Deliverable #2 - Jongyoeb Kim (JK), Zhining Hu

Estimated initial investment varies from $331,100 to $488,600 (average of $409,850). And the average annual sales (average unit volume) would be $522,580, in which we can make even more if we have a good year. The cost of franchising also includes franchising fee of $35,000 (for the first year) plus 6% gross revenues on royalty rate and 4% of advertising fund.

Hence the expected annual net income would be,

The material costs, labor costs and maintenance cost are all estimated according to the current situation in Shanghai, China. Since we are just opening up a small 35m2 store, we assume that we will hire 4 workers at wages of 2000 Yuan per month each person. Hence, the expected gross revenue will be around $398,580 and therefore the net income (which would be 90% of gross revenue) will be approximately $358,722.

Initial investment $ 331,100.00
First year real net $ 27,622.00

Similar to the starting of restaurants, we would not make huge real net income for the first year, but we expect that with our unique marketing strategies and huge potential of Shanghai consumers, we would make more than the average Red Mango franchise earnings of $522,580. In addition, the franchising fee will decrease from $35,000 to $30,000 after first year, which would boom our gross revenue and net income by $5000 and $4500 respectively. Hopefully, as our store gain recognition, the annual sale will also increase. And the initial investment of ($409,850.00) is just for the first term, and therefore for the second year, the real net income will be much higher.

Marketing strategy:

Idealize location (Targeting College students)

Location is perhaps the most important factor for a Red Mango shop. The store location is chosen in Wujiaochang City Center where there are lots of shopping malls and most important of all - very close to the University City. The several universities around the store location provide a promising amount of consumers. College students like to hang out and chat in somewhere with a clean and relaxing environment near their school after class. Red mango is also the ideal place for school clubs in the college to hold social gathering during weekends. Students, especially girls, who are on diets and looking for healthy non-fat desserts will also be greatly attracted by Red Mango.

Targeting Foreigners

Red Mango already made a huge recognition in many countries, especially in South Korea. There are about 65,000 Koreans are living in Shanghai, in which we can target special advertisement for them to taste Red Mango as they would taste in their hometown. For example, we can translate our menu and the pamphlet in different languages such as Korean, Japanese and English to attract foreigners. And we can also put workers who can speak in other languages for the foreigners’
convenience.

Targeting “new” customers

As Red Mango is not there in Shanghai, many of them might not know what exactly Red Mango sells and is different from other yogurts. The biggest unique characteristic of Red Mango is that yogurts are made of all natural flavors. Hence, to increase the reputation of Red Mango in Shanghai, we will post the writings about the difference of our products from other existing yogurts and train our store’s servers to explain the difference to the customers, and recommend certain products considering customers’ individual preferences. This is the first step we have to take to build our image.

Efficient use of space: avoid limited seats

Charge cheaper price for customers who is willing to take our yogurts and eat outside the store. When the store is crowded, some customers will just leave to avoid waiting for a seat. Hence, to save some seats for customers who are willing to eat yogurt seating down and relaxing andchatting with friends, we might be able to charge lower price for those who are willing to save some money and eat outside walking down the street. This can also be used as one of the marketing strategies. Other people would be able to see people walking and eating our yogurts, and hopefully get attracted by it.

Self serve

When facing the decision of choosing to open a traditional store or a self-serve one, we recommended the self serve store. This will allow our customers to create their own unique swirls in any amount they prefer. Therefore, they will walk-in to Red mango more frequently as they have much more freedom in customizing the amount and type of yogurt they want. They can keep changing flavors and the amount of topping they like and never get enough of frozen yogurt. In addition, they are free to make frozen yogurt a substitute for a meal or just a small after-meal dessert.