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EXECUTIVE SUMMARY

Sorvetes De Davao Company is a food store business that sells

soft serve ice cream in cones and cups with a variety of toppings to

create a more colorful and flavorful dessert. Toppings vary from single

to multiple colors in different shapes and textures.

This business plan presents the first three years of operations in

Davao City. The first store was put-up in Crossing Catalunan Pequeño,

Davao City in January 2017 and we are planning to bring the concept

to at least two more strategic locations in the city, where it is currently

in the beginning stage of market penetration. Sorvetes projects to be a

competitive local ice cream store in Davao City under its tagline, “A

Flavoursome Treat!”.

Sorvetes was established under a General Partnership owned,

managed, financed, and organized by three partners and owners:

Marbert E. Gregorio, Dengie Lyn C. Mamac, and Lemar E. Trumata on

June 29, 2016 with an initial investment of P150,000.00.

Sorvetes started its commercial operations on January 18, 2017

and has had gross earnings of P142,397.00 in its fifty-three (53) days

of operations ending March 31, 2017. According to this plan, projected

sales over the next three years are realistically attainable by even a

start-up Sorvetes store.

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OUR BUSINESS

Sorvetes De Davao Company (Sorvetes for brevity) was created to

become a new player in the ice cream and refreshment industry.

The initial offering of the business was to sell soft serve ice

cream to a selected customer based and focused on introducing its

name in Davao City and has set to generate jobs for the community.

This is a venture in an ice cream business that serves customers with

a wide array of desserts related to a premium, yet affordable, soft serve

ice cream.

Vision

We seek to become the top preferred soft serve ice cream retailer

in Davao City.

Mission

 An ice cream store committed to selling premium and affordable

soft serve ice cream that satisfies customers who seek a fun and

flavoursome treat.

 Aims to be visible in the Davao market through business

expansion and access to advancements in technology.

 Offers quality and excellent service through employee training

and by maintaining an attractive place of business.

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Goals

 Maintain and seek reputable sources of the finest and purest

ingredients.

 Make customers happy.

 Have a profitable business.

 Establish two additional branches in two years.

 Utilize social media.

 Employee development program.

 Cleanliness and orderliness in the ice cream shop.

Objectives

 To offer affordable ice cream where prices do not exceed P30.00

per unit

 To offer new flavours consistent with customer wants every

month

 To replenish inventory on a weekly basis or as necessary

 To check the quality of the soft serve ice cream in every

production process

 To improve leased properties once a year

 To re-introduce the business at school opening by employing

social media such as Facebook and Instagram

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 To introduce a sales promo campaign to encourage and

maintain sales

 To offer sponsorship at least once a year in the annual events of

the schools, barangay, or city that will create an impact on the

business

 To continue to improve the products and service offerings every

month

 To continue to develop new marketing and sales promos that will

suit the customers’ needs

 To continue to study the changes in the market in order to

develop new marketing strategies. Research should be done

semi-annually for the next two years

 To establish two stores by 2018 and to expand the business thru

franchising by 2020

 To reach out to the customers and answer their queries about

the products and services during business hours from 8am to

5pm from Mondays to Fridays

 To provide the best experience as they purchase their products

from the time they enter the store up to when they leave

 To serve the customers’ orders systematically

 Skills development seminar for the employees once a year

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 To ensure that customer concerns is answered properly and are

dealt with automatically

 To achieve 0% complaints in the day to day operations of the

business

 To achieve the target average sales of 236 cones and cups per

day

 To increase sales by 5% based on target unit sales in the

following and succeeding years of operation

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INTRODUCTION

Sorvetes De Davao Company is an ice cream company selling

soft serve ice cream and operates under the food and beverage

industry. Ice cream in cones and cups are now becoming popular to

students who seek an enjoyable treat.

The proponents saw the potential of the business, because it can

generate exceptional profits for a short period of time. The start-up

capital for this business venture is only P150,000.00.

The following sections outline their plans under marketing,

operations, and the organization. The financial plan shows results of

operations for the first three months, our projections for the remaining

months of 2017, and over the next two years.

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MARKETING

PLAN
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PRODUCTS/SERVICES

Product Description

Sorvetes de Davao Company is a food store business that sells

soft serve ice cream with a variety of white and dark chocolate strips,

jells, fudges, nips, and rainbow sprinkles that give value to an ordinary

ice cream cone and cup. For this particular endeavour, the business

has four choices of pre-mix powder; these include regular mix,

premium mix, high end mix, and the customized mix. Premium mixes

are used by Sorvetes in order to come up with a premium yet

affordable soft serve ice cream.

Sorvetes is on par in comparison with other ice cream stores in

the malls. The concept of Sorvetes is rooted in the belief that it is not

necessary to go into a mall just to get a cone of soft serve ice cream.

Sorvetes brings such happiness outside of its normal boundaries. Most

ice cream stores primarily focus on the sprinkles or toppings on its

products. The products offered by the existing competitors are also

available in Sorvetes; that is why a greater emphasis is being placed

on the products’ added value.

Sorvetes offers a type of ice cream that is softer than regular ice

cream and low in sugar with a high level of protein from the premium

pre-mixes.
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The products that Sorvetes sells include soft serve ice cream in

cones or in cups. The business caters to the wants of its target

customers for having the pleasure of indulging a delicious, yet

affordable, ice cream.

Sorvetes as retailer of soft serve ice cream has the following

offers and are being sold in different sizes and features. Additional

products may also be added to this list as the business progresses.

Table 1: Product List and Unit Price

1
Menu Price
Princess Cone2 P 10.00
Queen Cup3 P 20.00
King Cup4 P 30.00
Sundae Flotte5 P 25.00
1Allwill have flavours of vanilla, chocolate, and mix of vanilla and chocolate or depending
on the Flavours of the Day: Strawberry, Buko Pandan, Salted Caramel etc.

2No toppings. Additional pay for add-ons.

3Will have four (4) selected toppings from customer
4Will have the following toppings: rainbow sprinkles, rice crispy, mini mallows, chocolate
dip, chocolate sprinkles, chocolate droplets, crushed peanuts, crushed cookies, chocolate
heart, mini nips or all that are available
5Soda top with ice cubes and ice cream

Every day, our ice cream store serves two flavours. The store

also offers other desserts topped with ice cream such as Sundae

Flotte.

The customers’ wants being addressed include but are not

limited to an affordable and delectable soft serve ice cream.

Furthermore, customers are given first-rate service. Social media is

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being utilized in which customers ask questions about the products or

raise concerns about the services being offered.

Sorvetes has favourable outputs because of proper introduction

and promotion. Products are proven to be tasty and guaranteed by a

rigid quality control measures installed to check if products are up to

standard. Queries and concerns are being dealt with properly.

The business also warrants replacements and exchange for

returns of products not according to customers’ wants and

preferences.

The Ice Cream Store Menu

Sorvetes started out with only two flavors: vanilla and chocolate

plus mix of vanilla and chocolate with signature cones that creates

distinctive and indulgent taste experiences (See Figure 1).

Students can choose which flavors they want to enjoy; prices

vary according to the cone or cup sizes. Options are provided in order

to cater the pupils, students, faculty members, and other groups of

individuals in the area according to their purchasing power.

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_______________________

Figure 1: Ice Cream flavours: Vanilla, Chocolate

And Mix or Combination of Two

Market Readiness

Ice Cream is eaten in almost every country in the world; it is

one of the most popular foods consumed by children because of their

shapes, textures, colors and flavors in the age bracket of 2 to 12, as

well as adults over the age of 45. Everyone knows ice cream. The total

worldwide production of ice cream and related frozen desserts was

14.4 billion liters in 2001 (Chris Clarke, 2004).

