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TRANSCRIPT
Saskatoon Brew Pub, Guy Keeler
Table of Contents
1.0 INTRODUCTION.............................................................................................................................. 51.1 OVERVIEW..................................................................................................................................... 51.2 MISSION STATEMENT...................................................................................................................... 51.3 GOALS AND OBJECTIVES................................................................................................................. 51.4 PROJECT BENEFITS........................................................................................................................ 6
2.0 POLICY............................................................................................................................................ 73.0 OPERATIONS PLAN....................................................................................................................... 7
3.1 LOCATION...................................................................................................................................... 73.2 WORK PLAN AND FLOW OF WORK...................................................................................................83.3 THE BREWING PROCESS................................................................................................................. 93.4 AVERAGE BUSINESS CYCLES........................................................................................................14
3.4.1 The Average Week..............................................................................................................143.4.2 The Average Month.............................................................................................................143.4.3 Special Considerations........................................................................................................15
3.5 CAPITAL BUDGET.......................................................................................................................... 15
4.0 HUMAN RESOURCE PLAN..........................................................................................................174.1 HUMAN RESOURCE STRATEGY......................................................................................................174.2 ORGANIZATION STRUCTURE..........................................................................................................174.3 JOB DESCRIPTIONS....................................................................................................................... 194.4 TRAINING..................................................................................................................................... 214.5 FUTURE HUMAN RESOURCES........................................................................................................22
5.0 MARKETING PLAN.......................................................................................................................225.1 MARKETING MIX........................................................................................................................... 225.2 SEGMENTATION, TARGETING AND POSITIONING..............................................................................23
5.2.1 Segmentation...................................................................................................................... 235.2.2 Targeting............................................................................................................................. 24
2.2.2.1 Industrial Workers..........................................................................................................................242.2.2.2 Young Professionals......................................................................................................................242.2.2.3 Middle Aged...................................................................................................................................242.2.2.4 Target Market Summary................................................................................................................25
5.2.3 Positioning........................................................................................................................... 255.3 SWOT ANALYSIS......................................................................................................................... 25
5.3.1 Internal Strengths and Weaknesses....................................................................................265.3.2 External Opportunities and Threats.....................................................................................27
5.4 MARKET ANALYSIS........................................................................................................................ 275.4.1 The Market..........................................................................................................................275.4.2 Competition.........................................................................................................................285.4.3 Customers........................................................................................................................... 30
5.5 MARKETING STRATEGY................................................................................................................. 315.5.1 Sales and Profit Objectives.................................................................................................315.5.2 Channels of Distribution......................................................................................................315.5.3 Pricing Policy....................................................................................................................... 315.5.4 Select Markets/Products/Service Mix..................................................................................325.5.5 Selling and Advertising........................................................................................................325.5.6 Marketing Plan Budget........................................................................................................33
6.0 FINANCIAL PLAN..........................................................................................................................336.1 SOURCES OF FUNDING................................................................................................................. 33
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6.2 OPENING BALANCE SHEET............................................................................................................356.3 FINANCIAL SUMMARY.................................................................................................................... 356.4 ECONOMIC FORECAST..................................................................................................................366.5 SENSITIVITY ANALYSIS..................................................................................................................376.6 DIVIDENDS POLICY.......................................................................................................................386.7 UNIT COST OF PRODUCTION.........................................................................................................386.8 SUMMARY.................................................................................................................................... 40
7.0 CONCLUSION................................................................................................................................ 418.0 REFERENCES............................................................................................................................... 42APPENDIX A FINANCIAL PROJECTIONS.........................................................................................44
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List of figures
Figure 1. Floor plan of Saskatoon Brew Pub................................................................8Figure 2. The brewing process flow diagram. (Source: CDC Inc. Brewing Process from Grain to Glass,
2003)........................................................................................................................9Figure 3. Grain Mill. (Source: The Brewers’ Handbook, 2003)........................................................10Figure 4. Mash Tun. (Source: The Brewers’ Handbook, 2003).......................................................11Figure 5. Brew Kettle. (Source: The Brewers’ Handbook, 2003).....................................................11Figure 6. Heat exchanger and filtration system. (Source: Source: BrewTech Labs, Inc., 2003)........12Figure 7. Fermentation tanks. (Source: BrewTech Labs, Inc., 2003)............................................12Figure 8. Bright beer tanks. (Source: Sound Brewing Systems, 2003)............................................13Figure 9. Serving tanks. (Source: IDD Process & Packaging, Inc., 2003)..........................................13Figure 10. The organizational structure for the Saskatoon Brew Pub........................18Figure11. Pie chart showing percentage of revenue generated by each product......40
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List of Tables
Table 1. Estimated equipment costs..........................................................................15Table 2. Estimated working capital............................................................................16Table 3. Estimated building and furnishing costs.......................................................16Table 4. Estimated brewing costs of good sold..........................................................17Table 5. Estimated capital budget summary..............................................................17Table 6. Estimated wage and salary costs of employees for 5 years.........................21Table 7. Segmentation of the market.........................................................................23Table 8. The average amount of money spent on alcohol/tobacco in Calgary, Regina,
and Saskatoon. (Statistic Canada, 2003).........................................................................28Table 9. Saskatoon Brew Pub Competitors...............................................................29Table 10. Marketing Costs.........................................................................................33Table 11. Table showing the sources of financing.....................................................34Table 12. Opening balance sheet..............................................................................35Table 13. Sales Growth Forecast 2004-2013.............................................................36Table 14. Summary of net income, end of year cash flow and dividends paid when
the Saskatoon Brew Pub receives 170 customers per day.................................37Table 15. Summary of net income, end of year cash flow and dividends paid when
the Saskatoon Brew Pub receives 149 customers per day.................................37Table 16. Material cost of production of house brew..................................................38Table 17. Total cost of production of house brew......................................................39
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1.0 Introduction
1.1 Overview
The Saskatoon Brew Pub is a new business venture to be set up in Saskatoon,
Saskatchewan. The founder of this venture is local crop consultant, Guy Keeler. The
increased demand for off farm income has caused avid interest in the value added
production of a commodity readily produced on the prairies, malt barley. The
Saskatoon Brew Pub will provide a link for those interested in investing in the value
added production.
