Dec 2003 business plan for d'lectables

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Dec 2003 business plan for d'lectables

  1. 1. D’Lectables Main Line Corporate Center 807 Cricket Avenue, Suite 100 Ardmore, Pennsylvania 19003 Tel. (610) 995 9648 Fax (610) 788 2748 www.dlectables.net Principal Contact Dale S. Fickett President & Founder Summer 2004This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished toselect individuals for the purpose of providing potential financing to the Company. The Business Plan is aconfidential document that contains ideas, concepts, information, processes, methods and other proprietaryinformation. Readers are to treat the information herein as confidential and may not copy or otherwisereproduce the materials without the express written consent of D’Lectables, LLC.
  2. 2. Page 11.0 Executive Summary ............................................................................................. 4 1.1 Market Opportunity .......................................................................................................................................... 4 Exhibit 1 – Market Calculation ............................................................................................................. 4 Exhibit 2 – Same Store Sales Projections .................................................................................................. 4 1.2 The Concept....................................................................................................................................................... 5 1.3 Profitability ......................................................................................................................................................... 6 Exhibit 5 – 2004 Margins .................................................................................................................... 6 1.4 Returns to Shareholders ................................................................................................................................... 82.0 The Confectionary Industry & Our Niche ........................................................... 9 2.1 Our Environment.............................................................................................................................................. 9 2.1.1 Industry Scale ........................................................................................................................... 9 2.1.2 The Market for Fudge ............................................................................................................. 12 2.1.3 Macro Factors......................................................................................................................... 13 2.1.4 Industry Supply Chain ............................................................................................................ 14 2.1.5 Economics of the Industry ..................................................................................................... 15 2.1.6 Operating Environment.......................................................................................................... 18 2.2 The Company & The Concept ......................................................................................................................19 2.3 History ............................................................................................................................................................20 2.3.1 Over 100 Years of Fudge ...................................................................................................... 20 2.3.2 D’Lectables ............................................................................................................................. 21 2.4 Our Products....................................................................................................................................................21 2.4.1 Superior Fudge ....................................................................................................................... 21 2.4.2 Fine Chocolate Creations ........................................................................................................ 22 2.4.3 Other Products ....................................................................................................................... 23 2.5 Unique Selling Points ......................................................................................................................................233.0 Strategic Formulation ........................................................................................ 25 3.1 Corporate Focus & Social Responsibility ....................................................................................................25 3.1.1 Mission ................................................................................................................................... 25 3.1.2 Core Values ............................................................................................................................ 25 3.1.3 Core Purpose .......................................................................................................................... 25 3.1.4 Organizational Goals .............................................................................................................. 25 3.1.5 Envisioned Future .................................................................................................................. 26 3.2 Internal Analysis ..............................................................................................................................................26 3.2.1 A Resource to be Developed .................................................................................................. 27 3.2.2 SWOT Analysis ...................................................................................................................... 28 3.2.3 Value Chain Analysis .............................................................................................................. 28 3.2.4 Core Competencies................................................................................................................. 28 3.2.5 Value Proposition & Positioning............................................................................................. 28 3.3 Strategic Analysis (7 & 8) – Seeking Sustained Competitive Advanatage ...............................................28 3.3.1 Grand Strategy ........................................................................................................................ 28 3.3.2 Entry/Growth Strategy – Our Strategic Choice ...................................................................... 28 3.3.3 Long-term Objectives (6) ........................................................................................................ 30This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  3. 3. Page 2 3.4 Strategic Implementation (9) .........................................................................................................................30 3.4.1 Short-term Objectives & Action Plans .................................................................................... 30 3.4.2 Reward System ....................................................................................................................... 30 3.4.3 Functional Tactics................................................................................................................... 30 3.4.4 Empowerment ........................................................................................................................ 