There is a growing market for premium ice cream in the

Philippines mainly because of the Filipinos’ sense of adventure in taste

and current strong purchasing power. “Premium ice cream sellers

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have now adjusted their price points, making these affordable for the

local market even as they maintain its quality,” said Jeff Puno,

president of Visfood Corp., the exclusive Philippine distributor of Blue

Bell Ice Cream.

The center of trade and commerce in Barangay Catalunan

Pequeño is within the Crossing Catalunan Pequeño. This barangay is

known as the location of some of the major subdivisions in Davao City.

These subdivisions include Samantha Homes, Wellspring Village,

Residencia Del Rio, Granville and Wellspring Highlands Subdivision.

The nearest malls located in this area are kilometres away, such as

NCCC Mall in Ma-a and SM City in Ecoland. There are also some

existing supermarkets which are located in Mintal and Calinan. With

this, customers have to enter into the mall or supermarkets in order to

have a cone of ice cream. This is where Sorvetes goes into, the idea of

bringing ice cream cones near the doorsteps of the customers.

Sorvetes is happy to serve its community to fill the desires of their

palates.

As of February 2016, there is only one ice cream store, Sorbe

Twirl, operating in Crossing Catalunan Pequeño. In response to the

needs, Sorvetes serves the existing market in the area. Sorvetes offers

premium ice cream with a twist in the cone or cup that makes it

unique and different among others.

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Proprietary Position

Sorvetes takes good care of its name and is known for its logo

and premium products.

The business is aiming to establish a lofty market position in the

next three (3) years of operations and is envisioned to be the preferred

soft serve ice cream in the city. Thus, all of its marketing platforms are

strategized to add value and strength to the brand that can help stave

off the competition.

The name of the ice cream store is distinctive and valuable asset

that can be associated with trademark rights. This is protected and

registered to the Securities and Exchange Commission (SEC). Sorvetes

is also planning to have its name and logo patented.

Figure 2: Sorvetes De Davao Company Logo

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Comparative Position

Products are all sourced out from reputable suppliers. The

observance of first in first out (FIFO) method and updating the

inventory has an edge on its competitor. Further, maintaining new and

fresh products has an advantage over the business competitors.

Sorvetes makes certain that the products it offers are better from

the products of the competitor. This table shows the comparative

position of Sorvetes’ products compared with Sorbe Twirl, the only

competitor in the area.

The goal of comparative analysis is to better position the

products and to leverage their competitive edge in the competing

business. The table shows the competitive analysis of Sorvetes

according to the surveys and interviews conducted by the owners

within the area.

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Table 2: Comparative Analysis

Bases Sorvetes Sorbe Twirl
Price Lower Regular
Princess Cone P10.00 10 Peso Cone
Queen Cup P20.00 15 Peso Cone
King Cup P30.00 20 Peso Cone
Sundae Flotte P25.00 30 Pesos Cone

Appearance Smooth Rough

Colorful Toppings Chocolate and Ube dips

Premix Powder Premium Regular

Quantity Optimum Optimum

Taste Sweet Sweet

MARKET ANALYSIS

Macro-Environment Analysis

The Philippine ice cream business is a promising industry.

Engaging a business with this kind of industry will no doubt be a

successful venture for as long as the business and people running it

are equipped with ample understanding, technical knowledge and

qualifications on how to run and operate the business.

According to National Economic Development Authority (NEDA),

the Davao Region outperformed all other 16 regions in the Philippines

in terms of economic growth after posting a stellar gross regional

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domestic product (GRDP) in 2014 at 9.4 percent, a significant increase

from its 6.7-percent performance in 2013.

National Economic Development Authority (NEDA) XI Director

Maria Lourdes Lim said the region surpassed even the national

average of 6.1 percent+ in 2014, which is still among the fastest

growing economies in Asia. She attributed the impressive performance

to the collective efforts of the different sectors for enabling the region

to sustain its high growth levels for the past three years.

Having recorded the fastest growth among 17 regions, she said

Davao has maintained its position as the top economy in Mindanao

when it comes to GRDP value.

As the third largest and most urbanized metro in the

Philippines, Davao is a promising setting for budding businessmen. It

is highly noticeable that the city is emerging globally due to its recent

infrastructural developments along with its slight societal change.

With this, a large number of local entrepreneurs are encouraged

to venture out and participate in improving their livelihood as well as

the city’s economic status. Among the many reasons the city is

accessible include the fact that Mindanao is a regional center, with an

ideal climate and a peaceful and friendly environment.

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To benefit from the regions’ fastest growing economy particularly

in the ice cream industry, this plan is to establish Sorvetes De Davao

Company.

Available data from the leading distributors of ice cream

machines in Davao City were gathered. They verified that soft serve ice

cream industry is a flourishing industry in the region. Table 3 shows

facts and figures provided by Monterozza, CT Concepts and Remach

Kitchen Equipment. They recorded a consolidated sales in units of 173

from 2014-2016. Considering 2014 as the base year, there were

increasing percentage sales for 2015 and 2016 of 31% and 50%,

respectively.

Table 3 : Ice Cream Machine Sales in Davao City

SORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño,
Davao City

Ice Cream Machine Sales from

2014-2016

Suppliers Address 2014 2015 2016 TOTAL

Monterozza Lanang, Davao City 8 12 20 40

Mabini St., Davao
CT Concepts City 19 30 26 75
Remach Ecoland, Davao City 15 13 30 58
Total 42 55 76 173

Percentage
Increase 0% 31% 50%
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Barangay Catalunan Pequeño is part Talomo District of Davao

City’s First Congressional District. The barangay is bounded by

Catalunan Grande on the East, Mintal on the North and Bago Oshiro

on the South.

Crossing Pequeño market and other commercial establishments

are the hub of activity in the area. Commercial establishments in the

Barangay include the following: bakeshops, gasoline stations, sari-sari

stores, fruit stands, restaurants, hardware, fish retailers, mini mart,

laundry shops, water refilling stations and many more.

Crossing Pequeno is also composed of different subdivisions that

include Samantha Homes, Wellspring Highlands, Wellspring Village,

Granville and Residencia del Rio.

PEST Framework

Political Factors

Sorvetes is affected by some government regulations in the

localities. Listed below are mandated city ordinances that the business

needs to follow:

The minimum wage rates set forth in the Labor Code of the

Philippines are based on the normal working hours of eight (8) hours

per day. Small businesses may implement policies and impose terms
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and conditions of employment as they deem fit given their operating

and profitability requirements.

These policies and employment terms and conditions however

must be consistent with mandated labor policies. Under the Labor

Code, employees are entitled to compensation or basic wages, overtime

pay, holiday and premium pay, service charges, SSS, EC, and

Philhealth contributions, service incentive leaves, and retirement pay.

Compliance to the City Ordinance No. 56, series of 1948,

otherwise known as the “Health and Sanitation Ordinance of Davao

City” is necessary in order to be responsive to the current health and

sanitation welfare of the citizenry.

“The Solid Waste Management Program” under RA 9003, Davao

City Ordinance encourages all citizens including all business sectors

to practice proper garbage segregation.

Sorvetes, as a juridical entity under the General Partnership

type of business, is also qualified under Republic Act 9178, also

known as Barangay Micro Business Enterprises (BMBEs) Act of 2002.

It is an act to promote the establishment of Barangay Micro Business

Enterprises (BMBEs), providing incentives and benefits therefore and

for other purposes. Once the business application is approved, the

following are the incentives and benefits given by the act: exemption

from taxes and fees, exemption from coverage of minimum wage law,
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credit delivery, technology transfer, production and management

training and marketing assistance, trade and investment promotion

and information dissemination.