The ideal growing conditions in Saskatchewan have allowed it to become the second
largest malt barley producing province in Canada. Saskatchewan produces an
average of 5.48 million metric tonnes of malt barley per year (approximately one
quarter of Canada’s malt barley production). With this large tonnage of barley being
produced it is thought to be beneficial for the barley to stay within the province and
have value added here instead of allowing the manufacturing to occur elsewhere.
1.2 Mission Statement
“To profitably produce a high quality brew to be served in a relaxing and sociable
environment. All products are made in Saskatchewan and will allow everyone to
experience the Saskatchewan way of life.”
1.3 Goals and Objectives
The goals and objectives of the Saskatoon Brew Pub are as follows:
- Provide at least 15% internal return on investment
- Establish a well known, respected name within the brewpub industry
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Short Term:
o Gain a substantial market share in the brewpub industry in Saskatoon
o Provide excellent customer service for consumers
o Produce a profit which will be used for payments on the long term debt
Long Term:
o Become a leader in the Saskatoon Brew Pub industry
o Profitable growth in percentage of clientele and demand for
the house brew
o Expand facilities for function rooms for separate parties
o Expand the menu, and to offer a larger range in meals
o To provide a return on investment in the form of dividends to
shareholders
1.4 Project Benefits
The development of the brewpub industry in Saskatchewan will bring numerous
benefits to the province:
- By the setup of a brewpub, it will add diversity to the many licensed
restaurants found in Saskatoon
- The Saskatoon Brew Pub will provide jobs for Saskatoon residents and add to
the economy.
- Allow off farm income for the farmer share holders.
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2.0 Policy
Under the SLGA’s policy, in order to have the designation of a “Brewpub” the
Saskatoon Brew Pub must:
- Only allow a maximum of 210 customers in the establishment at one time
- Purchase a liquor license under The Alcohol and Gaming Regulation Act for
approximately $500 (and a $200 application fee).
- Be licensed under The Liquor Consumption Tax Act for the sale of liquor.
- Pay Liquor Consumption Tax of 10% on the total selling price of beer, wine,
and spirits.
- Charge a minimum price of $2.25 per ounce of spirits and the same amount
for bottled or canned beer (assuming 12 ounces per container). The minimum
price for draught beer is $0.16 per ounce, and for wine the minimum price is
$0.35 per ounce. All these prices include the Liquor Consumption Tax and
GST.
3.0 Operations Plan
3.1 Location
The Saskatoon Brew pub is located on 51st Street, Saskatoon. The building is
situated in a new development site, therefore indicating that there is expansion and
development within the area. The 3000ft2 building will be leased yearly at a rate of
$42,000. Since the building is new and being leased, fewer renovation costs will
occur as much of the construction can be completed while contractors are still
working on the site. The location will be in the vicinity for a large number of
employees within the industrial area. It will also be within close proximity to
Saskatchewan Place, this will allow the Saskatoon Brew Pub to capture customers
who are going home from events held at Saskatchewan Place.
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3.2 Work Plan and Flow of Work
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Malt Storage
Washroom
s
Bar
Lounge
Kitchen
Common Cooler
Bright Beer Tanks
Office
Fermenters
60 feet
Common CoolersOffice
Saskatoon Brew Pub, Guy Keeler
Figure 1. Floor plan of Saskatoon Brew Pub.
3.3 The Brewing Process
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50 feet
Fermenters
Saskatoon Brew Pub, Guy Keeler
Figure 2. The brewing process flow diagram. (Source: CDC Inc. Brewing Process from Grain to Glass, 2003).
Grain Mill: The grain mill (figure 3) is used to split the husk (preferably lengthwise) to
reveal the starchy endosperm to allow for efficient extraction and the husk will act as
a filter for the wort. It is important that the grain is not milled too finely, as although
there will be a greater surface area of endosperm exposed for extraction, improper
infiltration will occur during the subsequent steps. (The Brewers’ Handbook, 2003)
Figure 3. Grain Mill. (Source: The Brewers’ Handbook, 2003)
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Brew Kettle
Grain Mill
Mash Tun Heat
Exchanger
Bright Beer Tank
ServingTank
FermenterFilter
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Saskatoon Brew Pub, Guy Keeler
Mash Tun: The mashing is the process that converts the starch from the milled malt
and solid adjuncts into fermentable and un-fermentable sugars to produce wort of the
desired composition. The composition of the wort will vary according to the style of
beer. Mashing involves mixing milled malt and solid adjuncts with water at a set
temperature and volume to continue the biochemical changes initiated during the
malting process. (Note: adjuncts are grains such as corn, rice, rye, oats, barley, and
wheat. They are used because they provide extract at a lower cost (a cheaper form
of carbohydrate) than is available from malted barley and because they are readily
available. By adjusting the temperature in this stage, the brew master can produce
fuller or lighter tasting beer. Higher temperatures produce a fuller tasting product,
while lower temperatures produce a lighter taste (Brewsource.com,2003). Following
the mashing process (once all the starch has been broken down) the wort (liquid
extract) is separated from the spent grain and adjuncts (solids) (figure 4). The wort
separation is important as the solid portion contains large amounts of protein, poorly
modified starch, fatty material, silicates and polyphenols (tannins). The remaining
spent grains are cleaned and recycled as cattle feed. (The Brewers’ Handbook,
2003).
.
Figure 4. Mash Tun. (Source: The Brewers’ Handbook, 2003)
Brew Kettle: From the mash tun the wort is moved back to the brew kettle where
hops are added and the wort-hop solution is boiled for approximately 1.5 hours
(figure 5). Boiling concentrates the wort, sterilizes it and captures the necessary
essence from the hops. Once the hop flavors have been extracted, the wort is
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transferred to the hot wort tank. The next step is to separate the hop debris and the
trubaceous matter (hot break) from the boiled wort before cooling. (The Brewers’
Handbook, 2003).
Figure 5. Brew Kettle. (Source: The Brewers’ Handbook, 2003)
Heat Exchanger: The clear wort is then drawn off and sent to the wort cooler
(Brewsource.com,2003). As the wort transfers through the cooler, the temperature
drops from boiling to 14 degrees Celsius (figure 6). (The Brewers’ Handbook, 2003).