30 3.4.5 Leadership & Culture .............................................................................................................. 30 3.4.6 Strategic Control & Continuous Improvement (11) ................................................................ 30 3.5 Harvest Strategy ...............................................................................................................................................314.0 Market Research & Analysis .............................................................................. 32 4.1 Customers .........................................................................................................................................................32 4.1.1 Segmenting Our Customers .................................................................................................... 32 4.2 Nature & Degree of Competition .................................................................................................................34 4.3 Market Share & Sales Forecasts ....................................................................................................................355.0 Our Marketing Plan ........................................................................................... 37 5.1 Strategic Positioning........................................................................................................................................37 5.2 Potential Locations..........................................................................................................................................37 5.3 SWOT Analysis (move to 2.6.2.2) ................................................................................................................37 5.4 Pricing ...............................................................................................................................................................38 5.5 Sales ...................................................................................................................................................................38 5.6 Advertising & Promotions .............................................................................................................................39 5.7 Logo & Packaging ...........................................................................................................................................40 5.8 Distribution ......................................................................................................................................................41 5.9 Product Guarantees ........................................................................................................................................416.0 Production & Operations ................................................................................... 42 6.1 Operational Strategy........................................................................................................................................42 6.2 The Process ......................................................................................................................................................43 6.3 Facilities ............................................................................................................................................................44 6.4 Suppliers............................................................................................................................................................44 6.5 Logistics & Inventory Management .............................................................................................................477.0 Human Resources ............................................................................................. 49 7.1 Job Design (2) ..................................................................................................................................................49 7.2 Commitment to Diversity (3&4) ...................................................................................................................49 7.3 Staffing ..............................................................................................................................................................49 7.3.1 Recruitment (5) ....................................................................................................................... 49 7.3.2 Selection (5) ............................................................................................................................ 49 7.3.3 Terminations & Separations (6) .............................................................................................. 49 7.4 Development....................................................................................................................................................49 7.4.1 Appraisal & Motivation (7) ..................................................................................................... 49 7.4.2 Training (8) ............................................................................................................................. 49 7.4.3 External Development (9) ...................................................................................................... 49 7.5 Compensation (10, 11 & 12)..........................................................................................................................49 7.6 Governance (13, 14 & 16) ..............................................................................................................................498.0 The Online Initiative.......................................................................................... 50This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  4. 4. Page 3 8.1 Introduction .....................................................................................................................................................50 8.2 Implementation Considerations ....................................................................................................................51 8.3 B2B Opportunities ..........................................................................................................................................51 8.4 Online Challenges ...........................................................................................................................................51 8.5 Technology Infrastructure .............................................................................................................................529.0 Management Team ............................................................................................ 53 9.1 Our Organization ............................................................................................................................................53 9.2 Before D’Lectables ..........................................................................................................................................53 9.3 Compensation & Ownership .........................................................................................................................54 9.4 Other Investors................................................................................................................................................54 9.5 Buy Sell Agreements & Stock Options ........................................................................................................54 9.6 Board of Directors ..........................................................................................................................................55 9.7 Other Shareholders, Rights & Restrictions .................................................................................................55 9.8 Supporting Professionals & Advisors ..........................................................................................................5510.0 Overall Schedule ............................................................................................... 