By Kelsey MoreauApril 9 2015

ENT 310

Bowl. Eat. Drink. Dance

Neon

Executive Summary

Neon will be a Bowling Bar located on the corner of 20th St and Ave B in Saskatoon Saskatchewan. This business is unique in that it combines the entertainment that comes with bowling and the excitement of dancing at a club to give you an all in one entertainment spot. Featuring local Dj’s, Neon has everything the hottest clubs have, with a spin. Not only is Neon a hot scene at night but it’s a great place to enjoy a classic lunch in a unique neon atmosphere.

The operations of Neon are similar to that of a bar with a full kitchen. A manager will oversee all operations and information of the corporation. The difference is that there is a full bowling alley located in the second level of Neon.

Neon will employ servers, bartenders, cooks, bowling attendants and maintenance staff.

The marketing strategy is very important for the success of the company. A large part of this strategy is an awareness campaign and bowling leagues that run all through the year. Affiliation with clubs from the University of Saskatchewan will also draw in many people.

Neon needs a minimum of 86 customers per day to break even in the first year. This will be made possible be an aggressive marketing campaign. Projected profits are in the positives from year 1 and owner’s salary is generous by year 5.

This new idea is sure to have everyone talking. They will never to think to go to an ordinary club again.

2

Neon

Table Of Contents1.0Introduction to Neon…………………………………………………………………………...……

51.1What is

Neon……………………………………………………………………………...........51.2Goals and

Objectives………..................................................................................51.3Main Success

Factors..........................................................................................52.0Operation

s...................................................................................................................52.1Legal

Structure....................................................................................................52.2Organizational

structure......................................................................................52.3Location...............................................................................................................

62.4Floor

plan.............................................................................................................72.5Work

flow.............................................................................................................92.6Hours of

Operation...............................................................................................92.7Supply

Analysis....................................................................................................92.8Service

Providers...............................................................................................102.9Capital

Budget...................................................................................................102.10 Cost of

Sales....................................................................................................112.11 Operating

Expenses.........................................................................................122.12 Working Capital

Analysis..................................................................................133.0Human

Resources.......................................................................................................133.1Job

Descriptions................................................................................................133.2Training..............................................................................................................

143.3Wages &

Salaries...............................................................................................154.0Marketing....................................................................................................................

154.1Positioning

statement.........................................................................................154.2Target

Market.....................................................................................................16

3

Neon4.3Competition........................................................................................................

164.4SWOT

Analysis...................................................................................................184.5Marketing

Strategy.............................................................................................184.6Marketing

Budget...............................................................................................195.0Financing and

Accounting...........................................................................................205.1Financing

budget...............................................................................................205.2Dividends...........................................................................................................2

05.3Profit and Cash Flow

Projections........................................................................205.4Breakeven

analysis............................................................................................215.5Sensitivity

Analysis.............................................................................................225.6Owner’s

Compensation......................................................................................235.7Management Information

System.......................................................................235.8Contingency

Plan...............................................................................................236.0Summary.....................................................................................................................

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FiguresFigure 1 Organizational

Structure..................................................................................6Figure 2 Location of

Neon..............................................................................................7Figure 3 Level 1 Floor

Plan.............................................................................................8Figure 4 Level 2 Floor

Plan.............................................................................................8Figure 5 Competitive

Analysis......................................................................................17Figure 6 SWOT

Analysis...............................................................................................18Figure 7 Marketing Poster

Example.............................................................................19Figure 8 Financing

Budget...........................................................................................19Figure 9 Profit and Cash

Flows....................................................................................21Figure 10 Breakeven

Analysis......................................................................................21

4

Neon

TablesTable 1 Hours of

Operation............................................................................................9Table 2 Capital

Budget................................................................................................10Table 3 Cost of

Sales...................................................................................................11Table 4 Operating

Expenses........................................................................................12Table 5 Working

Capital...............................................................................................13Table 6

Salaries/Wages...............................................................................................15Table 7 Salary/Wage

Costs..........................................................................................15Table 8 Marketing

Budget............................................................................................19Table 9 Customer

Sensitivity.......................................................................................22Table 10 Price

Sensitivity............................................................................................22Table 11 Owner’s

Compensation.................................................................................23

