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HomeMy WebLinkAbout04-10-2012 Council Economic Development CommitteeAGENDA City Council Economic Development Committee Tuesday, April 10, 2012 8:00 a.m. HeUing Conference Room City Hall 1. Call to Order 2. Consider approval of minutes from the March 13 and March 20, 2012 Economic Development Committee meetings. 3. Consider request for CDBG Economic Development Loan for Molly's Cupcakes Iowa City LLC 4. Staff time 5. Committee time 6. Other business MINUTES PRELIMINARY CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE MARCH 13, 2012 HELLING CONFERENCE ROOM, 8:00 A.M. Members Present: Matt Hayek, Susan Mims, Michelle Payne Staff Present: Wendy Ford, Jeff Davidson, Geoff Fruin, Tracy Hightshoe, Kevin O'Malley, Tom Markus, Eleanor Dilkes Others Present: Gigi Wood, Gregg Hennigan, Marc Moen RECOMMENDATIONS TO COUNCIL: Payne moved to recommend to the City Council the request for Financial Assistance for Redevelopment of 114 S. Dubuque Street, as discussed. Hayek seconded the motion. Motion carried 3-0. CALL MEETING TO ORDER: The meeting was called to order by Chairperson Mims at 8:05 A.M. WELCOME AND INTRODUCTIONS: Chairperson Mims welcomed everyone and asked that those present introduce themselves. CONSIDER APPROVAL OF THE MINUTES OF THE FEBRUARY 23, 2012, ECONOMIC DEVELOPMENT COMMITTEE MEETING: Chairperson Mims asked if there was approval of the minutes as submitted. Jeff Davidson noted that the record should reflect that City Manager Markus was also present at this meeting, albeit late from another meeting. Hayek moved to accept the February 23, 2012, meeting minutes as amended. Payne seconded the motion. Motion carried 3-0. CONSIDER REQUEST FOR FINANCIAL ASSISTANCE FOR REDEVELOPMENT OF 114 S. DUBUQUE STREET: Davidson addressed the Members concerning the proposed project at 114 S. Dubuque Street. He noted that the applicant, Marc Moen, is also present and available for questions that may arise. Davidson began by explaining the location of this project — the current Wells Fargo building on the pedestrian mall. This would be a mixed -use building, with retail on the first floor and either retail or office on the second floor, with two additional floors of office, and then various residential units on the remaining floors. Davidson added that the applicant is required to have retail on the first floor, but that the other floors of retail/office are at the developer's discretion. This is an almost $11 million project that will have a positive impact on the City's tax base. Davidson continued, explaining the parking requirements that must be met in this development. Davidson stated that the developer is requesting $2.5 million in TIF financing for this project. He added that he has hard copies of the formal request including the building concept plans, and a letter from the City Attorney's office regarding issues with Black Hawk Mini -Park for members. The discussion continued, with Davidson noting that the applicant has stated that without TIF assistance from the City, this project will not be built. Projections show that the $2.5 million could be paid back by new taxes generated by the project in approximately 18 years. Davidson described the impact to the pedestrian mall during construction, should this project move forward. He also spoke briefly about the City Attorney's letter addressing other issues with the ped mall. Marc Moen then addressed Members. He stated that in working with staff, they have tried to come up with a building that addresses the stated need for office space and affordable residential units downtown. Moen continued, stating that he read the City Attorney's letter last night and that he is somewhat concerned with what she has stated. A major concern is the possibility of future development of the Black Hawk mini park next to this site. City Attorney Dilkes responded to concerns, further clarifying her recent letter regarding this project. The discussion continued, with staff and members weighing in on what, if any, development might occur in the area surrounding this project. Members agreed that the Black Hawk Mini -Park would most likely stay a park — an integral part of the pedestrian plaza. They also agreed that some sort of assurance to this would be helpful for the developer. Dilkes stated that another way to assure that this area isn't developed in the future would be to dedicate it as right-of-way. Another issue under discussion was 'air rights,' concerning the balconies being proposed for this building and the overhang of the alley, for example. Dilkes gave Members a brief history on this issue, and Davidson noted what other communities have done in similar situations. Moen then responded to Members' questions regarding this project. Members noted their concern with the term of this proposed TIF project —18 years for the City to repay itself from the new taxes generated by the project. Mims stated that she believes this will be a successful project and that there's a chance for earlier repayment if valuations are higher than predicted. She added that she would be in favor of recommending this project to the full Council. Hayek agreed, stating that the 18 years is longer than he would like to see, as well, but that he believes these are conservative estimates. The Members agreed that the City Attorney will look into the right-of-way issue as discussed. Payne moved to recommend to the City Council the request for Financial Assistance for Redevelopment of 114 S. Dubuque Street, as discussed. Hayek seconded the motion. Motion carried 3-0. REPORT ON DISBURSEMENT OF ECONOMIC DEVELOPMENT FUNDS FOR BUSY COWORKING LLC: Ford addressed Members regarding Busy Coworking LLC. She explained how the coworking model works, stating that it is an office that can house 20 people at a time, has wireless internet connection and other office amenities, such as a copy machine and printer. This type of space allows people either to work individually on their own work, or to even have collaborative efforts with others in the coworking site, all while having an `office' to work from. The location of Busy Coworking LLC is in the Chait Building at 218 E. Washington Street, on the third floor. Ford then responded to questions, giving further clarification of the operations at Busy Coworking LLC. Tom Markus also clarified how this operation will work. STAFF TIME: Ford stated that the meeting scheduled for next week is not a sure thing at this point. She will let Members know if this meeting is going to be postponed. Hightshoe added that a request had been received for CDBG funds, but that after review, staff could not make a favorable recommendation to the EDC. She briefly explained how they arrived at this decision. COMMITTEE TIME: None. OTHER BUSINESS: The next Economic Development Committee meeting is tentatively scheduled for Tuesday, March 30, 2012, at 8:00 A.M. in the Helling Conference Room at City Hall. ADJOURNMENT: Hayek moved to adjourn the meeting at 9:00 A.M. Payne seconded the motion. Motion carried 3-0. Council Economic Development Committee ATTENDANCE RECORD 2012 TERM ro w w NAME EXP. 3 N 3 N -4 w w o Michelle 01/02/14 X X X Payne Matt 01/02/13 X X X Hayek Susan 01/02/13 X X X Mims Key: X = Present O = Absent O/E = Absent/Excused MINUTES PRELIMINARY CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE MARCH 20, 2012 HELLING CONFERENCE ROOM, 8:00 A.M. Members Present: Susan Mims, Michelle Payne Members Absent: Matt Hayek Staff Present: Wendy Ford, Tracy Hightshoe, Geoff Fruin, Jeff Davidson, Tom Markus, Others Present: Gigi Wood, Nancy Quellhorst, Joe Raso RECOMMENDATIONS TO COUNCIL: Payne moved to recommend to the City Council the request for Financial Assistance for Plant Expansion at Alpla, 2258 Heinz Road, Iowa City. Mims seconded the motion. Motion carried 2-0; Hayek absent. CALL MEETING TO ORDER: The meeting was called to order by Chairperson Mims at 8:11 A.M. WELCOME AND INTRODUCTIONS: Chairperson Mims welcomed everyone and asked that those present introduce themselves. CONSIDER REQUEST FOR FINANCIAL ASSISTANCE FOR PLANT EXPANSION AT ALPLA LOCATED AT 2258 HEINZ ROAD: Wendy Ford addressed Members, giving them some background information on the Alpla facility in Iowa City. She stated that Alpla has approached the City regarding an expansion of their production facility. The expansion will occur here in Iowa City, or at their Jefferson City, Missouri, facility. They have approached the governmental bodies at both locations to compare incentives available for such an expansion. This project involves a $12.2 million capital investment by Alpla, about $1 million of which would be the taxable valuation of a 10,000 square foot addition. Previous Alpla projects also received economic development grants— one, a 4-year and the other a 5- year TIF rebate. Staff then determined that if they did a 4-year TIF on the new value created for this expansion it could mean a potential $170,000 property tax savings for Alpla over the four years. She further noted that this amount is smaller than the previous expansions due to the taxable value portion of the proposed project. The overall value of