5611.0 Critical Assumptions & Risks ........................................................................... 5812.0 Economics of the Model .................................................................................. 59 12.1 Projected Costs & Margins ..........................................................................................................................59 12.2 Profit Potential & Durability .......................................................................................................................61 12.4 Breakeven Analysis .......................................................................................................................................63 12.5 Cash Flow .......................................................................................................................................................6313.0 The Financial Plan ........................................................................................... 65 13.1 Pro Forma Financial Statements .................................................................................................................65 13.2 Cash Flow Analysis .......................................................................................................................................67 13.3 Cost Control...................................................................................................................................................67 13.4 Additional Analysis .......................................................................................................................................6814.0 Proposed Company Offering ............................................................................ 70 14.1 Desired Financing .........................................................................................................................................70 14.2 Offering ..........................................................................................................................................................70 14.3 Capitalization .................................................................................................................................................70 14.4 Use of Funds ..................................................................................................................................................71 14.5 Investor Returns ............................................................................................................................................7115.0 Regulatory & Legal Considerations ................................................................. 7416.0 Appendices ....................................................................................................... 75This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  5. 5. Page 41.0 Executive Summary Market opportunity worth $2,190,000 in Philadelphia, $146,000,000 nationally Upscale confections concept with premium positioning and marketing Gross margins of 76%, operating margins of 36% Return to shareholders – projected at 55%; worst case 32%1.1 Market Opportunity Exhibit 1 – Market Calculation 2004The market opportunity for retail candy in Philadelphia is 1 National Chocolate Market 14,600,000,000compelling for several reasons. First, the under-served National Fudge Market @ 1%2 146,000,000market for fudge in Philadelphia is estimated at Fudge Market by Metro Area$2,190,000, while that of the New York, New Jersey and New York @ 5.2% 7,592,000 Scranton-Hazleton @2.0% 2,920,000Pennsylvania tri-state area is $16,352,000, and nationally Philadelphia @ 1.5% 2,190,000is $146,000,000 (see exhibit 1). Second, the entire Nassau-Suffolk @ 1.3% 1,898,000 Pittsburg @ 1.2% 1,752,000retail candy industry is attractive because it is mature and Tri State Fudge Market 16,352,000stable, growing at 4% nationally, leading to impressive Philadelphia Fudge Market 2,190,000conservative same store net sales growth estimates (see Philadelphia Retail Market Sector (1/6) 365,000exhibit 2). The industry is also characterized by a high Market Share Captured @ 75% 273,750household penetration rate, strong brand differentiation Anticipated Sales of Other Candy 100,000 Same Store Sales Projections 373,750and brand loyalty among the wide consumer base, un-concentrated suppliers, and customers that are generally willing to pay a premium for superior quality and Exhibit 2 – Same Store Sales Projections upscale branding. These industry advantages have $440,000 $437,176 historically led to superior margins, especially to $420,361 $430,000 those firms producing their own products. Third, $420,000 $410,000 $404,223 the Philadelphia geography is attractive because $400,000 $388,719 there are currently no specialty providers of fudge $390,000 $380,000 $373,750 in the region, the 11th largest metro area for retail $370,000 candy sales in the country (see section 2.1.1). The $360,000 $350,000 little prepackaged fudge that is available is of lower $340,000 2004 2005 2006 2007 2008 quality due to the use of chemical preservatives and1D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.2 Corcoran, Jim. National Confectioners Association. Personal Telephone Interview. April 20, 2003.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  6. 6. Page 5additives. The entry strategy to exploit this opportunity includes the construction of numerous retailstores throughout the region, each carrying the fudge product line and other upscale confections, as wellas the establishment of secondary sources of revenue including orders received via the internet andtelephone and business to business sales; however, it is anticipated that early growth will be achievedprimarily through geographic expansion and subsequently through product line extensions.1.2 The Concept Exhibit 3 – Industry PositioningD’Lectables, LLC was recently Ultra Premium; Godivaformed in early 2004 to bring Boutique Chocolate and Trufflethe D’Lectables concept to Retailers; D’Lectablesretail mall environments Department Stores, Mom-n-Pops Price Gas Stations, Convenience Stores, Grocerywithin the greater- Stores, Wholesale ClubsPhiladelphia region. It is Discount Stores, Dollar Storesbased upon providing retail Product Qualitycandy stores that arereminiscent of an age gone by. The typical customer approaches the store and is met with the sweetaroma of the fudge being handmade – just as it has been for over a 100 years, the sight of it being tossedhigh into the air by expert confectioners, the taste of smooth consistency and pure quality - the type ofproduct quality that is often missing in today’s marketplace, and the service of a cordial and pleasantsalesperson. Our fudge will be made with pride and tradition that is reminiscent of the artisans of decadespassed, and all-natural ingredients and freshness that are always guaranteed. In short, D’Lectables plans tobecome the leader in providing confections products of outstanding quality, a nostalgic store atmospherethat is reminiscent of the artisans of decades passed, and timeless excellence in customer service. Within the aforementioned retail candy market our target consumers and their benefits soughtinclude: 1) Gourmet food consumers searching for a quality confection; 2) Impulse snack shopperslooking to satisfy a sweet tooth; and 3) Upscale gift purchasers seeking a branded gift. Our upscale brand Exhibit 4 – Core Competencies image as a premium confection will be achieved by • Superior Product Quality coupling the aforementioned product quality with other • Nostalgic Store Atmosphere • Customer Service Excellence marketing efforts such as premium pricing, elegant packaging, selective store placement, and a consistentThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  7. 