2

1|Copeland Associates @OHIO

Integrated Business Cluster

Transmittal

Subject: Prepare a feasibility analysis on opening a business that offers outdoor adventure and health

eating options in Portland Maine.

Date November 15,2014

To: Professor Lori Marchese

Professor John Keifer

Professor Luke McElfresh

Professor Jamie Lambert

From: Queen's Port Tea PM 107

Billy Groves

Anthony Head

Jordan Andrews

Harley O’Flaherty

Lin Weisheng

We established a business concept for the feasibility analysis, which includes:

Trade dress for tea store

Information System Insightly

Memberships and promotions

Brand identity

Included in our report are two demand scenarios for the specialty tea store through comparable

markets and traffic patters. We also described Porters 5 forces for the industry. A marketing plan has

been set to describe our strategy towards gaining potential customers. To finalize the feasibility

analysis we created financial project for the stores cash flows over a 5 year period. Each of these

pieces of information helped us determine the feasibility to open a tea store in Portland Maine.

Thank you for the opportunity to conduct this feasibility analysis for our client. We feel that this

project has helped us gain an understanding and knowledge on how to determine the most effective

plan towards starting a business.

Copeland Associates @OHIO


Natural & Specialty

Food Analysis

Prepared for:

Professor: Lori Marchese

Professor: John Keifer

Professor: Luke McElfresh

Professor: Jamie Lambert

Copeland Associates Faculty

College of Business

Ohio University

Prepared by:

Anthony Head

Harley O’Flaherty

Billy Groves

Lin Weisheng

Jordan Andrews

Copeland Associates Students

College of Business

Ohio University



Industry

Analysis

Business

Concept

Demand

Scenario

Marketing

Plan

Financial

Projections

Table of Contents

Figure 1 – Projected Profit Margins Natural and Specialty foods

Figure 2 – Major Market Segmentation by age

Figure 3 – Shopping Preferences of Specialty food consumers in U.S

Figure 4 – Store layout with key

Figure 5 – Comparable market cities with similar tea shops

Figure 6 – Population/Commuter/Tourist Population Maine

Figure 7 – Number of visitors daily near location of tea shop with expected average

Figure 8 – Initial Balance Sheet

Figure 9 – Income Statement

Appendix- A - Pest Analysis

Appendix- B - Porters 5 Forces

Appendix- C - Marketing 4 P’s

Appendix- D - Location Information

Appendix- E - Extra Industry Information

Appendix- F - Persona Identification

Appendix- G - Comparable Market Continued

Appendix- H - Store Supply Items

Appendix- I - Hours Open & Employee Schedule

Appendix- J - Store Flyer

Appendix- K - Queen’s Port Statement of Financial Position

Appendix- L - Website Screenshots

Section Description Slide No.

1 Introduction

Transmittal………………………………………………………………………………………………… #1

Title Page………………………………………………………………………………………………….. #2

Table of Contents………………………………………………………………………………………….. #3

Executive Summary……………………………………………………………………………………….. #4

Introduction……………………………………………………………………………………….……….. #5

2 Industry Analysis

Industry……………………………………………………………………………………………………. #6

Market……………………………………………………………………………………………………... #7

Competition……………………………………………………………………………………………....... #8

3 Business Concept…………………………………………………………………………………………….......... #9

4 Demand Scenarios

Comparable Market……………………………………………………………………………………….. #12

Traffic Patterns……………………………………………………………………………………………. #13

5 Marketing Plan……………………………………………………………………………………………………. #14

6 Financials………………………………………………………………………………………………………….. #16

Conclusion………………………………………………………………………………………………………… #17

References………………………………………………………………………………………………………… #18

Appendix………………………………………………………………………………………………………….. #24

Figure 10 – Average daily customers

Figure 11 – Product Breakdown

Figure 12 – Cash Flow Projection



Executive Summary

The purpose of this project is to provide a feasibility study on a Natural and Specialty Foods store in

the area of Portland, Maine. After conducting an industry analysis we had to create a store that had a

high chance of being profitable in the market. The store that research showed would be popular in

Portland, Maine was a British themed Tea House called Queens Ports Tea. The report will provide

an in depth look into the business concept and marketing plan that would make Queens Ports Tea

successful business Venture in Portland, Maine. The report will also include pro-forma financial

statements that will show that Queens Port Tea is in fact a feasible business.

Unique Business in a Growing Industry

After intensive analytical research the Natural and Specialty Food industry is growing due to

changes in social trends and the influx of different ethnic groups. People are starting to become

more health conscious and making healthy alternatives to products like coffee, processed foods, etc.

Portland, Maine is one of the healthiest cities in America and a majority of the population consumes

tea. This is perfect for a British themed tea house because of the high demand, low barriers to entry,

and lack of competition in the surrounding area. The location of Queen’s Port Tea is a high

trafficked area that draws a lot of attention. Both of our demand scenarios predict a high volume

amount of customers to enter our store. The location is critical to Queen Port’s success. Not only is

the location a high trafficked area but other tea shops in similar markets are also experiencing a

plethora of customers giving Queen’s Port Tea a very bright future.

High IRR and Positive Net Present Value

Based upon analytical research and the development of pro-forma financial statements the study

shows that this project should be accepted and is highly feasible. With an IRR of 57% and NPV of

$2,891,055 Queens Port Tea will be a very successful business in the Portland, Maine area

financially. Cash flows are significantly increasing, with a starting investment of $796,850.49

Queens Port Tea is expected to generate $559,942.29 by its 5th year of operating.

Final Recommendation

In conclusion Queens Port Tea has shown to be financially feasible as well as a unique business

concept that is in demand in the area of Portland, Maine. The NPV and IRR present enough data to

prove that financially the project is feasible and will be incredibly successful. The high trafficked

location of Queens Port Tea and the high amount of tea consumption in Portland, Maine also show

that the environment a catalyst to Queens Port Tea’s road to success.



Introduction

The purpose of this project is to conduct an initial environmental analysis, develop a business

concept and market plan, and compute financials to determine whether opening a natural and

specialty food store in Portland, Maine would be feasible. Statistics and findings have led us to

develop three key factors that lead to success in this industry. These three factors include average

household income, healthy trends of the area, and age demographics. Through our research we have

determined Queen’s Port Tea store to be highly feasible in the Portland, Maine area. Through our

report we analyze opportunities, threats, and trends that lead us to developing our project’s scope

and strategy that we can present to our client.

Average household

income

Healthy Trends of the

Area

Age Demographic

Key Success Factors

The reason that averagehousehold income is such animportant factor in thenatural and specialty foodindustry is considered aluxury way of eating and ispriced higher than regularretail stores. Averagehousehold income isimportant because thehigher the income the higheramount that will bedisposable and will be spenton specialty and naturalfoods.

The reasons for why healthytrends of the location isimportant is because thebigger the trend the moresuccessful that natural andspecialty foods will be.Locations who have a higherhealthy trend usually have apopulation of peoplewho prefer to workout, andeat organic. More peoplewill be interested in healthconscious alternativemaking it crucial to anindustry's success.

The age demographic is akey success factor becausethe amount of people thatbuy natural and specialtyfoods are going to be inbetween 18-50 years old. Itis important that the area ispopulated with this agegroup because of theeducation level of peoplewho are 18 or older is atleast through high schooland have been taught aboutnutrition.