Figure 6. Heat exchanger and filtration system. (Source: Source: BrewTech Labs, Inc., 2003)
Fermenter: Once cooled, living active yeast is added to the wort, it travels to the
fermentation tanks (figure 7). Fermentation is the microbiological process in which
yeast converts sugars in the wort into alcohol and carbon dioxide. Fermentation is
complete in approximately one week, and the yeast is either removed from the top of
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the brewing tank (for ale) or from the bottom (for lager). (The Brewers’ Handbook,
2003)
Figure 7. Fermentation tanks. (Source: BrewTech Labs, Inc., 2003)
Filter: Filtration is needed to remove residual yeast, other turbidity-causing materials,
and microorganisms in order to achieve colloidal and microbiological stability (figure
6). (The Brewers’ Handbook, 2003).
Bright Beer Tanks: After filtration the beer will be transferred to bright beer tanks
where it is stored in bulk until needed to be moved into the serving tanks (figure 8).
(The Brewers’ Handbook, 2003).
Figure 8. Bright beer tanks. (Source: Sound Brewing Systems, 2003)
Serving Tanks: The beer is transferred into the serving tanks ready for the customer
consumption (figure 9). (The Brewers’ Handbook, 2003)
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Figure 9. Serving tanks. (Source: IDD Process & Packaging, Inc., 2003)
The brew pup will initially produce five different kinds of house brews. They will
consist of: pale ale, pilsner lager, wheat beer, cream ale, and a special house blend.
3.4 Average Business Cycles
3.4.1 The Average WeekThe business day will start at 11am until 2am the following morning, Monday through
Saturday. Sunday’s will be a slower pace; therefore, the business will only be open
until midnight. Brewing will take place whenever needed. On average, a batch of
beer a week will be needed to be made. Inventory will be stock checked during the
middle of the week (Wednesday). During the week the busiest days will be Thursday
through Saturday, and any other times promotional nights are held. From 6pm
onwards will be the busiest period during the day, as people will arrive after work for
drinks.
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3.4.2 The Average MonthThe average month for the Saskatoon Brew Pub will vary depending upon which
beers are being produced. The busiest periods will occur on promotional nights and
holidays. The brew master, head bar tender, and kitchen manager will each be in
charge of ordering their inventory needed. The office clerk will ensure that all bills are
paid on time. Since all products will be paid for upon purchase, the manager and
office clerk will not have to send out invoices. Wage based employee’s will be paid
fortnightly, whereas the salary based employees will be paid monthly with an
advance of pay halfway through the month. Monthly financial statements will be
produced and analyzed to see how well the company is doing or what improvements
need to be made.
3.4.3 Special ConsiderationsThe beer will be produced according to demand with a regular rotation of brewing.
Some beers require longer or shorter fermenting times, therefore the brew master will
have to organize a brewing schedule to ensure that there will be adequate quantities
of beer available at all times.
West Can will be the supplier for the malt and specialty malts. The food will be
supplied through a wholesale club such as Costco or Superstore wholesale. The
beer will be supplied directly through the local liquor stores.
3.5 Capital Budget
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As seen in (table 5) the capital budget, the Saskatoon Brew Pub requires
$258,000.00, this includes the working capital, equipment and building expenses.
Table 1. Estimated equipment costs.
Type of EquipmentEstimated Cost Sources
Brewing Equipment 121,475.00
Commercial Dishwasher 4,725.00 www.acemart.com
Under Counter Glass Washer 3,780.00 www.bigtray.com
Chest Freezer 970.00
Back Bar Cooler 2,375.00
Back Bar Cooler (Glass) 2,510.00
Reach-In-Freezer 3,645.00
Under Counter Refrigerator 2,050.00
Heavy Duty Range 2,170.00
Gas Griddle 700.00
Microwave 400.00
Fryer 2,805.00
Flatware 180.00
China 225.00
Glassware 1,080.00
Miscellaneous Bar/Kitchen Supplies 1,595.00
Total Cost of Equipment $150,685.00
Table 2. Estimated working capital.
Inventory 12,558.00 Tony Roma’s
Accounts Payable (13,923.00)
Cash 44,205.00
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Total Working Capital $42,840.00
Table 3. Estimated building and furnishing costs.
Building (lease) 42,000.00/year
Bar Stools (10 pair @ $240.00/pair) 2,400.00 www.galasource.com
Chairs (100 @ $54.00/each) 5,400.00
Tables/square (15 @ $165.00/each) 2,475.00
Tables/round (10 @ $165.00/each) 1,650.00
Bar ($385.00/ft * 30ft.) 11,550.00
Miscellaneous Bar Furnishings 2,000.00
Total Building Costs $64,475.00
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Table 4. Estimated brewing costs of good sold.
Malt 500L/beer 14,000.00 www.brewsource.com
Hops 500L/beer 2,400.00
Adjuncts 500L/each 2,000.00
Total Brewing Costs $18,400.00
Table 5. Estimated capital budget summary.
Equip. Costs (brewing+ restaurant) 150,685.00
Working Capital 42,840.00
Building Costs (lease + furnishings) 64,475.00
Total Capital Required $258,000.00
4.0 Human Resource Plan
4.1 Human Resource Strategy
The microbrewery strives to create a welcoming atmosphere for customers and to
help achieve this goal employees will be motivated to work as a team. All employees
will work towards a common goal ‘to make the brew pub a success’. Due to the large
number of employees working at the establishment daily staff meetings will be held
before opening so that problems can be addressed, ideas generated, and a
guarantee that communication between staff is occurring.
4.2 Organization Structure
As can be seen in figure 10 the board of directors will include five internal, and two
external directors. The five internal directors will be the producers (farmers), the two
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external directors will include Guy Keeler and a local business person with expertise
in the brew pup industry. The board of directors will include the president who is
elected by the board of directors to represent the company. The manager and brew
master both will be interviewed and selected by the board of directors. The brew
master will be working as needed (whenever beer is needed to be made). The
manager will organize the work for the additional employees including the kitchen
staff, servers, and bartenders.
Figure 10. The organizational structure for the Saskatoon Brew Pub.