5

Neon

1.0 Introduction to Neon

1.2 Goals and Objectiveso To offer a fun and happening place for young people to enjoyo To create a unique atmosphere that people will want to experience again

and againo To serve tasty favorites in a quality manoro To be fully entertaining

1.3 Main Success Factorso Have an impressive and powerful marketing strategy to bring in the required

amount of customerso Drawing in more customers with leagueso Effective and structured managemento Bring in sought-after entertainmento Hire reliable and fun staff members

2.0 Operations

2.1 Legal Structure

1.1 What is Neon?Neon is the next generation of

bowling alley with its combination of a bowling alley and nightclub. It is a place to hang out with friends and socialize while enjoying a competitive sport. Neon is also a place to have a delicious meal in a unique atmosphere. Neon is located in Saskatoon Saskatchewan, home to many young people wanting a place to escape from reality.

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NeonThe legal structure of Neon will be a corporation because it is the least risky

when starting a new venture. This will ensure fewer taxes are paid out and less risk is put on the owner since Neon will be its own entity.

2.2 Organizational StructureNeon will be organized very similar to most restaurants or clubs. There will

be one owner/manager and five full time staff to start and part time staff will be added in when needed. The full time staff will cover positions such as bartending, cooking, serving, maintenance/custodial, and bowling supervision.

Figure 1 Organizational Structure

2.3 LocationNeon will be prominently located on the corner of 20th St W and Ave B in the

Riversdale Neighborhood. Not long ago many would have questioned this choice in location but with 20th street’s recent boom, this location is perfect for a new attraction such as Neon. This location serves as a central location to those who live in Stonebridge and those living in Hampton village. It is also a short cab ride for those university students who live in Residential areas such as Nutana, Varsity View or Buena Vista. In the past few years more new businesses have opened their

Servers Bartenders

Custodian/Maintenance

Manager

Bowling Attendant Cooks

7

Neondoors on 20th St including Saskatoon’s own Thrive Juice Co. This implies that this area is the new “it spot” for young trendsetters.

Another important aspect of where this venture is located has to do with placement of competition. In this location, Neon will be located in moderate proximity from any direct competition.

The Riversdale neighborhood is a good fit for entertainment because it is walking distance from many hotels downtown. For those spending the night and looking for something fun and exciting rather then sitting in an ordinary pub, Neon will be the perfect option for them.

Figure 2 Location of Neon

2.4 Floor PlanNeon will be laid out between two floors. The reason for this is to give a

grungy basement feel for the bowling alley but still have a lighter space for lunch hour customers. The first floor will contain the kitchen, washrooms, an office for the manager, a large significant bar and tables with seating. There will also be seating around the bar. Washrooms are large and spacious because they are often the social hot spot in bars. The kitchen is roomy for a better workflow and will also hold extra supplies for the bar. The second floor will hold the bowling lanes, seating for the lanes, the shoe rental and a dance floor with a DJ booth.

The access to the second floor will be a ramp to avoid legalities that may come with the dangers of stairs mixed with alcohol consumption. There will be a total of 7 bowling lanes in the basement. The dance floor will be separated from the rest of the floor with a railing surrounding it to keep it some-what separate from the shoe rental. There will be benches around the dance floor for people to sit if they get too

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Neontired although it would be more beneficial for people to gather around the bar upstairs to increase sales. he dance floor will be lower down then the rest of the floor to give more of a separate feeling to it. The DJ booth will be easily accessible to ensure customers have an influence on what they listen to. It is important far the booth to have space around it because part of the promotion will be getting in local up-coming DJ’s so there is space for them to put up their own signage.

Figure 3 Level 1 Floor Plan

9

Neon

Figure 4 Level 2 Floor Plan

2.5 Work FlowThe workflow of Neon is very similar to other bars. The manager will usually

be welcoming customers at the host station and seating those who would like to have something to eat or directing other downstairs to the bowling lanes or dance floor. The manager will be wearing a headset that will enable them to communicate with employees working at the shoe rental, kitchen and the bar via microphones. If the servers have any questions or concerns they can go up and ask the manager since they will be close by. The servers will not wear headsets, as it would be dysfunctional and uncomfortable for them.