Industry

The natural and specialty food industry has grown in

popularity due to the growth of health awareness and the

rise of an immigrant population. For example, in

America, according to first research Hispanic consumers

control about $1 trillion of the buying power (First

Research, 2014). Experts expect the number to double

within a decade making immigration a huge factor that

impacts the growth and size of the industry. Due to these

growing trends the natural and specialty food industry

has grown into a $7.7 billion industry. This is much less

then the supermarket industry which makes up 91% of

the $571 billion food industry (Lerman, 2014). Even

though supermarkets are 91% of the food industry the

specialty and natural food industries profit margins are

higher. The industry is expected to earn $240.1 million

in profit which is about 3.1% of the revenue. According

to first research the percentage of revenue that is profit is

projected to reach 4% by 2018 (See Figure 1).

Industry Analysis

Business Concept Demand Scenario Marketing PlanFinancial

Projections

Data Source: firstresearch-learn.com Figure 1

In Portland, Maine the market is still significantly large for the local markets with approximately 113

operations whom had an average annual market volume of $210,960,270 in that the sales are trending

upward(See 2013 (Bizminer, 2014). All of this data shows that the natural and specialty food retail business

is rather large both in revenue creation and in number of operations especially in the U.S. and in Portland,

Maine. Although the growth rate of Portland is a little bit lower than the industrial average. The average of the

industry according to BizMiner is 19.75% while Portland's is only 18.59% (Bizminer, 2014). (For more

information on economics within the industry see Appendix A)

0%

1%

2%

3%

4%

5%

6%

2013 2014 2015 2016 2017 2018

Projected Profit Margins Natural and Specialty Foods

Industries across the globe are always changing and evolving, but some trends and practices are still preserved

and used today. The power between suppliers and buyers is leaning more to the suppliers. This is because they

are targeting a niche market and the supermarkets aren’t producing the quality or the product of specialty or

natural goods (See Appendix B for more information). Major products sold by specialty food stores include

meat, poultry, fish, produce, baked goods, and candy. These specialty food stores can be in the form of chains,

independent retailers, franchises, and cooperatives. The natural and specialty food stores have full control on

deciding the price of their product based on the value they believe they bring to consumers. The merchandise

mix helps determine locations for these stores (See Appendix E for more information on merchandise

mix). Stores with a broad range of products seek out strip malls, while smaller stores may be further from

increased population areas (First Research, 2014). For more information about suppliers and buyers adhere to

Appendix B. (For more information on industry see Appendix E)

Size & Growth

Trends



Market

ProductsThough, this industry may be considered somewhat of a niche market, there are still, a significant amount of

products in which a natural and specialty food retailer can sell. Located around Deering Oaks Park in

Portland more than 30% of the population uses organic foods. The three most common types of

organic food used in Portland are meat and poultry, any frozen foods, and yogurt (Simple Map, 2012

SimmonsLOCAL). Though, these brands may be less known among the general population, they are known

by some of the consumers in the industry and they would be willing to pay a higher price or a premium for

these natural and specialty foods.

Demographics & ConsumersThe natural and specialty foods demographic is very

broad. This is because each store is designed for a

specific niche market. The new healthy eating trend has

been perfect for this industry showing that one of the

most important demographic segments is age. As shown

on IBISWorld the industry is mostly comprised of people

who are aged between 18-35 taking up 34.5% of the

market while the second highest is adults 36-50 who take

up 29.5% of the market (Lerman, 2014). This shows that

adults and young adults are more educated and

aware of eating healthy than children or the

older generation. The consumers of this industry are

very knowledgeable of the products and expect the

employees of their store to be knowledgeable as

well. Statistically, 64% of customers shop at

specialty food stores where employees are

knowledgeable about products. Knowing the

information about the product will help with promotion

and knowledge of the health issues and benefits. 36% of

US consumers shop at specialty stores for this

reason (Statista, 2013 August). (For more information

on buyers refer to Appendix B)

OpportunitiesIn this industry, the rise in popularity of butcher shops are viewed as one of the industry opportunities because

it provides high quality products. Customers who shop in this industry care about quality over any other

factor. Another opportunity is called “DIY FOOD”, which means do-it-yourself food. A large majority of

customers show their interests in making food by themselves due to their independent lifestyle. The

opportunities will not only increase the demand for specialty and natural foods but also the ingredients that are

used to make them (First Research, 2014). (For more information on threats refer to Appendix B)

34%

29%19%

18%

Major Market Segmentation by age (2014)

18 - 35 36 - 50

Under 18 51 and Older

First Research (2014, October) Figure 2

Industry Analysis


Projections



Competition

Specialty FoodsStores in this industry are able to create a competitive advantage by “carving out a niche,” or focusing on

perfecting fewer products rather than wholesale. Generally these stores remain local and rely on strong

customer loyalty and uniqueness to distribute their products. Specialty food stores differentiate themselves

through quality, price, and brand to target the niche market.. The three most common types of organic food

used in Portland are meat and poultry, any frozen foods, and yogurt (Simple Map, 2012 SimmonsLOCAL).

These items give insight, from which our client can determine what kinds of specialty food products to

supply.

Employee knowledge of productsOrganic food demand is rising and will lead to more

demand in the specialty food store market (Lerman,

Sally, 2014 June). Knowing all the information about

your products enhance the chances of selling it. (See

Figure 4)

Informing individuals of the health benefits from

specialty food items gives reasoning for the value on

what consumer choose to eat and increases demand.

Increasing the awareness on the long-term effect that

specialty foods have on an individual’s life influences

the consumer’s decision to buy the product.

•Where employees knowledgeable about products64%

•Where consumers agree with company values46%•Where employees knowledgeable about health wellness issues

36%

•Where advice on recipe techniques are supplied33%

•Where consumers know the owner27%

(Statista, 2013 August). Figure 3

Shopping preferences

of specialty food consumers in U.S.

PricingCustomers that opt for lower costs over quality

can stop at any local Specialty Foods store and

find what they’re looking for. Mass

supermarkets’ and grocery stores pose a threat

to specialty food stores by providing customers

with products at lower prices. Two

components that need to be evaluated to

determine markup rates for our products are

household income and what we can afford to

invest into the business.

Building brand imageGrowing population in the United States increases

demand for food products (Lerman, Sally, 2014 June).

Finding who and what to supply will be crucial in

creating a valuable product for consumers.

Appealing productsWhen products are appealing to consumers, and are

considered a part of their culture, it will influence them

to buy the products. Specialty food stores produce

healthy and organic foods that appeal highly to diet-

conscious consumers.

Industry Analysis


Projections



Business Concept

Queen's Port Tea cares about having strong relationships with our customers that is why we have

started the usage of our CRM program ,Insightly , to track the habits, behaviors, and memberships

of our business. This will allow ease and efficiency of the business model. Queen's Port Tea will

implement Square Up to keep track of our transactions and sales to make sure that the financials are

accurate and clear. (for more information on technology refer to Appendix A.)

The items that Queen's Port Tea will sell to consumers all represent our brand image, elegance and

class. We will produce the finest and freshest exotic teas that can only be acquired at very select

stores in Portland, Maine. We will also have special seasonal beverages which include in the fall a

spicy sweet pumpkin tea latte, in the summer, a sweet and tart lemon tea, the winter, a spiced calm

and relaxing winter tea and in the spring a rejuvenating and revitalizing spring tea. We also offer an

assortment of fruit, black, white, herb, and milk teas that are good for the spirit, body, and mind.

