for the WHF store have been local middle and high school
students. They visit the shop before school for a beverage and a treat; additionally, they visit after
school (though less frequently). WHF has engaged the local elementary, middle, and high schools in
a series of events intended to bring more students and their families into the store. These events
include:
     Violin lessons, taught by an award-winning local high school student
     Swing dance lessons, taught by an award-winning local high school student
     Mini classical music concerts, performed by local high school students
     Art shows, focusing on environmentally-themed art produced by local students

These events have been successful in bringing students and their families into the store; the events
show that the Lake Mills student population can be engaged creatively to increase store traffic.

This group is a key target market for the store expansion. WHF will continue to engage local school
students and teachers to find creative events to host at the store. In addition, WHF plans to market
more aggressively to middle and high school students, starting in fall of 2009, to formally set up
periodic tutoring groups and study groups at the store; some of these groups will be hosted by
Shawn and Raelyn Rediske.



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5.4.1.4. Commuters
Commuters are another important customer segment for WHF retail business. The commuters who
frequent WHF fall into two general categories:
     Commuters who live in Lake Mills and commute to work outside of Lake Mills. The majority
       of WHF commuter customers fall into this category.
     Commuters who live outside of Lake Mills and stop in Lake Mills on the way to work or on
       the way home.

This market segment is particularly important in Lake Mills, being a community centrally located
between Wisconsin’s two largest metropolitan areas, Milwaukee and Madison. Many of Lake Mills’
residents commute to either of these larger cities.

Commuters purchase
    coffee/tea, breakfast
    after-work treat or coffee
    additions to dinner
    dessert

With the expansion of the store, WHF expects that commuters’ purchases will expand to include
    Specialty coffees
    Breakfast
    Light dinner

5.4.1.5. Business people
Business people are another important group of customers at WHF. The store has served as a
meeting place for business people travelling through or to Lake Mills (primarily from Madison,
travelling to Lake Mills or to the Milwaukee area). The store offers a pleasant, upscale, neutral
environment for business meetings.

Additionally, numerous customers come to WHF to purchase products for clients and business
associates:
    Meetings at work and bring food to the meeting
    Purchase food for clients or employees
    Business meals – breakfast, light lunch, or light dinner.

With the expansion of the store, WHF expects that business people will expand their purchases at
WHF to include
    Catered lunches and dinners
    Expanded business meeting opportunities, including rental of the space for private meetings

5.4.1.6. Seasonal residents
From late spring to mid fall, Lake Mills experiences a significant influx of out-of-town vacationers.
Many of these vacationers own properties in the town and frequently visit. These seasonal residents
tend to have expendable income and more expensive tastes that match well with the product
offerings at WHF.

Seasonal residents purchase
    coffee/tea, breakfast
    breads for meals
    treats

With the expansion of the store, WHF expects to be able to provide additional offerings to seasonal
residents:
     Specialty coffees
     Light lunches – dine-in and take-away
     Light dinners – dine-in and take-away


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        Deli fare
        Special events
        Meeting spaces for get-togethers with friends and family
        Catering opportunities for parties
        Fresh herbs for garnish, decoration, etc.

5.4.1.7. Visitors
In addition to the out-of-town vacationers who own properties in town, significant numbers of
visitors who do not own properties visit Lake Mills to shop, visit family and friends, and to
participate in the large number of community events. Due to its location between Madison and
Milwaukee, travelers often stop in Lake Mills to break up travel. These visitors tend to have
expendable income and more expensive tastes that match well with the product offerings at WHF.

Visitors purchase
     coffee/tea, breakfast
     breads to take home for meals
     treats

With the expansion of the store, WHF expects to be able to provide additional offerings to seasonal
residents:
     Specialty coffees
     Light lunches
     Light dinners
     Deli fare
     Special events
     Fresh herbs for garnish, decoration, etc.

5.4.2 Wholesale Market Segment
Shortly before the opening of WBLM on December 5, 2008, WHF discontinued its wholesale
business, with the exception of Brick Street Market in Delavan, Wisconsin, and Veronico’s Café in
Burlington, Wisconsin. WHF made this strategic decision to allow focus on the development of its
retail venue and to ensure its success.

However, prior to the discontinuation of the wholesale business, WHF was selling product wholesale
into the following locations:
     Brick Street Market, Delavan, Wisconsin
     The Wine Vineyard, Lake Mills, Wisconsin
     Rock Lake Activity Center, Lake Mills, Wisconsin
     Building 129 Too Coffee Station, Lake Mills, Wisconsin
     Regent Street Market, Madison, Wisconsin

In addition to achieving placement at these locations, WHF was in negotiations to begin selling
wholesale into the following additional locations:
     Fromaggination, Madison, Wisconsin
     Willy Street Market, Madison, Wisconsin
     Jennifer Street Market, Madison, Wisonsin
     Whole Foods, Madison, Wisconsin
     Carp’s Landing, Lake Mills, Wisconsin

Through these placements and negotiations, WHF identified the typical characteristics, wants, and
needs of potential wholesale customers. These wholesale customers fell into two broad groups:
specialty shops and restaurants.

Specialty shop customers that were interested in WHF product exhibited a set of common
characteristics, wants, and needs.




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        Interested in a bakery close enough that it could offer daily delivery of fresh product. Many
         locations sold or were interested in selling WHF product only on consignment, which
         requires constant rotation of the product on the customer’s shelves.
        Tended to be small, specialty shops, with limited buying power; larger grocery stores operate
         their own bakeries and do not have a need to carry WHF products.
        Tended to be privately-owned or co-operatively owned.
        Drew a clientele that sought local, organic, high-quality artisan products and were willing to
         pay higher prices for them.
        Sought local products to feature in their stores and feature with their other products; they
         were looking for breads to feature with their existing line of products.
        Required wholesale pricing that allowed competitive pricing at reasonable in-store mark-up.

Restaurant customers that were interested in WHF product exhibited the following set of common
characteristics, wants, and needs:
    Exhibited small, intimate atmospheres.
    Offered gourmet, specialty products.
    Focused on healthy, organic, and local ingredients.
    Sold higher-priced, higher quality foods.
    Tended to be magnet restaurants – they drew diners from throughout the region.

Similarly, local B&B’s represent another potential wholesale market for WHF products, particularly
exclusive bakery and deli offerings that will help differentiate a B&B from its competition.

The addition of the certified kitchen at Water House Foods provides additional baking capacity,
allowing Water House Foods to expand its offerings to local specialty shops, markets and
restaurants.

