Great American Cookies in China

Juyi Li (Jerry)-Louis Morris-Jessica Rogers-Alena Tatum

Group 2

Background Founded by Michael Coles and partner Arthur Karp First store opened in Atlanta, Georgia’s Perimeter Mall in 1977. Founded on the strength of a generations-old family chocolate

chip cookie recipe Great American Cookies expanded in malls across the country Developed a complete line of cookies and brownies, including

our signature Cookie Cake product Operates 300 stores in over 40 US states, Bahrain, Chile, Guam,

Mexico, Puerto Rico, Saudi Arabia and the United Arab Emirates.

Strategy-Brief Flagship Store on Nanjing Road, Shanghai

• High Foot Traffic• Great visibility • Marketing and promotional

advantages

Food and Drinks Offered

• Chocolate Chip Cookie as signature cookie

• Regionalized favors• Red Bean• Green Tea• Sesame Seed

• Drinks• Coffee• Tea

Strategy-Brief Hands on baking experience An opportunity for kids to participate in making and baking

cookies

Couples and young adults to enjoy a baking experience

Distribution Hub for Micro Stores

Advertisement for Micro Stores

Extended Nighttime Hours

Company Owned

New Product Testing

Strategy-Hub Store Design

Interior view of flagship store.

Aiming to provide a classic baking experience as if the cookies are baked in the kitchen of an American family.

Micro Stores (x6)(Spokes) Supplied through Distribution Hub No Ovens High Traffic Areas Normal Hours of Operation Franchise/Partnerships Limited Menu (products that tailor to local tastes)

Strategy- Micro Stores

Strategy-Industry Facts

Cookie consumption market size in Shanghai alone is $98.71 million dollars.

Total market size in China is $3.8B Growth rate projected to be 11% annually 200

6200

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1201

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15.647 17.41 19.37121.55423.96226.515 29.32 32.42335.85339.646

43.841

Growth Projection of Frozen Cookie and Cracker Products Shanghai

Strategy-Competition Major competition:

Mrs. Field’s Cookies (American) Mr. Donut (Japanese)

Minor (supermarket based) competition:

Kraft foods Specific Brand, Oreo and Chips Ahoy!

Venerability of the Business Model

If Great American Cookie is successful in providing both a dining and baking experience for its customers, GAC does foresee our business model being copied

Strategy- Growth Focusing in the 1st tier cities in China, i.e. Shanghai

and Beijing

Providing franchising and licensing rights to Chinese partners who wish to open Great American Cookie to their locations in 2nd and 3rd tier cities.

All locations will retain the chocolate chip cookie as its signature cookie.

If the market allows, the 2nd and 3rd tier cities will also provide a baking experience for customers. However, if not, we will focus on just selling finished products

Strategy-CFDA Great American Cookies will follow China Food

and Drug Administration’s rules and regulations.

Furthermore, GAC will also never compromise the quality of our food by importing frozen dough and dry goods from the United States.

GAC will employ Jun He Law Firm to ensure that all food related regulations are met under Chinese Law.

Strategy- Changing Trends

Growing number of kids eating cookies and deserts Growing number of families having disposable

income Growing number of adults willing to experiment with

western cooking GAC will still have to educate the consumer on a

dessert eating culture, however, with the one child policy, young adults today are much more willing to eat sweeter tasting treats compared to their counterparts 20 years ago.

Marketing- TM Target Market:

20-35 year old women Students Financially well-off Children between 10-18 years old Expats and general tourist trade Market taste tests on a semi annual to annual

basis Surveys of the experience

Marketing- Branding Giving the experience of a real American home Branding Strategy

Recognizable logo: American Brown Bear, GAC apron, Blonde American Sales Girls

Establish an impression on children Product Placement

TV advertisements Yao Ming Zhang Ziyi

Marketing Market Entry Strategy

Increase brand awareness Television- cartoon adverts Nanjing Road Fridays

Mainly foot traffic Intensive Distribution- while still keeping quality Importing goods from US, Japan and Australia

