How to set up and run a school tuck shop

1. Introduction

This portfolio work will enable me to know how to set up and run a school tuck shop and what I have to do to get the tuck shop started. A business plan will be needed in order to do this. A business plan is essential; it not only helps the business to obtain funds but also demonstrates the viability of the business. It will also be used to allow the tuck shop to monitor the progression of the business in its first few years of trading, on the whole it will outline my aims and objectives and help me to plan for the future. If I don’t write a business plan there will be an increase in risks and a decrease in success rate. A business plan will also allow me to minimise risks of failure, failure can be very costly to a business.

2. Research Methods

Market Research is vital to a business. It gives an idea to the business about what people are looking for in a tuck shop. It also gives the business an idea of what particular feature it will have to offer its customers, that sets it apart from its competitors. This is called a unique selling point (USP).

The research method that I will use is Primary research (also known as Field research). This is first hand information and data which is relevant and specific to the business, therefore it is beneficial for the tuck shop. The disadvantage of this type of research is that it is very time consuming to obtain. I will design my own questionnaire to collate my research and ask 50 students to complete it. For this type of research I will also interview people that have set up their own business, I can then find out what it is like to run your own business and what the owners have to do in order to keep it a success.

I will use Secondary research (also known as Desk research). This is information that already exists, it will give me useful, background information quickly and cheaply – this is a great advantage to the tuck shop but there is a downside - it maybe out of date or irrelevant to the business. I will be using leaflets from banks and business start up guides to ensure that my business plan is written professionally and carefully. I will also study my competitors and see what products they sell and at what prices. This will then enable me to set my own pricing strategy and to make sure that the tuck shop will be open the same times as competitors.

3. The Business

The name for the tuck shop will be: ‘Take A Break!’ The main business activity will be selling ranged confectionary, including ice creams. The idea of selling ice creams will give Take A Break a competitive advantage, because in many areas where food is sold in the school ice cream is not – this makes the business’s appeal to the market both distinctive and defensible. Take A Break will also be providing a friendly service to customers. The business aims to make an 8% net profit margin within the first year. This means that for every £1 received 8p is taken out a net profit.

4. Key Staff

To run the tuck shop efficiently, 3 people will be required to manage Take A Break, they will need to be a friendly and flexible workforce. These students will have to deal with busy times in the tuck shop, such as lunch time or break, because these are the most popular times of the day the tuck shop would be visited (refer to Appendix 9). The key staff will need to have good numeracy skills because they will be handling money. The staff will need to be committed and honest if they are to remain an asset to Take A Break. Annika Kataria will be the sole owner for Take A Break. This mean that I will be the individual that runs the business and I will be personally responsible for any losses incurred.

5. Marketing Strategies

Marketing strategies help a business to achieve their marketing plans and targets. The marketing strategies that will be used in order to make the tuck shop successful will be the 4P’s. These are:

Price
Product
Promotion
Place

Take A Break will have a wide range of products such as: sweets/chocolates; soft drinks; canned drinks; ice creams; crisps; cakes; Pick ‘n’ mix; etc. These items are segmented for the ...

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5. Marketing Strategies

Marketing strategies help a business to achieve their marketing plans and targets. The marketing strategies that will be used in order to make the tuck shop successful will be the 4P’s. These are:

Price
Product
Promotion
Place

Take A Break will have a wide range of products such as: sweets/chocolates; soft drinks; canned drinks; ice creams; crisps; cakes; Pick ‘n’ mix; etc. These items are segmented for the correct age group at the school, e.g. teenagers aged from 11-17 are most likely buy these products. This is known as Market Segmentation – this is the division of the tuck shop according to different types of customer, in order to meet people’s needs. The tuck shop could introduce a new product and fill a gap in the market, which is also known as a Market Niche. Take A Break can add value to their products to make them look more attractive, like adding packaging onto foods such as cakes and biscuits. Added Value is the difference between the cost of inputs into the product and the value placed on that product by the tuck shop. This will hopefully increase demand, therefore increasing sales revenue – sales revenue is calculated as: price multiplied by sales.

If the price that is set for the products is too high then it is easier to lower them than it is to raise them. Demand changes towards price, which is called ‘price elasticity’ (see Appendix 23, paragraph 6 column 1).

From the results of the questionnaire, 70% of respondents said that keeping prices low is important (see Appendix 11). When students buy food 50% of them said that price influences their choice of decision (see Appendix 12). Therefore the pricing strategy that will be used will be Competitive pricing. This is when the price is determined by the price charged by the competitor, depending on the strategy the price can be higher, lower or the same. In this case the price will be lower because 80% of students felt that the prices in the school are too high (see Appendix 10). Therefore I feel that if Take A break has the lowest prices in the school, we wouldn’t be making a great amount of loss because the demand and supply will be high. The items of food such as crisps will be priced around 10p-20p because this is the price range that students are willing to pay for a packet of crisps (see Appendix 4). From my observations of my competitor analysis (see Appendix 17) I have found that the competitors charge around 27p-35p for a packet of Walkers crisps. By observing what kind of prices customers are willing to pay and what price is charged by the competition, Take A Break will then decide on a suitable price to satisfy consumers needs and wants. This means that for a standard sized packet of crisps Take A Break will use the competitive pricing strategy and price the crisps at around 25p.

The second pricing strategy that could be used for Take A Break is Cost plus pricing, this is when the firm calculates and adds a percentage mark-up to determine the price. The percentage mark-up = profit. I have not used this pricing strategy because if it was used it would not give Take A Break the competitive advantage of having cheaper prices.