Sorvetes will apply to BMBEs once mandatory requirements of

government for the permits and licenses are completed.

Economic Factors

The inflation is a factor to be taken into account as it strongly

impacts on the final consumer prices and the level of sales of ice

creams and sorbets. The increase in price is explained by the volatility

of raw material prices which are used to make ice cream, such as eggs,

milk, sugar, fat, and aromas.

The production price of sugar is also very volatile. According to

the National Dairy Authority, the escalation of world market prices and

a delay in the start of the 2010/11 milling season drove prices for a

50-kg bag of sugar to a record high of P3,084. After that, domestic

prices retreated steadily for the remainder of CY 2010/011 to

P41.66/kg in August. Sugar prices have remained relatively stable in

CY2011/12, with a slight drop in November-January. Industry sources

expect prices to increase slightly for the remainder of CY 2011/12, as

the milling season comes to a close. The diagram below shows prices

of raw materials for sugar and its retailed price in the Philippine

market.
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Table 4: Philippine Dairy Statistics from 2008 to June 2013

PHILIPPINE DAIRY UPDATE
Jan- Jun
Particulars 2008 2009 2010 2011 2012 2013

1. Supply Situation
(Quarterly - in LME -
'000 MT)
Local Production 13.81 14.41 15.86 16.45 18.45 9.59

Imports 1,618.71 1,789.65 2,015.02 1,903.41 1,955.41 941.32

Gross Supply 1,632.52 1,804.06 2,030.88 1,919.86 1,973.86 950.91

Exports 298.85 199.79 254.98 295.81 131.76 6.33

Net Supply 1,333.67 1,604.27 1,775.90 1,624.05 1,842.10 944.58

2. Local Consumption(m
kg) 1,717.60 1,752.56 1,754.46 1,786.38 1,818.87 925.97
3. Milk Requirements 2,712.00 2,766.90 2,770.20 2,820.60 2,871.90 1,462.05

(m kg)

4. Local Production
Sufficiency (%) 1.00 1.00 1.00 1.00 1.00 1.00

5. Value of Imports - CIF

(US $, mil.) 712.00 466.72 729.03 847.68 763.84 383.20

(Pesos, mil) 31,662.64 22,234.54 32,886.54 36,713.02 32,256.96 15,803.17

6. Value of Exports -
FOB
(US$, mil.) 165.70 99.41 142.12 176.69 82.86 10.39

(Pesos, mil) 7,368.68 4,735.89 6,411.03 7,652.44 3,499.18 428.48

7. Value of Production
(Pesos, mil.) 411.95 464.00 481.83 498.93 559.96 290.86

Source: National Dairy Authority

The price of milk in Philippines has an add-on effect on the

product. The Philippine’s dairy products has been pegged at 1% for the

last 5 years (National Dairy Authority, 2013; Ang, 2012). This implies

that 99% of the local dairy consumption has been continually sourced

from overseas, and that the dairy production supply is more or less
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growing at the same rate as the local demand. Most of the imported

milk utilized for consumption and further processing are sourced from

New Zealand (46%), USA (29%), Australia (8%), and France (3%).

Eighty-five percent of these imports are in the form of powdered milk

(National Dairy Authority, 2013). Other dairy statistics are presented

in Table 4.

In view thereof, the sudden change in exchange rate as to the

increase of price in raw materials would create price increase of

finished goods and a low price for raw materials create low price for

finished goods.

Social Factors

Most of the school events and activities in Catalunan Pequeño

National High School and Elementary School contribute to the

increase in sales of Sorvetes due to the instant demand from the

students.

Every 3rd Week of May, Catalunan Pequeño celebrates its “Araw ng

Barangay” wherein the “katawhan” residents and non-inhabitants

gather together to witness its yearly anniversary. Some classes are

suspended in the afternoon so most of the students participate in this

big event. This is a good opportunity for Sorvetes to implement its

marketing strategies.
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Technological Factor

It was not until the mid-1800s, however, that is the first recognized

ice cream machine come up or people know about the ice cream

machine. Since ice cream businesses require machines for the

production and operation, this serves as the backbone of Sorvetes.

Without the machine, there is no ice cream. If the machine breaks

down, the operation stops. If the machine malfunctions, the product

output deteriorates. The softness and hardness of the ice cream rely

on the proper functioning of the machine.

According to the ice cream business owner of Fabrica Ice Cream

located in San Pedro Street Davao City, who also sells powder mixes

for soft serve, proper handling, daily and quarterly maintenance and

enough technical background helps the operation work smoothly.

The basic problem that most of the machines encounter is the

frozen cylinder rooted from mishandling the unit. Once encountered,

this might also result in a broken beater. The major problem that

might occur is the change of compressor that is very costly and would

take one to two weeks replacement depending on its availably. Wear

and tear of the parts includes rubber gaskets and the expansion tube.

If the machine gets in trouble then the operation of the business shuts

down.
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Recent brown outs in the city may affect business operations. It is

the uncontrollable factor that the owners cannot handle.

Industry Analysis

Ice cream in the Philippines facts and figures ([Link],

2010) show that the industry sales were expected to grow by 2.8% in

2009 to P8.75bn (US$195.4m). Volumes were forecast to inch up 0.7%

to 64m litres. The market is dominated by two large players, Nestle

and Selecta. The minimal growth will mainly come from the expansion

of smaller lower-priced brands; this includes others in impulse ice

cream such as soft serve ice cream retailers. Consumption of ice cream

in the Philippines was concentrated within the Greater Manila area

between 2004 and 2008, with 60% of total volume purchased there.

The remaining 40% was the share of the provinces and the cities

outside of metro manila. Euromonitor believes there is an opportunity

for manufacturers to penetrate key cities such as Davao City where

the level of consumer income is on par with Metro Manila. Products

geared towards lower and middle income consumers have enjoyed

recent success. The proliferation of smaller companies offering lower-

priced branded products in the market has been snatching sales from

major brands, especially in impulse ice cream. Chocolate remains the

undisputed favourite of Filipinos making it the number one flavor

launched and developed by ice cream makers.

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If we take a look on the income of the food services activities in the

Philippines last 2012 base on the final results of the 2012 Census of

the Philippine Business and Industry (CPBI) conducted nationwide,

with 2012 as the reference year, Philippines had a total of 26,557

establishments engaged in Accommodation and Food Services

Activities. Total income earned in 2012 by Accommodation and Food

Service Activities section reached PhP361.5 billion.

The vibrant economic performance in the Philippines provided a

lucrative landscape for the growth of restaurants and mobile food

services that includes ice cream store business in 2013. Chain players

are able to expand their outlet networks as shopping centre operations

establish a strong presence in fast growing cities nationwide.

(Consumer Food Service Euromonitor International)

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Restaurant & Mobile Food Services

Shorterm Accommodation activities
2% Beverage Serving Activities
1%
Event Catering & other Food Service Activities
9% Other Accommodation

13%

75%

Source: Based on the final results of the 2012 Census of the Philippine
Business and Industry (CPBI) conducted nationwide

Figure 3: Percentage Distribution of Accommodation and Food Services

Activities Establishments with Total Employment of 20 and Over by
Industry Group: Philippines, 2012*

Market Forces Analysis

The Porter’s Five Forces Model illustrates how the industry’s

competition is affected by these forces: Supplier Power, Threat of New

Entrants, Buying Power, Threat of Substitute, and Rivalry. Each model

plays a vital role in the competition of food industry.