In the short term, WHF will continue selling wholesale to Veronico’s Café in Burlington, Wisconsin,
and Brick Street Market, in Delavan, Wisconsin. In the mid-term, WHF will seek to resume its
wholesale business by targeting local and regional restaurants and specialty markets. A focus of this
mid-term thrust will be in the Madison market, by heavily marketing its use of local and organic
ingredients to Madison co-ops. In the long-term, WHF will seek to expand its wholesale business by
targeting premier restaurants and specialty shops.
     Restaurants:
            o Carp’s Landing – Lake Mills, Wisconsin
            o Blue Moon – Lake Mills, Wisconsin
            o Highway Harry’s – Johnson Creek, Wisconsin
            o Velvet Lips – Fort Atkinson, Wisconsin
            o Café Carpe – Fort Atkinson, Wisconsin
            o Salamone’s – Fort Atkinson, Wisconsin
            o Fireside – Fort Atkinson, Wisconsin
            o L’Etoile & Café Soleil – Madison, Wisconsin
            o Harvest – Madison, Wisconsin
            o Bluefie’s – Madison, Wisconsin
     Specialty Shops and Markets
            o Williamson Street Market – Madison, Wisconsin
            o Regent Street Market – Madison, Wisconsin
            o Fromaggination – Madison, Wisconsin
            o Whole Foods – Madison, Wisconsin
            o Good Harvest – Pewaukee, Wisconsin


5.5. SWOT Analysis
In order to effectively align Water House Foods’ current values and beliefs with a strategic expansion
profile, it needs to recognize its strengths and weaknesses, as well as identify the external
opportunities and threats it faces. Therefore, a Strengths, Weaknesses, Opportunities and Threats
(SWOT) Analysis was prepared to help develop WHF expansion strategy.



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Table 5-5 SWOT


WATER HOUSE FOODS
Strengths:
1.   Only producer of artisan breads in Lake Mills community
2.   Produces over 16 different flavors of bread
3.   Online ordering system through Water House website
4.   The organization’s culture and values
5.   Continued improvement on product quality
6.   Only organic bread and baked goods distributor in Lake Mills
7.   Unique market niche
8.   Ingredients are home or locally grown when possible

Weaknesses:
1.  Start-up company in first year of production
2.  Low brand recognition
3.  Lacks large financing backing for expansion purposes
4.  Bakery kitchen is ill-equipped to handle increased production
5.  Only two employees
6.  Minimal market share
7.  High inventory costs due to retail prices

Opportunities:
1.  Unique product offerings
2.  Expansion into other areas (e.g. sales of beverages, sandwiches and soups)
3.  Larger retail space with on-site kitchen increases the ability to meet the needs of the
    community
4.  Americans continue to experience economic stress; thus economically priced specialty
    foods are desirable

Threats:
1.   Competitors located in two surrounding communities (Cambridge and Jefferson)
2.   Economic stress may cause the cost of organic ingredients to rise
3.   Continued threat of economic deterioration may decrease customers’ buying habits

WHF is currently planning the following strategies to leverage its strengths and capitalize on some of
the recognized opportunities. With the expansion of the current facility into a bakery with a larger
retail space and a full kitchen on-site, WHF will be able to broaden its product offerings and
continue to meet the needs of its customers (S1, S2, S3, S4, S6, S7, S8, O1, O2, O3). Expansion
into adjacent markets including the deli and additional café offerings increases benefits over other
competitors (S6, S7, O1, O2, O3). The focus on product quality that has existed from the start of
WHF will be upheld through all means on expansion including new products and improvements to
existing products (S1, S2, S5, S6, S7, S8, O1, O2, O3). WHF plans to continue to utilize technology
to maintain the “Bakery Bucks” program. This program is a customer database intended to reward
loyalty through discounts based on the dollars spent in the store (S3, S7, O1, O2, O3). By focusing
expansion in these ways, WHF hope to increase their demand to the point that it is able to purchase
ingredients in bulk and keep costs low (S6, S7, S8, O4).

The following strategies have been created to mitigate the recognized weaknesses by leveraging the
existing opportunities. Increasing advertisements, events and promotions are planned to increase
market penetration further into the Lake Mills community as well as surrounding areas (W1, W3,
W7, O1, O2). By securing financing from the SBA, WHF will be able to drastically shorten the
timeline to renovate the existing retail space and build the on-site kitchen. (W4, O2, O3). Renovation
of the commercial kitchen enables the increase in production of breads and other baked goods,
which allows WHF the ability to more closely meet the needs of the community. The increased



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offerings are expected to not only increase sales to current customers, but draw in new customers
as well (W4, O2).

The strengths identified are used to mitigate the threats identified in the following ways. By
purchasing ingredients in bulk, WHF will be able to keep costs low (S6, S8, T2, T3). A marketing
campaign will be launched in order to highlight product differentiation (S1, S2, S3, S6, S7, S8, T1,
T2, T3).

The following strategies will be implemented to address the weaknesses and threats. Continued
focus on increasing advertising activities which could be further expanded by combining with other
Lake Mills area small businesses to increase affordability of larger advertising campaigns (W3, W6,
T1). The prior mentioned financing through the SBA loan would not only be used for retail space
expansion and building of a commercial kitchen, but also for implementing portions of the
advertising campaign (W1, W2, W4, T1, T2, T3]. Purchasing ingredients in bulk to keep costs low
addresses the last few weaknesses and threats (W7, T2, T3).


Water House Foods: Strengths and Weaknesses

Water House Foods has a unique market niche and its products are differentiated from its
competitors’ products and services. The utilization of local and organic ingredients to make its
specialty and artisan breads is the key to differentiation. This is a tremendous strength for WHF as
its products and services really speak to the needs and demands of its target market. The small
town atmosphere that WHF operates in is a wonderful setting for its homemade style products. For
these reasons, WHF has a prime location with the ideal target market for an expansion of
operations. Market research has indicated that the residents of Lake Mills want a bakery in their
downtown community, desire a variety of products and try to purchase their products from local
venues. Therefore, WHF strengths support expansion, as the economic climate and its position in
terms of location, market and demand in the community are desirable.

The fact that Water House Foods is a new, start-up organization is one of its weaknesses. WHF
lacks national brand recognition, as well as a large market share. Due to its small rented
commercial kitchen, it also carries an equivalently small inventory of both ingredients and finished
goods. This relates to purchasing ingredients at retail prices, rather than at wholesale prices and
keeps the costs of goods sold at a higher price than desired.