7. Page 6 Exhibit 5 – 2004 Margins message of superior product and service in Monthly Annual MarginNet Sales 31,250 375,000 100% advertising and promotions efforts. Our Cost of Goods Sold 7,646 91,752Gross Margin 23,604 283,248 76% premium pricing of $15/lb. for fudge and 3 Store Operation Costs 12,412 148,944 $25/lb. for chocolates maintains the upscaleOperating Margin $11,192 $134,304 36% branding yet still keeps an immediateconsumption portion within reach at $2 to $4. At these price points unit sales are estimated at 1,530pounds of fudge and 335 pounds of chocolates per month, while break even is achieved at 1,083 lbs. and236 lbs., respectively. The primary competitive advantages for D’Lectables in the pursuit of this marketopportunity are in the combination of our core competencies - superior product quality, nostalgic andengaging store atmosphere, and excellence in customer service. Each of which may be moderatelydifficult to imitate in independence, but collectively will be infinitely harder to duplicate. It is important tonote that in the area of product quality, potential competitors would face a steep learning curve whenattempting to imitate our production.1.3 Profitability Exhibit 5 – Conservative Sales & Profitability ProjectionsWe estimate our gross 4,500,000margins at 76%, and our 4,000,000single store operating 3,500,000margins at 36%.4 A long- 3,000,000term growth rate of 48% is 2,500,000sustained by opening two 2,000,000stores a year over a five year 1,500,000period. In 2004, conservative 1,000,000cost estimates for store, 500,000internet, and office setup are 0 2004 2005 2006 2007 2008$85,000; and operating costs 96,242 255,137 470,854 691,280 896,508 Earningsare $26,700 monthly for all Net Sales 363,242 1,201,370 2,153,742 3,172,470 4,115,995operations. It has been Sales Growth 230.74% 79.27% 47.30% 29.74% 48%3 These margins do not include a contribution towards supporting head office or the internet/telephone cost centers.4 See section 10.1.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  8. 8. Page 7estimated that all setup andoperating cash expenditures for the first Exhibit 6 – Low Growth / Low Demand Scenariostore will be recovered within 16 months.5 2,000,000Projecting out store sales, assuming the 4% 1,800,000industry growth rate, and costs6 results in 1,600,000strong profitability (see exhibit 5). 1,400,000 Exhibit 6 shows the impact of our 1,200,000 1,000,000low demand, low growth scenario. In this 800,000scenario, the revenue numbers are adjusted 600,000to reflect the case in which demand is 85% 400,000of our projections, store openings occur at a 200,000rate of one per year (as opposed to the 0projected 2 per year), and 2004 2005 2006 2007 2008 Earnings 22,268 69,906 132,351 193,639 253,229internet/telephone sales are 50% of Net Sales 225,781 547,250 961,900 1,404,926 1,878,016projections per year. Interestingly, the sales Sales Growth 142.38% 75.77% 46.06% 33.67% 33.67%growth level remains strong at 33.67%. Using the assumptions from the original market and resultant financial projections, the pro forma financialstatements reveal that net income (net of the depreciation expense) grows from $75,526 in 2004 to $1,422,575 in2008. The projected balance sheet reveals total assets grow from $300,000 upon inception to $2,918,477, whilebook value of the equity grows from $300,000 to $2,918,477, over the same period. Projected cash flow isevidenced by a cash account that grows from $220,645 at the end of 2004 to $2,430,763 at the end of 20087. An analysis of a low growth/low demand scenario includes 85% of the projected demand, and inwhich we grew stores at a rate of one per year (as opposed to two per year in the projections), andinternet/telephone orders at 50% of those in the projections. This scenario results in profits of $22,268 in2004 and $253,229 in 2008. Also, the sales growth rate is then projected at 33.67% (see exhibit 6).Plugging these numbers into the pro forma statements reveals low demand net income of $5,268 for 2004after the depreciation expense and it increases to $154,223 by 2008. The low demand balance sheet reveals thatthe cash level increases from $235,951 at the end of 2004 to $394,603 in 2008.5 See section 10.5.6 The cost growth rates: 4% on store operating costs, 10% on store setup costs, and 15% on internet operating costs.7 See 11.1 and 11.2 for full pro forma statements.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  9. 9. Page 8 Exhibit 7 – Return on Invested Cash1.4 Returns to Shareholders Invested Capital for 5% holding $100,000Return on equity of 21.1% for 2004, return oninvested capital from 11.33% in 2004 to 80% in Low Demand Distributions At Projections Scenario2008, and equity distributions of 25% over the 2004 at 25% of earnings 947 66first three years and 30% in 2007 and 2008 can 2005 at 25% 3,967 300 2006 at 30% 8,440 983be expected. Fixed asset turnover is strong, 2007 at 30% 15,979 1,655increasing from 2.14 in 2004 to 10.06 in 2008, 2008 at 30% 21,374 2,313and a collection period of 0 is Repurchase Value days 828,675 402,096representative of the retail nature of the Return on Investment 55.73% 32.42%business. Finally, the acid test ratio increasesfrom 16.41 in 2004 to 30.91 in 2008, further End of year cash balance $2,430,763 $394,603reflecting the strong cash flow of the business model.8 Most impressive, is the fact that after calculating theprojected stream of equity distributions and repurchase value of the 5% holding9, a rate of return on the $100,000investment is calculated at 55.73% for our projections, and 32.42% for the low demand scenario. The management team is comprised of the president, Dale Fickett, and the vice-president Joseph Filachek,owning and invested thus far at 60%/40%, respectively. Dale has over ten years of experience within the retailcandy industry managing a store with a peak season staff of 30 employees, while Joe also has retail candyexperience. The two had an opportunity to work together within the industry and complement one another’sleadership styles well. More recently, Dale graduated from Villanova University with a Masters of BusinessAdministration degree10, and Joe has gained valuable sales experience as a representative with Sola Optical Lenses,handling a sales geography that stretches the eastern seaboard. D’Lectables is seeking start-up financing, and is offering 5% of the outstanding equity for an investment of$100,000 and 15% for $200,000. Currently Dale and Joe have collectively made arrangements to personally invest$100,000 and are seeking the remaining financing needed for working capital, and for investment into the requiredfixed assets associated with the store fronts and supporting infrastructure.8 See 11.4.9 See section 11.5 for calculations of the equity distributions, and the repurchase value in 2008.10 See 7.2 for more on Dale’s background.