Bargaining Power of Suppliers

The suppliers of raw materials usually have power over

industries. In an ice cream industry there have lots of local suppliers

in the market that offer regular to premium mixes. Unknowingly,

almost all premium mixes have the same taste. Other suppliers do not
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offer premium but only limited to regular and standard mixes. Judea,

Miguelitos, Marleys, Chefsbest and Injoys are the local players of

premixes in Philippines that can also be found in the City of Davao.

One of the owners of Sorvetes is currently employed in food

service industry, apart from the technical advancement and issues she

usually encounters from her clients’ experiences, the connection

established with different supplier of powder mixes from local to

national supplier through customer referrals becomes the competitive

edge of Sorvetes.

Therefore, the bargaining power of the supplier is relatively

low. Bargaining Power of Customer

Customers are the backbone of any business. Sorvetes

understands that happy customers can make business happy. In

order to retain loyal customers and gain new ones, Sorvetes is serious

in adding value to its products. Since there is only one existing direct

competitor in the area and kilometers away to the mall where the next

ice cream store is located, Sorvetes will initially offer two flavors of ice

cream, chocolate, vanilla and combination of two. The prices will vary

according to the customers’ purchasing power. In order to cater the

toddler, primary and high school, faculty member, including the classy

individuals and the passengers and peddlers, 10pesos, 20pesos,

25pesos and 30pesos depending on sizes of the cones and cups and
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the toppings or add-ons. This makes the bargaining power of

customers high.

Threats of New Entrants

The threat of new entrants is high. Reliable suppliers for the

machine and the raw materials require thorough research; it involves

daily and quarterly maintenance, machine breakdown and sometimes

poor location may contribute to start-up barrier in this industry.

However, it is not expensive to start an ice cream business that is why

there are lots of new entrants.

Threats of Substitute Products

Catalunan Pequeño is a progressive Barangay in Talomo

District. Most of the food stores within the vicinity of the schools are

residents in the said Barangay. In school areas, food chains are

everywhere plus, the cooperative and canteen operating inside the

school which makes the threat of substitute products are high. One of

the solutions of Sorvetes in decreasing the threat is to keep in touch

with customer preferences and offer seasonal products based on their

ability to purchase. To maintain customers and attract new ones,

monthly sales activity is implemented not just around price change

but also to the right amount of customer service. These solutions are

implemented successfully; Sorvetes maintains a competitive advantage

over rivalries.
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Competitive Rivalry within the Industry

Competition in soft serve ice cream retailing is low because of its

location and its existing loyal customers. No one wants to be left

behind, the reason why customers have a lot of options as where to go

and buy. In soft serve ice cream businesses, comparison is obvious so

the competitive edge must be more visible than others. Added value to

the product and the service makes Sorvetes enjoy the competition.

There is only one direct rivalry in the area which just started last

February 2016, Sorbe Twirl. As expected, the normal way of selling

was adopted and implemented. Sorvetes is confident that it can gain

customers respect and penetrate the area.

Table 5: Market Forces Analysis

5 Forces High Low

Suppliers Power /
Buyers Power /
Potential Entrants /
Substitutes /
Rivalry /

To sum it up, according to the analysed Porter’s Five Forces of

Sorvetes, except for the bargaining power of supplier and competitive

rivalry, all other forces are relatively high. Sorvetes penetrates the

market despite the facts that threat of substitute products is high. To

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resolve the issues of substitute products, Sorvetes uses this

opportunity to sell ice cream by using different and not the usual

cones in the market. The customers bargaining power is also high in

certain circumstances. Therefore, this industry is not so saturated, yet

very competitive, and that requires good planning and strategies.

Competitive Analysis

The goal of competitive analysis is to better position the

business to leverage the competitive edge in the competing industry.

There is one (1) identified competitor in Crossing Catalunan

Pequeño. Sorbe Twirl started its operation on February of 2016. To be

competitive, Sorvetes is designed to be different from its only

competitor.

Table 6: Competitive Analysis

Factors Sorvetes Sorbe Twirl

Location School School

Staff Friendly, attentive, Attends the bare

honest minimum

Store Ambiance Inviting Relatively unattractive

Service Above Normal Normal

Customers Pre-schoolers, pupils & Pupils & students

students, passersby
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Competitive Analysis Summary

Most of the ice cream stores are located inside a mall but only a

few are in public place like schools. Ice cream stores in public areas

are just adopting the normal way of selling ice cream that basically

offers single pricing. Most of the ice cream stores located in the public

have the same store ambience. Customers will buy ice cream in places

where it is accessible. Customers buying ice cream are particular to

the total appearance of the ice cream. Ice cream taste does not matter

to kids for they taste very closely similar to ordinary and premium ice

cream. Customers are price sensitive and yet want to get the quality

ice cream. According to observation and field interview, customer

preferences rely on the following: ice cream presentation, cleanliness of

store, visibility of marketing paraphernalia and number of customers.

Target Market

According to the Philippine Statistics Authority (PSA) in its

highlights of the Philippine population as of August 1, 2015 the

country has a total populace of 100,981,437 based on the 2015

Census of Population (POPCEN 2015). Out of these, Region XI – Davao

Region shared the total population of 4,893,318.

Below is the matrix showing the information for Region XI –

Davao Region population.

 32

Table 7: Davao Region Total Population as of August 2015

Total Population by Province, City, Municipality and Barangay:
as of August 1, 2015
Province, City, Municipality Total
and Barangay Population
DAVAO ORIENTAL 558,958
COMPOSTELA VALLEY 736,107
DAVAO OCCIDENTAL 1 316,342
DAVAO DEL NORTE 1,016,332
DAVAO DEL SUR * 632,588
* Excludes Davao City.
DAVAO CITY 1,632,991
*Catalunan Pequeño 22,809
REGION XI - DAVAO REGION 4,893,318
1 Created into a province under Republic Act No. 10360 dated July 23, 2012;
ratified on October 28, 2013; taken from the province of Davao del Sur.
Source: Data procured from [Link]

Davao City has a registered total population of 1,632,991. Out of

these individuals, a total of 22,809 were listed to Barangay Catalunan

Pequeño, where Sorvetes established its first ice cream store

particularly in Crossing Catalunan Pequeño, where elementary and

high schools are also located.

Below are the figures showing the number of pupils and

students enrolled in Elementary and Secondary, respectively.

 33

Table 8: Catalunan Pequeño Elementary School Enrolment Data

Year 2013 2015
Grade Male Female TOTAL Male Female TOTAL
1 182 154 336 173 157 330
2 188 148 336 145 128 273
3 151 143 294 179 147 326
4 132 137 269 182 163 345
5 132 109 241 172 166 338
6 107 124 231 160 156 316
TOTAL 892 815 1,707 1,011 917 1,928
Table 9: Catalunan Pequeno National High School Enrolment Data

Year 2013 2015

Level Male Female TOTAL Male Female TOTAL
1 138 136 274 179 216 395
2 106 111 217 192 188 380
3 109 120 229 146 169 315
4 78 88 166 123 140 263
TOTAL 431 455 886 640 713 1,353

Based on the 2015 enrolment data above, it is concluded that

there are an estimated 3,300 pupils and students enrolled for this

school year 2016-2017 that is inclusive of the two schools located in

the same area that gives the food store its perfect place to operate.

Even with the population growth rate of 2.30% for 2010-2015

([Link]) for Davao City, Sorvetes can only expect more

students from this school and other schools it targets in the coming

years.
 34

The target market of Sorvetes is the students of elementary and

secondary schools. There is only one direct competitor in the area as of

the present.