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Board of Directors Internal (5), external (2)
President (1)
Facility Manger (1) Brew master (1)
Kitchen Manger (1)
Servers (5)
Head Bartender (1)
Bartenders (8)
Office Clerk (1)
Cooks (2)
Saskatoon Brew Pub, Guy Keeler
4.3 Job Descriptions
Shareholders/Directors: The shareholders and external directors will hire the
facility manger and brew master. The board of directors will also aid the manager by
approving decisions which will result in the profitability of the brew pub. Shareholders
will be paid with dividends when the end of year cash flow is in excess of $50,000.
Facility Manager: The Facility Manager is one of the most important positions.
The manager will have at least 5 years experience as well as good managerial skills
to deal with the day to day running of the facility. The facility manager will be in
charge of marketing the products and hiring additional employees. Excellent
organizational skills will be required as the manager will have to oversee all aspects
of the business. The manager must be dynamic, able to generate ideas for the
business and be able to create a pleasant working environment for all employees.
The facility manager will require a competitive wage to ensure that the best is being
done to make the brew pub profitable. The starting salary will be $48,000 (Salary
Expert, 2003).
Brew Master: The brew master will be employed under contract and will require a
minimum of five years experience. The brew master will be in charge of brewing all
beer, recipe making, ordering supplies, and maintaining equipment. The brew master
will be in charge of the overall quality of the product. A brew master must have good
organizational and planning skills to successfully manage the logistics-heavy brewing
process and be able to control inventory to meet the customer’s demands. The
starting salary of $55,000 will increase with inflation, the brew master receives $7000
more than the facility manager since the brew masters ability to produce the brew is
critical (Portland Brewing Company, 2003).
Bar Tenders: Bar tenders will be in charge of serving drinks to customers, dealing
with money, cashing up at the end of the day, taking orders, collecting and washing
glasses, stock checking inventory, and general housekeeping. Bar tenders will be
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part time employees arranged on shift work. They will aid with special promotions
and generate new ideas for promotional nights. A head bar tender will be required to
handle all ordering of inventory, designing rota’s, creating an inviting atmosphere for
customers and an enjoyable work environment for employees. All bartenders will
receive minimum wage, and the head bartender will receive $10.00/hour.
Kitchen Manager: Responsible for ordering inventory, managing staff kitchen and
serving staff, generating menu ideas and training all new kitchen employees. The
kitchen manager will receive $10.00/hour.
Part-time Cooks: Responsible for food preparation, cooking and general
housekeeping of the kitchen area. Cooks will have an opportunity to show initiative
along with bar tenders to generate ideas for special promotion nights as well as menu
ideas Part time cooks will receive $8.50/hour.
Servers: Servers will be responsible for taking food orders from customers, and
serving food. Servers will have an opportunity to show initiative to generate ideas for
special promotion nights along with menu ideas. Servers will work on a part time
rotational basis and receive $6.65 hour (minimum wage).
Office Clerk: The office clerk will work on a part time basis of approximately 2
days per week (8 hours/day) to organize pay checks, paying of invoices, filing etc.
The office clerk will receive a salary of $12,500.
The cleaning of the establishment will be completed by a local cleaning firm, costing $15,000 per year.
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3.3 Total Wage and Salary Costs
Table 6. Estimated wage and salary costs of employees for 5 years.
Direct Labour 2004 2006 2008 2010 2012Brew Master 55000.00 56997.82 59068.21 61213.80 63437.33TOTAL salaries 55000.00 56997.82 59068.21 61213.80 63437.33Salary benefits 4834.50 5010.11 5192.10 5380.69 5576.14 Head Bartender 20800.00 21555.54 22338.52 23149.95 23990.85Bartender 65356.20 67730.20 70190.43 72740.03 75382.24Kitchen Manager 20800.00 21555.54 22338.52 23149.95 23990.85Part time cooks 25636.00 26567.20 27532.23 28532.31 29568.72Servers 58094.40 60204.62 62391.49 64657.80 67006.43 Total Wages 190686.60 197613.10 204791.20 212230.03 219939.08Wage employee benefits 25609.21 26539.44 27503.46 28502.49 29537.82
TOTAL Direct Labour $276,130.31 $286,160.47
$296,554.96
$307,327.02
$318,490.37
Management salaries Facility Manager 48000.00 49743.55 51550.44 53422.95 55363.49Office Clerk 12500.00 12954.05 13424.59 13912.23 14417.58Total salaries 60500.00 62697.60 64975.03 67335.18 69781.07Benefits for salary employees 4979.15 5160.01 5347.44 5541.69 5742.98
TOTAL Management Salaries $ 65,479.15 $ 67,857.61
$ 70,322.47
$ 72,876.87
$ 75,524.05
Note: Salaries are increasing by 1.8% inflation, salaries are estimates from Salary Expert.com (2003) and Portland Brewing Company (2003). Benefits include: employment insurance, Canada Pension Plan, holiday pay and workers compensation.
4.4 Training
Both the facility manager and the brew master will be experienced employees and no
training will be required. The head bartender and kitchen manager will also have
experience and will be responsible for on the job training of all employees under
them. The office clerk will be experienced and have up to date skills. Optional
courses such as Bar Management/Mixology (by SIAST) could be taken at the
employee’s expense.
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4.5 Future Human Resources
In the future, the company plans to look upon expanding the business to bottling beer
and supplying it to liquor stores. If property will be available they are hoping to
expand their location to allow for conferences as well as becoming a tourist attraction.
Should any of these aspects take place additional staff will be needed.
5.0 Marketing Plan
5.1 Marketing Mix
Product: The Saskatoon Brew Pub’s main focus is to provide a superior service to its
customers, by providing both excellent food and beverages served in a relaxing
atmosphere. As the Saskatoon Brew Pub is selling a service it must be concerned
with how the brew pub presents itself to the public by means of attracting customers
and maintaining the cliental. This brew pub plans to produce a high quality beer, and
provide a friendly and hospitable environment in which everyone is welcome to come
and enjoy.
Price: The pricing for these products are regulated by government. The price will be
competitive with those of local competitors, as well as trying to give the best possible
prices for our consumers.