External Opportunities and Threats

Water House Foods exhibits some very promising opportunities for expansion. First, there is a great
need in the community for a variety of bakery products. As it stands, many of WHF competitors do
not offer a large variety of baked goods, such as those that WHF currently sells. Second, WHF has
the desire to expand its operations to include offering more than the traditional bakery items. The
retail space expansion in downtown Lake Mills will allow the sale of beverages, sandwiches and
soups in addition to its artisan breads and specialty baked goods. Currently, there are no another
businesses in the Lake Mills community that offer the same type of services and/or products as
Water House Foods.

The threats to WHF operations include (i) bakery competitors in two surrounding communities (see
Table 5-7 for a detailed listing of competition in the area), (ii) the continued economic stress in the
community, which elevates the cost of organic ingredients, a major component of WHF products
and (iii) a continued deterioration of the national economy, which creates the potential to put a
damper on the expendable income of the community.

The strategies set forth by Water House Foods strive to leverage its strengths and opportunities and
use them to mitigating its weaknesses and threats. The primary driver to Water House Foods




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expansion strategy is building a full size commercial kitchen in the 110 East Lake Street WHF retail
shop to prepare its products on site

The retail space allows Water House Foods to develop a strategy that focuses on expanding its
operations while continuing to develop its customer base, allows it to increase the effectiveness of its
brand within the Lake Mills community. Customers are able to visit the retail shop in downtown
Lake Mills, and see Water House Foods face-to-face, as it had at its Farmer’s Market venue. This will
help generate more attractiveness to the WHF products and brand.

In addition, WHF storefront will be a unique store in the Lake Mills community. According to the
Lake Mills Consumer Survey3, one of the most frequent comments noted was that residents thought
the vacant storefronts downtown needed to be filled with “unique stores that capitalize on the small
town charm of Lake Mills”. Water House Foods’ strategy will represent the unique style and charm
that the Lake Mills’ residents desire. WHF will be able to expose its own unique brand of organic
foods to its customers.

The expansion project including building of a commercial kitchen in the existing retail space
consists of purchasing and installing used bakery equipment, such as a convection oven, an NSF
approved refrigerator, racks, and tables that are needed to allow Water House Foods to increase
their production. Once this project is completed, Water House Foods will have more storage area for
ingredients and inventory as well as increased production capacity. Currently, there is not enough
space to continue to meet the growing needs of the community. While demand is being met with
existing products, Additional resources would allow further expansion of new products increasing
the product offering resulting in additional sales from current customers and ideally pulling new
customers to purchase. Space is a large constraint resulting in lack of storage for items such as a
large ingredient inventory, additional mixers to increase productivity and additional ovens to
increase the speed in which products can be baked. Besides limiting the throughput of the kitchen,
restricted space for ingredients drives the cost up due to purchasing in smaller quantities more
frequently and additional trips for ingredients adds an additional damper to productivity. With the
expansion of the retail space, Water House Foods will be able to store a greater amount of inventory,
mainly ingredients for its products, which means that it will be able to purchase large quantities at
wholesale prices to reduce the costs associated with making its products. In order to get an idea of
how this affects the costs of goods sold, please see the Sales Forecast located in Section 5.2 below.
This forecast reflects a higher inventory of goods and a decrease in the cost of goods sold. It predicts
that there will be a decrease in costs of goods sold by 11.25% in the year 2009, and an additional
decrease of 10.6% in 2010 due to purchasing ingredients at wholesale prices.

To assist Water House Foods in implementing these strategies, WHF seeks a $50,000 loan from the
Small Business Administration. From these funds WHF plans to build the commercial kitchen at the
110 East Lake Street WHF location. This estimate is for the purchase and installation of used
commercial sized equipment for the retail space. This will eliminate the need for a rented
commercial kitchen, saving $200 a month, and allow WHF to prepare and sell foods at one central
location. Any amounts not used in the kitchen project will be diverted into a marketing campaign
that seeks to further expose the Water House Foods brand to Lake Mills and surrounding
communities. The SBA loan will provide Water House Foods the financial support necessary to make
its expansion strategy a success.


5.6 Competition

Competition in the local area is minimal, as most competitors lack one or more products or services
offered by Water House Foods. One of the largest competitors is a local grocery store, Sentry, which
sells donuts and commercially produced breads. It does not offer its customers the same freshness
or variety of products that WHF offers. In fact, this competitor mostly provides brand name items

3
 This survey was conducted in the summer of 2007 by the Lake Mills Main Street Program. Electronically retrieved from
http://www.uwex.edu/ces/CCED/economies/mainstreet/documents/lake_mills_Consumer_v6.pdf.



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that are not organic or made from locally grown ingredients. This differentiates WHF products from
this competitor, as well as many others.

Other competitors lack the marketing capabilities and tactics that WHF has put into place to gain
market share. In Cambridge and Jefferson, each about 10 miles away from Lake Mills, there are full
service bakeries that are competitors of Water House Foods. However, these two bakeries are “small
town” bakeries without the national marketing intention that WHF offers through its website. One of
its key successes is that it has developed a creative website to advertise its brand and products as
well as provide its customers with news updates about its expansion plans. Its e-mail newsletter has
over 70 loyal customers, many of whom also order Water House Foods products online
(http://www.waterhousefoods.com/index.shtml).

Table 5-7 Local Competitors




                                                                                                                                                             Bulk Products
                                                                                      Light Dinner


                                                                                                     Beer & Wine
                                                                        Light Lunch




                                                                                                                                   In-store get
                              Beverages




                                                            Breakfast




                                                                                                                                    togethers


                                                                                                                                                  Catering
                                                                                                                          Events
                                                   Breads
                                          Treats




                                                                                                                                                                             Herbs
                                                                                                                   Deli
Competitor
Cambridge Bakery
and Café                       X           X        X        X            X             X              X           X       X           X           X           X              X
  Cambridge, WI
Frank’s County
Market                                     X        X        X            X                                        X
  Jefferson, WI
Ripley’s Bakery &
Eatery                         X           X                 X                                                             X           X
  Cambridge, WI
Daily Grind Coffee
Shop                           X           X                 X                          X                          X
  Cambridge, WI
Wal-Mart
Supercenter                    X           X        X        X            X             X                          X                   X           X
  Watertown, WI
Bon Ton Bakery
                               X           X        X        X            X             X              X           X       X           X           X                          X
  Jefferson, WI
Pick n’ Save
                               X           X        X        X            X             X              X           X
  Watertown, WI
Piggly Wiggly
 Cambridge, WI                 X           X        X                     X             X              X           X                                                          X
  Jefferson, WI
Glenn’s Market
                                                                          X                                        X                               X
  Watertown, WI
Dan’s Pastry Gallery
                                           X
  Cambridge, WI
Watertown Homestyle
Bakery                                     X        X
  Watertown, WI
Perkins Restaurant
And Bakery                     X           X                 X            X             X
  Watertown, WI
Jerry’s Cake Corner
  Fort Atkinson, WI
McGynn’s Bakery



