ICE CREAM AND YOGURT PARLOR
(SIC No. 5812-02)
(NAICS No. 71111, 72211, 722211)
A.??????????????? Nature of the Business
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Ice cream parlors or shops cater to millions of Americans who, despite the convenience of home freezers and supermarkets, prefer good hand-scooped ice cream served in a dish or on a cone.? To be sure, ice cream shops cater to a variety of customers.? Some like the richest, high-end ice creams, such as Haagen-Dazs, Ben and Jerry?s, and Baskin-Robbins.? Others choose the relatively healthier frozen low-fat or non-fat yogurt offerings.
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B.???????????????? Industry Statistics
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Restaurant Business reported in 1987 more than 10,000 shops nationwide.
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A survey of this category by Dun & Bradstreet in Industry Norms & Key Business Ratios (1992-1993) indicated (rounded):
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Net Sales????????????????????????????????????????? $931,800?????????????? 100%
Gross Profit??????????????????????????????????????? 488,700????????????? 52.4%
Net Profit After Taxes???????????????????????? 35,400??????????????? 3.8%
Return on Sales?????????????????????????????????????????????????????????????? 3.3%
Return on Assets??????????????????????????????????????????????????????????? 7.9%
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In Dun & Bradstreet?s Industry Norms & Key Business Ratios (Desk-Top Edition 1996-97), a survey of 1,817 businesses in this category showed in 1996 the average business had net sales of $1,844,488, gross profit of $986,801, and net profit after tax of $70,091.? Profitability figures show an average 3.4% return on sales, 7.7% return on assets, and 18.6% return on net worth.
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NOTE:?? These figures are not specific to the Ice Cream and Yogurt Parlor but apply to the larger category of Eating Places.
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C.??????? Facility
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An average ice cream parlor requires from 500 to 1,000 square feet.? Space usage varies depending on whether the parlor offers service.? In a shop without table service, more than two-thirds of the space is allocated for production work behind the counter.? Other shops allocate about 50% or more of space for tables and chairs for customers.? In larger ice cream parlors, a public restroom usually is incorporated in the floor plan.
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The best location for an ice cream parlor is a strip center and a location with high foot traffic.? Another good location is close proximity to small businesses.
D.??????? Lease
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The business usually has a short-term lease, one or two years to start, with an option to renew.? The lease may be a flat rate lease or a percentage lease.? Assignment clauses are important for the transfer of the business.
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- E.???????????????? Equipment
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New equipment for an ice cream parlor generally ranges from $15,000 to $50,000.? Major expenses are typically for freezer equipment.? An average ice cream parlor purchases basic office furniture, computer, typewriter, cash register, security system, and a sign for the shop.
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Start-up expenses for a new ice cream parlor usually range from $35,000 to $80,000.? Typical start-up expenses include:? first and last months? rent, security deposit, leasehold improvements, utility deposit, telephone deposit, fixtures, payroll, equipment inventory, supplies, advertising, accounting services, legal services, insurance, and any miscellaneous expenses.
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F.???????? Income and Expense Pro Forma - $500,000 to $2 million[1]
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1.???????? Net Sales??????????????????????????????????????????????????????????? 100%
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2.???????? Gross Profit????????????????????????????????????????????????????? 60.8%
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3.???????? Operating Expenses????????????????????????????????????????? 54.0%
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4.???????? Operating Profit????????????????????????????????????????????????? 6.8%
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5.???????? All Other Expenses???????????????????????????????????????????? 1.7%
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6.???????? Profit Before Taxes??????????????????????????????????????????? 5.2%
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G.??????? Valuation
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1.???????? Rules of Thumb
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a.???????? 4 to 6 times monthly net revenues (sales).[2]
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- 1 to 3 times annual owner?s cash flow.[3]
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c.???????? 5 times monthly gross sales, add inventory.[4]
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d.???????? 45% to 50% of annual gross sales, add inventory.[5]
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e.???????? 1 to 1.5 times annual adjusted earnings, add fixtures, equipment, and inventory.[6]
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Retail Stores in General[7]
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- 25% to 50% of annual gross sales, plus inventory.
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b.???????? 47% of annual gross sales.
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Rules of Thumb may or may not be industry averages.? They are usually applied to sales in some form.? They result in an example of value for a business having that level of sales.? Please see Section II, Chapter 5, for a discussion of Rules of Thumb and their limitations.
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The values of fixed assets are generally included in Rules of Thumb; however, they are sometimes added in separately.? Working Capital (e.g., cash, inventory, less payables), debt and real estate are many times not included.? These three are generally valued separately and added to the formula value.? Intangible Assets including goodwill and leasehold may be included, but normally only in Rules of Thumb based on earnings/cash flow.
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2.???????? General Valuation
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The valuation of this entity as a going concern is usually accomplished through an Income Approach, most probably with a capitalization of earnings.? Please refer to Section II, Chapter 3, of this book for a discussion of the Income Approach to Valuation of a Closely Held Business.
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H.??????? Sources for Further Statistical Information
(See also the bibliography at the end of this book, ?Recommended for Reference.?)
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- Associations
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National Ice Cream and Yogurt Retailers Association (NICRA)
1028 West Devon Avenue
Elk Grove Village, IL? 60007????????????????????????????????????????????????????????? www.nicra.org
(847) 301-7500;? Fax (847) 301-8402
National Frozen Dessert and Fast Food Association (NFDFFA)
P.O. Box 1116
Millbrook, NY? 12545?????????????????????????????????????????????????????????????????? www.nfdffa.org
(845) 677-9301, (800) 535-7748;? Fax (845) 677-3387
International Dairy Foods Association (IDFA)
1250 ?H? Street, NW, Suite 900
Washington, DC? 20005?????????????????????????????????????????????????????????????????? www.idfa.org
(202) 737-4332;? Fax (202) 331-7820
- Trade Publications
Tid Bits
National Frozen Dessert and Fast Food Association (NFDFFA)
P.O. Box 1116
Millbrook, NY? 12545?????????????????????????????????????????????????????????????????? www.nfdffa.org
(845) 677-9301, (800) 535-7748;? Fax (845) 677-3387
Ice Cream Reporter
7 Hilton Terrace
Willsboro, NY? 12996
(518) 963-4333;? Fax (518) 963-4999
Ice Cream Store Business Guide
Entrepreneur Media Inc.
2445 McCabe Way, Suite 400
Irvine, CA 92614?????????????????????????????????????????????????????????????? www.entrepreneur.com
(949) 261-2325, (800) 421-2300, (949) 261-0234
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National Dipper
1028 West Devon Avenue
Elk Grove, IL? 60007????????????????????????????????????????????????????? www.nationaldipper.com
(847) 301-8400;? Fax (847) 301-8402
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[1] RMA Annual Statement Studies 1996.? (Philadelphia:? RMA, 1996), p. 600.
2 Desmond, Glenn M.? Handbook of Small Business Valuation Formulas and Rules of Thumb, 3rd ed.? (Camden:? Valuation Press, 1993), p. 333.
4 West, Thomas L., and Jeffrey D. Jones, eds.? Handbook of Business Valuation.? (New York:? John Wiley & Sons, Inc., 1992), p. 123.
5 Desmond, Glenn M.? Handbook of Small Business Valuation Formulas and Rules of Thumb, 3rd ed.? (Camden:? Valuation Press, 1993), p. 333.
7 West, Thomas L., and Jeffrey D. Jones, eds.? Handbook of Business Valuation.? (New York:? John Wiley & Sons, Inc., 1992), p. 126.
Source: http://www.zamucen.com/blog/how-to-value-an-ice-crean-and-yogurt-parlo/
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