Promotion: This brew pub will appeal to all ages; however it will have an “off the
wall” type of atmosphere. Customers can be attracted through promotional days with
discounts on certain products. Both flyers and radio advertising will be used to
promote the Saskatoon Brew Pub. Flyers will be distributed to local business within
the industrial area, as well as at Saskatchewan Place. Radio advertising will allow a
wide range of potential customers to hear about the offers and superior services
provided. Promotional items, such as glasses or beer mugs will be available for
purchase, should customers wish to do so.
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Place: Location is one of the most important aspects within the marketing mix. If
these products and services are not easily accessible to the public then no one will
be willing to travel in order to consume them. The location of the Saskatoon Brew
Pub is one of its major weaknesses, but providing local clientele can be established
the profitability of the venture is expected to grow.
5.2 Segmentation, Targeting and Positioning
5.2.1 SegmentationTo gain the largest overall market share the market has been broken into four
different sectors. (table 7). Each segment of the market has a corresponding name,
age, needs and benefits as well as their demographics, geographics, socioeconomics
and psychographics. Each segment was broken up primarily by age, needs, and
benefits.
Table 7. Segmentation of the market.
Name of Segment
Industrial Workers
Young Professionals Middle Age Oldies
Age range 19-55 23-30 31-49 50+
Needs and benefits - convenient - low price
- high quality
- high quality- nice atmosphere
- high quality-relaxing atmosphere
Geographics - work in the industrial area - all areas - residential
areas- small residential areas
Socioeconomics -lower – middle class -middle class - middle class - middle class
Psychographics - socialising- socialising- work- hard, play –hard attitude
- family orientated
- traditional- brand loyal
Demographics- some disposable income
- some disposable income-single
- some disposable income- family
- disposable income- conservative
Usage - medium-high - medium -high - medium - medium
Beer purchased- in-house ales if competitively priced
- in-house ales if competitively priced
- well known brand
- well known brand
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5.2.2 Targeting
Of the four segments three will be targeted upon, industrial workers, young
professionals and middle aged.
2.2.2.1 Industrial Workers
By targeting the industrial workers a large sector can be gained. This sector will
remain stable throughout the year as the jobs in this region are dependable. The
growth and development within the industrial area will allow for potential growth in
sales providing the workers use the brew pub. The Saskatoon brew pub will offer
competitive pricing for beer, regular beer promotions and happy hour to entice the
workers to come to the brew pub for after work drinks and meals during lunchtime.
2.2.2.2 Young Professionals
The targeting of the young professional group will allow for the completion of
targeting all people less than 30 years of age. This will be a majority of the clientele,
as these people are looking for a more mature drinking environment which meets
their needs of high quality and reasonable prices. The group of individuals will make
use of the promotional nights but come on a regular basis, such as for after work
drinks or evening snacks. This market share is sustainable and if gained will allow for
the penetration and of the loyalty of the middle aged target market.
2.2.2.3 Middle Aged
The middle aged segment will develop from the loyalty of the young professionals.
These people are likely to have children and therefore will be unlikely to be regular
customers due to these responsibilities. This group requires high quality, good
service and a pleasing atmosphere. Since this segment would have a reliable,
disposable income they would be unlikely to make use of promotional nights, and
would rather enjoy a quiet, relaxing evening
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2.2.2.4 Target Market Summary
Of all three target markets the market with the most room for growth would be the
industrial workers and young professional sectors. This sector is least influenced by
promotional nights and therefore these customers will become regular users of the
service provided and will offer the largest opportunity for growth and potential profit.
5.2.3 Positioning
These three segments will allow the Saskatoon Brew Pub to obtain an excellent
position within the brewpub industry. The Saskatoon Brew Pub should be seen as a
place which has a high quality, good value, and great tasting beer. There are
currently some competitors within Saskatoon (such as Maguires), so it is crucial that
the in-house beer produced is of high quality in order to achieve a market share.
Currently many people assume that beer produced by brewpubs is of low quality and
tastes awful; therefore the Saskatoon Brew Pub will need to prove otherwise. Many
brewpubs produce these low quality beers to be able to sell off sale. This is not the
image wanted for this company.
5.3 SWOT Analysis
The SWOT analysis (strengths, weaknesses, opportunities and threats) of the
Saskatoon Brew Pub will examine the strong qualities and challenges of the business
by considering both internal and external aspects. Strengths and weaknesses study
the internal facts, whereas opportunities and threats investigate the effect of external
forces on the business.
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5.3.1 Internal Strengths and Weaknesses
Being a new business in a highly competitive industry; means that this business must
be very strong internally to succeed in the long run.
The strengths of this brew pub are the brew master, good service, and great
atmosphere. The brew master will have a minimum of five years experience when
he/she starts, and will produce the high quality beers which will be promoted. In
regards to this service and atmosphere, the brew pub strives to be a place where
people want to come back to and have a good time. Patrons should be comfortable
and relaxed when they come, and pleased with what they have received when they
leave.
The major weaknesses include; the location, type of business, financial resources,
and the limited menu options. Since the location is on 51st Street, it is not located in
the close proximity to any residential areas; many people may choose to drink at
establishments closer to home. This location is in a heavily noised area of the city,
and most of the competition is in a more residential and quiet atmosphere.
Setting up as a brew pub also has its draw backs. There is a high turn over ratio in
the food service industry in regards to waiters/waitresses. The goal is not to have a
high turn over of employees, as this may cause problems in the service provided to
customers, and employee training would be an ongoing process.
Since there is a high turnover rate for the restaurant industry many lenders are
unwilling to loan large portions of the capital required for the initial business setup. It
is assumed that banks would only be approved to lend one third of the capital
required and the remaining capital be raised by the selling of shares.
The menu is also a draw back. The “pub style” menu will not meet the needs for
those people who want to come and have lunch and/or supper at this establishment.
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The menu may turn away potential patrons due to the lack of diversity and choices. A
larger menu will be introduced in the subsequent years.
5.3.2 External Opportunities and Threats
The opportunities for the Saskatoon Brew Pub include the lack of competition in the
area. An advantage to location being in the North end of the city is that there are
very few pubs and/or clubs in the area, and the only genuine competitor is The Fox
and Hound.