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
  Watertown, WI
Mike’s Bakery and
Catering Services
  Fort Atkinson, WI
Sentry
                                      X        X         X                      X           X          X           X
  Lake Mills, WI
McDonalds
                                      X        X                     X          X           X          X
  Lake Mills, WI
2 Loons Café
                                      X                                         X
  Johnson Creek, WI


5.7 Critical Success Factors

Keys to the success of this business are knowledge of customer needs, planning for expansion by
means of new customers, new products, into adjacent markets or ideally, a combination of all three.
The framework has been established to obtain detailed customer buying habits and continuing to
gather this data will make it easier to understand how to expand the business appropriately.
Combined with the outward focus on the customers, WHF also needs to continue looking inside its
walls to reduce production costs and improve productivity throughout their processes. The largest
potential WHF has at this time is the expansion of its space to allow more seating, offer additional
products including a deli and bring the baking in the same facility with an on-site kitchen.

In order to address branching out to new customers, WHF plans to expand its marketing focus to
include more advertisements locally and outside of Lake Mills. By working with other local
businesses, WHF plans to not only advertise in these businesses for their products, put
advertisements for those businesses in its space and also combine funds to launch a broader
advertisement with the intent of drawing people into the many businesses of the Lake Mills
Community.

The Bakery Bucks program was initiated to gather data about the buying habits of repeat customers
as well as incentivize these customers to keep coming back. By spending __ the customer gets two
dollars off their next purchase. By using this information, WHF can see which products the
customers who frequent the most typically buy and grow its inventory in areas where demand is the
highest.

There has been a growing concern for the environment over the years, as well as a trend towards
organic farming and foods due to recent foods scares highly publicized throughout Europe and
America. In addition to those food scares, the recent strain of the American economy has taken a
significant toll on the retail bakery industry. Many bakery owners had to raise the prices of their
products to overcome the strain placed on the industry due to the rising price of commodities. Large
bakeries are “[c]utting labor, reducing hours, tightening inventories, and eliminating waste [as]
options in attempting to seek out economies of scale” (Retail Bakers of America, 2008) 4. Retail
bakeries are looking at importing certain types of breads from Europe in order to offset the rising
costs of flour, eggs, and milk. Using organic and locally grown ingredients can be essential for small,
non-commercial bakeries to produce economical, safe, and healthy bakery items. Therefore, there is
a greater need, both from a social and economical standpoint, to produce products from organic and
locally grown ingredients.

By increasing supply in the product areas where there is adequate demand, WHF will also be
increasing the usage of key ingredients, allowing purchase at wholesale prices rather than retail
prices. Ingredients are only one aspect of keeping costs as low as possible, continual focus on
increasing productivity in baking time is the second area. With material costs down and productivity
high, WHF can provide their premium products at affordable prices to its customers.


4
 Syska, Aleksandra (2008). Explosive price increases on commodities could determine future of retail bakeries. Electronically retrieved from
http://www.rbanet.com/News/RBA%20Testimony%20JEC%2005-01-08.html



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In adding a deli, Water House Foods will be offering services and goods that are not readily available
in the local area. By doing so, WHF expands its customer base to those interested in these types of
products and services as well as increased business from current customers.

The retail space is currently designed for comfortably socializing and spending time. By increasing
the footprint, WHF can open these events up to larger groups and also hold events that require more
space such as larger dance classes.


5.8 Marketing Strategy

The focus of WHF strategy is to become the primary full service bakery for Lake Mills and the
surrounding communities. WHF has the competitive edge of being the only full offering bakery
currently in the Lake Mills area. Residents of Lake Mills have indicated that they do not have many
choices in terms of bread and other baked goods from local markets and stores. These consumers
desire a variety of available products and more choices of places to frequent. In fact, according to
the Water House Foods Farmer’s Market survey, most respondents indicated that they desired items
such as sweet rolls, Danishes and donuts, most of which are not offered by current competitors
other than grocery stores. Water House Foods further holds the competitive edge by providing
products that are made from organic ingredients. No other bakery in the Lake Mills or surrounding
communities offers the same categories of products as Water House Foods. It will offer a larger
variety of baked foods to a unique niche of customers who value quality, organic foods.

Based on changes in the business arrangement between Water House Foods and Windsor Breads,
the success of Windsor Breads-Lake Mills and requests from customers and the community, the
following changes are in process at the 110 East Lake Street location. Windsor Breads-Lake Mills
transitioned to Water House Foods, wholly owned and operated by Shawn and Raelyn Rediske in
May 2009. In summer of 2009 WHF will expand to a Bakehouse, Confectionary, Coffeehouse and
Delicatessen This change includes renovation to the existing building at 110 East Lake Street to
double the current retail space and to add a certified kitchen. The additional retail space will house
a delicatessen, additional product offerings (detailed below), additional customer seating, and space
more adequately designed for special events. With the addition of the certified kitchen, products will
then be baked onsite.

There are several existing venues that serve as models for both the existing space and future
expansion.
Zingerman’s – Ann Arbor, Michigan (www.)
Zingerman’s will serve as a model for the deli portion of the new WHF space.

Veronico’s Café – Burlington, Wisconsin (www.)
Veronico’s Café is a representation of passion infused in their food, warm welcoming environment,
reuse of construction materials in the design of their space and future growth plans that continue to
take into account the changing needs of the community.

Brick Street Market – Delavan, Wisconsin (www.)
Brick Street Market is customer focused while looking towards future endeavors to not only expand
the business but also add further value to the community.