Management Partners

Intellectual property Employees

Lack of loyalty Handling cultural differences

Government Auntie Anne’s Example Doesn’t help enforce litigation claims

Guanxi

A. Nanjing Road (Flagship/Distribution Hub)

B. Sichuan North Road (Spoke) (8 min)

C. Super Brand Mall (Spoke) (14 min) D. Zhangyang (Spoke) (24

min)

E. Yuyuan Commercial City (Spoke) (9 min)

F. Hunihai Zhong Lu (Spoke) (10 min)

G. Xujiahui (Spoke) (18 min)

Location

Total Route Supply Time (A-G): 1 hour 12 min

Locations Represent Major High Traffic Areas

(Shopping, Dinning, Etc…)

Location

Flagship StoreStrengths

High Traffic Area Located in Key Shopping Area High Visibility Takes Advantage of Surrounding Attractions Provides an Experience and Lasting Impression

Weaknesses High Real Estate Costs Large Square Footage Requirement High Staffing Costs Business Success Relies in Larger Part on Flagship Customer

Impressions

Location

Micro Stores (x6)Strengths

High Traffic Areas Low Overhead Costs Low Staffing Costs Takes Advantage of Surrounding Attractions Distance from Hub Under Direction of Franchise Partners

Weaknesses Not as Visible as Flagship Stores Limited Menu Items Under Direction of Franchise Partners

Location

Set Realistic Goals 6 stores at the end of 3 years Expand Beyond Initial Market Within 5 Years

Petition for Government Approval to Enter the Market Continue to Dialogue to Stay Aware of Changes Secure Proper Licensing/Meet any Regulatory

RequirementsEstablish Budget Secure Adequate Funding

Execution

Begin Market Analysis Assess Target Market Develop Products Based on Local Tastes

Begin to Establish and Develop Strategic Partners

Local Partners Established Businesses

Determine Store Location Availability and Cost

Execution

Secure Distribution Lines Frozen Shipment of Goods (Basic Dough) Machinery Shipments Non Perishable Goods Shipments or In Country

PurchaseAssess Workforce Requirements and AvailabilitySecure Material Sourcing As Required

Adequate Power & Water Food Items Potential Manufacture of Some Products in

Country

Execution

Develop Store Design as Required Set Date for Grand Flagship Store Opening Establish Marketing Campaign

Execution

24 23 22 21 20 19 18 17 16 15 14 13 12Goal SettingGovernment ApprovalEstablish BudgetSecure FundingBegin Market Analyis

Assess Target MarketDevelop Tailored Product Offerings

Establish Pricing StandardsDevelop Strategic PartnersDetermine Store LocationsEstablish Distribution ChannelsAssess Workforce Requirements & AvailabilitySecure Material Sourcing As Required

Real EstatePowerWater

Food ItemsIn Country Product Support

Finalize Store Desgin and LayoutFlagship

Mirco StoresSet Date for Grand OpeningBegin Grand Opening Marketing Campaign

MONTHS UNTIL FLAGSHIP STORE OPENING

Execution

11 10 9 8 7 6 5 4 3 2 1 0Goal SettingGovernment ApprovalEstablish BudgetSecure FundingBegin Market Analyis

Assess Target MarketDevelop Tailored Product Offerings

Establish Pricing StandardsDevelop Strategic PartnersDetermine Store LocationsEstablish Distribution ChannelsAssess Workforce Requirements & AvailabilitySecure Material Sourcing As Required

Real EstatePowerWater

Food ItemsIn Country Product Support

Finalize Store Desgin and LayoutFlagship

Mirco StoresSet Date for Grand OpeningBegin Grand Opening Marketing Campaign

MONTHS UNTIL FLAGSHIP STORE OPENING

Execution

Initial Cookie Dough and Frozen Products Sent From the United States to Storage Warehouse for Immediate Distribution to Flagship Store

Non Perishables Purchased in House or Sent With Frozen Products- Cost Dependent

Local Adaptations Added to Dough and Desert Products as Needed

Product Decoration and Design Conducted at Flagship Store

Supply Chain

Daily Distribution from Hub Store of Finished Cookie/Dessert Products and other Perishable Items (Soft drinks) to Micro Stores via Ground Transportation (Conducts Resupply as Needed)