the project is high due to the new technology that will be used, and due to the addition of 34 new jobs. Mims stated that she would like to clarify that a large portion of the capital investment is in machinery and equipment, which under Iowa State Law is not taxable. K Ford continued, noting that of the 34 jobs, 20 will pay above the current county median wage. At the end of three years, all of the jobs are expected to exceed the county median wage. The existing 190 or so employees will be retained. Ford stated that staff took a tour of the Alpla facility recently and noted that they have made several expansions without City assistance, as well. Jeff Davidson stated that staff is asking for recommendation to Council for a 4-year TIF rebate project, not to exceed $170,000, for Alpla's expansion. Members then asked questions of staff regarding this request. Mims stated that she believes this is a good request and that she would entertain a motion to recommend to the full City Council. Payne moved to recommend to the City Council the request for Financial Assistance for Plant Expansion at Alpla, 2258 Heinz Road, Iowa City. Mims seconded the motion. Motion carried 2-0; Hayek absent. STAFF TIME: None. COMMITTEE TIME: None. ADJOURNMENT: Payne moved to adjourn the meeting at 8:20 A.M. Mims seconded the motion. Motion carried 2-0; Hayek absent. Council Economic Development Committee ATTENDANCE RECORD 2012 TERM NAME EXP. ry 3 N 4 W w o Michelle 01/02/14 X X X X Payne Matt 01/02/13 X X X O/ Hayek E Susan 01/02/13 X X X X Mims Key: X = Present O = Absent O/E = Absent/Excused INITIAL REVIEW OF MOLLY'S CUPCAKES IOWA CITY LLC WORKING CAPITAL Business Proposed: Molly's Cupcakes is a new full -service bakery specializing in cupcakes, but will also sell cookies, brownies, cheesecakes, layer cakes and more. The business will be located at 14 S. Clinton and hopes to open this August. The bakery will include a dining area and will be open on weekends until midnight. Molly's Cupcakes Iowa City will be the company's first franchise. The original store opened in 2007 in Chicago, followed by a store in New York in 2011. The owner has worked at the Chicago store since April 2010 as front of house staff and then account manager/office manager and will open a store in Iowa City. Financial assistance is requested for working capital. Budget & Private Financial Contribution The applicant estimates start-up costs of $250,000. Applicant secured a loan commitment of $115,000 through MidWestOne and will provide $50,000 in investor capital. Owner, Jamie Smith, with 51 % ownership, will be in charge of all day to day operations. The applicant registered with the state as a targeted small business and applied for a $50,000 loan through the state of Iowa. The state's application is pending review. The private lender will secure their loan through a UCC statement on all business assets. Applicant has negotiated a five-year lease with two five-year renewal terms. Applicant requests $35,000 through the CDBG Economic Development Fund for working capital. Comprehensive Plan/CITY STEPS Plan The project does not require public infrastructure and is located in a CB-10 zone (central business). CITY STEPS notes a high priority for employment training and a low priority for direct financial assistance to a for -profit business. Quality of Jobs The applicant anticipates hiring approximately 7 FTEs. These positions include a manager, head chef, sales/back of house, and bakers. No fringe benefits are anticipated at this time. Owner hopes to offer health insurance to those employees over 35 hours/week once the business is established and profitable. Economic Impact The proposed CDBG funds will provide a small, woman owned business with access to low interest working capital. Due to the collateral shortfall and the bank's underwriting guidelines, CDBG assistance is requested. Environmental/Community Involvement Applicant states recycling will be set up and utilized for front and back of house staff. The business hopes to support charitable donations to education -related programs/activities. Staff Recommendation: The owner's lender and attorney reviewed the business plan and financial projections. The lender stated the application is very thorough and the projections realistic. Applicant has a history of paying all prior debt obligations. Staff recommends $35,000 for working capital with a maximum term of 7 years at 0% interest contingent upon the applicant securing a private loan of $115,000 and investor April 2012 investment of $50,000. Staff recommends as a condition of the award the business is evaluated by the Small Business Development Center. Any technical assistance necessary would be based on an evaluation by the Small Business Development Center. For partial security, staff recommends a lien on the applicant's personal vehicle in addition to a UCC statement for all business assets. MidWestOne will have the first lien on all business assets. April 2012 Iowa City CDBG Economic Development Funds Application for Business Financial Assistance Business Requesting Financial Assistance: Individual: JAMIE SMITH Home Address: 2075 MELROSE AVE, #1 IOWA CITY IOWA 52246 Name of Applicant Business: MOLLY'S CUPCAKES Full Street Address of Business: 14 S. CLINTON STREET, IOWA CITY IOWA 52240 Phone Number & Email Address: (773) 419.6746 DUNS Number (If awarded funds, applicant must obtain a DUNS number): Type of Business: BAKERY Date Business Established: 2/29/2012 Bank of Business Account and Address (if applicable): MIDWEST ONE BANK 102 S. CLINTON ST. IOWA CITY IOWA 52240 NOTE: The City will not provide assistance in situations where it is determined that any repre- sentation, warranty or statement made in connection with this application is incorrect, false, misleading or erroneous in any material respect. If assistance has already been provided by the City prior to discovery of the incorrect, false or misleading representation, the City may initiate legal action to recover City funds. Revised 11/15/06 Section 1: Description of Business and Proposed Project 1.1. Describe the proposed "project" (for example, company relocation, building expansion, remodeling, new product line, number of new jobs, amount of investment in machinery and equipment) and the expected benefits it will receive from the financial assistance requested: THE PROJECT CONSISTS OF A COMPETE GUTTING AND REMDOELING OF AN EXISTING RETAIL SPACE INTO A FULL -SERVICE BAKERY WITH A DINING AREA. FINANCIAL ASSISTANCE WILL BE USED FOR PURCHASE OF EQUIPMENT & MACHINERY AND INVENTORY/SUPPLIES FOR TRAINING THE STAFF. APPROXIMATELY 15 NEW JOBS WILL BE CREATED FOR THE FIRST YEAR OF BUSINESS. 1.2. Provide a brief history of your company: MOLLY'S CUPCAKES IOWA CITY WILL BE THE FIRST FRANCHISE OF THE ORIGINAL MOLLY'S IN CHICAGO, ILLINOIS. FRANCHISE OWNER JAMIE SMITH HAS WORKED FOR THE COMPANY SINCE APRIL OF 2010 AND HAS WORKED ON GETTING THE IA CITY STORE OPEN FOR OVER A YEAR. MOLLY'S CHICAGO OPENED IN DECEMBER 2007 AND THEIR SECOND LOCATION OPENED IN NEW YORK CITY IN AUGUST 2011. 1.3. Describe the organizational structure of the business: MAJORITY OWNER JAMIE SMITH WILL BE IN CHARGE OF ALL DAY-TO-DAY MANAGEMENT DUTIES, INCLUDING HIRING THE STAFF, ALL ACCOUNTING AND PAYROLL, ORDERING SUPPLIES, AND OVERSEEING THE STORE. THERE WILL BE A HEAD CHEF IN THE KITCHEN AND SEVERAL PART-TIME EMPLOYEES WORKING IN FRONT -OF -HOUSE AND BACK -OF -HOUSE. 1.4. Management (Proprietor, partners, officers, directors, all holders of outstanding stock, 100% of ownership must be shown) Name & Position/Title Complete Address % Owned JAMIE SMITH 2O75 MELROSE AVE, #1, IOWA CITY IA 51 52246 MARC REIFENRATH 1709 PARLMER CT. PARKERSBURG IA 12.25 DAVE MORGAN 2208 YORKSIRE DRIVE, CEDAR FALLS 12.25 IA ADAM LEWIS 2017 BOXWOOD DRIVE, CEDAR 12.25 FALLS, IA CORY SCHMIDT 1105 S. 11 , ADEL IOWA 12.25 Attach a brief description similar to a resume of the education, technical and business background for all the people listed under Management. 1.5. Will the project involve a transfer of operations or jobs from any other Iowa City or Johnson County facility or replace operations or jobs currently being provided by another Iowa City or Johnson County company? If yes, please indicate the facility(s) and/or company(s) affected. NO. Revised 11/15/06 Section 2: Financial Contributions to the Proposed Project 2.1. Use of Proceeds USE OF Proceeds Activity Loan Requested (Enter gross dollar amount rounded to the nearest hundreds) Land acquisition $ 0 New Construction/Expansion Repair $ 0 Acquisition and/or Repair of Machinery and Equipment $ 15,000 Inventory Purchase $ 10,000 Working Capital (including accounts payable) $ 10,000 Acquisition of Existing Business $ 0 All Other (provide description) $ 0 Total Loan Requested (All Sources): $ 35,000 2.2. Terms of Proposed Financing (Sources) Proposed Financing Amount Monthly Payment Type i'� Rate Term Financial Institution: MIDWEST ONE BANK $ 115,000 1050.00 DIRECT 5% 15 YRS Financial Institution : TSB Loan $ 50,000 415.00 GOVT 0% 10 YRS Other : Investor Capital $ 50,000 0 - - Iowa City CDBG Economic Dev. Fund $ 35,000 292.00 DIRECT 0% 10 YRS TOTAL: 1 $ 250,000 1,7571 F (')For example: forgivable loan, direct loan, or grant. 