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  10. 10. Page 92.0 The Confectionary Industry & Our Niche2.1 Our EnvironmentThe best approximation of the market for D’Lectables could be described as: ‘the market for gourmetfudge and chocolate in the mid-Atlantic region’. However, it is also useful to view this industry at theconfections level, meaning the nation-wide amount of all gourmet chocolate sold. A regional breakdownallows insight into the market potential within the mid-Atlantic region. 2.1.1 Industry ScaleIn 2003, the mature U.S. chocolate industry generated $13 billion in sales, according to data gathered fromMarketResearch.com11. The premium, or gourmet, segment is estimated at 10% of this market,representing $1.3 billion in sales. From 1999 to 2003, growth in the gourmet segment of the market hasgrown at an average annual rate of 13%. Over this period growth has slowed, while the largestcompetitors have continued to experience double-digit growth.12 MarketResearch.com also projects thegrowth rate of the market to be 10.18% over the next five years13 (see exhibit 8): Exhibit 8 – Projected US Market for Gourmet Chocolate Sales (in thousands of dollars) 1,916 2,000 1,739 1,800 1,578 1,432 1,600 1,300 1,400 1,200 1,000 800 600 400 200 0 2003 2004 2005 2006 200711 “The U.S. Market for Gourmet Chocolate.” MarketResearch.com, April 2004, p. 2.12 “The U.S. Market for Gourmet Chocolate.” MarketResearch.com, April 2004, p. 4.13 “The U.S. Market for Gourmet Chocolate.” MarketResearch.com, April 2004, p. 25.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  11. 11. Page 10Factors which explain the growth in the gourmet chocolate market, include: population growth withinthose age and ethnic segments that have an affinity for gourmet chocolate, an increased prevalence ofchocolate consumption as a part of one’s daily routine, the increased awareness of high-cocoa contentdark chocolate as a healthy indulgence, increased availability of organic and all-natural chocolate products,and convenient single-serving sized packages. In general, the industry is attractive because its sheer size,coupled with its uniquely high household penetration rate, makes it an area in which retailers can beaggressive with their margins14. While the vast majority of the confections industry sales are conducted through grocery stores,warehouse clubs, and convenience stores, ‘Candy, Nut, and Confectionery Stores’ (SIC code 5441)achieved 2002 sales totaling $957.7 million15, or roughly 5% of the overall confections industry. Theestimated 6,879 establishments employ 32,897 people, or an average of 4.7 employees per establishment.Finally, average annual sales per establishment are $200,000.16 Interestingly, over 85% of establishmentsemploy nine or fewer individuals (see exhibit 2). Exhibit 9 – Market Analysis by Company Size17 Number of Number of Percent of Total Total Average Average Employees Establishments Total Employees Sales Employees Sales Unknown 303 4.4 N/A 19.3 N/A 0.8 1 1118 16.3 1118 50.1 1 0.1 2 to 4 3484 50.6 8638 277.4 2 0.1 5 to 9 1422 20.7 8763 235.9 6 0.3 10 to 24 457 6.6 5824 209.7 13 0.7 25 to 49 59 0.9 1827 66.6 31 1.6 50 to 99 16 0.2 951 23.1 59 2.1 100 to 249 12 0.2 1608 35.1 134 5.9 250 to 499 4 0.1 1250 40.5 313 20.3 500 to 999 4 0.1 2918 N/A 730 N/A Total / Average 6879 100 32897 957.7 5 0.2 Note: Sales figures are in millions. Also of particular interest is the market size for these confectionary establishments by metro area.When ranking these markets by total annual sales, the Philadelphia area represents a market of $14.9million, while the Scranton, Hazleton, and Wilkes-Barre area represents a market of $19.4 million – 11th14 David Wellman, “Sugar Rush”, Supermarket Business, June 1999, p. 23-26.15 D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.16 D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.17 D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  12. 12. Page 11and 8th in the country, respectively (see exhibit 3). In fact, five of the top thirteen local markets forconfectionary stores are located within the New York, Pennsylvania, and New Jersey tri-state region. Exhibit 10 – Market Ranking for Confectionary Stores by Total Sales in Metro Areas18 Metro Area Total Percent Number of Total Average Average Sales of Total Establishments Employees Employees Sales Riverside – San Bernardino, 66.4 6.93% 76 340 5 1.3 CA New York, NY 50.4 5.26% 486 1313 3 0.1 Merced, CA 38.4 4.01% 5 20 4 9.6 Chicago, IL 29.4 3.07% 349 1730 5 0.2 San Francisco, CA 28.3 2.95% 65 576 10 0.7 Los Angles – Long Beach, CA 22.5 2.35% 190 828 5 0.2 New Orleans, LA 19.7 2.06% 34 188 6 0.8 Scranton, Wilkes-Barre, 19.4 2.03% 28 514 18 1.3 Hazleton, PA Youngstown – Warren, OH 18.2 1.90% 18 258 14 1.8 Cleveland,Lorain,Elyria,OH 15 1.57% 97 536 6 0.3 Philadelphia, PA-NJ 14.9 1.56% 128 416 3 0.2 Nassau – Suffolk, NY 12.8 1.34% 115 403 4 0.1 Pittsburg, PA 11.6 1.21% 98 480 5 0.2 Boston, MA 10.8 1.13% 108 438 4 0.1 Sacramento, CA 10.7 1.12% 45 179 5 0.4 Dallas – Fort Worth, TX 9.7 1.01% 94 276 3 0.1 Buffalo – Niagara Falls, NY 9.6 1.00% 55 271 5 0.3 Cincinnati, OH 9.3 0.97% 44 180 4 0.3 St. Louis, MO-IL 8.8 0.92% 56 226 4 0.2 Seattle, WA 8.8 0.92% 64 288 5 0.2 Atlantic City – Cape May, 8.5 0.89% 47 261 6 0.3 NJ Detroit, MI 8 0.84% 80 227 3 0.1 Minneapolis-St. Paul, MO-WI 7.9 0.82% 69 497 8 0.2 Honolulu, HA 7.9 0.82% 29 185 7 0.4 San Diego, CA 7.5 0.78% 66 298 5 0.2 Portland, OR 7 0.73% 53 189 4 0.2 Note: Sales figures for exhibits 10 & 11 are in millions.18 D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  13. 13. Page 12 Exhibit 11 - Market Analysis by Specialty (8-digit SIC Code)19 SIC SIC Description No. % Total Total Total Avg. Avg. Code Bus. Emps. Sales Emps. Sales 5441- Confectionery produced for 151 2.2 782 34.9 5 0.3 9903 direct sale on the premises2.1.2 The Market for FudgeJim Corcoran of the National Confectioners Association estimates fudge, a sub-segment of the chocolateindustry, to represent less than 1% of the U.S. Chocolate market due to its short shelf life, and theresultant inability of large producers to mass market fudge20. That is, fudge is primarily sold throughmanufacturing confectioners, or those retailers who produce fudge to sell directly at a retail location. SICcode 5441-9903 denotes ‘Confectionery produced for direct sale on the premises.’ These 151establishments accounted for $34.9 million in annual sales, achieving average sales of $300,000 (seeexhibit 4) or 50% more than those establishments that are not included in the category. 1% of the $13 billion total chocolate industry results in a national fudge market worth $130million. Given that the Philadelphia metro area market represents 1.5% of the national market forconfectionary stores, we conclude that the Philadelphia metro area also represents 1.5% of the nationalfudge market. Thus, our best estimate of the Philadelphia market for fudge is $1,950,000. A similaranalysis of the top 5 markets within the tri-state area reveals a total market for fudge of over $14 million(see exhibit 5). Exhibit 12 – Our Market in New York, New Jersey, and Pennsylvania - 2004 National Gourmet Chocolate Market..................................................................................1,300,000,000 National Market for Fudge................................................................130,000,000 New York @ 5.2%....................................................................6,760,000 67,600,000 Scranton-Hazleton @ 2.0%.....................................................2,600,000 26,000,000 Philadelphia @ 1.5%.................................................................1,950,000 19,500,000 Nassau-Suffolk @ 1.3%........................................................... 