The
Importance of Strategic Analysis
The Strategic Analysis for any
potential business enterprise will need to pass four feasibility tests. These
tests will help insure the owner/investor achieve positive results. The four
tests are as follows: 1) Does the business forecast supply and demand support
that property (location) for that business to succeed, 2) Does the property
location (site) support projected inventory and customers and 3) Does the
projected financials indicate a greater profit to risk margin, and if so, will
future profit from hold sale be what was expected and 4) What zoning is allowed
on the subject building site, what building codes are in effect and what
construction requirements are required?
Market
Feasibility
The Demand For Retail Food Businesses
Focusing on the
subject business (property), the forecast for demand for the type of food and
beverage products that we offer will be high due in part that this is a
relatively new idea to this area, due in part to keeping prices very reasonable
and due in part to the high quality food and customer service that this
business will promote and practice. There is always a demand for new food
ideas, as long as quality, price and customer service are paramount.
Aubrey
is a small town 15 miles Northeast of Denton, Texas, which makes up part of the
larger Trade area known as Denton County. The retail food market is strong in
this area and growing at a steady pace. A recent article in the Dallas News.com
on-line journal cited the steady growth of the Retail sector, specifically in
the area of food stated, “Retail sales increased, but the pace decelerated from
earlier this year. Discount retailers said sales of food and sundries were
strongest. Three large retailers said sales growth in the Dallas Fed
district outpaced the nation. Auto sales grew at a steady pace”.
The Supply Side of
Vacant Land
Since the economic
downturn in 2008, one of the most important growth and indicator of growth
sectors has declined greatly. This as we all know, is the housing market. The
residual effects were many. One effect was the loss in value of Real Estate,
which affects vacant land. In the downturn, very few if any will sell vacant
property. Recent market indications are seeing a strong inventory of vacant
land in the Aubrey, Texas area (area of proposed business). Surveying the some
of the local residents of Aubrey has led me to conclude that vacant land hasn’t
come onto the market for sale in this quantity for more than 20 years. The
reasons for this sudden upswing in vacant land inventory can be attributed to
land value increases since the 2008 recession and generational indifference.
While land value increases can be quantified, the generational indifference is
a social trend that indicates that older, more established residents now
leaving their homes and vacant land due to age and/or health reasons are
leaving their property to their families, who would rather sell than hold.
The Primary Market Competition
In small rural towns such as Aubrey, retail food competition can be best described as fierce. Aubrey food retail establishments are divided into two geographical areas. Old Main Street Aubrey, Texas Spur 428, has some of the original buildings built in the early 1800’s.
 |
| Old Main Street Aubrey |
The second geographical area is Texas route 377. This is where the greatest growth has occurred, mostly in the last 10 years. Over this 10 year period, there has been a staggering 68% growth in all sectors of real estate.
 |
| New Business Area Highway 377 |
 |
| Taco Bell Highway 377 |
 |
| Subway & Mr Jim's Pizza |
 |
| Sonic |
 |
| Betty's Cafe |
Economic Impact From
Competing Retail Restaurant Sector
|
City of Aubrey, Texas -
Estimated Gross Revenue - As of June 2011
|
Restaurant Name
|
Year Established
|
Seating Capacity
|
Parking Capacity
|
Gross Revenue/Yr.
|
Betty's Café
|
1997
|
110
|
125 spaces
|
$165,000
|
Kathy's Kitchen
|
2011
|
50
|
20 spaces
|
$150,000
|
Mom's on Main
|
2000/2011
|
125
|
30 spaces
|
$275,000
|
The BBQ Joint
|
2006
|
55
|
25 spaces
|
$70,000
|
Chicken Express
|
2008
|
65
|
30 spaces
|
$375,000
|
Sub-way
|
2009
|
40
|
10 spaces
|
$465,000
|
Mr. Jim's Pizza
|
2005
|
0
|
5 spaces
|
$260,000
|
Sonic
|
2002
|
20
|
40 spaces
|
$435,000
|
Taco Bell
|
2009
|
40
|
10 spaces
|
$425,000
|
Location
and Site Feasibility
The Proposed building
site is located at the corner of 377 & Highmeadow Drive in Aubrey, Texas.
The Subject Property is .50 Acres (21,780 s.f.), flat graded with existing
utilities, directly across from the new Family Dollar retail center. The
entrance is Highmeadow Drive, newly constructed with curb and gutter. Pad site
is ready to build on with minimal work. Traffic count is relatively high, at
approximately 11,800 vehicles (both north and south) per day. There is a stop
light at the intersection of 377 and Highmeadow Drive. Any and all inventory
will be moved in and out of the site with no resistance.
 |
| Proposed Building Site |
The City of Aubrey is
located 15 miles Northeast of Denton, adjacent to Krugerville and Pilot Point.