There will usually be two cooks in the kitchen at busy time and at slower times only one cook is required. There will be 3-4 servers working at busy times cover both floors of Neon. During the lunch hour there will be two servers. There will be 1 person working the shoe rental. Servers will take orders at the tables and enter them into a till near the kitchen, which then get sent to a screen for the cook to see. The bartender can also place food orders from a till at the bar.

2.6 Hours of OperationNeon will not only be a hot spot at night but also a place for people in the

Riversdale neighborhood to eat for lunch. The hours of operation are as follows:

Table 1 Hours of Operation

10

Neon

Neon is open only after lunch on Sundays because most of our market sleeps later and like to relax on Sunday mornings. Thursday, Friday and Saturday are open later then weeknights because then is when we will see most of our customers. On weeknights we are open until 12 am because we host leagues are they may often run late.

2.7 Supply AnalysisNeon will be purchasing its bowling equipment from alliedbowling.com. This

site offers high quality equipment and also offers a warranty and maintenance with their price.

Liquor will be purchased through SLGA, which is Saskatchewan’s Liquor and Gaming Authority. It is important for liquor to be purchased from SLGA because the money gets put back into the province. Deliveries will be made every Wednesday, to ensure the bar is fully stocked for the weekend (thurs-sat).

Sysco will supply food products including beef, chicken, bread and pasta, vegetables, dairy products and cooking products (condiments, spices, etc.). This is because they are a large supplier and will be very reliable. Deliveries from Sysco will arrive every Monday.

2.8 Service ProvidersStevenson Hood Thornton Beaubier will provide all law services pertaining to

the start up of this business as well as ongoing activities. Thomas Jasper & Associates will provide accounting services. SaskTel will provide telephone and Internet services. Energy and power provided by Saskenergy and Saskpower. Debit machines and the till system will be provided by Moneris.

2.9 Capital Budget

11

Sunday Monday Tuesday Wednesday

Thursday Friday Saturday

1:00-12:00

11:00-12:00

11:00-12:00

11:00-12:00

11:00-2:00

11:00-2:00

11:00-2:00

11 hours total

13 hours total

13 hours total

13 hours total

15 hours total

15 hours total

15 hours total

NeonThe Capital Budget for Neon includes leasehold improvements for the

location and all equipment needed to operate the business. These costs are estimates and may be subject to change.

Leasehold Improvements 200,000

Bowling equipment 150,000

Electronic Equipment 15,000

Furniture and Fixtures 70,000

Total 435,000Table 2 Capital Budget

2.10 Cost of Sales2015 2016 2017 2018 2019

Bowling 36,000 35,424 39,941 42,986 46,264 Food 90,000 88,560 99,851 107,465 115,659

Liquor 110,250 108,486 122,318 131,645 141,683 Total Cost of

Goods Sold236,250 232,470 262,110 282,096 303,606

Table 3 Cost of Sales

These numbers were calculated assuming 40% of revenues come from bowling at a 90% margin, 25% of revenues come from food at a 60% margin and 35% of revenues come from liquor at a 65% margin. The cost of bowling comes from things like maintaining the lanes and organizing promoting the leagues plus replacing or repairing bowling shoes and bowling balls and pins.

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Neon

2.11 Operating Expenses

13

Accounting and Legal 2,500 2,563 2,627 2,692 2,760

Advertising (Marketing) 3,000 3,075 3,152 3,231 3,311

General Supplies 1,000 1,025 1,051 1,077 1,104 Insurance 5,000 5,125 5,253 5,384 5,519

Telephone 1,200 1,230 1,261 1,292 1,325 Utilities 45,000 46,125 47,278 48,460 49,672

Repair and Maintenance 5,000 5,125 5,253 5,384 5,519

Rent 250,000 256,250 262,656

269,223

275,953

Wages 217,580 220,994 242,795

260,114

279,027

Employee Benefits (salaried) 4,095 4,197 4,302 4,410 4,520

Employee Benefits (wages) 23,394 23,696 26,561 28,795 31,248

Misc. Variable Costs % Sales 2,250 2,214 2,496 2,687 2,891 Capital Cost

Allowance 15,000 27,750 23,663 20,319 17,575 Debt Interest 17,500 16,522 15,475 14,355 13,156