The threats which occur include competition in the city, target market age, and set up
in Saskatchewan. Within the city, there are many places which a person can go and
have a beer or sit and just relax. As well, this brew pub will be competing against the
other brew pubs in the city (direct competition), but the business is also competing
against the night clubs, lounges, and any other activity that people could do besides
coming to the pub (indirect competition). Setting up in Saskatchewan could be either
an opportunity or a threat; however it poses as a threat in this situation. Within the
province, there are many laws that prohibit or restrain a pub from selling their own
beer off premises, as well as the different tax levels which make setting up as a
brewery very costly.
5.4 Market Analysis
5.4.1 The Market
Saskatoon’s current population is 213,607 (City of Saskatoon, 2003). Among these
people, there are 76,774 males over the age of eighteen and under the age of 65.
There are 82,366 females over the age of eighteen and under the age of 65. The
average expenditure of income per household in Saskatoon is $53,600. Of the
$53,600, the average amount of money spent on tobacco and alcohol products is
$1,436. The statistics for Regina shows that the average household expenditure of
income per household is $56,727 and the amount spend on tobacco and alcohol
products is $1,190. In Calgary, the average expenditure of income was $73,782 and
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the amount spend on tobacco and alcohol was $1,612. This shows that residents in
Saskatoon spend more on tobacco and alcohol than people in Regina and Calgary.
(Statistic Canada, 2003).
Table 8. The average amount of money spent on alcohol/tobacco in Calgary, Regina, and Saskatoon. (Statistic Canada, 2003).
City % of yearly income spend on alcoholCalgary 2.2%Regina 2.1%Saskatoon 2.6%
This brew pub will attract people in the age bracket of 19-50, where as a night club
will include a demographic age of 19-24. On average in 2003, each Canadian of
legal age consumed approximately 83 litres of alcohol, and of the 83 litres, 79% was
beer consumption. (Statistic Canada, 2003).
The consumption of alcohol is affected by many economic factors, especially in
Saskatchewan. If there is a year in which farming income decreases, the economy is
highly affected, primarily because Saskatchewan is a farming province. Other factors
such as demographics also affect whether alcohol will be consumed. Beer is not a
necessity of life, and therefore is a “want”. Since beer is not needed, the consumption
and purchase varies sometimes substantially from year to year. As well the
environment impacts sales of alcohol. There are higher sales in the summer months
than there are in the winter months. People tend to buy more alcohol, beer especially,
when the temperature and environment are pleasing.
5.4.2 Competition
The major competition to this brewpub will obviously be other brewpubs (table 9). In
Saskatoon there are many other brewpubs to compete with. The major ones are
Maguires, The Fox and Hound, Whiskey Jacks, The Hose and Hydrant, and Bridges
Ale House. Being located in the north end of Saskatoon, The Fox and Hound will be
major competition. Maguires will also offer considerable competition because they
offer a very high quality and large selection of house brews. The brewpubs in
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Saskatoon share the city wide market, each having a certain degree of the local
market in the area they are each located.
Table 9. Saskatoon Brew Pub Competitors.
Brew Pub Competitors Strengths WeaknessesMaguires - central location - sporadic service
- high quality product
- established cliental- good atmosphere- large brew selection- ample parking
The Fox and Hounds - established cliental - location in the strip mall
- good menu
- high quality product- good location in the city- ample parking
The Hose and Hydrant - unique atmosphere - poor parking availability
- lots of competition on Broadway
Whiskey Jack's - great atmosphere - limited seating
- have karaoke - new to brewing- large student cliental nearby
- great location* Bridges Ale House is also a competitor, but since no one in the group has been there, strengths and weaknesses cannot be established.
Due to certain liquor laws, the majority of pricing is standard in the brewpub industry.
The Saskatoon Brew Pub aims to compete with other brewpubs by offering a superior
line of brews, a location that has little competition, and ample parking. An area of
weakness for the brewpub is that other competitors can join the industry very quickly
and within a short span of time many new competitors are able to enter the industry.
In addition, the competition can easily copy ideas, products or promotions that are
successful.
A concern to the brewpub is the large amount of indirect competition. This can
include other types of drinking establishments such as restaurants, bars, nightclubs,
and lounges. In a more general sense any activity that competes for the
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entertainment dollar can be seen as competition as most customers have a limited
amount of disposable income.
5.4.3 Customers
It is difficult to estimate how many customers each day, and what they will buy.
Because alcohol consumption varies greatly to which day of the week it is, what hour
of the day, and how the economy is doing, trying to determine the customer numbers
is very hard. An estimate can be taken, that the lunch and supper hours will be the
busiest times of day, as well as on the weekends. Most people visiting this
establishment will have either a job or school to attend during the day, fewer
customers can be expected in the afternoon.
5.4.4 Target Markets
The target market easiest to penetrate will be the industrial workers, as they will be
within a close proximity of the location. The industrial workers will require fast
efficient service in a friendly welcoming atmosphere. The middle age target will be the
hardest target to infiltrate. These people know what is good, and tend to stick with
that. They are somewhat brand loyal, as well; most of them have families to support.
They monitor where their money is going more closely and take fewer risks then
those of the other segments.
5.4.5 Product/Service Features
The product is going to be produced as a high quality brew, an outstanding service
will be provided with a friendly, comfortable atmosphere. It will be a place where
people can come and enjoy the company of friends/family/coworkers and have a
good time.
This product is designed to be a craft brew, and will obviously be different from the
main stream brews like Labatt’s or Molson’s products. The plan is to create a brew
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that is pleasing to the palate as well as one that is comparable in popularity to other
high quality craft brews in the city.
5.4.6 The Opportunity
Based on the target market of young professionals, industrial workers, and middle-
aged people, the largest market opportunity lies among the industrial workers and
young professionals. Between these two target markets, the percentage of sales will
be between 65-75% of the market share.
5.5 Marketing Strategy
5.5.1 Sales and Profit Objectives
During the first year of operation the profit goal is to meet variable costs and interest
expense on any loans that are needed. It is felt that this is reasonable as it takes a
certain degree of time to develop a cliental and a reputation as providing a
consistently high quality product. This will be explained to the investors and will be
accounted for when seeking financing.
5.5.2 Channels of Distribution
The government is allowing pubs to sell in house brewed beer, or through an
attached off sale. Beer will not be sold through the liquor board or any outlet.