2.3. Explain why assistance is needed from the City, and why it cannot be obtained elsewhere. If the applicant did not apply for a loan through a private financial institution, please explain why. If denied assistance through a financial institution, please attach the letter of denial. BUDGET CAN NOT BE MET IF ALL FINANCING IS THE SAME INTEREST RATE AS THE LOAN THROUGH THE FINANCIAL INSTITUTION. Revised 11/15/06 2.4. Indicate the owner's contribution (cash, assets for the operation of the business, etc.) to this project. TOTAL CONTRIBUTION FROM OWNERS IS $50,000 2.5. Identify all agencies or institutions involved in the project (financial, technical assistance, etc.) and what their involvement is: MIDWEST ONE BANK IS FINANCING OUR SMALL BUSINESS LOAN. I HAVE ALSO APPLIED FOR A TARGETED SMALL BUSINESS LOAN THROUGH THE STATE OF IOWA. 2.6. What type of security will the assisted business provide the City? If no security or less than the dollar amount requested is offered, an explanation must be provided. € Corporate Guaranty € UCC Financing Statement € Irrevocable Letter of Credit € *Personal Guarantee € Surety Bonds € Mortgage on Real Estate € *Escrow Account € Other: Before execution of a CDBG agreement, if the collateral consists of machinery and equipment, inventory, or other, the applicant must provide an itemized list that contains serial and identification numbers for all articles that had an original value of greater than $5,000. Include a legal description of real estate offered as collateral. 2.7 If the City did not provide financial assistance, could the project proceed? NO. Section 3: Jobs to Be Created/Retained Special Note: The Community Development Block Grant (CDBG) program requires that at least 51 % of the jobs created or retained must be held by or made available to low - moderate income persons. The business acknowledges that if it fails to create and/or retain the jobs identified below by the end of the project period and maintain them for a period of time (usually 12 months from the date of the award); it may be required to reimburse City funds for the employment shortfall. 3.1 If an existing business, how many employees are currently employed at your Iowa City location? Please attach a copy of the company's quarterly Iowa "Employer's Contribution and Payroll Report" for the most recent quarter. N/A Revised 11/15/06 3.2 Complete the following chart identifying the number of jobs to be created and/or retained based on this specific project. Type of Job and Hourly Rate for Created and/or Retained Positions in First 12 Months of Project Award (please see attached ✓ob Category De 1i 7111bas) # of Jobs Created # of Jobs Retained Type of Job No. Hours Per Week Hourly Rate of Pay Fringe Benefits* 1 Manager 65+ $40,000 ANNUAL NONE 1 Professional — HEAD CHEF 40 $35,000 ANNUAL NONE 4 BACK -OF -HOUSE 15 HRS EA. $7.75/HR NONE 7 Sales — FRONT OF HOUSE 20 HRS EA. $7.75/HR NONE 2 BAKER 25 HRS EA. $9.00/HR NONE Craft Wokers (Skilled) Operatives (semi -skilled) Laborers (unskilled) Service Workers *If fringe benefits are provided, please attach a description of all employee benefits provided by and paid for (in full or in part) by the business. ONCE BUSINESS IS ESTABLISHED AND PROFITING, HEALTH INSURANCE MAY BE PROVIDED FOR EMPOLOYEES WITH OVER 35 HOURS/WEEK. 3.3 What is the estimated annual payroll for the new employees resulting from this project? $180,000 3.4 If an existing business, will any of the current employees lose their jobs if the project does not proceed? If yes, how many? Explain why: N/A Section 4: Economic & Environmental Impact 4.1. What other Johnson County companies could be considered to be your competitors? DELUXE CAKES; JAVA HOUSE; CAPPANA, YUMMIES 4.2. Please describe the energy and resource efficiency programs, waste reduction, waste exchange, and recycling programs at your Iowa City operation. RECYCLING WILL BE SET UP AND UTILIZED BY FRONT -AND BACK -OF -HOUSE. DAILY PRODUCTION WILL CORRESPOND WITH AMOUNT OF CUSTOMERS TO ENSURE MINIMAL WASTE. ALL PRODUCTS CAN E SOLD NEXT -DAY AS TO AVOIDE ADDITIONAL WASTE. RECIPES HAVE ALREADY BEEN CREATED, THERE WILL BE LIMITED WASTE AS A RESULT OF THIS. Revised 11/15/06 Section 5: Community Involvement, Compliance with Law 5.1 In addition to your normal business activities, does your business contribute or have plans to contribute to the community through volunteer work, financial contributions, or through other means? Please describe. MOLLY'S IS DEDICATED TO CHARITABLE DONATIONS TO EDCATION-REALATED PROGRAMS/ACTIVITIES (MOLLY WAS A SCHOOL TEACHER). 5.2 Has the business been cited or found to violate any federal or state statute or regulation within the last five years (including, but not limited to environmental regulations, payroll taxes, Occupational Safety and Health Administration laws, Fair Labor Standards, the National Labor Relations Act, the Americans with Disabilities Act)? If yes, please explain the circumstances of the violation(s). NO. 5.3 Has the company or any officer of your company been involved in bankruptcy or insolvency proceedings during the past 7 years from the date of this application? If so, provide the details. NO. 5.4 Are you or your business involved in any pending lawsuits? If yes, provide the case name of the lawsuit, docket number, and city and state where it is pending. NO. Section 6: Summary of Required Attachments Check off each attachment submitted. If not submitted, explain why. [X] Business plan (if start-up business) [ ] Balance Sheet (3 year historical if an existing business. Start-ups must provide a pro - forma balance sheet) [ X] Profit and loss statements (3 year historical if an existing business, 3 year projection for start-ups) INCLUDED IN BUSINESS PLAN [ X ] 12 month cash flow statement (if the business does not expect to turn profitable within the first 12 months, provide a cash flow statement extended to the year the business expects to turn profitable) [N/A Description of fringe benefits provided to employees, if applicable [X] Brief description of the education, technical and business background for all the persons listed under Management (Question #1.4) Revised 11/15/06 1X] Please provide the social security numbers for all the persons listed under Management (Question #1.4) [NIA If an existing company, copy of the company's quarterly Iowa "Employer's Contribution and I Payroll Report" for the most recent quarter. [NIA Construction loans only: Cost estimates for construction and a statement of the source of any additional funds Include a list of any machinery or equipment or other non -real estate assets to be purchased with the financial assistance and the cost of each item as quoted by the seller. Include the seller's name and address. NO EQUIPMENT HAS BEEN PURCHASED YET. Upon review of a submitted application, the City reserves the right to request additional information in order to assist the City with its evaluation of an application. Release of Information and Certification NOTE: Please read carefully before signing I hereby give permission to the City of Iowa City (the City) to research the company's history, make credit checks, contact the company's financial institution, and perform other related activities necessary for reasonable evaluation of this proposal. I understand that all information submitted to the City relating to this application is subject to the Open Records Law (1994 Iowa Code, Chapter 22) and that confidentiality may not be guaranteed. I hereby certify that all representations, warranties or statements made or furnished to the City in connection with this application are true and correct in all material respects. I understand that it is a criminal violation under Iowa law to engage in deception and knowingly make, or cause to be made, directly or indirectly, a false statement in writing for the purpose of procuring economic development assistance from a state agency or political subdivision. If applicant / is a proprietor or general partner, sign below. By; Date: iv o("4 If applicant is a Corporation, sign below: Corporate Name and Seal Date At Signature of President Attested by: Signature of Corporate Secretary Revised 11115/06 JAMIE J. SMITH 2075 Melrose Avenue Iowa City, IA, 52246 773.419.6746 mollys.jamie@gmail.com PROFESSIONAL HISTORY lvlvccy s k'upcunes %,iucago, unnois Account Manager / Office Manager • Responsible for making payments to all vendors for both Chicago and New York locations • In charge of payroll for all employees at both Chicago and New York locations • Create and monitor monthly operational budget • Manage insurance benefits and monthly premiums for all eligible employees • Conduct cost analysis and profit margin for goods sold • Work closely with kitchen managers to analyze and manage inventory pricing • Oversee day-to-day management of the office Molly's Cupcakes Chicago, Illinois Front of House Staff • Assisted customers at a busy, high -volume bakery • Took customer orders and entered into point -of -sales system • Decorated cupcakes to order and made coffee/tea beverages to order • Assisted kitchen manager in early morning