Total Operating Expenses 592,519 615,891 643,82

3667,42

4693,58

0

Neon

Table 4 Operating Expenses

These expenses are estimates and may be subject to change. Accounting and Legal expenses are for annual taxes and also covers an liabilities Neon may have to deal with. The Advertising expense may need to be higher in the first year to get things rolling. Cost for general supplies covers things like office supplies and washroom toiletries. Insurance is high seeing as Neon is a bowling facility but will also be promoting alcohol consumption and irresponsible behavior. Another reason is because the Business is split between two levels. Telephone and utilities rates are general for anyone in Saskatoon, rates are consistent. Maintenance and repair will hopefully be lower than estimated because a large investment is being made initially on leasehold improvements to prevent high maintenance costs. Rent expense is very high because the building is 100,000 square feet, split between two levels. This equals to $10 per square feet. Capital cost allowance covers the leasehold improvements to the building.

2.12 Working Capital Analysis

Inventory 13,125 12,915 14,562 15,672 16,867

Accounts Payable 13,125 12,915 14,562 15,672 16,867Total 0 0 0 0 0

Table 5 Working Capital

3.0 Human Resources

3.1 Job DescriptionsManager:

o The manager has the most responsibility of all other positions. They are the one to go to if anything is not running smoothly and oversee all operations.

o They are in charge of scheduling staff. o The manager hires all staff and is responsible for their training. o The manager oversees all decisions made in the kitchen pertaining to new

menu items.o The manager is responsible for knowing about all certifications needed by

the bartenders and cooks. o The manager does all supply ordering such as food and liquor according

to inventory sheets supplied by the bartenders and cooks.

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Neono The manager spends some of his/her time on the floor coaching staff and

ensuring customers are having a good experience. o Some of his/her time is spent in the office making orders and paying bills

and scheduling and doing payroll.Bartender:

o The bartenders must be certified in their position. o The role of the bartender is to serve customers at the bar. This includes

making a variety of specialty drinks and being able to be entertaining in a timely fashion.

o The bartender may also take food orders from those customers sitting around the bar, these orders are sent to the cooks in the kitchen.

o The bartender must be enthusiastic and energetic to keep customers coming back to the bar.

o At he end of the night it is the responsibility of the bartender to clean up the bar and take account of the inventory used in that day.

Server: o Severs at Neon must be organized and efficient. o Because there are two floor levels to this business, they must be able to

be focused in order to bring orders from the second level to the first level and then bring the food or drink back down to the second level.

o They must be friendly and well presented. The servers could be either male or female.

Cook:o The cooks are required to have a food safety course and some experience

cooking. o The meals at Neon are not gourmet but it is expected they are very tasty

to quench any craving. o The cooks must be quick and organized. o They must be clean to ensure high quality meals leaving the kitchen.

Bowling attendant: o The bowling attendant is responsible for all activities having to do with

bowling. o They take payment for the games as well as get people fitted with

bowling shoes. o They set up the screens above the lanes with the correct names of those

bowling and if there are any technical difficulties, the bowling attendant will fix then or report the problem to the manager to be dealt with.

Custodian/Maintenance:o This position requires handyman skill such as being able to repair a toilet

or change light bulbs and operating the bowling lanes. o It also requires cleaning skill. o This position is an on call position along with a cleaning routine that

happens every morning before Neon opens. She/he should be friendly and thorough.

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Neono This job can be dirty but is very important for the maintenance of the

building and the operation of Neon.

3.2 TrainingAll initial training will occur on a training weekend before Neon opens. This

gives all the staff a chance to work together and get to know each other and how to communicate in the best way. If new staff are hired from then on, they will be trained by shadowing an existing staff member, as well as getting a run through of Neon by the manager. Training activities include:

o Team bonding exerciseso Menu trainingo Till operationso Customer serviceo Bowling equipment function

3.3 Wages & Salaries

Salaries/Wages 2015 2016 2017 2018 2019

Manager Salary 50,000 51,250 52,531 53,845 55,191

Full time staff (wage rate/hr)

15.00 15.38 15.76 16.15 16.56

Part time staff (wage rate/hr)

10.50 10.76 11.03 11.31 11.59

Table 6 Salaries/Wages

Salary and Wage Costs 2015 2016 2017 2018 2019

Manager 50,000 51,250 52,531 53,845 55,191

Full time staff 147,000 150,675 154,442

158,303

162,260

Part time staff 20,580 19,069 35,822 47,967 61,576 Total Salaries and

Wages 217,580 220,994 242,795

260,114

279,027

Table 7 Salary/Wage Costs

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NeonSalary for the manager is an average amount for a manager and he/she will also

be compensated with dividends in future years. The full time staff make well above minimum wage, which should be appealing to many people applying for the job. There is probably some room to lower the full time staff wages if expenses needed to be cut. But this would have to happen before these people were hired.