Organic ingredients oftentimes lead to higher prices, WHF uses a blend of locally and home grown
ingredients that keep costs of transportation and distribution low. WHF can then pass on the cost-
savings to its customers by offering their specialty products at competitive prices compared with
non-organic foods. By obtaining ingredients this way, WHF also maintains control of the source of
these ingredients and ensures consistency. Its competitive pricing strategy meets the demand of the
middle- to higher-income local market residents and tourists. Through its current expansion
strategy, WHF intends to buy many ingredients in bulk to continue to reduce the costs of making its
products. This ensures that they will continue selling their foods to customers at affordable prices




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Table 5-8 Water House Foods Pricing Targets

                                             Water House Foods                                              Competitors

                                                                                                  Sentry
                                                                                                                 Whole
                          Wholesale            Farmer’s Market                  Retail           (La Brea                 Panera
                                                                                                                 Foods
                                                                                                  breads)
Type of Bread        Artisan    Specialty     Artisan     Specialty    Artisan     Specialty
Loaf                                                                                                            $4.99-
(10” wide loaf)      $4.25      $4.50         $4.50       $4.75        $4.75       $5.00       $3.19-4.39                 $4-6
                                                                                                                6.99
Baguette
                                                                                                                $2.69-
(12” narrow          $2.25      $2.50         $2.50       $2.75        $2.75       $3.00       $2.09-2.59                 $2-3
                                                                                                                3.19
loaf)
Roll
(6” narrow           $1.25      $1.50         $1.50       $1.75        $1.75       $2.00       $1.99            NA        NA
loaf)

The addition of the kitchen, further use of automated kitchen equipment and additional staff at
Water House Foods will permit an increase in production volumes that will allow WHF to make
product at volumes that can meet wholesale demand and lower product costs to continue to allow
competitive wholesale pricing of WHF products

Water House Foods products, which are produced using organic and local ingredients, are currently
produced in Lake Mills, using the certified kitchen at the Rock Lake Activity Center. These products
include:
     European-style yeast breads
     Beer breads produced using Tyranena Brewing Company (a Lake Mills company) products
     Croutons produced from the yeast breads
     Muffins & cupcakes
     Scones
     Toffee
     Fudge
     Traditional seasonal offerings
Beverages
     Stone Creek Coffee
     Rishi organic teas
     Oregon chai tea
     Hot chocolate
     Coca-Cola sodas
     Bottled water
     Juices
     Vitamin waters
     Frappuccinos
     Izze sodas
Additional products:
     Local pure honey produced by Lake Mills residents, Jenks
     Kickapoo Gold organic maple syrup
     Fudge

The expansion of the WHF retail space and addition of a certified kitchen will allow the product
offering to expand into the following additional areas.
Water House Foods products
     Pastries
     Cakes
     Cheesecakes



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
     Pies
     Buns
     Additional candy offerings
Beverages
     Specialty coffee drinks including espressos, cappuccinos, lattes, and flavored coffees
     Smoothies
     Italian-style sodas
     Iced teas
     Lemonade and seasonal fresh juices
Prepared foods
     Salads – eat-in and take-away
     Soups – eat-in and take-away
     Sandwiches – eat-in and take-away
     Baked Appetizers – eat-in and take-away
Canned and Jarred goods
     Jellies
     Jams
     Pickles
     Peppers
     Onions
     Honey
     Syrup
     Butters
     Salad Dressings
     Oils and Vinegars (bulk)
Deli offerings
     Cheeses
     Sliced Meats
     Olives and condiments
     Bulk Market Product – everything that is used in the kitchen to make baked product will be
         made available for purchase in bulk
Fresh Herbs
Alcohol
     Beer by the glass
     Wine by the glass

Promotional Activities / Marketing Plan
Through creative sales and marketing strategies with several local retail customers, WHF will
continue to position themselves as the premier bakery in the Lake Mills community. In order to
further boost its sales, WHF marketing objectives and strategies are as follows:

Relationships have been established with other small businesses in the Lake Mills area and
continued cross-marketing with these venues is a key portion of the advertising plan for WHF. Other
means of promotion to the Lake Mills community include advertisements in the local newspaper,
distribution of flyers and other marketing materials circulated by various means in the community
and to continue publicizing the WHF name through newspaper articles covering various events at
the space. Another focus will be improving the website and online ordering system as sales orders
and demand for products increase reaching customers that would not normally visit the retail
space.

WHF promotes other local businesses by posting fliers or notices with information on the other local
businesses in the retail space. These businesses offer the same in exchange for WHF, whether
promoting the store and products themselves, or specific events held throughout the month. The
“Business of the Month” program was established to offer coupons in the WHF space for a chosen
business which rotates each month. Larger advertising campaigns have been proposed at initial




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steps taken at places such as American Players Theatre in Spring Green, WI and other county-wide
venues to promote several of the Lake Mills small businesses.

These   joint efforts are primarily taking place in conjunction with the following:
         The Wine Vineyard
         Rock Lake Activity Center
         Dutch Designs
         American Family Insurance
         The Rose Gallery

Other local businesses to expand these programs with are:
    Rock Lake Activity Center
    Lake Mills Fire Department
    Fargo Library
    The Wine Vineyard
    American Family Insurance
    The Rose Gallery
    2 Shores Classic Cars
    Local churches and church groups
    Main Street Program events
    Chamber of Commerce Events

        Mainstreet – need details
        Chamber of Commerce – need details
        REMEMBER TO PUT IN THE CROSS-MARKETING STUFF WITH OTHER LOCAL
         BUSINESSES – need details

Water House Foods has collected extensive data on its customers through collection and analysis of
sales data, collection of frequent buyers’ data using its Bakery Bucks card, and through collection of
customers email addresses for newsletter communications. As of Mid-April 2009, the email list
includes over 250 addresses. Monthly newsletters are sent to all list members to publicize events
and promotions as well as continue to keep the WHF name in front of its customers. In addition to
this objective data, subjective data is obtained on a daily basis from the customers in the shop.
Whether solicited or not, continual communication and feedback is obtained from supportive
customers with praises and support as well as suggestions for future product offerings and
expansions. This information will continue to be used to analyze how best to expand the business.
More detailed results can be found in the Market Research section.

Special Events
As part of meeting the needs of the community, the retail space expansion provides the ability to
host a variety of different events. Doing so will not only bring people into the store, but also support
community building events. These events will be focused on providing educational and personal
growth opportunities as well as collaborating with other area businesses.