1,690,000 16,900,000 Pittsburg @ 1.2%.......................................................................1,560,000 15,600,000 Tri-State Market for Fudge............................$14,560,000 Tri-State Market for Gourmet Chocolate..................................$ 145,600,00019 D&B Sales & Marketing Solutions. www.zapdata.com. October 8, 2003.20 Corcoran, Jim. National Confectioners Association. Personal Telephone Interview. April 20, 2003.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  14. 14. Page 13 Exhibit 12A – Our Market in California - 2004 National Chocolate Industry..............................................................................................14,600,000,000 National Market for Fudge................................................................146,000,000 2.1.3 Macro Factors Bernadino @ 6.9%.......................................10,074,000 Riverside - San 1,007,400,000 Merced @ 4.0%..........................................................................5,840,000 584,000,000 San Francisco @ 2.9%...............................................................4,234,000 423,400,000 Los Angeles – Long Beach @ 2.4%....................................... 3,504,000 350,400,000 Sacramento @ 1.1%...................................................................1,606,000 160,600,000 Tri-State Market for Fudge............................$25,258,000 For Chocolate............................$ 2,525,800,000Whether one is examining the confections industry as a whole, or the chocolate segment, it is clear thatthere are several macro issues that are noteworthy. First, regulations regarding the labeling of food, foodsafety, and workplace safety continue to develop. Although at first glace it may appear that regulationsregarding food safety and product transparency are mature, and that significant changes are unlikely tocontinue, the opposite may in fact be true. Take for instance the July 11, 2003 FDA final ruling on thelabeling of products that contain trans-fatty acids; or the two new regulations that have been proposedunder the Bio-terrorism Act. Second, demographic shifts in age for the American population may belinked to an increase in candy consumption. According to the Bureau of the Census, the proportion ofthe U.S. population aged 65 and older will increase from 12.6 percent in 2000 to 20 percent by 203021.Industry experience would indicate that chocolate and confection consumption is positively correlated to Exhibit 12C – Significant Gourmet Market Factors • Smaller households and ‘on-the-go’ lifestyles that encourage snacking over full meals, including chocolate consumption • Increasing customer interest in gourmet chocolates, especially dark chocolates, and retailer willingness to stack premium items • The consumption of gourmet chocolate seen as more of an affordable indulgence rather than as a gift item sparking everyday consumption. Product offerings in convenient packaging and attractive pricing will increase consumption. • Product innovation in various combinations of nut and chocolate varieties and innovative packaging and sizes to hold consumer interest. • Increased retail presence with offerings in chocolate cafes, making chocolate consumption convenient and pleasant experience. • Increasing health consciousness among baby boomers and evidence that dark chocolate is beneficial to health. • Nostalgic flavors and images of retro products appealing to the aging baby boomers and flavors suited to the diverse ethnic population will expand the market in the future.21U.S. Bureau of Census. “Resident Population Projections by Sex and Age”, reproduced in Statistical Abstract of the UnitedStates: 2001, table 13, at 15.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  15. 15. Page 14age increase, or that as people age they tend to consume more candy. Also, demographic shifts in theethnic profile of America may have an impact on the industry, however no conclusive evidence exists tosupport a positive or negative effect. Finally, technological advances currently play a small role in theindustry and no relevant manufacturing improvements are on the horizon. A significant social trend that persists is characterized by attitude changes regarding personalweight control, healthy lifestyles, and dieting. Although the trend has yet to negatively affect theconfections industry; there is a risk of a future impact. Coverage of food issues in the US media is oftenerratic and occasionally alarmist. Because of the aforementioned attitude shifts, studies fromorganizations of widely varying credibility frequently receive significant attention from the major media.Similarly, studies on the healthfulness of chocolate have received mixed results. Articles have revealed thebenefits of chocolate in moderation, while studies also speak of the real health dangers of over-consumption. Less certain is the link between these reports and consumer buying behavior. In sum, mostindicators are that while customers are well versed in dietary matters, they are not significantly changingeating patterns. Most recently, the health-conscious have been drawn to healthier versions of theirfavorite foods primarily when there is no perception of a reduction in product quality or taste (for moremarket trends specific to the gourmet market see exhibit 12C22). 2.1.4 Industry Supply ChainThe industry supply chain for the confections industry23 is composed of retailers, producers, wholesalers,importers, and farmers (see below). Exhibit 13 – Confections Industry Ingredients Supply Chain Raw Refineries Importers Food Confections Whole- Retailers Consumers Material and and Distributors Producers salers Producer Processing Transporters and Plants Farmers22 “The U.S. Market for Gourmet Chocolate.” MarketResearch.com, April 2004, pp. 9.23 We use the confections industry as the relevant market to analyze as it is inclusive of all industry players.This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  16. 16. Page 15The areas in light blue represent those areas of the industry, which are external to D’Lectables businessmodel, while those areas in dark blue represent those functions of the industry carried out in-house.D’Lectables has focused on these areas of the supply chain, because this is where the most value is addedand will continue to be added through differentiation and branding. Little real economic profit is madedealing in the commodity areas of the industry, however those producers and retailers able to build brandrecognition make significant profits. 2.1.5 Economics of the Industry 2.1.5.1 Internal RivalryFor the sake of this analysis we will define D’Lectables market as the confections shop market within thePhiladelphia metro area, although this region is typical of the suburban and urban markets around theUnited States. People are rarely willing to travel outside their metro area for the purchase of confections;however this is not to say that people don’t purchase outside their local metro area. Certainly, manypeople purchase confections while vacationing. Within this market internal rivalry can be said to bemoderate. On the one hand, there are many small sellers within a slow growth industry, which usuallytends to heat up price competition. However, this industry has historically been characterized as having high margins. Several reasonscan be defended: 1) As mentioned, high household penetration rates have worked to keep margins high;2) Strong brand differentiation has enabled companies, such as Godiva, to combine brand presence,positioning and a quality product as a recipe for aggressive returns; 3) High levels of brand loyalty havebeen enjoyed by many stores, especially those offering outstanding customer service. D’Lectables intendsto take advantage of the market opportunity by building core competencies around superior productquality, an engaging shopping experience, and excellence in customer service. 