Bi-weekly Distribution of Non- Perishable Items (Napkins, Straws, Bags, etc…)

Cookie Cake Orders Distributed from Hub Store Only. Picked up at Hub or at Micro Store

Solicit Customer Feedback Place Additional Orders for Products

Supply Chain

Feedback

GAC Sourcing Local Sourcing

Flagship Store

Micro Store

Micro Store

Micro Store

Micro Store

Micro Store

Micro Store

Local Distributor

Local Taste AdaptationsDesig

nFinish

Supply Chain

Start-Up FundingGrand Opening Marketing 5000.00Travel and Living Expenses While in Training 20000.00Cookie Ingredients 10000.00Other Opening Inventory 15150.00Architectural Fees 6750.00Furniture, fixtures Equipment & Décor 96750.00Signs 6000.00Prepaid rent & Security Deposit (3 months) 8010.00Leasehold improvements 68200.00Utility Deposits 3000.00Professional Fees 6000.00Computer System 5500.00Business Licenses, permits, etc 2500.00Insurance (3 months) 3500.00Additional Funds (3 months) 12000.00Total Startup Capital 268360.00

Table 1

GAC Financial Position Revenues in excess of $6million for the past 3

years. Multi-million dollar net income and cash flows

for the past 3 years Ratios Recent acquisition of NexGen

ProjectionsYear 1 Year 2 Year 3

Revenue from Franchise Fees 45000.00 45000.00Revenue from Royalty Fee 20355.30 42746.13Sales 393750.00 413437.50 434109.38 COGS 111037.50 116589.38 122418.84Net Sales 282712.50 296848.13 311690.53 Total Revenue 282712.50 362203.43 399436.66Advertising 5654.25 5936.96 6233.81Labor 107493.75 112868.44 118511.86Rent 32040.00 33642.00 35324.10Insurance Expense 14000.00 14700.00 15435.00Utilities 12000.00 12600.00 13230.00Depreciation Expense 19350.00 19350.00 19350.00TOTAL OPERATING EXPENSES 190538.00 199097.40 208084.77Operating Income 92174.50 163106.03 191351.89Other Start-up Expenses (Prior to Opening) 134460.00Interest 10734.40 10734.40 6734.40Earnings Before Taxes (53019.90) 152371.63 184617.49Taxes (18556.97) 53330.07 64616.12NET INCOME (34462.94) 99041.56 103993.63

Great American Cookies-ChinaProforma Income Statement

Projections Cont.

Year 1 Year 2 Year 3Assets Cash 131347.07 148481.12 102144.38 Inventory 25150.00 26407.50 27727.88Total Current Assets 156497.07 174888.62 129872.26 Furniture/Fixtures 96750.00 96750.00 96750.00 Accumulated Depr (19350.00) (38700.00) (58050.00) Net Furn Fixtures 77400.00 58050.00 38700.00Total Long Term Assets 77400.00 58050.00 38700.00Total Asets 233897.07 232938.62 168572.26

Liabilities Note Payable 268360.00 168360.00 0.00

Members Equity -34462.94 64578.62 168572.26Total Liabilities & Members Equity 233897.07 232938.62 168572.26

Great American Cookies-ChinaProforma Balance Sheet

Year 1 Year2 Year3Operating Activities Net Income -34462.94 99041.56 103993.63 Change In Inventory -25150.00 -1257.50 -1320.38 Depreciation Expense 19350.00 19350.00 19350.00Cash Flows from Operating Activities -40262.94 117134.06 122023.26

Investing Activities Purchase of equipment -96750.00 0.00 0.00Cash Flows from Investing Activities -96750.00 0.00 0.00

Financing Activities Change in Notes Payable 268360.00 -100000.00 -168360.00Cash Flows From Financing Activities 268360.00 -100000.00 -168360.00

Change in Cash 131347.07 17134.06 -46336.74Beginning Balance 0.00 131347.07 148481.12Ending Balance 131347.07 148481.12 102144.38

Great American Cookies- ChinaProjected Statement of Cash Flows

Conclusion Location Selection Tailored Local Flavors Dinning Experience and Memories Partnerships Supply Chain Proper Execution

Questions