Water House Foods plans to continue to expand its relationships with local businesses and
organizations by collaborating to develop themed events where multiple local businesses would host
similar events in a short period of time that would echo and amplify each other. Example: identify a
local author’s book currently sold at The Rose Gallery, host a book signing at WBLM, coordinate
wine sampling during the signing with the Wine Vineyard and produce a special addition wine that
would feature the local author, book, and event. Leveraging several area small businesses also
opens the door to promotional options such as purchasing advertising space on road signs and in
regional publications, extending along the Milwaukee-Madison corridor, which would otherwise be
cost prohibitive. Doing so also markets Lake Mills as an area of various businesses appealing to a
wider audience. With the addition of the deli, WHF will also have the ability to cater local business’
and organizations’ events.

Current ideas for special events will include:



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   Food Events
        o Baking classes
        o Cooking classes
        o Food tastings
        o Make-and-Share-Your-Own-Meal parties
   Arts Events
        o Daily décor is for sale
        o Art shows – by local artists and local middle and high school students
        o Poetry readings
        o Prose readings
        o Book Clubs
        o Book signings
        o Small plays/skits – produced and acted by local middle and high school students
        o Dance
                 Events and gatherings
                 Recitals
        o Intimate music venue
                 Jazz
                 Classical
                 Quartets
                 Folk
                 Ethnic
   Educational
        o Classes on organic, Local, Sustainable
        o Buy local movement
        o Organic vs. Conventional practice
        o Science in baking – baking classes
        o Science in cooking – cooling classes
        o Science in coffee – coffee classes
        o Science in wine – wine appreciation and science classes
        o Science in beer – beer appreciation and science classes
        o Spirituality explorations
        o Tutoring
        o After-school study
        o Before-school study

Water House Foods has developed relationships with some students and local schools. Utilizing
their unique talents to expand the variety of activities available at WHF not only helps bring people
into the store, but also supports the growth of this young talent.
     Violin lessons – taught by a local high school violin player
     Dance lessons – taught by a local high school dance competitor
     Art shows – featuring the artwork of local students, coordinated with school art classes

Water House Foods plans to continue to expand its relationships with local students and schools by
providing education-focused events in a comfortable environment.
     Classes on organic, Local, Sustainable
     Buy local movement
     Organic vs. Conventional practice
     Science in baking – baking classes
     Science in cooking – cooling classes
     Science in coffee – coffee classes
     Science in wine – wine appreciation and science classes
     Science in beer – beer appreciation and science classes
     Spirituality explorations
     Tutoring
     After-school study
     Before-school study



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
        Health and nutrition

After this expansion, WHF will resume its wholesale marketing and sales strategy, initially targeting
the following local locations.
 Carp’s Landing – Lake Mills, Wisconsin
 Blue Moon – Lake Mills, Wisconsin
 Highway Harry’s – Johnson Creek, Wisconsin
 Velvet Lips – Fort Atkinson, Wisconsin
 Café Carpe – Fort Atkinson, Wisconsin
 Salamone’s – Fort Atkinson, Wisconsin
 Fireside – Fort Atkinson, Wisconsin
 Bethany Lynn’s Tea & Treasures – Fort Atkinson, Wisconsin
 L’Etoile & Café Soleil – Madison, Wisconsin
 Harvest – Madison, Wisconsin
 Bluefie’s – Madison, Wisconsin
 Specialty Shops and Markets
 Williamson Street Co-op – Madison, Wisconsin
 Regent Market Co-op – Madison, Wisconsin
 Jennifer Street Market – Madison, Wisconsin
 Mifflin Street Co-op – Madison, Wisconsin
 Fromaggination – Madison, Wisconsin
 Magic Mill Natural Foods Co-op – Madison, Wisconsin
 Whole Foods – Madison, Wisconsin
 Yahara River Grocery Co-op – Stoughton, Wisconsin
 Good Harvest – Pewaukee, Wisconsin
 Fargo Mansion B&B


5.9 Market Research

WHF has collected extensive knowledge of its customers through collection and analysis of sales
data, collection of frequent buyers’ data through its Bakery Bucks program, also including
customers email addresses for newsletter communications.

Sales Data (from Bakery Bucks Database, started in January 2009
                              Bakery Bucks Database         Total Sales Data
Total Number of Sales         3410                          N/A
Total Dollars of Sales        $28,200                           ?????
Average Dollars per Sale      $8.30                         N/A
Total Months of Operation     3.5                           4
Average Dollars per Month     $8,060                          ?????

As of April 2009, a total of 1300 customers are registered in the Bakery Bucks Card Program. The
repeat customer data is broken down as follows:
     5+ visits (average 1 visit / month) = 218 cust – 17%
     10+ visits (average 2 visits / month) = 76 customers – 6%
     15+ visits (average 3 visits / month) = 39 customers – 3%
     20+ visits (average 1 visit / week) = 18 customers – 1%
     30+ visits (average of more than 1/week) = 13 customers – 1%

In order to prediction maximum growth potential within Lake Mills, order statistics from the number
of customers that fall into the category of 1 visit /week is extrapolated out by the population of Lake
Mills _____. This results in an estimate of _____, which represents the maximum sales for repeat
customers and determines the jump-off points for additional growth. The next step of this analysis
would be to expand to a regional population and extrapolate the data accordingly.




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The second iteration of this analysis of orders would be a review of sales data from the one time
customers, which is assumed to be a representation of vacationers. This calculation is Total Sales –
Bakery Bucks Total Sales. The results of which will be used to project sales during summer months;
assuming an influx of vacationers.


                         1300                                                                                                            26%

                         1200                                                                                                            24%

                         1100                                                                                                            22%

                         1000                                                                                                            20%

                         900                                                                                                             18%
   Number of Customers




                         800                                                                                                             16%




                                                                                                                                               % of Customers
                         700                                                                                                             14%

                         600                                                                                                             12%

                         500                                                                                                             10%

                         400                                                                                                             8%

                         300                                                                                                             6%

                         200                                                                                                             4%

                         100                                                                                                             2%

                           0                                                                                                             0%
                                1+   5+ (at least 1/month)   10+ (at least      15+ (at least   20+ (at least 1/week)   30+ (more than
                                                              2/month)           3/month)                                  1/week)
                                                                   Frequency of Visits




6.0 Financial Analysis
            Sales Forecast
                     Current volumes
                     Expected growth
            Expense Forecast
            Strategic and tactical rationale for expenses
            Contribution Margins
            Project Financial Impact
            Net Present Value Analysis

Water House Foods’ sales forecast can be seen in the table shown below. As the table reflects, WHF
started out with a total of ____ for its first month of sales in with the retail space. Sales have
continued from January 2009 through May 2009 to total ____. WHF expects sales to increase
exponentially between June 2009 and December 2009 to complete its first full year of operation.
After the first year, WHF believes its sales with further increase substantially through expansion of
its retail store business and its wholesale customer sales. This increase also takes into
consideration an increase in sales through its website direct ordering.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
WATER HOUSE FOODS
Sales Forecast