Market Segmentation

Sorvetes is very specific regarding its target market, the

students.

In Catalunan Pequeño National High School alone, there are

1,353 students from the first to fourth years. There are also 1,928

pupils in Catalunan Pequeño Elementary School from grade 1 to grade

6 that leads to a total 3,281 students. Sorvetes needs only 236 cones

as its target ice cream sales volume for the day.

Figure 4: Target customers through behavioural segmentation

based on research and survey
 35

The students in Catalunan Pequeño National High School are

35% of the total target market. These are students from first year up to

fourth year. They spend their allowances most in foods.

The pupils in Catalunan Pequeño Elementary School are 50% of

the total target customers. These range from grade 1 to grade 6. Kids

are more in love with ice cream

The location of the store is about ten (10) meters away from the

entrance and exit gates of the pupils that becomes a factor of their

buying decision. The lowest price specifically targets the pupils who

have the lowest allowance for consumption. On average, according to

the teachers, students and pupils have allowances from P20.00 to

P50.00 per day. Students go out of school around 11:30am or lunch

time and 4:30pm during dismissal. Sales are at peak during these

instances.

Other Potential Market

Basic mode of transportation in this area is tricycle. Tricycle

drivers who are working under the heat of the sun seek food for

pleasure is 3% of the total market. There is an estimated 100 drivers of

tricycle according to Crossing Pequeño Tricycle Drivers Association

(CPTDA).

Students from the other school who visit other schools for any

other reasons such as invited for a school activity, such as delegates

 36

or representative in a competition who are allowed to come in the

premises. They are good money spenders for food stuffs. An estimated

of 50 students belong to this market. This is 1% of the total market.

The parents of about 300 or 8% of the total market, who wait for

their children, are in favour to try a cone of ice cream.

Members of the faculty such as the teachers, working staff and

admin personnel are also potential buyers which are composed of

around 60 members, which is 2% of the total target market.

Other customers or passersby (1%) who have the craving of

having one princess cone of Sorvetes.

Sorvetes assures to maintain cleanliness and add value to ice

cream cone to extend unexpected potential customers.

Supply and Demand Analysis

Ice cream consumption usually peaks during the hot summer

months. Demand, however, is also stimulated by festivities, town

fiestas, birthday parties, and or any family celebrations. As such,

consumption of ice cream remains significant even during the rainy

season. Since it is strongly associated with joyful occasions, its

consumption is also triggered whenever individuals especially students

desire to reward themselves as it is an easily accessible indulgence.

 37

The total population of the students and pupils in two schools

within Crossing Catalunan Pequeño is 3,281 and as projected target

sales of 236 cones and cups per day is about 3 to 4 kilos of premix.

Sorvetes defined the following groups that classified according to

the basis of their daily behaviour which composed of elementary

pupils, high school students and other potential customers. This data

serves as the demand analysis of the ice cream store.

While on the other hand, there is only one ice cream food store

in the area. The strategies of Sorvetes boost the demand and create

competition in the market. Thus, this is a good avenue to project a

good market share and a favorable supply analysis.

MARKETING PROGRAMS AND STRATEGIES

Sorvetes’ products and markets already exist. There appears,

however, that want for something better with a twist in the ice cream

for that area given our performance during the first 4 months of our

operation. Hence Sorvetes’ approach is a combination of some market

penetration and product development strategies following the Ansoff

Matrix framework.
 38

___________________________________________________
Source: [Link]

Figure 5: Ansoff Matrix

To gain its market reputation, Sorvetes stays focused on its

marketing initiatives that concentrate on the following:

Product and Service Plan

Sorvetes major goal is to offer premium yet affordable soft serve

ice cream. Detailed objectives, strategies and action plans for its

products and services are laid down below.

 39

Table 10: Product and Service Plan

Objectives Strategies Action Plans
 To offer  Review prices  Ask discounts from
affordable ice offered by suppliers
cream where competitor  Adjust prices using the
prices are not discounts given by the
exceeding suppliers
P30.00 per
unit
 To offer new  Understand and  Conduct surveys
flavors integrate  Provide shout out board
consistent customers in for flavours of the day.
with interactions
customer’s the business as
the source of the
wants every
new offering
month

 To replenish  Adopting First In  Arrange storage facility to

inventory on First Out (FIFO) facilitate FIFO
weekly basis method of  Be aware of the seasons
or as inventory is an requirements and make a
necessary effective in program of purchase
technique  Conduct inspection to
making sure monitor the expiry dates
that storage of of the products. Have an
supplies are agreement with the
brand new and suppliers for return policy
fresh that non-moving items
are replaced with
 To check the  Assign the  Store manager should
quality of the production crew delegate the quality
soft serve ice to check the control of the production
cream every taste and quality to the staff.
production of the soft serve  Train the staff on how to
process ice cream in the spot changes in taste and
absence of the sweetness during
store manager production
 To improve  Set aside  Leasehold improvements
lease restricted funds will be done during
properties or budget for the summer vacation
once a year improvements
 40

Communications Plan

Sorvetes has to establish its advertising, sales promotion and

public relations plans. The plans and other sales activities of Sorvetes

aim to create public awareness to inform its target customers: the

students of Catalunan Pequeño National High and Elementary Schools

and other potential customers, faculty staff, drivers or peddlers,

parents and outsider students from other schools.

Advertising Plan

Selling messages for the target markets is conveyed through

word of mouth, tarpaulins, leaflets or flyers and social networking

sites. The business has set aside an advertising budget to reach the

maximum number of people efficiently through these media.

Sales Promotion Plan

Activities to help increase awareness and preference for the

products have been performed such as sampling. Complimentary taste

spoons for every customer that comes in to the store can have a try

when a new product is launch. This tempts the client to buy a cone of

ice cream. Other sales promo is prepared for different types of

customers.

Visual merchandising displays aim to make Sorvetes products more

visible by encouraging customers to make an impulse purchase or to

choose Sorvetes products rather than the competitor.

 41

Buy-one-get-one-free (BOGOF) to encourage customers to give more

for their money is applied on “no school days” on specified products.

To encourage customers to buy for ice cream during ordinary boring

days, this BOGOF creates noise in the market.

During summer, Sorvetes is offering “unlimited ice cream” booking

for events, parties and get together. This is good for five (5) hours.

Public Relation Plan

In order to improve the business public image, financial reports

is provided on monthly, quarterly and annual basis, the business

maintains only one book as against to the practice of having two books

both for the BIR and in-house purposes. Government compliance is in

the priority list. Giving back to the community is also included in the

list.

Sorvetes maintains schools and barangay relation through

sponsorships. Suppliers’ relations is also maintained by the business

as it takes bulk orders from them and endorses more customer

referrals for their products.

The store implements “ice cream parties” where kids are

gathered together and ask how much they love ice cream. It is

documented through photos and videos to increase popularity and

patronage among children.

 42

Table 11: Communications Plan

Objectives Strategies Action Plans
 To be able to  The business  Within the first
re -introduce will resort to month a budget
the business both free and is set aside for
on school paid Facebook
opening advertisements advertisements
also known as
FB Boost.
 Leaflets and
tarpaulins are
also utilized
 Word of mouth
and social media
such as
Facebook and
Instagram are
tapped for free
advertisements.
 To introduce  Sales promo  Souvenirs will be
sales promo kicks in first given out
campaign at week after  Raffle prizes for
the start of the opening of the walk-in
business business, in customers
operations to this way sales  Special deal
encourage and are increased promo for bulk
maintain sales or maintained purchase
 Free add-ons on
ice cream
 To offer  Number of  Sorvetes will
sponsorship at activities will offer sponsorship
least once a be conducted
year in a year both in terms of party
in schools, balloons and
barangay and
city poppers that will
multiply the
name visibility to
the public
 43

Research Plan

To measure the effectiveness of the marketing plan and in order

to adapt with the drastic changes in the market and develop new

product, the business engages into research. This is conducted on a

regular basis to assist the business with its overall goals. The plan is

measured how far the effectiveness of the marketing strategies exerted

by the business. Tracking customers fast changing needs.