There are two categories of teas that we offer beverage and traditional tea. Beverage teas include

fruit and milk whereas traditional includes original tea. Not only do we have a variety of teas we

also offer a plethora of delicious succulent food that makes any persons mouth water. These include

different kinds of nuts, muffins, dried fruit, scones and other pastries that go great with any one of

Queen's Port Tea’s teas. (For more information or product see Appendix C and Appendix L)

Vision

“Providing consumers with a relaxed but elegant ambiance, while they experience a unique way to enjoy their tea of choice”

Location 569 Congress St

Yearly cost = $34,110

Monthly cost = $2,842.50

Bus stop Hotel

Starbucks Congress Square

Gourmet pizza Misc. Shopping

Deering Oaks park Restaurants

Queen's Port Tea is aimed to provide consumers

with a unique way to purchase, experiment, and

enjoy specialty tea and food options. We have

targeted a specific market in order to integrate our

products successfully into the natural and specialty

foods industry. Our target market includes tea

enthusiasts, well educated, people with ages ranging

from early twenties to late fifties. The location of

our store is located near a park, apartment complex,

hotel, parking garage, and is located exactly 1 mile

away from the University of Southern Maine. We

chose this location because all factors of our target

market are met and accounted for. Refer to

Appendix D for further explanation on how our

location meets the factors of our target market. Our

tagline states our overall view of the products we

provide to consumers, “Elegance you can taste”.

Products Offered

Information Systems

Introduction

Industry AnalysisBusiness Concept

Demand Scenario Marketing PlanFinancial

Projections



Business Concept

High quality products

Strong branding techniques

Promotional options

Marketing strategies

Brand Identity

Queen's Port Tea isn’t just a tea store and cafe it is a way of life. To embrace the Queen's Port Tea

lifestyle the customer must breathe class, elegance, and relaxation. Queen's Port Tea not only

represents elegance but the ability to remain calm at all times. Queen's Port Tea believes that the

different teas can affect a customer's mood, health, and overall life. The company wants to provide

consumers with a relaxed but powerful ambiance, while they experience a unique way to enjoy their

tea of choice. The way that allow customer creativity is we have a tea creation and taste bar. This is

one of the most unique features of the brand. Customers will be able to try any tea of their choice

and create their own special concoction of Queen's Port Teas exotic teas. This will give the

customer the ultimate interactive experience to find their own Zen. Queen's Port Tea wants

customers to discover their identity through our variety of specialty teas.

Memberships & Promotions:

Queen's Port Tea offers many promotional offerings for our

consumers through our membership program. Signing up for

exclusive access into our membership club rewards consumers with

multiple benefits. Exclusive members of Queen's Port Tea receive

discount tea and retail options, birthdays and Holidays, as well as

discount cooking classes and free recipe pamphlets. Each member

receives a membership loyalty card that can be swiped for discounts

and prepay options. We offer incentives, such as discounts and retail

items, to members who sign up others for memberships here at

Queen's Port Tea. Social media is a huge part in people’s daily lives

all over the world. Consumers who post pictures enjoying Queen's

Port Tea products to social media accounts and captioning the photo

with, #Queen'sPortTea, will receive a one time discount off their

next purchase. Discounts for consumers differ depending on their

membership level.(For more information on 4ps see Appendix C)

Figure 4

Key Takeaway



Projections



Business Concept

More info Appendix D

Queen's Port Tea integrates a relaxed but yet elegant

ambiance throughout our store. Our theme is designed

to represent a traditional style English tea store that

provides customers with a unique way to enjoy their

tea of choice. Our theme will include colors that are

represented on the English flag; white, red and blue.

Being located near a main distribution port in Portland,

we plan to design our store with a sea theme as well.

This sea theme will include antique look-a-like ships,

English style table and chair set up, and elegant drapes.

These factors will create the English ambiance we are

trying to portray in our Queen's Port Tea store for

customers in the Portland, Maine area. Providing

scones, pastries, and muffins will only add to the

customer’s experience of a traditional style English tea

house. We plan to incorporate our store logo on our to-

go tea cups, to-go bags, and on all packaged brand

items. Placing our logo on these products will only

help Queen's Port Tea integrate our product and brand

identity to the tourists and local population of Portland,

Maine. The brand image we portray to consumers is

unique and different than what any competitor in our

industry provides. Our promotional and marketing

ideas are what bring our customers in, while our

environment and ambiance keep loyal customers

coming back.

Trade Dress



Projections



Demand Scenario

Figure 5References Page 13, lines 3-8

Williamsburg, VA (70%)Williamsburg, VA is an extremely close

comparison to the market in Portland, ME.

This is due to Williamsburg’s similar tourist

population and other similarities such as

weather and demographics. The person that

was interviewed for the information in Figure

5, was Laura from the Spice & Tea Exchange.

The location of this store is also significantly

more similar in location to Queen's Port Tea,

than the location of the store in Bellingham,

WA. This is why Williamsburg is weighted as

a 70%.

Bellingham, WA (30%)Bellingham, WA also, has a comparable market

to Portland, ME. They have a similar tourist

population each year, as well as, a similar

median household income. Though, they do

have tea shops, the locations of the tea shops

are not as comparable to the location of Queen's

Port Tea. The person that was interviewed in

Bellingham, WA, was Allie from Spice Hut.

The information that they provided was

inputted into Figure 5. This is why the city of

Bellingham, WA, was only rated as 30%, in

comparability to the location in Portland, ME.

The data that both Laura and Allie provided from their stores was used to determine the potential

daily visitors of Queen's Port Tea. The similarity in the tourist population and social population

between all three of the cities listed in Figure 5, allows us to determine the approximation of these

variables. We took the weighted average, of the percentage of the daily population who visit the tea

shops in both Williamsburg, VA and Bellingham, WA. Through this equation, Queen's Port Tea is

projected to have 125 visitors daily. This scenario was weighted at 75% because this scenario uses

primary information from similar markets. This makes the comparable market the most feasible

demand scenario.

Comparable Market: 75%

Key Takeaway:

Industry Analysis Business ConceptDemand Scenario

Marketing PlanFinancial

Projections



Demand Scenario

569 Congress St. is located in the heart of

downtown Portland. Portland has many different

attractions from arts & culture, shopping,

transportation, and corporate offices. Being a

gathering point for the community and tourist

this are gives them ability to enjoy a day in

Portland Maine. The street to with Congress

Square located on one end and Lincoln Park on

the other. Being located closer to these parks will

bring more pedestrian traffic that will create

more awareness towards our retail store.

110

250

592

317

0 200 400 600

FIVE FIFTY-FIVE

DUNKIN DONUTS

STARBUCKS

TEAM 5

Number of Visits Per Day

References , lines 3-8 Figure 7

Data Source: SimmonsLOCAL, Portland

Maine Figure 6

Total Population of Portland

• 66,318

Portland employed commuters

• 270,000

Average Annual Tourism Yearly

• 5,800,000

We will use marketing techniques for

designing the display of our store front to draw

customers into our store. From the investment

in our prime location we gained the high foot

traffic that will be influenced by out discounts

and free samples described in our business

concept. We rated traffic pattern demand

scenario at 25% because this statists rely more

on secondary research compared to

comparable markets primary research (refer to

Figure 7). For more information on the key

location for Queen’s Port Tea refer to

Appendix D.

Key Takeaways:

Average Annual Tourism

Commuter EmploymentTraffic Patterns: 25%

Nearly 270,000 people that live in Maine

commute to work in the Portland area every

day. (Tourist stats Portland Maine 2010, Feb).