food preparation • Worked with kitchen staff on filling/decorating baked goods • Performed daily functions essential to the smooth flow of the business Kopley Partners, LLC, Chicago, Illinois Director of Sales September 2010 — Present April 2010 — September 2010 April 2008 — April 2010 • Welcomed and showed property to prospective new buyers and handled incoming phone calls from prospective new buyers • Conducted all business in accordance with company policies and procedures, Fair Housing, Americans with Disabilities Act, Fair Credit Reporting Act, and all other laws pertaining to real estate • Constant vendor/contractor communications concerning work scheduling, billings, and certificates of insurance • Ensured sales files were complete and that completion of sales and addendums were executed properly • Worked closely with buyers on selecting finishes for the build -out of their units The Kopley Group, Inc., Chicago, Illinois Project Coordinator July 2007 — April 2008 • Responsible for all monthly payouts involved with a 37-unit condominium conversion project ($7.5 million) and a 91-unit loft development ($24 million) • Allocated all construction expenses and soft costs to project budgets • Managed operating account for 37-unit Home Owners Association • Coordinated timesheets and weekly payments for general contractor employees • Satisfied all insurance requirements related to project for developer, general contractor and subcontractors • Assisted marketing group with selecting finishes for both residential projects and calculate selling prices of all upgraded features. • Performed final walkthroughs of sold units with buyers and executed respective punch -lists • Responsible for collecting all rents when due and posting in a timely manner. Ensured all bank deposits were made daily. • Managed tenant relations and coordinated requests for repairs and maintenance, understanding of rent charges, lease issues and other tenant concerns. The John Buck Company, Chicago, Illinois Project Coordinator August 2005 — July 2007 • Monitored Executive Budget Summary and allocated expenses for $2million condominium conversion • Compiled invoices and produced sworn statements for monthly draws • Assisted in serving as liaison between designer and subcontractors • Developed contracts for all consultants in $106 mil condo/hotel project • Provided insurance requirements and controlled all certificates of insurance for consultants in development projects • Developed RFP's and analyzed proposal comparisons for several commercial projects • Compiled/Monitored data for Due Diligence projects • Facilitated OAC meetings EDUCATION • Central College , Pella, Iowa: B.A. in International Management and Spanish 2005 • Study Abroad Program — Granada, Spain 14* DAVID MORGAN 2208 Yorkshire Drive Cedar Falls. 1A 50613 (319) 404-8550 d—Morqan@cfu.net PROFILE Bachelor's degree in Business Administration, self-employed small business owner, fourteen years experience in the foodservice industry. EXPERIENCE Conceptualized, opened and operated a 180 seat restaurant. Staffed, trained and supervised and staff of 60+ employees. Opened and operated the organizations seventh location EDUCATION University of Northern Iowa — Business Administration - 1998 SKILLS Marketing, Communication, staffing, team building, training, policy creation and implementation, accounting. Marc Reifenrath 1709 Palmer Ct. Parkersburg, IA 50665 319-961-1209 Education: University of Northern Iowa 2001- BA Marketing: Sales & Advertising Entrepreneur of the Following: • Spinutech, Inc • Founded in 2000 • Currently have clients in around 45 states and employ around 20 people in Cedar Falls/Des Moines Spinvestments • Founded in 2005 • Real estate holding company with five plus commercial properties River Run Productions • Founded in 2006 • Video production company we started to serve Spinutech clients and their video needs Lava Row • Founded in 2006 • Social media company we invested in to compliment Spinutech service offerings • Located in Des Moines Entrepreneurially minded with an emphasis in digital marketing/strategy Strong desire to encourage economic growth within the great state of Iowa Cory Schmidt Spinutech, Inc founded in 2000 - Currently have clients in around 45 states and employ around 20 people in Cedar Falls/Des Moines Spinvestments founded in 2005 - Real estate holding company with five plus commercial properties River Run Productions founded in 2006 - Video production company we started to serve Spinutech clients and their video needs Lava Row founded in 2006 - Social media company we invested in to compliment Spinutech service offerings (located in Des Moines) AgencyBloc founded in 2008 - SaaS company with clients in over 25 states Adam Lewis Spinutech, Inc founded in 2000 - Currently have clients in around 45 states and employ around 20 people in Cedar Falls/Des Moines Spinvestments founded in 2005 - Real estate holding company with five plus commercial properties River Run Productions founded in 2006 - Video production company we started to serve Spinutech clients and their video needs Lava Row founded in 2006 - Social media company we invested in to compliment Spinutech service offerings (located in Des Moines) AgencyBloc founded in 2008 - SaaS company with clients in over 25 states MOLLY'S CUPCAKES BUSINESS PLAN Franchise - Iowa City, Iowa TABLE OF CONTENTS EXECUTIVE SUMMARY --------------------------------- MARKET ANALYSIS - -----------------------1. 2. COMPANY DESCRIPTION-------------------------------------------------------------- 3. ORGANIZATION & MANAGEMENT MARKETING & SALES MANAGEMENT PRODUCT LINE ------------------- FUNDING REQUEST ---- 5. NMI ------------------------------------------ 7. APPENDIX------------------------------------------------------------------------------- 8. I. EXECUTIVE SUMMARY F00-0AYES Welcome to Molly's Cupcakes! Molly's Cupcakes is a fun, inviting bakery that specializes in .... you guessed it — cupcakes. However, you don't just order a cupcake — you build it! For example, you decide whether you want a chocolate, vanilla, carrot or red velvet cupcake. Then you pick your frosting — chocolate, vanilla, butter cream, cream cheese, you name it. But the fun doesn't stop there. You can add as many toppings as you like, such as hot fudge, Gummy Bears, M&Ms, chocolate chips, etc. Once you design your favorite combination, a staff member from behind a counter builds your ideal cupcake. If that's not enough toppings, head over to our Sprinkle Station to add the finishing touch. Molly's will also serve center -filled cupcakes and other baked classics like chocolate chip cookies, brownies, cheesecakes, and old-fashioned layer cakes. Owner John Nicolaides opened Molly's Cupcakes in 2007 in Chicago, Illinois. The concept came from his Td grade teacher, Molly, who would bake cupcakes for her students' birthdays. Keeping with the scholastic theme, the bakery includes features such as swings in place of barstools and menu items displayed on chalkboards. The great atmosphere attracts kids and kids -at -heart alike. Located in the heart of Lincoln Park, Molly's offers a perfect place for passersby to stop in for a treat, or for couples to grab dessert after a date. Whereas typical bakeries are mainly carry -out, Molly's provides ample seating for a fun dine -in experience. In . only its third year, Molly's Cupcakes Chicago averages $4,000 in sales a day or $1,428,000 a year. We sell anywhere from 700 cupcakes on our slowest days to over 3,500 cupcakes a day during our busy season. Molly's is averaging a 40 percent increase in sales each year. In year four (2011) sales are forecasted to reach $2,000,000. Other stats: • Molly's was profitable on a month -to -month basis from the first month it opened. • During its slowest months, Molly's easily makes a profit. • It has never advertised. All business has been generated by word of mouth. • Molly's Cupcakes is opening a store in New York City in mid-2011. This will create buzz and excitement for the Molly's Cupcakes brand overall. Awards: • Best Red Velvet Cupcake (Chicago Magazine 2008) • Best new bakery (Time Out Chicago, 2009) • Best bakery (City Search, 2010) • Food Network (Winner of Season Finale of Cupcake Wars 2010) • 4.5 out of 5 stars on City Search Our Mission: Make people want more. Our treats have to be so good that people will want more. Our Bakery has to be so much fun and so inviting that people will want to come back. We need to be a brand that people love at every level. To do this we have to make sure everything associated with Molly's is adored, friendly, and fun. Our website is enjoyable and engaging. Our decor is playful and inviting. Our staff makes people feel welcome and happy. We have creative names for our products. We play lively, upbeat music. With everything we touch and every time we interact with the community and customers, we convey Molly's image. Heck, even this business plan should be fun. Put simply, every contact point between Molly's and consumers is fun. That means our boxes, our website, our sales staff, our products are all fun. We want Molly's to be not just a great bakery, but also a great brand -- an iconic brand. A brand that stands for delicious baked goods and fun, creativity, friendship, belonging, and a really good time. We are establishing Molly's as a "lighthouse" brand — a name that everyone sees and heads to for fun and to experience everything it has to offer. The extreme success of Molly's Cupcakes allows for growth and expansion into other markets. With Molly's Cupcakes New York opening in 2011, we want to keep the momentum going. That's where Molly's Cupcakes Iowa City comes in. Molly's Cupcakes Iowa City will be the company's first franchise. Exciting, isn't it? Here's the plan: Objectives: • Establish a retail space in the heart of Iowa City • Create a true presence in the community and become the most sought -out destination for baked goods. • Expand distribution to include weddings and local deliveries. • Make Molly's such a great place, because of the treats and the vibe, that people will want to come back. • Become cash -flow positive after the first month of business. Methods used to achieve these objectives: • Grass Roots Marketing • Social Media (Facebook, Twitter, Use of Blogs) • Marketing/Advertising on University of Iowa's Campus • Consistent delivery of quality baked goods II. MARKET ANALYSIS Iv"w 7o� CAKES We think selling cupcakes is an inherently obvious money-maker. First, throughout the nation, specialty bakeries have done remarkably well. For example, there's a place that specializes in cookies (Mrs. Fields). There's a bakery that sells cinnamon rolls (Cinnabon). There's a place that specializes in pretzels (Auntie Annes). And let's not forget Dunkin Donuts and Baskin Robins. But, as of this moment, there are only a couple national chains that specialize in cupcakes. We may not be the first, but we want to be the best. And cupcakes are really, really, really well loved. But don't just take our word for it. Here are some stats on a couple well-known "cupcakeries". Chicago now has several cupcake bakeries, including Sprinkles, Sugar Bliss, Sweet Mandy B's, Crumbs, Swiriz, and of course, Molly's Cupcakes. Sweet Mandy B's sells 1,500 cupcakes a day. In New York, the famous Magnolia Bakery sells ... drum roll please ... 3,000 to 4,000 cupcakes a day, averaging about $4.1 million a year. Those figures don't include beverage sales and other baked goods sales. Fortunately, Iowa City does not yet have any cupcake bakeries, strictly speaking. There are, however, bakeries that include cupcakes in their product line, such as Bread Garden Market and Deluxe. Bread Garden Market is located directly in the pedestrian mall (see Appendix map) thus being within five hundred yards of the desired location for a Molly's storefront. This is mainly a supermarket and provides only a small variety of cupcakes. Deluxe Cakes and Pastries is more than a mile away from Molly's preferred location; it is not within walking distance of the University, (one characteristic of any Molly's Cupcakes). Moreover, no bakery of any kind in Iowa City has the late -night hours that help make Molly's unique. The cupcake trend is without a doubt catching on — big towns, small towns, and every town in between. The success of Molly's Cupcakes Chicago, along with the numerous cupcake bakeries across the country, gives us confidence that the trend will continue into rural communities. Hurray! Now is the perfect time to establish a presence in Iowa City and become the area's first true cupcakery. We believe Iowa City will welcome Molly's Cupcakes with open arms and an enormous sweet tooth. Customers: Molly's will target two groups of customers. Core Customer: Young adults 18- 35 These folks range from college students looking for a snack to young couples stopping in for a cupcake during a Saturday night out. Young adults who want a treat and a fun place to hang out will constitute our core group. This market is filled with potential. Couples are constantly searching for new date places. Molly's will give them a new place to enjoy each other's company. Friends can meet at Molly's to catch up and play board games. Young adults and young professionals will also purchase specialty cakes for birthdays, bachelorette parties, graduations, house-warmings, office parties, etc. College kids always want new places to hang out with friends. At Molly's they can have a great time trying each other's cupcakes, sipping lattes, having study groups, etc. (Studying is always better with a cupcake). Basically, Molly's is an original alternative to a bar, the movies, or a typical restaurant. We're open until midnight on the weekends to provide a fun hangout place for anyone who needs a sugar fix. Secondary Customer: Parents & Children Parents with children below the age of 13 will be our secondary group. Parents will want to treat their kids with delicious goodies and celebrate their birthdays by placing large orders. Parents are always looking for ways to bond with their children. By going to Molly's and creating a cupcake with their children, Moms & Dads can interact in a new, creative way. Also parents will love to see the joy their children get while designing their cupcake. And there's nothing better than watching a kid dive into a cupcake! They will be able to order beautifully decorated cakes and cupcakes for birthday parties or even host their child's birthday party in the bakery. Parents and kids will primarily frequent the store during the day. Young adults will mostly come at night, when they are out having fun. With this approach, we believe the bakery will have a steady stream of customers. Market Anal,, s�rowth Chart: The chart below reflects conservative estimates for how many people will come to Molly's each year. These figures are based on information obtained from the UNI Regional Business Center. Of the households with children, it is assumed that 10% will enter the bakery every year. Remaining conservative, this calculates to (9) parents and children entering the bakery each day. For young adults, 30% of the town's residents are assumed to visit the bakery, along with 20% of The University of Iowa's students. Together, this totals to (33) young adults entering the bakery each day. Potential Annual Customers Growth Rate Parents w/ Kids 15% Young Adults 15% Other 15% Total Annual Visitors Year 1 Year 2 Year 3 Year Year 5 3,200 3,680 4,232 4,867 5,597 12,000 13,800 15,870 18,250 20,988 4,320 4,968 5,713 6,570 7,556 19,520 22,448 25,815 29,687 34,141 The following chart displays forecasted sale prices and number of units sold for the first 12 months of operation. These prices are competitive with other cafes and bakeries in Iowa City, which sell cupcakes for approximately $2.00 each. Molly's cupcakes will range from $2.00 (basic cupcake) to $3.25 (center -filled cupcake) each. In comparison, Molly's Chicago cupcake prices range from $2.00 to $3.75 and cupcakes at Molly's Cupcakes New York will range from $2.25 to $4.25 each. Avg. Price Units per day Cupcakes $2.70 300 Baked Goods $1.50 15 Cakes $25 1 Add-Ons $.25 18 Beverages $2 25 An average of 5 cupcakes is assumed per customer, given that most dine -in customers will have 1-2 cupcakes, while others will order a dozen or more for carry -out. The table that follows shows projected sales and gross margins (sales less costs of goods sold, as estimated in the Pro Forma Income Statements) for the first five years of operation. Sales are based on the unit prices and units sold per day (as shown in the previous table) and are based on the following assumptions: • Molly's will operate approximately 360 days each year • Unit sales will increase 20% each year • Unit prices will remain the same The cost of goods was determined by using a food distributor's pricing for ingredients and then calculating how much it would cost to produce 1 year's worth of baked goods and coffee products. Gross margin is estimated at 80% of sales. A full list of costs is described in Section 7. Prgjected Sales and Gross Margins: Year 1 Year 2 Year 3 Year 4 Year 5 Cupcakes $291,600 $349,920 $419,904 $503,885 $604,662 (Gross Margin) $233,280 $279,936 $335,923 $403,108 $483,730 Baked Goods $8,100 $9,720 $11,664 $13 ,997 $16,796 (Gross Margin) $6,480 $7,776 $9,331 $11,197 $13,437 Cakes $9,000 $10,800 $12,960 $15,552 $18,662 (Gross Margin) $7,200 $8,640 $10,368 $12,442 $14,930 Add-Ons $1,620 $1,944 $2,333 $2,799 $3,359 (Gross Margin) $1,296 $1,555 $1,866 $2,239 $2,687 Beverages $18,000 $21,600 $25,920 $31,104 $37,325 (Gross Margin) $14,400 $17,280 $20,736 $24,883 $29,860 Total $328,320 $393,984 $472,781 $567,337 $680,804 Total Gross Margin $262,656 $315,187 $378,225 $453,869 $544,643 I COMPANY DESCRIPTION Molly's is the first cupcake bakery that lets you add toppings to your cupcake. Being able to build your own cupcake ensures getting exactly what you want. Molly's is also the first cupcake bakery with a dedicated seating area so that customers can relax, study, play board games, visit with each other, and enjoy the staff's shenanigans. Molly's is open late to attract the nighttime crowds, offering the perfect alternative to a bar and a great place for those late -night sugar cravings. Finally, we want to help brand a new category of cupcakes: the Center -Filled. As if a regular cupcake weren't tasty enough, we add a special treat inside. Molly's has over 30 varieties of Center -Filled cupcakes, of which 10- 15 are offered daily. Molly's appeals to all age groups, which is a major component to its overall success. Also, the steady stream of customers throughout the day keeps the staff engaged and energized and keeps the inventory moving. Cupcakes are made in small batches throughout the day, helping to maintain the great quality and freshness of Molly's products. Equally important is the atmosphere and image we intend to create. This is hard to describe, but lets give it a try. When you go to any of the other cupcake places, you are greeted cheerfully and the sales people take care of you in a friendly manner. But this does not create a memorable experience. Basically, you go there primarily for the food. Molly's is much, much more. Molly's is an experience. Suppose for example, we hand out a free taste of hot chocolate to people who've just come in from the cold. Suppose you get to sit on a swing instead of a chair. Suppose you get to add your own sprinkles at a Sprinkle Station. Suppose you can play board games at your table. Suppose the bakers and sales staff mingle with the customers. Suppose we play happy, upbeat music that instantly puts you in a good mood. Suppose we let people choose the music. Suppose the staff is encouraged to dance behind the counter. Well, now you're not just a customer, you're a part of Molly's. You are not just experiencing something wonderful, you are contributing to a wonderful experience. When you do all these things, Molly's takes on a personality. And it shows just how much we care about our baked goods and the people who come through the doors. It shows that we are not striving to do "just enough" to have satisfied customers. Rather, we go above and beyond to create enthusiastic customers. We call this approach to brand -building "relentless dedication." No other bakery commits in such an all -encompassing fashion. Everyday, Molly's will practice "relentless dedication" to ensure that people are enthusiastic and passionate about our bakery. This will make customers want more. Adding "icing to the cake" is the fact that our products are fresh, delicious, and unforgettable. 4.ORGA1vIZATION &MANAGEMENT Company Ownerfihip Each Molly's Cupcakes (Chicago, New York, and any future Molly's) is a separate LLC. This structure offers tax benefits and protects the investors and managers from liability. As a franchise, Molly's Cupcakes Iowa City, LLC will pay royalties of approximately 3% to the original Molly's Cupcakes owner, once the business is profiting substantially. Investors will have the option for partial ownership of the franchise (see Appendix A). All investors will have access to company financial statements, tax records, etc. Management Team Founder. John Nicolaides is the Owner/Founder of the original Molly's Cupcakes in Chicago, Illinois, which opened in December 2007. John has 20 years of advertising and marketing experience. Before opening Molly's he was a Senior Vice President/Creative Director at Leo Burnett, the fifth largest advertising agency in the world. John has expansive marketing experience in both the food and restaurant industries. Although John will have no direct ownership in Molly's Cupcakes Iowa City, he will very much be a part of the implementation, start-up and ongoing operations of the franchise. Franchise Owner. Jamie Smith will be the majority Owner of Molly's Cupcakes Iowa City (MCIC). Jamie started working at Molly's in Chicago in April of 2010 with the vision of opening a bakery in her home state of Iowa. Jamie will oversee the day-to-day operations of MCIC and handle all accounts/finances. Chef. Molly's will hire an experienced baker to implement original recipes, help manage inventories, and run the kitchen (including the kitchen staff). taffiLag For the bakery to operate in a smooth manner, we will have a friendly, efficient staff. The kitchen staff will consist (on a daily basis) of the Chef, a baker, and two center -fillers. The front -of -house staff will constitute 2 people working behind the counter at any given time. We believe in order to meet production needs and service our customers, we need a staff of four people at the bakery at any given time. This might consist of two sales people and two people doing the baking, or three sales people and one person baking. As the bakery becomes more popular, a staff of five people will be needed at one time to keep the bakery running smoothly. Jamie Smith and the head baker will be at Molly's a great deal of the time. Their presence will reduce the number of workers needed. We plan on having a large pool of workers and arranging shifts so that no workers have to work overtime. For example, if the bakery is open for 14 hours a day and needs 4 people there at any given time to run smoothly, then once a worker approaches the end of an 8 hour shift, a new worker would take over the shift. MARKETING & SALES MANAGEMENT F "off CUPCAKES CS Location Molly's Cupcakes Iowa City will be located on a street that has a lot of daytime foot traffic to attract moms and a lot of nighttime activity to lure young adults. For example an ideal location would be near stores at which moms shop and close to restaurants and pubs which young adults frequent. We also feel that being within walking distance of a University will help draw college kids. The storefront will be located no farther than 1,000 yards of U of I's campus. With this strategy, the bakery can have a steady daytime and nighttime crowd. Logistics The bakery should have a generous display area and comfortable seating so folks can hang out. The approximate area should be about 1,600 square feet. Although there should be a separate kitchen, much of the baking and cake decorating will be done in an open area behind the counter. That way, customers can watch the baking process. The kitchen/open baking area will account for approximately 50% of the space. The bakery will also need a restroom and dry storage. Strategy and Implementation To attract young adults, we will stay open late at night, so that people can come to Molly's for dessert after they've seen a movie or been to a bar. Our staff will interact with and befriend the customers, hopefully creating a large group of "regulars". Also, we can feature theme nights. For example, every Tuesday night could be 80's night, where we play music from the 80's and dress the part. Customers will receive a free cupcake if they answer an 80's trivia question correctly. To get Morns to come to Molly's we have several ideas. There will be a wall dedicated to displaying children's artwork. We can offer a Birthday Pack, which will include cupcakes, frosting and toppings. With the pack, moms can host a cupcake decorating party at home. We can also host story time on Saturday mornings. Molly's Cupcakes will provide delicious cupcakes and other baked treats at really good prices. We also want to make Molly's Cupcakes a fun, important part of the community. We want Molly's to be a place where children can feel special and young adults can feel they are a part of the bakery and interact with the staff. We want our neighbors to feel proud that Molly's is in their community. We want to make Molly's as important and loved as a church or a school. We want to make Molly's a lighthouse brand. (Ambitious, aren't we?) The concept of the bakery, the friendly staff, and the quality of the baked goods should generate sufficient sales. But in a pinch, to increase sales we have lots of fun ideas. We will have a large menu board with cupcake and extra topping suggestions. For example, we might suggest a vanilla cupcake with strawberry icing, chocolate chips and whipped cream. This should inspire and entice people to order more than just a basic cupcake. We will also reward loyal customers. This can be done by handing out a card and stamping it every time a customer purchases something. On the tenth visit, the customer can get a free cupcake with three toppings. The sales staff will be trained to suggest additional toppings and recommend beverages with every purchase. We will also regularly donate a portion of sales to local children's charities. This should inspire people, especially moms, to buy more. We will have a broad menu with many other baked goods and ice cream. And we will periodically offer new cupcakes. This will attract folks who want something other than regular cupcakes. Finally, and most importantly, we will utilize social networking websites and mobile technology. We can text coupons to our customers and have them print out online coupons. We can use Twitter or Facebook to let customers know of any theme nights or special events going on at the Molly's. We'll set up a blog and encourage employees and customers to contribute to it frequently. We will alter our website for easy online ordering and, eventually, deliveries. Keeping up with this part of the company's marketing and advertising will be essential to staying connected with our largest target market, young adults. Grass Roots Marketing In a community like Iowa City, it is important to establish good relationships, thus creating loyalty and opening the doors for positive word-of-mouth exposure. And what better way to say hello than with a cupcake? We will walk around to downtown businesses, introducing ourselves and handing out Molly's cupcakes. This strategy will also be done on the college campus. The key is to get the word out about our business, efficiently and inexpensively. Of course we will use web advertising and social media to get our name out there, but it is important to establish those one-on-one personal relationships for which rural communities are so well-known. There is no doubt that customers will love our products, but the products need to be hear bout first in order to be loved. 