5.5.3 Pricing Policy
Much of the pricing policies are predetermined by various provincial liquor laws. The
minimum that can be charged for a drink (bottle beer, highball, shot, etc.) is $2.25.
The minimum price for an ounce of draft beer is $0.17. These prices set a floor for
the liquor products. The competition has the same minimum prices to contend with
so to a certain degree it eliminates pricing competition. Liquor is market-based priced
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in that the price will vary with what the market will bear. It is perceived that the
customer is paying for more than just a drink but the atmosphere of the
establishment, friends, etc.
One main feature of the pricing policy is that the brew pubs own brewed beer will be
priced at a discount to other draft beer. This will be to encourage the consumption of
the brewpubs product. Due to the fact that the brewpub has a lower cost on the beer
that it produces, it will be easier to maintain a profit on this draft. There will also be
daily specials that change and discount incentives to buy food with a drink. Over time
prices will be increased as the cliental increases.
5.5.4 Select Markets/Products/Service Mix
In the beginning, the goal is to capture a small portion of the market. This is a new
pub with untested brew, and in order to become popular this business will need to
start small and build up.
5.5.5 Selling and Advertising
Advertising will take place via both flyers and radio advertisements. Advertising
through papers is not the best idea. The demographic age will fit because not a lot of
younger people subscribe to the paper.
The discount days will be organized, where draft is sold at a discount price, or where
certain foods are on discount (like having a wing night). These specials will bring in
more people, and spread the word of this new brew pub.
Flyers could be distributed within local workplaces and Saskatchewan Place could
also prove to advertise to many people, by placing coupons on the back of tickets.
This could bring people that are not normally in the north end into the brew pub.
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5.5.6 Marketing Plan Budget
To achieve a cliental base, the name must get out into the public quickly. As
previously stated in the marketing plan, the chief forms of promotion include: radio
advertisements and flyers and handouts. The budget for marketing can be seen in
the figure below.
Table 10. Marketing Costs.
Promotion Cost
Flyers and Handouts $3500
Radio Advertisements $6500
Total Cost $10,000
6.0 Financial Plan
6.1 Sources of Funding
There will be three main sources of funding in order to start up the brew pub (table
11). These sources will consist of a bank loan in the form of a long-term loan. The
brew pub will be structured as a limited partnership, thus involving both general and
limited partners. The goal is to finance as much of the pub as possible in order for
the general partners reduce the amount of equity required. In a venture such as this,
banks are usually unwilling to finance greater than approximately one third of the
capital required unless the owners are willing to put up personal assets as security,
which the ones involved in this project are unwilling to do. The reasons for this are
the volatility and uncertainty of the industry combined with the low salvage value of
used restaurant equipment. The bank loan will be taken at an interest rate of 8.0%.
Table 11. Table showing the sources of financing.
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FINANCING SOURCE AMOUNT
Long Term Debt $80,000
General Partners $90,000
Limited Partners $88,000
TOTAL $258,000
The financing will be structured as follows: bank loan 31%, general partners 35%,
and limited partners 34%. This structure will result in the general partners owning
51% of the pub and the limited partners owning 49%. Therefore the general partners
will own the control interest in the company. There will be between 3-6 general
partners all contributing an equal portion of the $90,000 needed. Selling 44 limited
shares at $2,000 each needed will raise the remainder of the capital.
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6.2 Opening Balance Sheet
Table 12. Opening balance sheet.
– Opening Balance SheetBrewpub
Opening Balance SheetJanuary 1st,2004
Assets:Current Assets Cash $ 84,840Total Current Assets $ 84,840
Fixed AssetsEquipment $ 173,160Total Fixed Assets $ 173,160
Total Assets $ 258,000
Liabilities:Current LiabilitiesLong-Term Debt $ 80,000Total Liabilities $ 80,000
Shareholder’s Equity:Share Capital $ 178,000Total Shareholder’s Equity $ 178,000
Total Liabilities and $ 258,000Shareholder’s Equity
6.3 Financial Summary
All financial results, analysis, and information are provided in the financial model
provided in Appendix A.
As explained earlier in the Marketing Plan, the financial goal was to break even in the
first year of operation. In the restaurant and pub industry, it is usually the first year
which is the most difficult especially for an independently owned operation that is not
a franchise. It is during this first year that a clientele must be attracted and repeat
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business established. In the brewpub industry liquor prices are fairly uniform among
establishments. This combined with the fact that the start up costs of the brewpub is
kept quite low makes the key variable for financial success the number of customers
that can be attracted. The provided financial analysis was done taking these factors
into consideration.
6.4 Economic Forecast
All the increases in costs/expenses and price increases in the analysis where done
with assumed inflation rate of 1.8%. The growth in sales was forecast as follows:
Table 13. Sales Growth Forecast 2004-2013.
Sales Growth Forecast
Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Growth 2% 2.5% 2.5% 3% 3% 3% 3% 3% 3% 3%
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6.5 Sensitivity Analysis
At the breakeven scenario in the first year the results were as follows:
Table 14. Summary of net income, end of year cash flow and dividends paid
when the Saskatoon Brew Pub receives 170 customers per day.
Year 2004 2005 2006 2007 2008
Net Income $910 $24,909 $39,080 $53,287 $69,557
End of Year Cash $100,831 $101,766 $109,849 $118,751 $130,681
Dividends Paid 0 $50,831 $51,766 $59,849 $68,751
Year 2009 2010 2011 2012 2013
Net Income $86,119 $103,161 $120,813 $138,652 $156,762
End of Year Cash $143,660 $157,728 $172,884 $188,599 $204,872
Dividends Paid $80,681 $93,660 $107,728 $122,884 $138,599
Internal Rate of Return on Equity Investment – 44%
External Rate of Return on Equity Investment – 29%
Table 15. Summary of net income, end of year cash flow and dividends paid
when the Saskatoon Brew Pub receives 149 customers per day.