Congress St. annual average daily traffic is

around 29,000 cars per day. (Maine Traffic

Counts 2014, September). The massive amount

of people that come to Portland every day will

bring awareness and potential customers to our

sites location because of the high traffic area.

The average annual tourist population for

Portland Maine 5,800,000 people. Tourists that

enjoy there stay at the Westin Portland

Harborview hotel will be supplied with a

broacher that will promote our stores products

and bring potential consumers to our store.

Industry Analysis Business ConceptDemand Scenario

Marketing PlanFinancial

Projections



Marketing Plan

Queen's Port Tea plans to integrate our products

and service by creating a strong strategically

designed marketing plan. Our marketing plan will

include product sampling, a marketing partnership

with local book store, a “Grand Opening” banner,

a table at a local festival, and a designed flyer and

brochure. This marketing plan will help integrate

our high quality products into a competitive

market in Portland, Maine.

Yes Books

Product Marketing

Promotional Days

Product Marketing

Queen's Port Tea plans to incorporate the use of a brochure to expand our name to Portland, Maine

and surrounding areas. The brochure will include key features of our store, popular items, contact

information, and information about the location of our store. The brochures are going to be located

in the hotel to attract tourists staying at the hotel to experience something unique and different. Not

only will these brochures also be located outside of our store for pass-through traffic, but we will be

providing street side samples of our products. By providing products to consumer’s street side, we

can attract them directly into our store. Also, flyers with similar but less detailed information will be

passed around the local college campus to attract college students and local residents of Portland,

Maine. Flyers are generally used for disposable marketing and are intended to be passed out to

random people. Queen's Port Tea will also be placing a “Grand Opening” banner across the top of

our store to attract all customers, and invite them to try something new. Successfully marketing our

product will lead to an increased customer base leading to customer loyalty and satisfaction

Marketing Partnership

To reach our target market even more effectively we have collaborated with a local book store and

reached a marketing partnership agreement. Yes Books is a local book store located only 1 minute

walking distance away from our store’s location. The thought of being able to purchase a book and

make the short walk to our store to enjoy a tea of choice and the newly purchased book creates more

interest for our target market. Purchasing a book from Yes Books will guarantee a 5% onetime

discount offer on a customer’s tea of choice. Likewise, purchasing a retail item in our store will

guarantee a 5% onetime discount offer on a single book of the customer’s choice. People enjoy

something warm to sip on while diving in and enjoying a great book that Yes Books can offer. This

marketing partnership will lead customers to our store over competitors due to the discount they will

receive upon buying a book.

Industry Analysis Business Concept Demand Scenario Marketing PlanFinancial

Projections



Marketing Plan

Queen's Port Tea wants to prove to our customers that we are much more than simply a tea store

looking to make money. We plan to donate 10% of our generated revenue from a specific product on

October 1st, to breast cancer research. October is the month to raise awareness and promote breast

cancer research. We also plan to do the same process in April with the organization, Autism speaks.

This organization raises awareness and promotes Autism research. We plan to analyze our data and

determine what product will be used based on popularity to ensure we can donate as much as

possible. People are more apt to buy products where the money they are spending is going to a

benefit or charity rather than to the stores revenue. These two days will not only increase our

revenue, but also raise money and awareness for two of the biggest research organizations in the

world.

Promotional Days

We plan to attract the local population of Portland, Maine by setting up a table at the local festival.

This festival attracts people of all ages including children who can have their face painted and visit

the local toy stores as the festival is going on. This is why Portland’s annual Kick-Off to Summer

festival is the perfect destination for us to integrate and introduce our products to the local

community. The more than 30 year on-going festival includes local foods, arts and crafts, and

multiple music stages creating a vibrant environment for festival-goers. Lemonade is a local favorite

beverage at this festival, which allows us to challenge this norm and introduce our refreshing

summer tea to the local population. Our tea would provide an alternative beverage for customers of

the festival to enjoy something new with their food rather than lemonade.


Projections



Financial Projections


Projections

Start-Up

Cash $ 532,465.50

Inventory $ 246,735.90

Prepaid expenses $ -

Total current assets $ 779,201.40

Property and equipment, net (a) $ 17,444.09

Intangible assets, net $ 175.00

Total assets $ 796,820.49

Accounts payable $ -

Accrued expenses $ -

Current portion of long-term debt $ -

Total current liabilities $ -

Long-term debt $ 239,046.15

Total liabilities $ 239,046.15

Paid-in equity capital $ 557,774.34

Retained earnings (b) $ -

Total equity $ 557,774.34

Total liabilities and equity $ 796,820.49

Initial Start-up Capital

RequiredAs you can see in Figure #8, the

initial capital that will be needed

for the start-up will be

$796,820.49. This will be funded

by 70% equity and 30% long-term

debt. So, the client will be funding

$557,774.34 and will receive a

loan with an APR of 8% for

$239,046.15. According to Caron

Beesley, a contributor to the Small

Business Association (SBA), every

new business should have at least

three to six months worth of

liabilities in their cash reserves

(Beesly, 2013). As you can see in

Figure #, the startup cash needed

is $112,811.15. This is because it

will be enough to cover up to six

months of the liabilities that were

projected throughout the life of the company. Such liabilities include: the direct store liabilities,

the rent, the utilities and some extra cash in case of emergencies. These cash reserves were

assumed to be the same throughout life of the project. Along, with the initial cash reserves,

Queen’s Port will approximately need $17,444.09 worth of property and equipment. For more on

the Property and Equipment Costs refer to Appendix #.

Figure 8 Appendix: K

Key Takeaway:

1• The initial capital required for Queen’s Port Tea is $796,820

2

• High start-up costs due to the high cash reserve needed in order for Queen’s Port Tea to cover six months cost and have some spare cash in case of emergencies




Year 1 Year 2 Year 3 Year 4 Year 5

Sales (a) $ 1,711,067 $ 1,763,987 $ 1,818,543 $ 1,874,787 $ 1,932,770

Gross profit $ 1,062,572.76 $ 1,095,435.83 $ 1,129,315.29 $ 1,164,242.57 $ 1,200,250.07

Operating income $ 877,511.46 $ 904,514.74 $ 934,231.84 $ 964,519.71 $ 995,472.89

Net income $ 492,872.15 $ 508,185.08 $ 525,016.18 $ 542,249.24 $ 559,942.29


Projections

Figure #9 Appendix: K

Income StatementFigure #9 contains the pro forma income statement for Queen’s

Port Tea in the first five years of operation. The projected revenue

for Queen’s Port Tea is expected to be almost $2,000,000 in its first

year alone. This is a significant amount of sales for a start-up

company. However, this was calculated using the weighted

average of the demand scenarios discussed earlier. The weighted

average showed that there should be approximately 173 customers

daily. Since, the businesses had been in operation for more than

five years, the consumers daily of 173 was placed in the fifth year

and subtracted three percent each year to account for the lack of

brand from a start-up Figure #10. This was then multiplied by the

average transaction value, which was approximated at $31.12. The

average transaction value was calculated through benchmarking a

similar store called Teavana. Teavana had an average transaction

value of $36. This was broken down to 56% Tea Retail 40% Tea

ware and 4% Beverages. Queen’s Port Tea will have a similar

product breakdown. However, Queen’s Port Tea has more variety

in their product lines. So, the product breakdown was broken

down in Figure #11. The cost of goods sold (COGS), was also

benchmarked off of Teavana’s 10k that was found on

getfilings.com. The COGS was found as 37.90% of revenue. This

will allow Queen’s Port Tea to have significant margins and leave

the owner with a substantially higher net income. (Cain, 2011).