6. PRODUCTS 0 O v UPCAKES Products Molly's will specialize in Cupcakes. Not only will it have the classic flavors and let you build your own cupcake, but the bakery will also offer unique center -filled cupcakes. These are cupcakes with a treat in the center, including Cranberry Orange, Cookie Dough, Boston Cream and a host of other flavors. During certain seasons and holidays, Molly's will offer specialty cupcakes. For example during the fall/winter season, customers will find Pumpkin Spice and Gingerbread cupcakes. During the summer, Strawberry Shortcake cupcakes will be available. People celebrating birthdays, anniversaries, graduations, etc. can order custom baked, beautifully decorated classic layer cakes. There will also be brownies, cookies, cinnamon rolls and other traditional baked treats. Beverages include sodas, juices, lattes, coffee, hot chocolate, milk, and tea. Cupcakes Our cupcakes come in (3) three different sizes. There's the standard size with which we are all familiar — this is known as a Molly (Center -filled cupcakes will also be this size). Then there will be Mini Mollies and Mega Mollies. All Mollies will be part of the Build - Your -Own category. We believe a majority of our profits in cupcake sales will come from center -filled cupcakes. Ad - ns Molly's will have lots of add-ons for an additional charge of 25 cents each. To tempt customers into purchasing add-ons, a menu board will suggest really tasty, fun combinations. For example the "Jenny" will be a vanilla cupcake with chocolate frosting, topped with chocolate chips and strawberries. The "Hawkeye" is a vanilla cupcake with chocolate frosting, topped with chocolate chips, hot fudge and brownie chunks. See, Molly's will even make naming things fun! Toppings include: Extra frosting Ice cream Reese's Pieces Nuts Hot fudge Chocolate Chips Gummy Bears Cookie Chunks Whipped cream M&M's Brownie Chunks Caramel Cakes Traditional layer cakes will be custom -baked to help people celebrate special occasions. Sizes range from 6" to 12" in diameter. All cupcake flavors will apply to cakes as well, including the Center -Filled flavors. Cakes will need to be ordered a day or two ahead of time; they will not be made for sale every day like the cupcakes. Cookies We will have four varieties of cookies: Chocolate Chip, Oatmeal Raisin, Peanut Butter, and Ginger Molasses. During special Holidays we'll offer specialty cookies. Our cookies will be thick and chewy and delicious — so delicious that we won't even take it personally if a customer chooses a cookie over a cupcake. Traditional baked goodies We'll have other baked goods too — brownies, pies, cheesecakes, etc. Each of these items will be freshly baked from a Betty Crocker mix. (Just making sure you're paying attention). Also, depending on the season or the mood the chef is in, we'll have specialty treats (truffles,. eclairs, etc) rotating in and out. We want to have a nice balance of the go - to treats for regulars and new treats for those looking for something different. Beverages Just as much attention will be given to beverages at Molly's. After all, we'd be cruel to sell a cupcake and nothing to help wash it down. There will be coffees and lattes that rival specialty coffee shops. The hot chocolate will be made with real milk and generous amounts of chocolate. Molly's will also serve teas, bottled water, juices, sodas, and teas. Birthday Packs For a child's birthday, we'll offer the Birthday Pack. A Pack consists of unfrosted cupcakes, different colored frostings, sprinkles and other items for children to decorate their cupcakes at home. T. FINANCIALS / FUNDING "O� CUPCAKES What's needed to get Molly's started? Courage. Positive thinking. And some tangible stuff as well. The Pro Forma statements for start-up costs are summarized below. Pro Forma Initial Source and Uses of Funds: SOURCE OF FUNDS: Funding/Grants $75,000 Commercial Loan $125,000 Other investors: $50,000 TOTAL SOURCE OF FUNDS: $250,000 START UP COSTS: Capital Expenditures: Organizational Legal and Accounting $3,000 Marketing/Advertising $2,000 Leasehold Improvements Contractor $125,000 Architect $15,000 Engineer $5,000 Signage/Awnings $2,000 Permits/Zoning/Licenses $1,500 Bakery Equipment Ovens / Range $9,200 Walk -In Refrigerator & Freezer $6,000 Under -Counter Coolers/Ice Machine $3,000 Mixers $8,000 Microwave $500 Coffee/Espresso Equipment $4,300 Display Cases $3,500 Pans, Measuring Cups, Utensils, etc. $4,000 Furniture and Fixtures Furniture (tables, chairs) $2,000 Bathroom Fixtures/Lighting $2,000 Office Equipment and POS System $10,000 Total Capital Expenditures: $206,000 Deposits (Including V month of business) Rent (6 months) $21,000 Utilities (5 months) $2,000 Inventories (Training plus V month of business) Ingredients $7,500 Food Containers and Eating Utensils $2,500 Kitchen Staff Wages (Training + 1st two weeks of business) $11,000 TOTAL START UP COSTS $250,000 Financial Assumptions: Molly's Cupcakes' financial success is based on two assumptions. First, due to our fair prices, we believe even a slow -growth economy will not dampen the sale of our products. Second, we assume there will be no major change in the public opinion of cake. It's delicious and will continue to be a part of our culture's numerous celebrations. Breakeven Analysis: Our yearly breakeven point, based on information included in the Pro Forma Statements of Income, has a fairly low sales requirement because of relatively low variable costs, primarily ingredients, and low fixed costs. The following illustrates our breakeven point. SALES: Cupcakes (268 a day @ $2.70 for 360 days) $260,120 Other sales (based on the ratio of other sales to total sales shown in the forecast in section 5.2) $32,150 TOTAL SALES $292,270 Costs and Expenses: Ingredients (17% of sales) $49,700 Packaging (3% of sales) $8,770 Rent $42,000 Utilities $4,800 Insurance $4,000 Salaries & Payroll Taxes (45 working hours per day) $170,000 Misc. Expenses (Scavenger, Pest Control, Administrative) $11,000 Cleaning/Office Supplies $2.000 TOTAL COSTS AND EXPENSES $292,270 If we were to ignore all other sales, we would need to sell 300 cupcakes a day to break even, which matches our projected sales of 300 cupcakes a day. Once we hire a manager, we will include his/her salary into the equation. This will range from $25,000 - $35,000, depending on experience. To cover a $30,000 salary, we would need to sell an additional 34 cupcakes a day. Pro Forma Statement of Income: Year 1 Year 2 Year 3 Year 4 Year 5 SALES $328,320 $393,984 $472,781 $567,337 $680,804 Ingredients $55,814 $66,977 $80,373 $96,447 $115,737 Packaging $9,850 $11,819 $14,183 $17,020 $20,424 Gross Margin $262,656 $315,188 $378,225 $453,870 $544,643 Gross Margin % 80% 80% 80% 80% 80% EXPENSES Rent (I I Months I" Year) $38,500 $42,000 $42,000 $48,000 $48,000 Utilities $4,800 $5,000 $5,200 $5,400 $5,600 Misc (Scavenger, CC process) $11,000 $12,000 $14,000 $15,000 $17,000 Maintenance/Repairs $2,000 $2,500 $3,000 $3,500 $4,000 Office/Cleaning Supplies $2,000 $2,000 $2,500 $2,500 $3,000 Salaries / Payroll Taxes $180,000 $212,000 $227,000 $237,000 $270,000 Insurance Bakery Liability $1,000 $1,000 $1,100 $1,100 $1,300 Workers Comp $3,000 $3,500 $4,000 $4,500 $4,500 Loan Repayment $20,000 $20,000 $20,000 $20,000 $20,000 TOTAL EXPENSES: $262,300 $300,000 $318,800 $337,000 $373,400 INCOME: $356 $15,188 $59,425 $116,870 $171,243 R. APPENDIX CUPCAKES Household Summary Geography: Iowa City, IA Metro Spring 2010 Household Status 1990 Census Total Households 43,520 Family Status Percent Change 2000 Spring 2015 1990 2010- Census 2010 Projection to 2015 Estimate 2000 52,136 59,821 63,713 19.8% 6.5% 1990 2000 Spring 2015 Percent 2010 Change Census Census Estimate Projection 1990- 2000 2010- 2015 Total Households with Children 13,215 100% 14,801 100% 16,815 100% 17,809 100% 12.0% 5.9% Family Hhlds with 13,064 14,615 16,627 17,624 11.9% 6.0% Children Married Couple 10,769 81.5% 11,405 77.1% 12,294 73.1% 12,696 71.3% 5.9% 3.3% Male Hhldr-No 411 3.1% 799 5.4% 970 5.8% 1,048 5.9% 94.4% 8.0% Spouse Female Hhldr-No 1,884 14.3% 2,411 16.3% 3,363 20.0% 3,880 21.8% 28.0% 15.4% Spouse Non -family Hhlds 151 186 188 185 23.2% -1.6% with Children Male Hhldr-No 113 0.9% 127 0.9% 151 0.9% 157 0.9% 12.4% 4.0% Spouse Female Hhldr-No 38 0.3% 59 0.4% 37 0.2% 28 0.2% 55.3% -24.3% Spouse Tot- /Households ` without Children 30,304 100% 37,335 100% 43,006 100% 45,904 100% 