2.1.5.2 Threat of EntryThe threat of new market entrants is a double-edged sword. Ease of entry for a start-up is beneficial,while once established, barriers to new entrants become advantageous. Generally, access to key inputs ishigh and there are few barriers to market entry – such as large up-front investments, network externalities,government protection, or limited access to distribution channels. Furthermore, there is a low minimumThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  17. 17. Page 16efficient scale, meaning a company can become profitable with a small piece of the market. All of thesefactors favor the new market entrant. Those factors that work against the new market entrant, and favor the market incumbent are clear.First, the low accessibility to our old-fashioned hand-whipping process is a clear competitive advantage forD’Lectables, and there is a steep learning curve associated with perfecting the process. Second, productdifferentiation is possible, and can be supported through brand differentiation. Finally, consumers arehighly brand loyal – further justifying the need for a strong brand position.Exhibit 14 – A Five Forces Analysis for the Confections Producing Industry Threat of Entry Environmental Factors • Low minimum • Regulatory Tightening efficient scale • Demographic Shifts • High access to key inputs • Low access to our production process • Supplier Power Internal Rivalry Customer Power • Commodity inputs • Many sellers in the market • Un-concentrated • Low threat of • Slow growth – mature industry customers – low forward integration • Strong brand differentiation power • Few relationship • Brand loyalty • Small sales relative specific investments • Low exit barriers to producers • Low threat of revenue forward integration • Low price-elasticity Substitutes and Complements • Many available substitutes • Low price elasticity – people don’t move to substitutes when industry prices rise • Readily available complementsThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  18. 18. Page 17 2.1.5.3 Substitutes & ComplementsMany people would assert that there is no substitute for chocolate! However, when it comes to sellingfudge, chocolate is a significant substitute, while distant substitutes would include ice cream, cookies,pastries, and other bakery products. Also, when thinking in terms of the product ‘fudge as a gift’,substitutes range from chocolates to flowers to books to clothing. If we focus primarily on chocolate asthe closest product substitute, we can see that chocolate has a low price elasticity of demand. That is,customers don’t stop purchasing chocolate when industry prices are high. Also, switching costs areinsignificant. In fact, in this market high prices can be justified by product differentiation coupled withstrong positioning. Complements include soft drinks, coffee and other beverages. Pricing ofcomplements has little impact on the industry. In conclusion, substitutes and complements place littlepressure on industry profits due to low price elasticity of demand. 2.1.5.4 Supplier PowerSuppliers are relatively un-concentrated and sell commodity inputs. This bodes well for a market leader ordominant firm, which can negotiate better service and lower prices for large orders. The threat ofcontract hold-up is negated by relatively low relationship specific investments. In sum, threat of forwardintegration is small (although some chocolate producers have moved towards retailing), suppliers’ powerto price discriminate is small, and overall supplier power is low.Exhibit 15 – The Pros and Cons of the Industry Industry Force Pro /Con Factors to Consider Moderate Internal Rivalry • Con • Many small sellers in a slow growth market • Pro • High household penetration rates • Pro • Strong brand differentiation possible • Pro • High levels of brand loyalty Moderate Threat of Entry • Pro • Access to key inputs is high • Pro • Few barriers to market entry • Pro • Low minimum efficient scale • Pro • Low accessibility to our old-fashioned hand-whipping process • Pro • Steep learning curve associated with perfecting the process • Pro • Consumers are highly brand loyal Substitutes & Complements • Even • Readily available substitutes and complements with no switching costs • Pro • Low price elasticity of demand for substitutes and complements Low Supplier Power • Pro • Suppliers are relatively un-concentrated and sell commodity inputs Pro • The threat of contract hold-up is negated by relatively low relationship specific investments Pro • Low threat of forward integration Pro • Low power to price discriminateThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  19. 19. Page 18 Low Customer Power • Pro • Un-concentrated retail customer base with small relative purchases Pro • Little risk of backward integration Pro • Low price elasticity - customers are willing to pay premium prices for premium products 2.1.5.5 Customer PowerCustomer power is also quite low. First, un-concentrated customers make small individual purchasesrelative to overall company revenues at the retail level. Second, there is little risk of backward integration,or the risk of a customer producing fudge themselves. If anything, cultural shifts have supportedpurchasing fudge as opposed to producing fudge in the home. 2.1.6 Operating Environment 2.1.6.1 Competitive Landscape D’Lectables Godiva Boutique Premium Mom-n-Pops, Mass Chocolate Chocolatiers Department Marketers Retailers StoresSample D’Lectables Godiva Lindt, Gertrude L.A. Burdick, Kilwin’s, Acme, CVS,Companies Hawk, Fudge Dean& Deluca Bayard gas stations, Fatale, Rocky Boscov’s, convenience Mountain Macy’s, storesMarket Share Small Medium Small to Small Medium to Largefor each player Medium largeBreadth of Medium Medium Medium Limited Medium LimitedProduct LineKey-account No Yes Yes Yes No NoadvantagesPrice No No Some No Some YesCompetitivenessAdvertising & Yes Limited No Yes YesPromotionalEffectivenessLocation & Age Good Good Good Adequate Aging Mixedof FacilitiesCapacity &ProductivityExperienceRaw MaterialsCostFinancialPositionPersonnelCaliberImage/ PublicityCustomerProfilePatents &This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  20. 20. Page 19CopyrightsLaborRelations/CultureTechnologicalPositionCommunityReputation 2.1.6.2 Customer Profiles – (to be added) 2.1.6.3 SuppliersSupplier Price Competitve / Reciprocal Quality Standards Reputation Shipping Terms Relationship 2.1.6.4 CreditorsCreditor Stock as collateral Acceptance of Leverage Loan terms and Payment History availability relative to profit objectivesPNC 2.1.6.5 Market for LaborCurrently, D’Lectables has no reputation within the labor market, but looks to hold a position that enablesus to attract and retain the talented people that are required for our continued growth. Because of thenarrow labor market (most people will be willing to travel 30 miles), availability of the people we need isspecific to the geography surrounding the particular location, as are the applicable employment rates.2.2 The Company & The ConceptD’Lectables is a new organization that has been designed from its inception to achieve a position as thepreeminent producer and boutique retailer of fudge and other fine confections. We are currently in theseed stage of organizational development, and are currently focused on the following objectives:This Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  21. 