Customers would want something new yet affordable in their

products and services. A competitor may offer a lower price with fair

service to them. What Sorvetes is offering are products with reasonable

price yet excellent service.

Table 12: Research Plan

Objectives Strategies Action Plans
 To continue to  Keep abreast  Attend customer
improve the with the service
products and latest news in seminars-
services the industry workshops for
offerings every new service
month. offerings
 Participate in the
products
updates
mentored by the
suppliers
 Business
meetings are
also sourced of
new information
on how to
improve the
business
 44

 To continue to  Soliciting  Giving out

develop new feedbacks customer
marketing and from the feedback forms
sales promos customers and perform
that will suit the would be the surveys to know
customers’ best way to their pulses
needs know what about the
they really current offerings
need (Refer to Annex
A)
 To continue to  Keep on  The store will
study the tracking the participate in
changes in latest updates business
market in order on business expositions to
to develop new environment develop
marketing and information
strategies. determine if gathering on
Research the marketing business
should be strategies development.
included in pre- have been  Performing
operating very effective surveys to
activities and customers is the
will be done best form of
semi-annually research plan in
for the next two order to improve
years product offering.
(refer to Annex A)
 To establish two  Look for  Sorvetes may
strategic resort to using
stores by 2018 locations its own funds,
where the Profit Sharing
and to expand business can Agreement with
be an Investor,
the business established Bank Loan and
DOST Loan
thru franchising
by 2020
 45

Customer Service Plan

This business is service oriented so that it is differentiated from

its competitor. In order to do this, the following objectives, strategies

and action plans are established.

Table 13: Customer Service Plan

Objectives Strategies Action Plans
 To be able to  Hired employee is  Hire capable crew
reach out to equipped with the to do the job
the customers technicalities of
and answer the product, his
their queries work is to make
about the sure that every
products and question is
services answered honestly
during and the best
business possibly
hours from
8am to 5pm
during
Mondays to
Fridays

 To provide the  Having a  Display area

best comfortable place should be clean
experience as where they can  Provide customers
they purchase stay and eat is one with an area
their products way to retain where they can
from the time customers have their orders
they enter the  A place where they consumed
store up to the can have a
exit chitchat with their
fellow customers
while consuming
their orders
 To serve  Purchase system  A step by step
orders of the is imposed to procedure in
customers avoid confusion in procuring and
systematically ordering. First selling the items is
come first serve established
basis for all
customers
 46

 Skills  To train staff and  Employees will

development personnel on undergo customer
seminar for regular basis so service seminar so
the employees that they know that they are
once a year how to conduct equipped with the
every time they knowledge on how
face and deal with to act whether in
the customers front of the clients
or not
 To ensure that  A well prepared  Training of
customer and equipped personnel as part
concerns is personnel can of the pre-
answered handle basic employment
properly and questions and process to know
is dealt with complaints from the technicalities
automatically customers in attending
 To achieve a  Ensure good  customer needs.
0% quality products Maintaining
complaints on and services clients database
day to day  Quality assurance by getting their
operations of and views to improve
the business measurements the existing
should always be services offered by
a priority of the ice  the business
cream store and All concerns and
its product line issues in a day are
acknowledged and
are endorsed to
any of the owners.
 Necessary actions
are done
depending on type
of complains. If it
is a minor issue,
staffs directly
resolves it. More
serious complaints
are documented.
Phone call
monitoring from
the owners to
staff. Ice cream
gifts or stuffs are
offered to client as
peace offering
 47

Sales Management Plan

One of the goals of Sorvetes is to establish its products and

services and promote awareness to the customers for repeat orders. To

achieve this, sales forecast is provided that will serve as a guide in its

sales management.

Since the business is a start up and is in its first year of

operation and for this particular marketing plan, inventory available

for sales of all products is reasonably maintained at 1 kilo for all raw

materials. Purchases are based on what are the most saleable items.

Out of these, inventory end is maintained at acceptable level if other

things are held constant. Inventory items are also divided into slow

moving, fast moving and non-moving for monitoring purposes and to

ensure movement of the stocks.

Based on the Davao City market prevailing prices for each item,

generally a mark up is added to all products to come up with the

estimated prices. From there, the marketing budget is prepared and

presented in the proceeding pages.

Table 14: Sales Management Plan

Objective Strategy Action Plans

 To achieve the  Marketing promo  See to it that the

target average is doubled up on production
sales of 236 the first month process is followed
of business to ensure the
cones and cups operations target volume
per day planned per day.
 48

 To achieve the  Introduce  Utilize word of

projected daily unlimited ice mouth
sales of 236 cream to  Advertise in
cups and cones events, parties Facebook
during summer and get through FB
together Boost/
Sponsored
 To increase  Introduce  Device special
sales by 5% sales promo at promos to cater
based on target the beginning to the needs
units sales on of each month and wants of
the following each customer
and succeeding type
years of  To insure
operations availability of
soft serve ice
cream for the
promo,
inventory will be
done by the
owners before
the operations
starts and
replenish
whatever is
needed on
weekly basis
 49

Sales Target per Item

Target sales per day are based on the actual sales revenue of

Sorvetes from January 18, 2017 to March 31, 2017 or 53 days of

operations.

Table 15: Actual Sales Revenue and Target Unit Sales

Sorvetes De Davao Company
Actual Sales Revenue and
Target Unit Sales
January 18 to March 31, 2017
(53 days)

Date Princess Queen King Flotte Add Ons Water Lemon Total
Jan 2017
(10 Days) 20,870.00 8,480.00 330.00 - 634.00 30.00 30,344.00
Feb 2017
(21 days) 40,050.00 10,540.00 1,350.00 225.00 1,039.00 10.00 80.00 53,294.00
Mar 2017
(22 Days) 51,460.00 4,740.00 530.00 1,475.00 477.00 77.00 58,759.00
Total 112,380.00 23,760.00 2,210.00 1,700.00 2,150.00 117.00 80.00 142,397.00

Divided
by: 10.00 20.00 30.00 25.00
Cones/Cu
ps 11,238.00 1,188.00 73.67 68.00
Divided
by: 53.00 53.00 53.00 53.00 Total
Daily Ave.
(53 Days) 212.04 22.42 1.39 1.28 237.13
Target
Unit Sales 212.00 22.00 1.00 1.00 236.00

Daily average unit sales are computed to come up with a total of

236 cones and cups as target unit sales per day from the gathered

data. A mark-up is added from the selling price of each item. Sales

target in number of units is the estimated yield for each product

offering. This is then multiplied to the unit cost per item to come up

with the sales target in figures. (Refer to Table 15)

 50

MARKETING BUDGET

Sales Target Matrix

Table 16: Projected Sales Revenue

ORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño, Davao City
Projected Sales
Revenue
2017
Products Target Selling Daily Monthly 6 Months 2017

Sales
Unit Sales Price Sales (20Days)
Princess 212 Cones 10.00 2,120.00 42,400.00 254,400.00 508,800.00

Queen 22 Cups 20.00 440.00 8,800.00 52,800.00 105,600.00

King 1 Cup 30.00 30.00 600.00 3,600.00 7,200.00

Flotte 1 Cup 25.00 25.00 500.00 3,000.00 6,000.00

Total 236 Units 52,300.00 313,800.00 627,600.00

Target Unit Sales is based on the actual average daily sales of Sorvetes from January 18, 2017 to March 31, 2017

Based on the provided, marketing budget will have a share of P

6,000.00 based on the 2017 annual sales revenue. This amount will go

to the business marketing expenses and sales expenses.