Year 2004 2005 2006 2007 2008
Net Income ($66,067) ($30,193) ($11,307) $7,457 $28,869
End of Year Cash $33,685 $30,401 $39,859 $62,774 $89,985
Dividends Paid 0 0 0 0 $12,774
Year 2009 2010 2011 2012 2013
Net Income $50,561 $54,449 $62,152 $77,661 $93,864
End of Year Cash $108,094 $109,058 $114,214 $127,599 $141,964
Dividends Paid $39,985 $58,094 $59,058 $64,214 $77,599
Internal Rate of Return on Equity Investment – 15%
External Rate of Return on Equity Investment – 11%
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As shown by table 15, 149 customers per day is the lowest that the business can go.
At this level, a profit is not made until the fourth year based on the sales projections.
However, even at 149 customers per day, the IRR is 15% over the ten year period
which is the lowest acceptable rate. It should also be noted under this scenario the
year end cash never gets too low, and therefore even when a profit is not made, cash
flow should not be a problem. This excess cash allows for the business to sustain
itself through slow times or if the first few months of operation are especially slow.
6.6 Dividends Policy
The dividend policy of the company is that dividends are paid out whenever the year
end cash exceeds $50,000. The dividends are paid out at the start of the next year.
Payment is based on the percentage of equity each shareholder has in the company.
The dividend policy can change if the general partners decide to do so. Table 14 and
table 15 summarize the dividends paid over a 10 year period based on the two
scenarios.
6.7 Unit Cost of Production
For the draft that is produced in house, a unit cost of production must be known.
Table 16. Material cost of production of house brew.
Material Cost of Draft Production Cost/L Cost/oz.
Malt $0.70 $0.02
Yeast, Hops, Adjucnts $0.22 $0.01
Total $0.92 $0.03
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Table 17. Total cost of production of house brew.
Costs of Production per Pint and
Ounce of House Draft
2004
Direct Materials $8,082
Direct Labour $59,835
Total Direct Costs $67,917
Cost per Pint $3.66
Selling Price $4.00
Cost per Ounce $0.23
Selling Price $0.25
As seen in table 16 the materials cost of draft manufacture is quite low. When the
labour cost is added in, as shown in table 17, the cost of production increases
greatly. This is due to the fact that the brewpub has a full time brew master in order
to achieve a very high quality beer. This could be changed in order to lower costs by
hiring or sharing a brew master with other brewpubs, or by having the facility
manager double as the brew master. A third option would be to hire the brew master
on a part time basis after a few years. If the house draft proved to be popular,
reducing the direct labour costs would result in a great increase net income.
However as it stands now, the house brew will be a small portion of the total revenue
(figure 11). One major advantage to having the brewpub is the ability to open an off
sale.
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Revenue Sources
39%
24%
28%
9%
Food and Non-Alcohol
Alcohol
Spirits
Alcohol (house beer)
Figure11. Pie chart showing percentage of revenue generated by each
product.
6.8 Summary
In summary, the financial plan indicates that the brewpub has the potential to be
financially viable. The success all comes back to one key variable, attracting
sufficient customers. The financing of the brewpub has taken accounted for a
potentially sluggish start, this being the reason behind the large amount of extra cash
on hand. The location, an excellent product, and adequate marketing should put the
brewpub in a position to be a success. Attracting adequate financing may be difficult
given the risk factor of the venture and the high percentage of investor equity
required. However the potential for an excellent payoff also exists. Investor patience
may be required as shown in table 15 in which the minimum number of customers for
viability prevents dividends not being paid out until the fifth year of operation. Overall,
the brewpub has a good chance for financial success given the right people can be
put into place.
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7.0 Conclusion
After completing the business plan for the Saskatoon Brew Pub it has been
concluded that the venture is feasible. The financial plan has shown that the
Saskatoon Brew Pub will have an IRR of 44% when 170 customers visit the
establishment per day. The main problems associated with the feasibility will be
ensuring that there are enough customers per day and that adequate equity is
invested. Providing that these two issues are not a problem the Saskatoon Brew Pub
appears to be an excellent addition to the Saskatoon business community.
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8.0 References
Acemart – Restaurant Supply. http://www.acemart.com/ Accessed on 5th October, 2003.
Big Tray – Restaurant Equipment and Supplies. http://www.bigtray.com/ Accessed on 5th October, 2003.
Brewsource.com. http://www.brewsource.com Accessed 2nd October, 2003.
BrewTech Labs, Inc. http://www.brewtechlabs.com. Accessed on 3rd December, 2003.
CDC Inc. – Brewing Process from Grain to Glass. http://www.cdc-brewing.com/documents/processFlowchart.html Accessed on 28th September, 2003.
City of Saskatoon. http://www.city.saskatoon.sk.ca. Accessed on 3rd December, 2003.
CrestonBC.com – A VirtualBC.com partner. http://www.crestonbc.com Accessed on 4th October, 2004.
Galasource,2003. http://www.galasource.com/ Accessed 5th October, 2003.
Government of Canada. Canada Customs and RevenueAgency.T4032PayrollDeductionsTables.http://www.ccraadrc.gc.ca/tax/business/payroll/t4032jan03/menu-e.html Accessed 7th October, 2003.
IDD Process & Packaging, Inc. www.iddeas.com. Accessed on 3rd December, 2003.
Portland Brewing Company. http://www.portlandbrew.com/admin/data_admin.html. Accessed 13th October, 2003.
SalaryExpert.com. Basic Salary Report. http://www.salaryexpert.com . Accessed 7th October2003.
Saskatchewan Institute of Applied Science and Technology . Food and Beverage Service.http://www.siast.sk.ca/siast/educationtraining/appliedcertificate/hospitalityapplied/foodandbevservice.htm Accessed 7th October, 2003.
Saskatchewan Workers Compensation Board. EmployerPremiums.https://web01.wcbsask.com/prod/rea/ClassIndex.nsf/WCBIndustry!OpenPage&Start=1&Count=1000&Expand=1 Accessed 7th October, 2003.
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SearchEngine. http://www.olybeer.com/malthops.html Accessed on 6th October, 2003.
Sound Brewing Systems. http://www.soundbrew.com/. Accessed on 3rd December, 2003.
Statistics Canada. http://www.statcan.ca. Accessed on 3rd December, 2003.
The Brewers Handbook. http://www.beer-brewing.com/ Accessed on 3rd December, 2003.
Tony Roma’s. Personal conversation. 2003.
Westcan Malt. Talked on the phone. October 2nd, 2003
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Appendix A
Financial Projections
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