23.2% 6.7% Family Hhlds 12,542 14,591 17,021 18,328 16.3% 7.7% w/out Children Married Couple 11,016 36.4% 12,786 34.2% 14,710 34.2% 15,735 34.3% 16.1% 7.0% Male Hhldr-No 529 1.7% 678 1.8% 777 1.8% 827 1.8% 28.2% 6.4% Spouse Female Hhldr-No Spouse 997 3.3% 1,127 3.0% 1,534 3.6% 1,766 3.8% 13.0% 15.1% Non -family Hhlds without Children 17,762 22,744 25,985 27,576 28.0% 6.1% Male Hhldr-No Spouse 8,264 27.3% 10,850 29.1% 12,847 29.9% 13,872 30.2% 31.3% 8.0% Female Hhldr-No Spouse 9,498 31.3% 11,894 31.9% 13,138 30.6% 13,704 29.9% 25.2% 4.3% Vehicles Available Percent Change 1990 2000 Spring 2015 1to0 2010- Census Census 2010 Estimate Projection o2015 2000 0 Vehicles 3,217 6.7% 3,910 7.5% 3,467 5.8% 3,336 5.2% 21.5% -3.8% 1 Vehicle 15,421 32.3% 18,108 34.7% 20,696 34.6% 22,307 35.0% 17.4% 7.8% 2 Vehicles 16,939 35.5% 20,040 38.4% 23,523 39.3% 25,084 39.4% 18.3% 6.6% 3 Vehicles 12,209 25.6% 10,078 19.3% 12,135 20.3% 12,986 20.4% -17.5% 7.0% Avg Vehicles Per 1.8 1.7 1.9 1.9 -2.9% 0.6% Hhid Consumer Expenditure Summary Geography: Iowa City, IA Metro Consumer Expenditure Totals (Average Household Annual Expenditures) Spring 2010 Spring 2015 % Change Estimate Projection 2010-2015 Total Households 59,821 63,713 6.5% Total Avg Household $55,987 $59,875 6.9% Expenditure Total Avg Retail Expenditure $23,755 $25,365 6.8% Consumer Expenditure Detail (Average Household Annual Expenditures) Spring 2010 % of Total Spring 2015 % of Total % Change Estimate Projection 2010-2015 Babysitting & Elderly Care $468.53 o 0.8 /o $509.84 0 0./0 9 0 8.8 /o Entertainment $3,127.30 5.6% $3,351.42 5.6% 7.2% Food & Beverages $8,566.72 15.3% $9,126.69 15.2% 6.5% Food Away From $3,459.21 6.2% $3,705.13 6.2% 7.1% Home Consumer Expenditure Categories contain overlapping information and will therefore NOT add up to Total Household Expenditure Nt a 0 N El a a v ro 3 0 d- r- N IT co CM W 00 co co Q U c m Eo I Q a 0 3 0 Q v ti N V cD ce) T OD O 00 Q U w c I v a o y V W • N m N cV O O N y ,t g 7o � O 0 G u7 � � � n O C N CO G5Q O p >w f I ® $ MCC as 0 E d 0 O a g N 4 c V pp U� TO 1 Ui .v.= Nz C D N LL N N li N N Ql �11 pyp' Q 2xNX N O in ya i Q a N ID M co M c0 M co Q U c m O U X N Q O N w ���sic maps Address 124 S Dubuque St Iowa City, IA 52240 !raivmo 71 Kokw(.cd I`% Vill Palk f of I .lj &( Palk U :-:,IV Par k U 101"ll"ll COA 6 Rt—hestel Ity DDWV\JM*y\ To Q+4 17 E I'f to hn St ojewt&r\ Mall county Rd F46 Meld lrlelr_se.A�� E: Un,versity He gt,.ts �Auscatjne Ave fln Run III Par k f 218 Park V P. i c. ei Park CA co Nik vVe.4heMy Park 2 M18 P.-- k . 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Rrl.l Y,it C) (� m a tlington St E Burlington St t'J "' t� E Burlington St it t E But u� I 1 C.ol..rt St E C.ol.rt St F S;o!,IR St p n ©201 1 Google V) Map data,kp0.1;'6gogle • Blue, STxat is bomiown Ewa G % Pedestrian Male • �ecl � s � ?er1Irf\ekf'S -%r 1000M ors • Qo�h� ~A" of v6werrci for -Elie, c er*cr of pedegW art MAII • c_s.o..._ s�,,,, ..� tr „ r*,c is oll,-vMi"A ih ' Mark • on Y A i� W MM� M�+■� �Wy W W A H C/� H TO `./ �� V IM�i W W r� V a U a a Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 8/31/2012 Cash at Beginning of Month j 15,0001 Cash receipts from customers j 19,000 Cash paid for Inventory purchases 3 800) General Operating Expenses __________L700) General Administrative Expenses Wage expenses (1 Q500) Rent (3,500) Utilities 400 Net Cash Flow from Operations (650) Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Cash receipts from Borrowing (from investors) - Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash (2,350) Cash at End of Month 12,650 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 9/30/2012 Cash at Beginning of Month 12,650 Cash receipts from customers 22,000 Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses (750) Wage expenses (12,100) Rent Utilities 400 Net Cash Flow from Operations 150 Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Cash receipts from Borrowing (from Investors) - Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash (1,550) Cash at End of Month 11,100 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 10/31/2012 Cash at Beginning of Month 11,100 Cash receipts from customers Cash paid for Inventory purchases L__...__.__...__._ 24,000_ (4,809). General Operating Expenses (700) General Administrative Expenses (750) Wage expenses (12,600) Rent (13,170) Utilities 400 (8,420) Net Cash Flow from Operations Cash paid for Purchase/Repair of EquipmentNet Cash Flow from Investing Activities - Cash receipts from Borrowing (from Investors) 2 000 Cash paid for Repayment of Loans (1,700) Net Cash Flow from Financing Activities 300 Net Increase in Cash (8,1 Cash at End of Month 2 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 11/30/2012 Cash at Beginning of Month 2,980 Cash receipts from customers Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses Wage expenses Rent Utilities Net Cash Flow from Operations Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities Cash receipts from Borrowing Cash paid for Repayment of Loans Net Cash Flow from Financing Activities Net Increase in Cash 27 1,450 (1,700)1 (1,700) Cash at End of Month 2,730 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 12/31/2012 Cash at Beginning of Month 2,730 Cash receipts from customers 32,000 Cash paid for ........-..-....._ Inventory purchases (6,400) General Operating Expenses (70t) General Administrative Expenses (75p) Wage expenses (17,600) Rent (3,500) Utilities 400 Net Cash Flow from Operations 2,650 Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Cash receipts from _ Borrowing Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash 950 Cash at End of Month 3,680 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 1/1/2013 Cash at Beginning of Month 3,680a Cash receipts from customers Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses Wage expenses Rent Utilities Net Cash Flow from Operations Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities Cash receipts from Borrowing Cash paid for Repayment of Loans Net Cash Flow from Financing Activities Net Increase in Cash Cash at End of Month 27,000 1,450 500 (500) 1,700 (1,700) (750 2,930 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 2/28/2013 Cash at Beginning of Month 2 930 Cash receipts from customers 33,000 Cash paid for Inventory purchases 6,600) General Operating Expenses —g00) General Administrative Expenses _ (_750) Wage expenses (181100) Rent Utilities 400 Net Cash Flow from Operations 2,950 Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Cash receipts from Borrowing - Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash 1,250 Cash at End of Month 4,180 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 3/31/2013 Cash at Beginning of Month 4,180 Cash receipts from customers 31,000 Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses (750) Wage expenses (17,000) Rent (31500) Utilities 400 Net Cash Flow from Operations 2,450 Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities Cash receipts from Borrowing Cash paid for Repayment of Loans Net Cash Flow from Financing Activities Net Increase in Cash Cash at End of Month (1,700)1 750 930 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 4/30/2013 Cash at Beginning of Month 4,930 Kash receipts from customers Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses Wage expenses Rent Utilities Net Cash Flow from Operations Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities Cash receipts from 31,000 2,450 500 (500) Borrowing Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash 250 Cash at End of Month 5,180 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending Cash at Beginning of Month Cash receipts from customers Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses Wage expenses Rent Utilities Net Cash Flow from Operations Cash paid for 5/31 /2013 5,180 j 28,000 _, _(5,600) (750) (3,500) (400) 1,650 Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Cash receipts from Borrowing - Cash paid for _ Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash (50) Cash at End of Month 5,130 1 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 6/30/2013 Cash at Beginning of Month 5,130 Cash receipts from customers j 27,000 Cash paid for Inventory purchases General Operating Expenses 70 General Administrative Expenses Wage expenses 14,900) Rent P-1fPoi Utilities (400) Net Cash Flow from Operations 1,350 Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities - Kash receipts from Borrowing - Cash paid for Repayment of Loans 1,700 Net Cash Flow from Financing Activities (1,700) Net Increase in Cash (350) Cash at End of Month 4,780 Molly's Cupcakes Iowa City Cash Flow Statement For the Month Ending 7/31/2013 Cash at Beginning of Month 4,780 Cash receipts from customers Cash paid for Inventory purchases General Operating Expenses General Administrative Expenses Wage expenses Rent Utilities Net Cash Flow from Operations Cash paid for Purchase/Repair of Equipment Net Cash Flow from Investing Activities Cash receipts from Borrowing Cash paid for Repayment of Loans Net Cash Flow from Financing Activities Net Increase in Cash Cash at End of Month 27,000 1 400)1 1,350 (1,700) 350) 4,430