The tuck shop will be located in the Sports Hall (see Appendix 7) because 50% of students would like it in this new location. Take A Break will be open at break and lunch times, because this was the most favourable time for it to be open (see Appendix 9), 40% would like the tuck shop to be open at break and 40% of students would like the tuck shop to be open at lunch time, so to satisfy consumer needs the tuck shop will be open twice a day 5 days a week.

The Unique Selling Point (USP) of the tuck shop will be the ice creams that will be sold. The reason being is because in the rest of the eating areas to buy food, ice cream is not sold. In the summer the net profit margin will be raised because there will be an increase in demand for cooler eating products, a raise in sales means a raise in profits!

The methods of promotion are important because it projects a specific image to the target market. The method that will be used is ‘special offers’ (see Appendix 8) as 76% of respondents would prefer this method. Using this method, it will make the tuck shop more popular amongst the students because new customers will be coming to try out free foods. To promote the tuck shop even more, posters could be used (see Appendix 24 for the design), 26% of students did say that this would catch their attention (see Appendix 8), this idea will hopefully attract new customers. Other methods of promotion that could be used are:

Advertising
School intranet
School newsletter
Good quality packaging on own brand products – (if own brand products were to be introduced, packaging for them will be used to add value).

From the secondary research I found (see Appendix 18, 19, 20, 21 and 22) I will refer to particular sections as guidance to construct the business plan in the correct manner. The only drawback to this information that I have obtained is that all of it may not be relevant for the use of the tuck shop.

By using this Marketing Mix I will hope to achieve a successful tuck shop and achieve the aims I have set myself so far.

6. Trading Forecast

A trading forecast will be used to predict how much profit the tuck shop expects to make in the first year of trading. The trading forecast will help to plan for the future. Below is a trading forecast for Take A Break.

Trading Forecast for Take A Break (school year 2002/3)

£ £

Projected Sales Revenue 2,340.00

less cost of sales:

Stock 1,482.00

1,482.00

Gross Profit 848.00

less overheads:

Rent 195.00

Wages 390.00

585.00

Net Profit 273.00

In the first year of trading Take A Break will be looking to make £273 profit. The Net Profit Margin for Take A Break will be 12% - this is calculated by using the following formula:

Net Profit/Sales x 100 = %.

= 273.00/2340.00 x 100 = 11.6666 (12%)

This is then be rounded off to 12. This means that for every pound received by the customers 12p will be kept as net profit.

It is useful for the tuck shop to construct a trading forecast because it gives an indication to the business of what is most likely to happen in the near future, usually the next coming year, how costs are to be kept in order to retain profits and how much retained profits you do have. These retained profits could be used for expansion or to invest in new facilities.

7. Breakeven chart

A breakeven chart is produced in a business because it shows the level of sales required to cover all the costs. Anything in excess of this figure will start to produce a net profit for the tuck shop. When a business ‘breaks even’ their total revenue equals their total cost (TR=TC) The total revenue of a business is the number of items sold, multiplied by the selling price. The breakeven formula = fixed costs/contribution

= 15/11 = 136

Therefore Take A Break will need to sell 136 items per week in order to break even. If 200 items are sold each week the margin of safety will be calculated as follows:

200 – 136 = 64

Therefore Take A Break’s margin of safety will be 64 items.

It is useful to construct a breakeven chart because it gives the business an idea of how many items they will need to sell in order to breakeven and how many more sales are needed to generate profits.

8. Financial Needs

The costs of the tuck shop for the first 6 weeks are as follows:

The total amount of money that will be needed for the first 6 weeks will be £358. This money can be obtained from internal or external sources of finance. Internal sources of finance come from the operations of the business, e.g. own savings.

External sources of finance are funds obtained from outside of the business, e.g. bank loan, or the school council.

The advantage of an internal source of finance is that it is quicker and easier to obtain. With this type of finance, lenders may not charge interest, which is a great advantage for the business. The disadvantage of this source of finance is that the lender might ask for the money earlier than the time you agreed to give it back.

The advantage of an external source of finance is that the lenders may not be biased because they don’t know you, bank loans are also quick and easy to obtain but the downside is that interest rates maybe high. External finances could be obtained from the school council.

Conclusion

To conclude the financial section of my business plan I will be using internal and external sources of finance. The internal finance will come from my own savings, which will be £100 and the external source of finance will be obtained by the school council, which will be £258, as they are very willing to help with this venture (see Appendix 18).

9. Conclusion

I feel that the opening of the tuck shop is a very good idea. I think the students of the school will be supportive of the school tuck shop and will purchase goods from the tuck shop, I know this because of the findings of my research.

Arguments which might be put against the tuck shop:

People might say:

‘There are many other places in the school to buy food from, so why Take A Break?’

‘How do we know that Take A Break will keep their prices low?’

‘How do we know that we can trust your workforce?

Arguments that might be put for the tuck shop are:

‘The school need more places where students sell the food and which means there is more of a customer and student relationship’

‘The school needs more places where they satisfy consumer needs and wants.’

‘Prices in the school need to be kept low and introducing a new tuck shop will be able to do this.’

Further information that I would like to have so that it will help me to decide whether opening a new tuck shop is a good idea is:

What will future trends be like? These are factors like:

How will the school size change over the years?
Economic situations
Social attitudes

Will product development appeal to students if it was to be introduced more into products? – Product development is improving a product for existing markets; this can be adding new features or new quality ranges.
How long will the premises be available for?

10. Bibliography and Sources Of Information

Books Used