Queen’s Port Tea: Product Breakdown

52% Tea Retail 30% Tea ware 10% Services8%

Beverage/Foods


140

145

150

155

160

165

170

175

1 2 3 4 5

Average Daily

Customers

YearFigure #10 Appendix: K




Project Cash Flows0 1 2 3 4 5

Project

cash flow $(796,645.49) $(3,015.17) $16,228.20 $34,449.53 $53,511.11

$

7,451,182.12


Projections

Accept or Decline Queen’s Port TeaFigure #12 contains the cash flows that were

projected from the pro income statement and

pro forma balance sheet. Theses cash flows

show that the initial investment will be

approximately $796,645.49. The first year will

have a negative cash flow. However, The rest

rise steadily.

Figure #12 also, contains the Weighted

Average Cost of Capital (WACC) which is

13.23%. The cost of equity was determined to

be around 16.94% because according to

Aswath Damodaran from Stern School of

Business, the risk premium that should be

added to a five year projection should be

8.94% (Damodaran, Pg. 6).

Figure #12 contains the net present value,

internal rate of return, and payback period.

With the use of the WACC the net present

value shows that is safe to accept the project.

The IRR is also higher than the WACC so this

also shows that one should accept Queen’s Port

Tea.

Capitalx

Cost ofx

After-Tax= WACC

Structure Capital Adjustment

Debt 30% x 8% x 57% = 1.37%

Equity 70% x 16.94% = 11.86%

13.23%

Decision-Making Criteria

Net present value = $2,891,054.60

Internal rate of return = 57%

Payback period = 4.09


Key Takeaway:

Projected cash flows steadily increase throughout the 5

years.

The WACC is 13.23%

Both the NPV and IRR show that a manager would accept

Queen’s Port Tea



Conclusion

Through conducting an initial environmental analysis, developing a business concept and marketing

plan, and computing financials, research proves that Queen’s Ports Tea store is highly feasible in the

Portland, Maine area. Statistics throughout the report prove that Portland, Maine has an increasing

demand for products and services in the Natural and Specialty Foods industry. Average household

income, age demographics, and increasing healthy trends are the three key factors that drive demand

in this industry. Queen’s Port tea will be successful in the Portland, Maine area by providing

customers with healthy delicious beverages, compatible food items, and a unique experience

different from competitors. By weighing the two demand scenarios we were able to create a more

focused strategy for Queen’s Port Tea. After conducting a in-depth financial analysis Queens Port

Tea is a feasible and the owner is projected to have enough income to open up another Queens Port

Tea in a different location.

Key TakeawaysPortland high demand for Specialty food items

Growing Market Trends

Traffic Patters Demand Scenario = 25%

Comparable Markets Demand Scenario = 75%

Brand Oriented Marketing Plan

Feasible Business



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Appendix A Pest Analysis

Political

• The Food and Drug Administration (FDA) is responsible for assuring that food products sold here in the US are safe and properly labeled. The FDA has passed The Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling act to govern food products under the FDA’s supervision. The Nutrition Labeling and Education Act require most foods to have nutritional labeling. Foods that have this nutritional content and health messages must comply with specific requirements. Regulations in this industry frequently change, which is why it is so important for companies in this industry to remain current on all political issues.

Economic

• The natural and specialty food industry is expected to experience growth due to the increase in consumer confidence and the increase in per capita disposable income. As disposable income rises, consumer’s confidence raises allowing them to spend their extra money at the natural and specialty food stores. Revenue is expected to grow at an annualized rate of 1.3% for the next 5 years to $8.3 billion. Most players in this industry are American-owned and earn their sales domestically. Some players do own operations abroad, but research shows there are no major players in this industry abroad. Companies in the US do not directly trade in exports, but still may be affected by them (Lerman, 2014 June).

Social

• The social element of the PEST model deals with social behaviors of the companies and consumers within a certain industry or market. Disposable income is one factor that must be taking into consideration when discussing social behavior within the natural and specialty foods industry. As the economy continues to recover and disposable income increases, the number of stores in the natural and specialty foods industry is expected to increase at an annualized rate of 1.8% for the next five years. This growth is likely to be offset by increased growth in supermarkets offering specialty foods, but still be effective due to consumers buying local products (Lerman, 2014).

Technological

• Technology advancement and research is low in the natural and specialty foods industry. The technological aspect of this industry is generally limited to shop security and the use of cash registers. Recently players in this industry have experienced the development of radio frequency identification (RFID) tags. RFID is used as an efficiency improving inventory control device that can store more product information. RFID has the ability to track all food product items throughout its supply chain. This increase of stored information allows retailers to minimize store shrinkage. This RFID technology is used to save costs for retailers in the long run of their company (Lerman, 2014 June).



Appendix B Porters 5 Forces

Supplier Power

Suppliers in this industry have the power to offer different prices, differentproducts, and target a specific niche market. These three factors are what cangive a company an advantage over competitors in this industry. Companiescan focus on providing certain products to a specific target market. Thisallows companies to perfect their products uniqueness and quality, leadingthem to an advantage over competitors.

Buyer Power

Buyer power is extremely high in this industry because consumers can getspecialty food products at supermarkets for cheaper prices than actual naturaland specialty food stores. Consumers choose these products because they aremuch higher quality items than what is sold at supermarkets for cheaperprices. As disposable income continues to increase, consumers will continueto gain confidence in spending the extra money for higher quality productsoffered in this industry.

Competitive Rivalry

The competition not only lies among companies within this industry, but alsolarge retail supermarkets and grocery stores. These larger retail stores canoffer natural and specialty food products at a lower price than stores in thisindustry. Stores within the natural and specialty foods industry compete byoffering local and natural products to a targeted market of consumers at a fairprice. The price is driven by what suppliers feel is necessary for the qualityof their product.

Threat of Substitution

The threat of substitution throughout this industry is relatively lowconsidering the local trend of consumer buying. Stores within this industryfocus on providing consumers with high product quality to a specific targetmarket. Focusing on a specific target market allows suppliers to perfect theirproducts. Large supermarkets and grocery stores offer a variety of specialtyfood products at a lower cost, but are lower quality than products offeredfrom stores in natural and specialty foods industry.

Threat of New Entry

The threat of new entry is low and continuing to remain low. The absence oflarge major players in this industry is why this industry has such a low levelof industry concentration. This lack of market dominance does potentiallyallow new store retailers to enter this industry by creating an easier route toattract and maintain market share. Entry costs are relatively low compared toother industries allowing potential players the ability to not be constrained bythe initial capital investment.



Appendix C4 P’s

Product

Our products not only add value to our store, but help create a connection with our store and

potential customers. Customers are able to experience high quality products in a unique way that

only Queen Port’s tea store can provide. Located in our store is a tea creation bar that allows

customers to mix and match tea and create their very own blend of tea. We offer retail packages of

our tea so that customers have the chance to make their tea in the comfort of their home. Customers

are also able to purchase to-go cups of tea to enjoy their favorite tea blend on the go. Our brand

image creates a relaxed but elegant feel that customers enjoy while they enjoy their favorite blend of

Queen Port’s tea.