The City of Crossroads is a developing city located 5 miles south of Aubrey and
has several small restaurants and retail and commercial business with
additional large residential subdivisions. The town of Pilot Point has, like Aubrey,
an Old Main Street Area. Field inspection of Old Main Street Pilot Point
indicates a portion of the historical area demolished and what remains is
approximately 50% vacant. Pilot Point’s CBD is also located on 377 and consists
of small restaurants, a McDonalds and a Dairy Queen and small retail and
commercial businesses. The town of Krugerville has a small CBD also located off
of 377 and has two small restaurants and small retail and commercial
businesses.
 |
| Denton County |
LEA Demographics for Zip Code 76227
Population in 2010: 2,595. Population change since 2000: +73.0%
Males: 1,225 (47.2%)
Females: 1,370 (52.8%)
Median resident age: 32.1 years
Texas median age: 40.8 years
Zip codes: 76227.
Estimated median household income in 2009: $59,446 (it
was $41,131 in 2000)
Aubrey: $59,446
Texas: $48,259
Estimated per capita income in 2009: $23,521
Unemployment in March 2012:
Here: 6.3%
Texas: 7.0%
Aubrey city income, earnings, and wages data
Estimated median house/condo value in 2009: $114,784 (it was $82,700 in
2000)
Aubrey: $114,784
Texas: $125,800
Mean prices in 2009: All housing units: $131,959;
Detached houses: $124,682; In 3-to-4-unit structures: $365,681; Mobile homes:
$239,499
Median gross rent in 2009: $855.
Read more:
http://www.city-data.com/city/Aubrey-Texas.html#ixzz298kfDd8D
Most common industries in 2005-2009 (%)
Males
Construction (25%)
Retail trade
(15%)
Manufacturing
(14%)
Public
administration (9%)
Transportation
and warehousing (7%)
Accommodation
and food services (5%)
Professional,
scientific, and technical services (3%)
Most common industries in 2005-2009 (%)
Females
Health care and
social assistance (19%)
Educational
services (17%)
Retail trade
(14%)
Administrative
and support and waste management services (8%)
Professional,
scientific, and technical services (7%)
Accommodation
and food services (6%)
Other
services, except public administration (6%)
Political
and Legal Feasibility
Current Planning and Zoning centers
around the 377 CBD. Zoning is primarily mixed use with a mix from Agricultural
land (Farms and Horse Ranches) to Commercial. The primary reasons for this
happenstance mixed use are many. Primarily, Aubrey’s history was farming and
agriculture. As time passed, there was a definite need for retail and
commercial businesses. The Old Main Street CBD houses original buildings built
in the early 1800’s and the City of Aubrey takes great pride in keeping these
buildings intact. The currently are leased to retail and restaurant businesses.
Off of the main 377 corridor are residential subdivisions constructed in the
last 20 years.
Zoning for the Highmeadow Drive retail
area is zoned for retail and commercial construction. For the proposed
business, the City of Aubrey was approached with some caution, but was welcomed
by the planning department.
Financial
Feasibility
The Cash Flow
Analysis for the Business Financial are below. They are calculated using
projected sales receipts for a 12 hour period, 6 day work week and 313 work
days per fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculate First
Years Receipts
|
|
|
|
|
[2013]
|
|
[2014]
|
|
[2015]
|
|
[2016]
|
|
[2017]
|
|
[2018]
|
|
Total
|
|
|
Year
|
|
|
$585,936
|
|
Beginning Cash Balance
|
30,000
|
|
$199,527
|
|
$432,014
|
|
$698,710
|
|
$1,005,086
|
|
$1,349,903
|
|
|
|
|
|
|
|
|
|
Cash Inflows (Income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Day:
|
|
|
$1,872.00
|
|
|
Sales & Receipts
|
669,165
|
|
736,082
|
|
809,690
|
|
890,659
|
|
979,725
|
|
1,077,697
|
|
5,163,017
|
|
|
Hour:
|
|
|
$156.00
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Pie Price:
|
$3.25
|
|
48
|
/hour
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Total Cash
Inflows
|
$669,165
|
|
$736,082
|
|
$809,690
|
|
$890,659
|
|
$979,725
|
|
$1,077,697
|
|
$5,163,017
|
|
actual breakdown:
|
313
|
work days
|
|
|
Available Cash Balance
|
$699,165
|
|
$935,609
|
|
$1,241,704
|
|
$1,589,369
|
|
$1,984,810
|
|
$2,427,600
|
|
|
|
|
|
|
|
|
|
Cash Outflows (Expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
hours:
|
|
|
|
|
|
|
Advertising
|
6,000
|
|
6,600
|
|
7,260
|
|
7,986
|
|
8,785
|
|
9,663
|
|
46,294
|
|
8
|
|
|
|
|
|
|
Bank Service Charges
|
300
|
|
325
|
|
350
|
|
375
|
|
400
|
|
425
|
|
2,175
|
|
9
|
|
|
|
|
|
|
Credit Card Fees
|
4,100
|
|
4,510
|
|
4,961
|
|
5,457
|
|
6,003
|
|
6,603
|
|
31,634
|
|
10
|
|
|
|
|
|
|
Delivery
|
200
|
|
220
|
|
242
|
|
266
|
|
293
|
|
322
|
|
1,543
|
|
11
|
|
|
|
|
|
|
Health Insurance
|
4,000
|
|
4,200
|
|
4,400
|
|
4,600
|
|
4,800
|
|
5,000
|
|
27,000
|
|
12
|
|
|
|
|
|
|
Insurance
|
4,880
|
|
5,612
|
|
6,454
|
|
7,422
|
|
8,535
|
|
9,815
|
|
42,718
|
|
|
|
|
|
|
|
|
Interest
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
Inventory Purchases
|
187,586
|
|
206,345
|
|
226,979
|
|
249,677
|
|
274,645
|
|
302,109
|
|
1,447,340
|
|
|
|
|
|
|
|
|
Miscellaneous
|
3,500
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,500
|
|
|
|
|
|
per day
|
total/$day
|
|
Office
|
1,200
|
|
1,320
|
|
1,452
|
|
1,597
|
|
1,757
|
|
1,933
|
|
9,259
|
|
bowls of soup
|
$2.50
|
|
15
|
$37.50
|
|
Payroll
|
101,440
|
|
106,512
|
|
111,838
|
|
117,429
|
|
123,301
|
|
129,466
|
|
689,986
|
|
bowls of chilli
|
$2.50
|
|
15
|
$37.50
|
|
Payroll Taxes
|
12,832
|
|
12,896
|
|
12,961
|
|
13,025
|
|
13,091
|
|
13,156
|
|
77,961
|
|
cinammon rolls
|
$2.49
|
|
24
|
$59.76
|
|
Professional Fees
|
6,500
|
|
6,600
|
|
6,700
|
|
6,800
|
|
6,900
|
|
7,000
|
|
40,500
|
|
Cans of soda
|
$0.75
|
|
48
|
$36.00
|
|
Rent or Lease Equipment
|
1,500
|
|
1,575
|
|
1,654
|
|
1,736
|
|
1,823
|
|
1,914
|
|
10,203
|
|
bottled water
|
$0.75
|
|
48
|
$36.00
|
|
Subscriptions & Dues
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
milk
|
|
$1.00
|
|
24
|
$24.00
|
|
Supplies
|
50,000
|
|
57,500
|
|
66,125
|
|
76,044
|
|
87,450
|
|
100,568
|
|
437,687
|
|
soft serve
|
|
$1.00
|
|
36
|
$36.00
|
|
Taxes & Licenses
|
15,000
|
|
31,600
|
|
31,650
|
|
31,700
|
|
31,750
|
|
31,800
|
|
173,500
|
|
|
|
|
|
|
$266.76
|
|
Utilities & Telephone
|
3,600
|
|
3,780
|
|
3,969
|
|
4,167
|
|
4,376
|
|
4,595
|
|
24,487
|
|
|
|
|
|
|
|
|
Other: Franschise Fees
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Additional Food/Drink
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Day
|
$266.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
Week
|
$1,600.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Subtotal
|
$402,638
|
|
$449,595
|
|
$486,994
|
|
$528,283
|
|
$573,908
|
|
$624,369
|
|
$3,065,787
|
|
Year
|
$83,229
|
|
|
|
|
Other Cash Out Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Purchases
|
50,000
|
|
5,000
|
|
5,000
|
|
3,000
|
|
6,000
|
|
3,000
|
|
72,000
|
|
|
|
|
|
|
|
|
Loan Principal
|
2,000
|
|
2,000
|
|
2,000
|
|
2,000
|
|
2,000
|
|
2,000
|
|
12,000
|
|
|
|
|
|
|
|
|
Owner's Draw
|
45,000
|
|
47,000
|
|
49,000
|
|
51,000
|
|
53,000
|
|
55,000
|
|
300,000
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Subtotal
|
$97,000
|
|
$54,000
|
|
$56,000
|
|
$56,000
|
|
$61,000
|
|
$60,000
|
|
$384,000
|
|
|
|
|
|
|
|
|
Total Cash
Outflows
|
$499,638
|
|
$503,595
|
|
$542,994
|
|
$584,283
|
|
$634,908
|
|
$684,369
|
|
$3,449,787
|
|
|
|
|
|
|
|
Ending Cash Balance
|
$199,527
|
|
$432,014
|
|
$698,710
|
|
$1,005,086
|
|
$1,349,903
|
|
$1,743,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