4.0 Marketing

4.1 Positioning StatementNeon reinvents the social experience by combining the entertainment of

bowling, the excitement of dancing and delicious food and drinks to give you a new kind of “going out”. Neon will be the place that comes to everyone’s minds when they are trying to decide where to go for a good time. Not only is this place great for weekend entertainment, It is also a fun and sociable place to hang out on a week night with involvement in a bowling league or drop in for a unique lunch atmosphere.

4.2 Target Market

17

Neon

Neon’s target market is young adults between the ages of 19-30 years old. Our customers are active young people who are tired of the same old thing at the bars they go to. These people want something fun to do with a group of people other than sitting around a loud pub where conversation in nearly impossible so the group is left staring around the room awkwardly.

University students will be targeted through promotion of the bowling leagues. When people hear about the leagues, word of mouth will be an affective way to get others talking about Neon.

Young professional also fit the target market. Neon is located near downtown, close to many accommodations for young professionals. Neon is a unique place to check out on those overnight stays in Saskatoon or to break up that boring mandatory conference weekend.

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NeonPeople that will consider spending their lunch break at Neon are those people

who live or work in the Riversdale or downtown area and want a unique atmosphere and some classic comfort food. They may even want to throw in a game of bowling before they head back to work.

4.3 CompetitionNeon’s main competition will be with other bowling alleys in Saskatoon;

mainly the two Hunter’s Bowling Centers (formally Eastview Bowl and Fairhaven Bowl) Other competition includes bars and pub around the downtown area. The food and drinks will be similar to what they are offering but Neon has something non of them have, great well rounded entertainment.

Figure 5 Competitive Analysis

The Sutherland bar and Sports on Tap are competition to Neon because they also offer leagues of other sorts that are marketed towards university aged people. The way Neon is differentiated is by having a club-like atmosphere and a dance floor and having these leagues open all year round. When the tournament or game

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Neonis over, there is no need to meet at a bar afterwards, you are already at the place to be.

4.4 SWOT Analysis

20

Neon

Figure 6 SWOT Analysis

4.5 Marketing StrategyMany techniques will be used to market Neon. In the beginning an

awareness campaign will be used to get Neon’s name out there and get people excited for the opening. The campaign will include:

o Posters across the University of Saskatchewan to advertise the leagues and the opening of Neon

o Radio advertisementso Social media presenceo Viral promotional videoo Grand Opening including local DJ celebrities and drink specials

Strengths:-All-in-one concept-great atmosphere

-leagues-favorite drinks and

food-dificult business to

start

Weaknessnes:-high capital costs

-need lots of customers/day

-small number of lanes

Opportunities:-a large target market-growth

-booming location-multiple locations

Threats:-pubs and bars around the area

-Other bowling alleys in the city

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NeonAfter the opening of Neon, marketing will change from external to internal,

focusing on customer service to insure customers will return and bring friends. This will be accomplished by having an impressive atmosphere that will have people talking. Presence on social media will also be an important continuing marketing strategy.

Figure 7 Marketing Poster Example

4.6 Marketing Budget

Table 8 Marketing Budget

The leagues are an important and easy part of marketing. Once our leagues have been established, they bring people in by themselves. It’s up to the customers to round up teams for each season. As long as people are having a good time with the leagues and the schedules are organized, people will convince their friends to join.

22

Neon

To cut costs on marketing, posters social media pages and promotional videos will be made by the manager. The largest expense in the marketing strategy will be the radio ads. Some of the budget for year two and three may be taken and used for the first year for the awareness campaign.

5.0 Financing and Accounting

5.1 Financing BudgetReceiving funding for this project will be difficult because it require a large

capital investment and it also has a low NPV. Aside from these aspects, a bank loan will be taken out on the conditions that the owner guarantees the bank their home and equity.