Price

Our products quality reflects the pricing of our products. Our average transaction cost is $31.12. We

provide customers with retail products and a service, yet still manage to have a 5$ less average

transaction cost than Teavana. We sell our retailed packaged tea at $20 for 4 ounces. We offer

customers the ability to rent a tearoom for $50. This tearoom can serve as a meeting place for

organizations while they enjoy their tea of choice from our creation bar. We also sell tea ware at

various prices, and our pastries and food items on average are sold for $8.

Place

Our store is located on one of the most highly trafficked streets in Portland, Maine, Congress St. Not

only do locals enjoy shopping and visiting the boutiques on this street, also tourists are highly

attracted to this area. We differentiate ourselves from competitors by providing the unique tea

creation bar for customers to create their own blend of tea. Our store is designed with a sitting area

located towards the back of the store in a secluded room. The front of our store is where we have our

tea creation bar, retail products, and checkout area.

Promotion

We have planned promotional days throughout the year to benefit two national charities. The best

time to reach out to our target market would be on the weekends when people are out enjoying the

shopping options Portland, Maine has to offer. We are passing out flyers around the local college

campus, and placing brochures at the local hotel in hopes to attract tourists visiting the area. Our

“Grand Opening” banner will attract customers into a new place that they have never experienced.

We plan to promote our products as the highest quality products in the area, while providing a

unique experience no other competitor can duplicate.



Appendix DLocation

Portland, Maine is a rather large city with many people and many outdoor attractions to

complement. Keys to identifying a target market for specialty food items is determining the best

location for distribution. When supermarkets open they create detrimental threats to smaller

specialty food stored. These supermarkets are targeting their niche market and if the market can

attain products and sell them at a cheaper price then it will be very hard to compete. There is a great

area in Portland, ME where consumers can be reached with healthy food products. This place is

called Deering Oaks Park. Deering Oaks Park has a farmer’s market event that takes place yearly

and can be used to help promote a new store in town that supplies specialty food items. In real

estate, the greatest value of a building is location. For this business to compete, an effective location

will be key.Location of store =

Location



Appendix DLocation

Queen's Port Tea

Five Fifty Five

Hotel

Starbucks Congress Square Park



Appendix EExtra Industry Information

40%

35%

15%10%

Product Segmentation by Revenue -Census Bureau

Meat, fish & Poultry

Other

Produce

Baked Goods & Candy


No company throughout this industry can succeed without adhering to certain regulations and

restrictions. Starting a franchise in this industry typically will include an initial fee, royalty

payments, and marketing costs. Anti-trust laws, such as the Clayton Act and the Sherman Anti-Trust

Act, play a dynamic role by keeping the environment competitive for smaller businesses to compete.

States enforce many of their own laws to provide consumers with the best price, quality, and

competition (Lerman, 2014). Several Government agencies, including the FDA, EPA, and the

Consumer Products Safety Commission (CPSC), regulate the manufacturing, labeling, advertising,

and sale of food products. The most influential law affecting the food industry and having a positive

impact on natural and specialty food stores is the new labeling law (Bernstein Research, 2007). For

more information about the labeling law and other restrictions companies must adhere to appendix

A.

Laws & Regulations



Appendix FPersona Identification


Emily Edwards is a 22 year old senior who is majoring in English at the University of SouthernMaine. She is always looking for new relaxing places where she can study and write papers. Sheusually goes to coffee shops but the environment is either not relaxing or she doesn't drink a lot ofcoffee. Queen's Port Tea gives a different location where she can study and hang out with herfriends,

Laura Landsdown is a 30 year old event planner who lives in the West End part of Portland, Maine.She always drinks a cup of tea to start her day and is looking for new places to take her clients.Queen's Port Tea is the perfect location for her to discover new teas to fuel her day and entertainher clients to an elegant experience.

Mike Masterson is a 50 year old family man who lives in the West End. He enjoys treating his wifeto unique experiences and because of his heart conditions he is constantly finding new beveragesthat can get him through the day and a healthy alternative to coffee. Queen's Port Tea presents anincredible opportunity to take his wife on brunch dates where they can try new and different teas. Italso gives him a healthy solution to help with his heart condition.



Appendix GComparable Market Continued

Weighted Average for % of Daily Available Population

Who Are Visitors

% of Daily Available Population Who Are Visitors

Tea Shops Visitors (Daily) 100 45

Daily Share of Population Multiplied

By:

% of Daily Available Population who

are visitors

1.77% 1.07%

= Daily Available Population 8,036 5,638 4,223

1.77%

1.07%

x

x

70%

30%

1.24%

.32%+

1.56%

Projected Tea Shop Visits (Daily)

= Daily Available Population 8,036 5,638 4,223

xDaily Share of Population

Multiplied By:% of Daily Available

Population who are visitors1.56% 1.77% 1.07%

= Tea Shops Visitors (Daily) 125 100 45



Appendix HStore Supply Items

Item Quantity Cost

Fruit & Nut Display 1 $199.95

Wood Chairs 32 $1,760

Round Tables 4 $312

Rectangular Tables 2 $612

Electric Range/Oven 2 $989.98

Tea Display 2 $6,225

Pastry Display 1 $2,643.56

NCR Silver POS Cash Register 1 $499



Appendix IHours open and Employee Schedule

Employee's

Hours Weekly Wages

A 32 weekly $12,480

B 32 weekly $12,480

C 32 weekly $12,480

D 34 weekly $13,260

E 34 weekly $13,260

F 24 weekly $9,360

G 24 weekly $9,360

H 24 weekly $9,360

I 14 weekly $5,460

Open Hours

Shift 1 (7-3) Shift 2 (3-10) M-F/ (4-10) S

Monday….. 7am-10pm 15 A,B,C D,E

Tuesday….. 7am-10pm 15 F,G,H D,I

Wednesday.. 7am-10pm 15 A,B,C D,E

Thursday…. 7am-10pm 15 F,G,H E,I

Friday….… 7am-10pm 15 A,B,C D,E

Saturday…. 8am- 10pm 14 F,G,H D,E

Sunday…… 8am-4pm 8 A,B,C Closed



Appendix JStore Flyer



Appendix KQueens Port Statements of Financial Position

Queens Port Tea Pro Forma Balance Sheet

Start-Up Year 1 Year 2 Year 3 Year 4 Year 5

Cash $ 532,465.50 $ 532,465.50 $ 532,465.50 $ 532,465.50 $ 532,465.50 $ 532,465.50

Inventory $ 246,735.90 $ 254,366.90 $ 262,233.92 $ 270,344.25 $ 278,705.41 $ 287,066.57

Prepaid expenses $ - $ - $ - $ - $ - $ -

Total current assets $ 779,201.40 $ 786,832.40 $ 794,699.42 $ 802,809.75 $ 811,170.91 $ 819,532.07

Property and equipment, net (a) $ 17,444.09 $ 15,150.32 $ 11,208.86 $ 8,370.51 $ 6,316.19 $ 4,793.68

Intangible assets, net $ 175.00 $ 175.00 $ 175.00 $ 175.00 $ 175.00 $ 175.00

Total assets $ 796,820.49 $ 802,157.73 $ 806,083.28 $ 811,355.26 $ 817,662.10 $ 824,500.75

Accounts payable $ - $ - $ - $ - $ - $ -

Accrued expenses $ - $ 254,366.90 $ 262,233.92 $ 270,344.25 $ 278,705.41 $ 287,066.57

Current portion of long-term debt $ - $ 26,591.70 $ 28,783.71 $ 31,156.41 $ 33,724.70 $ 36,504.70