21. Page 20 • Financing the creation prototype locations • Building and operating prototype locations • Planning the organizational infrastructure to support continued growth • Developing our management team and team of advisors • Securing appropriate proprietary standingsOur fudge will be sold to consumers through physical store fronts and electronic channels. Fudge saleswill typically follow holiday sales peaks, with the largest sales typically experienced in the four weeksleading up to Christmas, Easter, Halloween, and Valentines Day. D’Lectables locations will be located inretail areas characterized by high levels of foot traffic and with the demographics of our three targetconsumer groups. Hours of operation will be determined by consumer demand and will be constrainedby mall operating hours when indoor mall locations are utilized. Our management team includes expert in the production process, selling strategies, and storemanagement. Our president has had over 10 years of management experience within the industry. Thisexperience is a significant competitive advantage as D’Lectables will not meet a steep learning curve inperfecting the fudge production process, because the management team enjoys an intimate knowledge ofthe hand whipping production process. Second, the management team has developed competence inproven selling strategies. Third, we have demonstrated superiority at the cross-functional skills required tomanage the day-to-day sales and production activities preformed within a location. Fourth, the teamenjoys knowledge of their prospective customers’ tastes, as a large portion of our potential customers inthe greater-Philadelphia area purchase fudge while on vacation in Cape May County, New Jersey. Finally,the management team has established relationships with many of the necessary vendors. Theseadvantages, along with our passion for superior product quality, creating an engaging shopping experience,and providing excellence in customer service, will ensure D’Lectables customers consistently enjoy thequality and tradition of hand whipped fudge and of our other confections, and the freshness of onsiteproduction in an environment that supports our position as the premium fudge retailer.2.3 History 2.3.1 Over 100 Years of FudgeThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  22. 22. Page 21People of all ages and demographics have been enjoying fudge for over a century. Historically fudge hasbeen a homemade treat made by Mom. However over the last several decades it has been sold throughtwo channels. First, mom-and-pop candy shops have distributed their fudge directly to their retailcustomers. This has enabled these operations to tightly control the quality and freshness of their fudge,but owners have lacked the business acumen to grow their organizations beyond a handful of locations.Second, and with limited success, mass producers have distributed their products through re-sellers. Thishas afforded these companies larger market reach, however the quality of the product has been limited bythe addition of preservatives and the automation of production. Along the east coast of the U.S. holidaymakers find fudge and other confections shops at varioustourist destinations. These holiday resorts offered an ideal environment for confections retailing: highlevels of foot traffic, relatively low real estate costs, and generally provided the confectioner and theirfamily a comfortable lifestyle in a desirable location. One of the areas in which the industry has flourishedis Cape May County, New Jersey. It is no surprise given the ‘Jersey shore’ is legendary for summervacationing due to the beautiful beaches and fine resort towns. Dale was introduced to the business ofmaking and selling confections at the age of 14 with Fudge Kitchens, Inc., and has kept a hand in thebusiness ever since. 2.3.2 D’LectablesThe D’Lectables concept began as an idea of the president’s, and has been developed over the past twoyears. This business plan represents the results of the development of the concept. In early 2004D’Lectables, LLC was established in the state of Pennsylvania as a Limited Liability Company. Finally,D’Lectables is currently seeking start-up financing to establish prototype locations within the greaterPhiladelphia area to test the viability of the model.2.4 Our Products 2.4.1 Superior FudgeD’Lectables is committed to delivering consistently superior fudge that employs a production process thathas roots dating back to the 1800s. Our process produces simply the creamiest and most delicious fudgeavailable. Competing products are characterized as having a grainy and gritty texture, and as having lessdepth of flavor. D’Lectables product line consists of our 17 flavors of fudge (see appendix A). TheseThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.
  23. 23. Page 22flavors are divided into serving size pieces that are typically 2 ounces in weight, and are approximately 1.5”by 2” by ¾” in size; however it should be noted that due to the hand- cutting process pieces range slightlyin weight and size. Regardless of ordering channel, consumers have the option of customizing their package by thechoice of flavors, and by their choice of packaging. Packaging is determined by: 1) package quantity; and2) package style. Package quantities range from 1 piece to several pounds, and there are two packagingnon-seasonal styles – standard and gift. The following diagram shows the breakdown: Exhibit 16 – Packaging offerings Package Quantity Standard Gift 1 piece / 2 oz. Wax bag Not available 2 pieces / 4 oz. Wax bag Not available 4 pieces / 8 oz. Standard ½lb. box Elegant ½lb. ballotin 8 pieces / 16 oz. Standard 1lb. box Elegant 1lb. ballotin 16 pieces / 32 oz. Standard 2lb. box Elegant 2lb. ballotin All package quantities and both styles will be available in the stores, and quantities in excess of1/2lb. will be available for parcel shipment. Furthermore, customers will have the option of creating acustomized gift card that will be included in the package, when the gift packaging style has been selected. Our fudge has a shelf life of 3 weeks from completion of the production process to the cuttingprocess. Typically our fudge is cut the evening before, or on the day of purchase. After the fudge is cutfor sale, it has a shelf life of 10 days at room temperature and if kept within its packaging (the fudge canalso be frozen for six months and left to thaw at room temperature). This provides our walk-in customerswith a package of fudge that will be good for 10 days, and our shipping customers a package that willgood for 3 days, given a worst-case scenario 7 days in transit. 2.4.2 Fine Chocolate CreationsThis Business Plan has been prepared by the management of D’Lectables, LLC., and is being furnished to select individuals for the purpose of providing potential financing to theCompany. The Business Plan is a confidential document that contains ideas, concepts, information, processes, methods and other proprietary information. Readers are to treat theinformation herein as confidential and may not copy or otherwise reproduce the materials without the express written consent of D’Lectables, LLC.

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