                                                               2008
                                                               (December        2009           2010
Unit Sales                                                     only)
       Artisan Breads                                          540              3120           4160
       Specialty Breads                                        540              3120           4160
       Scones                                                  360              2080           3120
       Cookies                                                 540              3120           4160
       Bacon muffins                                           360              2080           3120
       Cheddar muffins                                         360              2080           3120
       Baguettes at Other 3 Locations                          360              2080           3120
       Baguettes at wholesale cheese shop                      252              1560           2600
       Other                                                   540              3120           4160
Total Unit Sales                                               3,952            22,360         31,720

Unit Prices
        Artisan Breads                                         $4.75            $4.75          $4.75
        Specialty Breads                                       $4.50            $4.50          $4.75
        Scones                                                 $1.25            $1.25          $1.25
        Cookies                                                $0.75            $0.75          $0.75
        Bacon muffins                                          $1.25            $1.25          $1.25
        Cheddar muffins                                        $1.25            $1.25          $1.25
        Baguettes at Other 3 Locations                         $3.00            $3.25          $3.25
        Baguettes at wholesale cheese shop                     $3.00            $3.25          $3.25
        Other                                                  $2.00            $2.00          $2.00
Total Sales                                                    $9,711           $57,070        $81,250


WATER HOUSE FOODS
Sales Forecast – Cost of Goods Sold

                                                                      2008
                                                                      (December        2009               2010
Direct Unit Costs                                                     only)
        Artisan Breads                                                $1.25            $1.15            $1.00
        Specialty Breads                                              $1.25            $1.15            $1.00
        Scones                                                        $0.50            $0.30            $0.30
        Cookies                                                       $0.25            $0.15            $0.10
        Bacon muffins                                                 $0.75            $0.70            $0.65
        Cheddar muffins                                               $0.75            $0.70            $0.65
        Baguettes at Other 3 Locations                                $1.25            $1.15            $1.00
        Baguettes at wholesale cheese shop                            $1.25            $1.15            $1.00
        Other                                                         $0.75            $0.65            $0.65

Direct Cost of Sales
        Artisan Breads                                                $675             $3588            $4160
        Specialty Breads                                              $675             $3588            $4160
        Scones                                                        $180             $624             $936
        Cookies                                                       $135             $468             $416
        Bacon muffins                                                 $450             $1456            $2028
        Cheddar muffins                                               $450             $1456            $2028
        Baguettes at Other 3 Locations                                $450             $2392            $3120
        Baguettes at wholesale cheese shop                            $315             $1794            $2600



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
WATER HOUSE FOODS
Sales Forecast

       Other                                                          $405              $2023        $2496
Subtotal Direct Cost of Sales                                         $3,735            $17,389      $21,944


The retail shop began operations on December 5, 2008, under the Windsor Breads name, with a
sign that reads, “Featuring Water House Foods” in the storefront display window. They will have
split the net monthly profits according to the Projected Profit Split chart listed below for the time
period between the December opening and May 2009.

Table 5-6 Three Year Sales Forecast



WATER HOUSE FOODS
Projected Profit Split with Windsor Breads
Three Year Forecast (December 2008 through December 2011)

           Monthly       Monthly       Monthly
By         Revenue       Revenue       profit                   WB     $        WB $      WHF     WHF    WHF $
                                                    WB %
Month      on WB         on WHF        after                    monthly         accum     %       $      accum
           products      products      costs
Dec   08   8000          900           4270         80%         2856            2856*     20%     543    543*
Dec   09   8000          5000          5500         5%          275             57459     95%     4746   8960
Dec   10   8000          5000          5500         5%          275             60759     95%     4746   65154
Dec   11   8000          5000          5500         5%          275             64059     95%     4746   122109

*Indicates projected first month sales


                 Growth Strategy – Financial SWAG
                 2009 - $8k/sales month Jan-June; $12k/sales month July-Dec = $120k
                 2010 – 20% growth  $15k/month = $180k

Water House Foods has developed a financial plan that includes borrowing $50,000 from the Small
Business Administration in order to fund its expansion initiatives. This includes building the
commercial kitchen and the expansion of the retail space to house the deli portion of the business
at the downtown Lake Mills location.

In addition to the borrowed funds, WHF expects to reinvest a portion of its net profits back into the
business to maintain growth potential. The reinvested monies will be directed towards marketing
initiatives and increasing inventory. Its expected increase in sales will assist WHF in paying back
the $50,000 SBA loan.

Water House Foods’ financial plan encourages a medium risk investment that leads to a return on
its investment in a short amount of time. WHF anticipates earning over $122,000 within the first
three years of operations. In addition to the financial plan, Water House Foods has structured its
expansion strategy to maximize the use of the borrowed funds, while also allowing profit realization
in a short period.

6.1 Projected Profit and Loss

As the Pro Forma Profit and Loss statement shows, Water House Foods expects to continue its
growth in profitability over the next three years as detailed below. This statement includes the need



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
to hire part-time help in the up-coming year. WHF believes the salary estimate may be high for the
2009 calendar year, but will be approximate for calendar year 2010.


Pro Forma Profit and Loss

                                                             Dec. 2008          Year 2009   Year 2010
Sales                                                        $9,711             $57,070     $81,250
Direct Cost of Goods Sold                                    $3,735             $17,389     $21,944
Other                                                        $0                 $0          $0
Total Cost of Goods Sold                                     $3,735             $17,389     $21,944

Gross Margin                                                 $5,976             $39,681     $59,306
Gross Margin %                                               61.54%             67.78%      72.99%

Expenses
Payroll                                                      $0                 $7,000      $7,000
Sales and Marketing and Other Expenses                       $0                 $3,300      $2,000
Depreciation                                                 $0                 $0          $0
Utilities                                                    $2,400             $2,400      $2,400
Payroll Taxes                                                $0                 $1,400      $1,400
Other                                                        $0                 $0          $0

Total Operating Expenses                                     $2,400             $14,100     $12,800

Profit Before Interest and Taxes                             $3,676             $42,970     $68,450
EBITDA                                                       $3,576             $25,581     $46,506
Interest Expense                                             $0                 $0          $0
Taxes Incurred                                               $286               $2,046      $3,720

Net Profit                                                   $3,290             $23,535     $42,706
Net Profit/Sales                                             33.88%             41.23%      52.56%


6.2      Break Even Analysis

Water House Foods’ Break Even Analysis is based on the average of its first year’s figures for total
sales per unit and operating expenses. The conservative assumptions asserted by WHF make an
accurate estimate of real risk. WHF believes it will break even by the end of the third year of its
operation as it steadily increases its sales.