Bank Debt 250,000

Equity 200,000

Figure 8 Financing Budget

The $200,000 of equity will be a combination of love money and personal savings. If the $250,000 loan from the bank is not approved, the ratio may be shifted to lower the bank loan and a venture capitalist may be considered to assist the start up.

5.2 DividendsDividends will be paid out to the owner whenever Cash exceeds 20,000. The

dividends will be whatever is above the 20,000 in the Cash account. In the first year no dividends are pain out but they begin in year 2.

5.3 Profit and Cash Flow ProjectionsProfits for Neon will be positive as long as it gets at least 86 customers on

average per day spending $25 average. The base case of 100 customers per day will result in a net income for the first year. By the end of the fifth year, profits are

23Year 1 Year 2 Year 3 Year 4 Year 5Advertising(Marketing) 3,000 3,075 3,152 3,231 3,311

Neonup to 138,684, which is a decent return in five years. Cash drops in year two due to the cost of capital allowance year two rule.

1 2 3 4 5

(50,000)

-

50,000

100,000

150,000

61,971

32,398

80,546

108,864

138,684

80,245

(40,587)

47,384

27,388 28,827

Net Income Cash Flow

Years

Dol

lars

Figure 9 Profit and Cash Flows

5.4 Breakeven Analysis

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Neon

1 2 3 4 50

20

40

60

80

100

120

140

100 96106

111116

8689 88 88 88

Year

Num

ber

of C

ust

omer

s p

er d

ay

NPV =187,138

IRR =42%

Average 5 year Net Income = 84,492

Figure 10 Breakeven Analysis5.5 Sensitivity Analysis

Table 9 Customer Sensitivity

Price/Customer

Average 5 year Profit

Net Payback IRR Compensatio

n

25

Customers/day

Average 5 year Profit

Net Payback

IRR Compensation

80 (19,514.00) (97,995.00)

-41%

55,191.00

90 34,745.00 333,764.00

12% 88,742.00

100 84,492.00 754,401.00

41% 149,620.00

110 134,240.00 1,175,037.00

66% 202,865.00

120 183,988.00 1,595,674.00

89% 256,110.00

Neon

$15.00 (155,617.00)

(1,202,062.00) % 55,191.00

$20.00 (19,514.00) (97,995.00) -

41% 55,191.00

$25.00 84,492.00 754,401.00 42% 149,620.00

$30.00 183,988.00

1,595,674.00 89% 256,110.0

0 $35.00 283,483.0

0 2,436,947.0

0134

% 362,601.0

0Table 10 Price Sensitivity

According to these sensitivity tables it is evident that Neon’s profits are more sensitive to the amount on average a customer spends there then how many customers come in per day. Although the number of customers does have an effect, if the average amount a customer spends changes by only $10, the average five-year profit will plummet by $71,125. This would devastate the business so it is crucial to ensure when customers do come in, they are purchasing food and /or drink along with their bowling fees.

5.6 Owner’s Compensation

Table 11 Owner’s Compensation

In the first year the owner’s compensation will be the salary for the manager position with out dividends. In year two when there is growth, dividends will be paid out. By year five the owner will be almost tripling their regular salary.

5.7 Management Information SystemThe manager will be responsible for managing all information needed to run

the operations. Things like inventories, sales, and payroll will all be managed through a computer system.

There will be a separate system used to manage all orders, food or drink. This system is linked with the first for inventory purposes. This system helps the manager track which meals and drinks are most popular and in what times of the year.

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Salary 50,000 51,250 52,531 53,845 55,191

Dividends - 60,245 19,658 67,042 94,430Total Owner's Compensation 50,000 111,495 72,189 120,88

6 149,62

0

Neon

5.8 Contingency PlanIn the case that Neon does not meet it’s breakeven, it would have to claim

bankruptcy. This would be a huge loss for the owner as such a large investment and risk was made. Since Neon did not own a building, there is little collateral for the bank other than belongings of the owner’s. It is possible that equipment could be sold off along with furniture and fixtures.

6.0 SummaryThe feasibly of Neon is poor. It will be very difficult to reach an average of

100 customers everyday. The capital costs to create Neon the way it is meant to be are too high. The problem is that an idea like this cannot be done on a small scale. It would be possible to do with a lot of capital if a person had time to wait for a return.

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