 51

Marketing Expenses and Selling Expenses

Presented below is the estimated annual marketing expenses

and selling expenses of Sorvetes.

Table 17: Marketing and Selling Expenses

SORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño, Davao City

Marketing and Selling Expenses

Particulars Amount
Advertising and promotion expense 6,000.00

Total 6,000.00
Notes:
1. *0.956% of Total Annual 2017
Sales Revenue
2. Rough estimates only
 52

OPERATIONAL
PLAN
 53

Business Process

Sorvetes is a merchandising or selling business. The business’

process involve are trading of its products. These are discussed on the

following sub-sections.

Process Flow

The business process that Sorvetes is aiming to undertake

involves the procurement (Purchase Order System), the creation

(Production Process) and disposal (Sales Order System) of raw

materials; soft serve ice cream and final products, accordingly. From

the requisition and receiving of products up to the sales, process flow

guides the business in the course through of its operation. The supply

chain of the business is incorporated in these process flows.

The following steps are followed in the merchandising business

process.
 54

Procedures Flow

START

1. Start
2. Requisition of inventory Purchase
Requisition Slip
will start from the from the
production crew
production crew. A
purchase requisition slip
Forward to the
(PRS) will be filled up by manager for
approval
him.
3. Forward the PRS to the
YES Approval
manager for approval.
Decision
4. Approved requisition slip

will be issued with a

Approved PRS NO
Purchase Order. Manager issued with
Purchase Order
will file disapproved PRS.
5. Purchase Order will be File

forwarded to the
PO will be
supplier. forwarded to the
Supplier
6. End
END

Figure 6: Inventory Requisition Flow

 55

Procedures Flow

1. Start
START
2. Manager will receive a
confirmation call of the Received
confirmation
order from the supplier. call from the
supplier
3. Delivery of items to the store.
Production crew will receive
Delivery of
the stocks. stocks to the
store
4. Production crew should
double check the YES
specifications of the order Double
Check
quantity and quality and Specifica
tions
matches it against the PO Issue receiving

issued. report (RR) for NO

stocks in good
5. Received stocks in good conditions.
condition. Issue Receiving

Report (RR) and forward copy

to the Cashier. Items that do Update Return

Inventory stocks that
not pass specifications will not Records do not pass
be accepted and will be specifications

returned to suppliers.

END Supplier
6. Update inventory records.

7. End

Figure 7: Inventory Receiving Flow

 56

Procedures Flow

1. Start
2. Preparation of raw START

materials (powder mixes

Preparation
and water) of raw
3. Preparation of equipment materials

(machine and mixing tools)

Preparation of
4. Ice cream process equipment
5. Quality check. This

involves tasting and Ice cream

adjustments if necessary. process

6. Final ice cream product for

Quality
sale Check
7. Draining of the left over
Ice cream
and cleaning of the ready for sale
machine

8. Left over to storage for use Draining of

the left over
in the next production and cleaning
process the machine

9. End Store left over

END for use in next
production

Figure 8: Production Process

 57

In the ice cream business as presented in procedures above, the

first step is the preparation of all raw materials, ice cream supplies

and mixing tools. Clean the ice cream machine by adding clean water

in the hopper. When everything is ready, pour the mixture and wait

until its gauge reaches 100% to automatically stop. This may take up

to 20 minutes depending on the factors affecting the performance of

the machine; factors include ambient temperature, electricity and ice

cream premix. When the machine stops, it indicates the ice cream is

ready for serving. There is no waste because the leftovers are

dispensed and stored in fridge and will be used in the next operation.

Operating time of ice cream machine is from 10:00AM to 6:00PM

only.
 58

Procedures Flow

1. Start
2. Received order from the START

customers.

3. Production crew will Receive order

from customers
prepare the items and

release Production crew

4. If not according to will prepare item

customers specifications, YES

Customer
set aside the ice cream Specificati
and prepare a new one ons

5. Set aside ice cream will go Cashier

NO
receives
to the storage to be used payment
in the next production
Set aside to
6. Cashier receives the Issue be used for
receipts next
payment and issue production
process
receipts
7. End END STORE

Figure 9: Cash Sales Flow

 59

Procedures Flow

1. Start START

2. Cashier receives cash

payment from the Cashier receives cash

payment from the
customers
customers.
3. Cashier issues official Cashier issues
official receipts
receipts
4. Count total cash during Count total cash
during cut off time
cut off time of 3pm. of 3pm
Prepare
5. Prepare deposit slips

deposit slip
6. Prepare the log book

7. Endorse cash and deposit Cashier receives

slips to the manager payment
8. Manager signs the log book Prepare the log
book
and deposits cash to One
Endorse cash and
Network Bank (ONB) deposit slips to the
9. Return validated deposit manager

slips to the cashier for Manager signs the log

book and deposits cash
recording to ONB

10. End Return validated

END deposit slips to the
cashier for recording

Figure 10: Cash Handling Flow

 60

Raw Materials

Cost of raw materials per product is presented on Table 17.

Toppings are shared by Queen and King Cups and there are special

add-ons for Kings Cups only.

Table 18: Raw Materials

Product Princess Queen Cup King Cup Sundae
Cone Flotte
Premix 1 Kg @ 1 Kg @ 1 Kg @ 1Kg@
Powder P125.001 P125.002 P125.003 P125.004
620pcs per 50pcs per 50 pcs per 100 pcs per
Cones/Cups box @ box @ box @ box @ P
P600.00 P65.00 P65.00 451.00
Coke None None None 1 Case @
P269.008
Toppings Assorted5 @ P3,841.50
None ( 94% to Queen = 3,616.25 None
(Shared)
6% to King = P225.25)
Special Add- Assorted6 @
ons None None None
P694.00
Assorted7 @ Assorted7 @
Superstix None P49.81 per P49.81 per None
cylinder cylinder
1
One (1) kilogram of soft serve powder yields 60 Princess Cone.
2 One (1) kilogram of soft serve powder yields 50 Queen Cups.
3One (1) kilogram of soft serve powder yields 50 King Cups.
4One (1) kilogram of soft serve powder yields 50 Sundae Flottes.
5
Sprinkles used as add-ons to the ice cream: rainbow sprinkles, rice crispies, mini
mallows, chocolate dip, chocolate sprinkles, chocolate droplets, crushed peanuts,
crushed cookies, chocolate heart and mini nips. Toppings yield a total of 1262 cups
for 53 Days. Out of these, unit sales of Queen Cups are 1,188 or (94%), 74 or (6%) of
King Cups are sold out. (Refer to Annex B)
6Special add-ons are added to King Cups only. (Refer to Annex B)
7Superstix has 100 sticks per cylinder. Each queen cup is entitled to half (1/2) stick while
King Cup is given one (1) stick.
8One (1) case has twelve (12) liters. One (1) liter yields at least five (5) Sundae Flottes.
 61