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
7.0 Implementation

Water House Foods is a family owned business with two main employees: Shawn Rediske, the Head
Bakery Chef and Operations Manager, and Raelyn Rediske, the Confectioner and Sales & Marketing
Manager. Each of them has extensive knowledge and expertise in their areas of work.


Organization & Operations Management

Shawn Rediske, Owner and Operations Manager, has an extensive background in management and
quality control, two important components of developing an organization for success. In his
profession, he is well versed in improving safety, quality, productivity, maintenance and cost, as he
has been trained - and trained others - to use the Six Sigma Black Belt Methodology. He first
became interested in baking when he received a bread cookbook from a relative, who also bakes
bread. That was over nine years ago and he has been baking breads ever since. His previous
management experience serves him well as a baker as he continuously refines his baking schedule
and recipes, as well as the quality of each loaf of bread. His science background gives him the
insight to understand the science behind bread - why and how it works. As his baking expertise
continues to grow, he puts together scrumptious breads and other delicious baked goods that
preserve his commitment to quality, and relishes his taste for goodness.


Marketing & Sales Management

Raelyn Rediske, Owner and Sales & Marketing Manager, has been working with the public in one-
on-one and group settings for the past 15 years. Her extensive teaching background in science
education also involved designing and marketing educational programs. While working at both the
Michigan Humane Society and Dane County Humane Society, Rae obtained sponsors for four
different summer programs and each program was filled to capacity with children. Her talents for
marketing and keen people skills are key qualities that she will deliver to Water House Foods. She
also has experience in developing promotional items such as brochures, flyers, articles and web
materials. She gained this expertise while working for the Wisconsin Center for Academically
Talented Youth. Through this program, Rae had to balance budgets, manage summer staff
members, and market and promote both fall and summer classes.


Personnel Plan

The two simultaneous expansion strategies require two different personnel plans. In the commercial
kitchen project, Water House Foods will contract licensed, certified construction professionals to
install the purchased equipment in the franchise retail shop. The one to two contractors will be
hired to install the used commercial equipment, sinks and shelves and ensure the space is ready for
bread production and operation.

For the retail operation in downtown Lake Mills, Water House Foods has hired a part time baker to
aid in maintaining the supply of the store. Shawn and Rae Rediske will both continue to run the
operations. Their salaries will come from monthly sales; therefore their income will vary directly
related to sales. Part time help to manage the retail space will also be hired in advance of the space
renovation. Upon completion of the deli and kitchen addition, four addition part time people will be
hired, two for the retail space and two bakers.


8.0 Roadmap / Growth Strategy

   2009 Expand to full-line bakery / deli / coffee shop / café
   2009 Primary Bakery in Lake Mills – provider of specialty bakery, deli, and coffee needs.



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
        o Maintain current customer base
        o Extend reach to Shorewood Hills and outlying Lake Mills residents
        o Capitalize on all LM community events – maximize sales and exposure
        o Organize or participate in of all LM community events
        o Capture the seasonal resident and visitor market
        o Become the prominent community hot spot in Lake Mills
        o Holidays make our months!
   2010 Achieve green tourism certification (Wisconsin)
   2010 Become a magnet location for the area (primary source for areas of no competition)
    8.1.1 Become Fort Atkinson’s primary Bakery (no current competition)
           8.1.1.1 Target marketing efforts to increase WHF visibility in Fort Atkinson
           8.1.1.2 Participate in Farmer’s Market
           8.1.1.3 Partner with businesses in the area to build relationships that will bring
                     customers to WHF
    8.1.2 Become Johnson Creek’s bakery (no current competition – capture Outlet Mall)
    8.1.3 Become Waterloo’s bakery (no current competition – capture Trek)
   2010 Open second location in Burlington – partner with Veronico’s
   2011 Become magnet location for the area (infiltrate areas of mild competition)
        o Become Watertown’s premier bakery & deli (mild competition)
        o Become Jefferson’s premier bakery & deli (mild competition)
                 Find a way to partner with Bon Ton
                 Find a way to partner with Frank’s Country Market
        o Become Cambridge’s premier bakery & deli (mild competition)
                 Find a way to partner with the Daily Grind
                 Find a way to partner with Ripley’s
   2012 Infiltrate specialty locations in Madison (infiltrate areas of higher competition)
        o Regent Street
        o Jennifer Street
        o Mifflin Street
        o Willy Street
        o Fromaggination
   2012 Achieve organic certification for products
   2013 Infiltrate top restaurants in Madison
        o L’Etoile / Harvest
        o Bluefie’s
   2013 Amplify organic/local/green credentials
        o Establish co-op and strengthen CSA in Lake Mills area
        o Go completely organic/local/green in shop
        o Publicize improvements heavily
        o Establish incubator kitchen in Madison – rent it out
   2014 Madison Farmer’s Market
   2015 Infiltrate major organic retailers
        o Whole Foods – Madison
        o Good Harvest – Pewaukee
   2016-2020 Infiltrate specialty and retail locations in greater Milwaukee area, along 94 corridor
        o Oconomowoc
        o Pewaukee
        o Delafield
        o Brookfield
        o Waukesha
        o Mukwonago
        o Muskego
        o Wauwatosa
        o Milwaukee

   2011 – 20% growth  $18k/month = $210k
   2012 – Add $1k/month from shops + 10% growth  $21k/month = $250k



Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
   2013 – Add $2k/month from restaurants +10% growth  $25k/month = $300k
   2014 – Add $2k/month from May-October + 5% growth  $28k/month = $330k
   2015 – Add $2k/month + 5% growth  $31k/month = $370k

9.0 Summary




Water House Foods LLC Business Plan, a2da8b25-7c6b-48b2-88fa-5ca16de2b5c3.doc
10.0     Appendices
         10.1 CVs
         10.2 Business proposal
         10.3 Market research
         10.4 Financial schedules



Notes:
Shawn to add

Christine to add


Laura Jacobs-Welch
Brick Street Market, Inc.
104 E. Walworth Ave., #101
Delavan, WI 53115

Veronicos
336 N Pine St
Burlington, WI.53105




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