Total current liabilities $ - $ 280,958.60 $ 291,017.63 $ 301,500.66 $ 312,430.11 $ 323,571.27

Long-term debt $ 239,046.15 $ 212,454.45 $ 183,670.74 $ 152,514.33 $ 118,789.63 $ 82,284.93

Total liabilities $ 239,046.15 $ 493,413.05 $ 474,688.37 $ 454,014.99 $ 431,219.75 $ 405,856.21

Paid-in equity capital $ 557,774.34 $ - $ - $ - $ - $ -

Retained earnings (b) $ - $ 308,744.68 $ 331,394.91 $ 357,340.26 $ 386,442.35 $ 418,644.54

Total equity $ 557,774.34 $ 308,744.68 $ 331,394.91 $ 357,340.26 $ 386,442.35 $ 418,644.54

Total liabilities and equity $ 796,820.49 $ 802,157.73 $ 806,083.28 $ 811,355.26 $ 817,662.10 $ 824,500.75

(a) Property and equipment, net:

Leasehold improvements $ 2,485.00 $ 2,485.00 $ 2,360.75 $ 2,124.68 $ 1,912.21 $ 1,720.86

Fixtures and equipment $ 14,401.09 $ 14,401.09 $ 12,343.17 $ 8,816.35 $ 6,297.60 $ 4,498.90

Computer hardware and software $ 558.00 $ 558.00 $ 446.40 $ 267.84 $ 160.70 $ 96.42

$ 17,444.09 $ 17,444.09 $ 15,150.32 $ 11,208.86 $ 8,370.51 $ 6,316.19

Less: Accumulated depr and amort $ - $ 2,293.77 $ 3,941.46 $ 2,838.35 $ 2,054.32 $ 1,522.51

Property and equipment, net $ 17,444.09 $ 15,150.32 $ 11,208.86 $ 8,370.51 $ 6,316.19 $ 4,793.68

(b) Retained earnings:

Balance, beginning of year $ - $ - $ 308,744.68 $ 331,394.91 $ 357,340.26 $ 386,442.35

Net income $ - $ 492,872.15 $ 508,185.08 $ 525,016.18 $ 542,249.24 $ 559,942.29

Less: Distribution to owner $ - $ (184,127.47) $ (485,534.85) $ (499,070.83) $ (513,147.15) $ (527,740.10)

Balance, end of year $ - $ 308,744.68 $ 331,394.91 $ 357,340.26 $ 386,442.35 $ 418,644.54




Queens Port Tea Pro Forma Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5

Sales (a) $ 1,711,067 $ 1,763,987 $ 1,818,543 $ 1,874,787 $ 1,932,770

Cost of goods sold and occupancy costs (b) $ 648,494.48 $ 668,551.02 $ 689,227.85 $ 710,544.18 $ 732,519.77

Gross profit $ 1,062,572.76 $ 1,095,435.83 $ 1,129,315.29 $ 1,164,242.57 $ 1,200,250.07

Direct store expenses (c) $ 183,421.30 $ 190,181.10 $ 194,343.46 $ 198,982.86 $ 204,037.18

SG&A Expenses $ 740.00 $ 740.00 $ 740.00 $ 740.00 $ 740.00

Pre-opening expenses $ 900.00 $ - $ - $ - $ -

Operating income $ 877,511.46 $ 904,514.74 $ 934,231.84 $ 964,519.71 $ 995,472.89

Interest expense $ 18,339.10 $ 16,147.09 $ 13,774.39 $ 11,206.10 $ 8,426.10

Income before income taxes $ 859,172.36 $ 888,367.64 $ 920,457.45 $ 953,313.61 $ 987,046.79

Provision for income taxes $ 366,300.21 $ 380,182.56 $ 395,441.27 $ 411,064.37 $ 427,104.50

Net income $ 492,872.15 $ 508,185.08 $ 525,016.18 $ 542,249.24 $ 559,942.29

(a) Sales:

Number of customers per day 153 158 163 168 173

x Average transaction value $ 31.12 $ 31.12 $ 31.12 $ 31.12 $ 31.12

Sales per day $ 4,766.20 $ 4,913.61 $ 5,065.58 $ 5,222.25 $ 5,383.76

x Number of days open per year 359 359 359 359 359

Sales $ 1,711,067.24 $ 1,763,986.85 $ 1,818,543.14 $ 1,874,786.74 $ 1,932,769.84

(b) Cost of goods sold and occupancy costs:

Cost of goods sold $ 752,869.59 $ 776,154.21 $ 800,158.98 $ 824,906.17 $ 850,418.73

Rent $ 34,110.00 $ 34,110.00 $ 34,110.00 $ 34,110.00 $ 34,110.00

Utilities $ 8,091.00 $ 8,091.00 $ 8,091.00 $ 8,091.00 $ 8,091.00

[Modify, delete, or insert items]

Cost of goods sold and occupancy costs $ 795,070.59 $ 818,355.21 $ 842,359.98 $ 867,107.17 $ 892,619.73

(c) Direct store expenses:

Store payroll, payroll taxes, and benefits $ 170,403.47 $ 175,515.57 $ 180,781.04 $ 186,204.47 $ 191,790.61

Store supplies $ 1,200.00 $ 1,200.00 $ 1,200.00 $ 1,200.00 $ 1,200.00

Depreciation and amortization $ 2,293.77 $ 3,941.46 $ 2,838.35 $ 2,054.32 $ 1,522.51

Advertising $ 8,816.06 $ 8,816.06 $ 8,816.06 $ 8,816.06 $ 8,816.06

Software Expenses $ 708.00 $ 708.00 $ 708.00 $ 708.00 $ 708.00

Direct store expenses $ 183,421.30 $ 190,181.10 $ 194,343.46 $ 198,982.86 $ 204,037.18




Required Rate of Return

Weighted average cost of capital (WACC):

Capitalx

Cost ofx

After-Tax= WACC

Structure Capital Adjustment

Debt 30% x 8% x 57% = 1.37%

Equity 70% x 16.94% = 11.86%

13.23%

Decision-Making Criteria IRR Numbers$ (796,645.49)

Net present value = $ 2,891,054.60 $ (3,015.17)

