The Market Analysis

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