$ 16,228.20

Internal rate of return = 57% $ 34,449.53

$ 53,511.11

Payback period = 4.09 $ 7,451,182.12




Depreciation BreakdownYear 3-Year 5-Year 7-Year 10-Year 15-Year

1 33.33% 20.00% 14.29% 10.00% 5.00%

2 44.45% 32.00% 24.49% 18.00% 9.50%

3 14.81% 19.20% 17.49% 14.40% 8.55%

4 7.41% 11.52% 12.49% 11.52% 7.70%

5 11.52% 8.93% 9.22% 6.93%

6 5.76% 8.92% 7.37% 6.23%

7 8.93% 6.55% 5.90%

8 4.46% 6.55% 5.90%

9 6.56% 5.91%

10 6.55% 5.90%

11 3.28% 5.91%

12 5.90%

13 5.91%

14 5.90%

15 5.91%

16 2.95%

17

Total 100.00% 100.00% 100.00% 100.00% 100.00%

Year Products Fixtures and equipment Book ValueComputer Hardware and

SoftwareBook Value

Leasehold

ImprovementsBook Value

Total Yearly

Depreciation

0

Total

Value $ 14,401.09 $ 14,401.09 $ 558.00 $ 558.00 $ 2,485.00 $ 2,485.00 $ -

1 $ 2,057.92 $ 12,343.17 $ 111.60 $ 446.40 $ 124.25 $ 2,360.75 $ 2,293.77

2 $ 3,526.83 $ 8,816.35 $ 178.56 $ 267.84 $ 236.08 $ 2,124.68 $ 3,941.46

3 $ 2,518.75 $ 6,297.60 $ 107.14 $ 160.70 $ 212.47 $ 1,912.21 $ 2,838.35

4 $ 1,798.70 $ 4,498.90 $ 64.28 $ 96.42 $ 191.35 $ 1,720.86 $ 2,054.32

5 $ 1,286.02 $ 3,212.88 $ 64.28 $ 32.14 $ 172.21 $ 1,548.65 $ 1,522.51

6 $ 1,284.58 $ 1,928.31 $ 32.14 $ - $ 154.82 $ 1,393.84 $ 1,471.53

7 $ 1,286.02 $ 642.29 $ 146.62 $ 1,247.22 $ 1,432.63

8 $ 642.29 $ - $ 146.62 $ 1,100.61 $ 788.90

9 $ - $ 146.86 $ 953.74 $ 146.86

10 $ 146.62 $ 807.13 $ 146.62

11 $ 146.86 $ 660.26 $ 146.86

12 $ 146.62 $ 513.65 $ 146.62

13 $ 146.86 $ 366.79 $ 146.86

14 $ 146.62 $ 220.17 $ 146.62

15 $ 146.86 $ 73.31 $ 146.86

16 $ 73.31 $ 0.00 $ 73.31

17




Loan Amortization Table

Loan Amount $ 239,046.15

Interest Rate 2% Quarterly

Loan Period 28 Quarters

PMT $11,232.70 Quarterly

Quarterly Beginning Balance Total Quarterly Payment Interest Paid Principal Paid Ending Balance

1 $ 239,046.15 $11,232.70 $ 4,780.92 $ 6,451.78 $ 232,594.37

2 $ 232,594.37 $11,232.70 $ 4,651.89 $ 6,580.81 $ 226,013.56

3 $ 226,013.56 $11,232.70 $ 4,520.27 $ 6,712.43 $ 219,301.13

4 $ 219,301.13 $11,232.70 $ 4,386.02 $ 6,846.68 $ 212,454.45

YEAR 1 $ 239,046.15 $44,930.80 $18,339.10 $26,591.70 $ 212,454.45

5 $ 212,454.45 $11,232.70 $ 4,249.09 $ 6,983.61 $ 205,470.84

6 $ 205,470.84 $11,232.70 $ 4,109.42 $ 7,123.28 $ 198,347.56

7 $ 198,347.56 $11,232.70 $ 3,966.95 $ 7,265.75 $ 191,081.81

8 $ 191,081.81 $11,232.70 $ 3,821.64 $ 7,411.06 $ 183,670.74

YEAR 2 $ 212,454.45 $44,930.80 $16,147.09 $28,783.71 $ 183,670.74

9 $ 183,670.74 $11,232.70 $ 3,673.41 $ 7,559.29 $ 176,111.46

10 $ 176,111.46 $11,232.70 $ 3,522.23 $ 7,710.47 $ 168,400.99

11 $ 168,400.99 $11,232.70 $ 3,368.02 $ 7,864.68 $ 160,536.31

12 $ 160,536.31 $11,232.70 $ 3,210.73 $ 8,021.97 $ 152,514.33

YEAR 3 $ 183,670.74 $44,930.80 $13,774.39 $31,156.41 $ 152,514.33

13 $ 152,514.33 $11,232.70 $ 3,050.29 $ 8,182.41 $ 144,331.92

14 $ 144,331.92 $11,232.70 $ 2,886.64 $ 8,346.06 $ 135,985.86

15 $ 135,985.86 $11,232.70 $ 2,719.72 $ 8,512.98 $ 127,472.88

16 $ 127,472.88 $11,232.70 $ 2,549.46 $ 8,683.24 $ 118,789.63

YEAR 4 $ 152,514.33 $44,930.80 $11,206.10 $33,724.70 $ 118,789.63

17 $ 118,789.63 $11,232.70 $ 2,375.79 $ 8,856.91 $ 109,932.73

18 $ 109,932.73 $11,232.70 $ 2,198.65 $ 9,034.05 $ 100,898.68

19 $ 100,898.68 $11,232.70 $ 2,017.97 $ 9,214.73 $ 91,683.96

20 $ 91,683.96 $11,232.70 $ 1,833.68 $ 9,399.02 $ 82,284.93

YEAR 5 $ 118,789.63 $44,930.80 $ 8,426.10 $36,504.70 $ 82,284.93

21 $ 82,284.93 $11,232.70 $ 1,645.70 $ 9,587.00 $ 72,697.93

22 $ 72,697.93 $11,232.70 $ 1,453.96 $ 9,778.74 $ 62,919.19

23 $ 62,919.19 $11,232.70 $ 1,258.38 $ 9,974.32 $ 52,944.88

24 $ 52,944.88 $11,232.70 $ 1,058.90 $10,173.80 $ 42,771.07

YEAR 6 $ 82,284.93 $44,930.80 $ 5,416.94 $39,513.86 $ 42,771.07

25 $ 42,771.07 $11,232.70 $ 855.42 $10,377.28 $ 32,393.80

26 $ 32,393.80 $11,232.70 $ 647.88 $10,584.82 $ 21,808.97

27 $ 21,808.97 $11,232.70 $ 436.18 $10,796.52 $ 11,012.45

28 $ 11,012.45 $11,232.70 $ 220.25 $11,012.45 $ -

YEAR 7 $ 42,771.07 $44,930.80 $ 2,159.73 $42,771.07 $ -




Tax Bracket 2014Year 1 2 3 4 5

Tax Rate Single Income $ 859,172 $ 888,367.64 $ 920,457.45 $ 953,313.61 $ 987,046.79

10.00% $ - $ 8,925.00 State Tax$ 68,304.20 $ 70,625.23 $ 73,176.37 $ 75,788.43 $ 78,470.22

15.00% $ 8,926.00 $ 36,250.00 7.95%

25.00% $ 36,251.00 $ 87,850.00 Federal

28.00% $ 87,851.00 $183,250.00 10.00% $ 892.50 $ 892.50 $ 892.50 $ 892.50 $ 892.50

33.00% $ 183,251.00 $398,350.00 15.00% $ 4,098.75 $ 4,098.75 $ 4,098.75 $ 4,098.75 $ 4,098.75

35.00% $ 398,351.00 $400,000.00 25.00% $ 12,900.00 $ 12,900.00 $ 12,900.00 $ 12,900.00 $ 12,900.00

39.60% $ 400,001.00 + 28.00% $ 26,712.00 $ 26,712.00 $ 26,712.00 $ 26,712.00 $ 26,712.00

33.00% $ 70,983.00 $ 70,983.00 $ 70,983.00 $ 70,983.00 $ 70,983.00

35.00% $ 577.50 $ 577.50 $ 577.50 $ 577.50 $ 577.50

39.60% $ 181,832.25 $ 193,393.59 $ 206,101.15 $ 219,112.19 $ 232,470.53

Total Tax

Liability$ 366,300.21 $ 380,182.56 $ 395,441.27 $ 411,064.37 $ 427,104.50

Year

1 43%

2 43%

3 43%

4 43%

5 43%

Average Tax Rate 43%



Appendix LWebsite Screenshots

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