Table 19: Cost of Raw Materials per Unit

Product Princess Queen Cup King Cup Sundae Flotte
Cone
Premix P125.001/ P125.002/50 P125.002/ P125.004/ 50
Powder 60 Cones Cups = 50 Cups = Cups = P2.25
= P2.08 P2.50 P2.50
P600.00/ P65.00 / 50 P65.00 / 50 P 451.00/
Cones/Cups 620 pcs = Cups = Cups = 100 Cups =
P0.97 P1.30 P1.30 P 4.51
(P269.006/ 12
Coke None None None Ltrs)/5 Cups
= P4.48
Sprinkles5 P3,616.25/ P225.25/ 74
None 1,188 cups = cups = None
(Shared)
P3.04 P3.04
Special Add- P694.00/ 74
ons None None Cups = None
P9.38
Superstix None P49.81/200= P49.81/ 100 None
P0.25 = P 0.50
Material
Cost per P3.05 P7.09 P16.72 P11.49
Unit
1
One (1) kilogram of soft serve powder yields 60 Princess Cone.
2 One (1) kilogram of soft serve powder yields 50 Queen Cups.
3One (1) kilogram of soft serve powder yields 50 King Cups.
4One (1) kilogram of soft serve powder yields 50 Sundae Flottes.
5
Sprinkles use as add on to the ice cream: rainbow sprinkles, rice crispies, mini
mallows, chocolate dip, chocolate sprinkles, chocolate droplets, crushed peanuts,
crushed cookies, chocolate heart and mini nips. Toppings yield a total of 1262 cups
for 53 Days. Out of these, unit sales of Queen Cups are 1,188 or (94%) 74 or (6%) of
King Cups are sold. (Refer to Annex B)
6Special add-ons are added to King Cups only. (Refer to Annex B)
7Superstix has 100 sticks per cylinder. Each queen cup is entitled to half (1/2) stick
while King Cup is given one (1) stick.
8One (1) case has twelve (12) liters. One (1) liter yields at least five (5) Sundae Flottes.
 62

Sorvetes uses premium premix powder as the main raw material

in all its products. Raw materials needed for production are procured

from reliable suppliers in Davao City.

Quality Control

The set of procedures to ensure that products meet its

requirements is examined by the production crew from the acquisition

of the raw materials up to sales. Owners of Sorvetes also conduct their

own inspection. Before the products are being dispatched to the

customers, thorough inspection is being observed to ensure alignment

with the product scope.

From the receiving up to disposal of the products, quality control

is observed and maintained. If the process flows are to be followed, the

quality of the items in the storage can also be sustained.

Monitoring the quality of the products starts at the receiving

point; the productions crew only receives items that are in good

condition and according to specifications enlisted in the Purchase

Order. Bad orders or those items that do not pass the specifications

are automatically returned to the suppliers and should be noted in the

receiving report. With this move, only quality products are kept in the

storage.
 63

Keeping the products in storage entails a huge amount of work.

To do this and to maintain the quality of the products, an efficient

master plan and store layout design and proper products arrangement

is followed. Products are arranged in the storage according to the

products sizes and type within the given slots.

Storage good practices can also add up to the quality control

being established. Storage care and maintenance is being practiced by

the business. The Five S’s of Total Quality Management (TQM) is also

applied. This technique according to Osada (as cited in Ho, 2006) is

used to established quality environment in the organization. The Five

S’s stands for five Japanese words: Seiri, Seiton, Seiso, Seiketsu and

Shitsuke, if applied to the store management, this is a key technique

of quality control that maintains the quality of the products as well. As

examples:

Table 20: The Five S of Total Quality Management (TQM)

Japanese Meaning Example

Seiri Organization Proper waste disposal and proper arrangement

of the products
Seiton Neatness Maintain store and storage cleanliness at all
times
Seiso Cleaning Consistently observe cleaning schedule

Seiketsu Standardization Document everything in the storage for

transparency. Provide reports as basis.
Shitsuke Discipline Sustain and do the 5-S daily
 64

Controls are indispensable for maintaining the quality of the

products in the store and the storage. Weekly inventory is being

performed by the production every Friday during business hours. The

physical inventory report on stock balances is matched with the stock

cards. Discrepancies, which include stock damages due to

mishandling, listing error and missing inventory, are accounted for

properly as reconciling items or inventory loss whichever is applicable.

Product movement classification is also practiced to know which

products are saleable and lagging. A separate report is provided to

show products that are fast moving, slow moving, and non-moving

with emphasis on the expiry dates. The production crew acts as the

quality control officer for this. Fast moving items are monitored in

terms of price changes and substitutes products, slow moving items

are promoted by the business and non moving items are returned to

the suppliers. Sorvetes enters into a contract with the suppliers that

all non-moving items are accepted as return stocks and are to be

applied as payment to the business accounts.

The above quality control results impacts the quality of the

products being offered.

The planned quality control is an operational internal control

procedure, whatever costs this control system entails one to put in

place, reflected in the pre-operating and operating costs of the

 65

business. This does not require a large amount of money as this

becomes part of the business standard operational procedures.

Waste Disposal

Waste disposal is being handled in accordance with the city

ordinances and other applicable local, national and international laws

on environment. Since the business of selling soft serve ice cream falls

into the food industry, proper waste handling and disposal is strictly

imposed.

Segregation is being practised by Sorvetes. As mandated by the

city ordinances enacted by the local government. Davao City Ecological

Solid Waste Management Ordinance of 2009, (City Ordinance No.

0371-10) Section 10. Mandatory Segregation of Solid Waste - The

segregation of waste at source by all establishments is mandatory.

To avoid having a bad image, the strict imposition of the

aforementioned quality controls is being observed and practiced. The

main objective is to have zero complains. The business also makes an

arrangement with the suppliers for return damaged stock.

Davao City Environment and Natural Resources Office (CENRO)

regulate and require each business establishment to segregate waste

before disposal. The business is also required to observe and practice

recycling to reduce garbage like reuse of plastic or cartoons as garbage

bins.
 66

Planned waste disposal is incorporated in the operations of the

business and is reflected in the operating expenses of the business;

the business does not have any investment in a waste disposal devise

because it is a production process that does not need a stricter

compliance.

Facilities

The particular site of the ice cream store creates value and

impact to the entire business operation because it ensures good

service and crafts the business market position.

Good and conducive facilities under a perfect business location

and store lay-out enables Sorvetes to easily implement all of its

marketing strategies without compromising the quality of food and

services.

Storage, Office and Store Location

The storage, office and store are located at the premises of the

business address at Crossing Catalunan Pequeño Davao City.

Emphasis is given to the entire store since the business is handling

and dispensing foods. The store is built in accordance with law; to do

this the business gets clearances from the local authorities.

Location Plan

Figure 11 shows the exact location of Sorvetes as provided by

Google maps.
 67

Sorvetes ice cream store is located at Crossing Catalunan

Pequeño, Davao City adjacent to Catalunan Pequeño Elementary and

Catalunan Pequeño National High Schools. The property is

strategically located since it is accessible to those customers located

along barangay road leading to the nearby subdivisions of Granville,

Wellspring Highlands, Samantha Homes and Residencia Del Rio.

Figure 11: Location of Sorvetes in Crossing Catalunan Pequeño

Sorvetes rents a space at Crossing Catalunan Pequeño (refer to

Annex C for Lease Contract). The area is about 20 square meters and is

way above the required 12 square meters to establish the business.

 68

The building space is owned by Sara A. Bautista, the space incurs

P6,000.00 monthly rental fee with one (1) month advance and two (2)

months recoverable deposit.

Store lay-out

The ideas, designs, concepts, decors and lay out of the ice cream

store are protected to avoid potential infringement issues and cases in

the future (Refer to Annex D). This is under Republic Act 9150 Series

of 2011, an “act providing for the protection of layout-designs

(topographies) of integrated circuits, amending for the purpose certain

sections of Republic Act no. 8293, otherwise known as the intellectual

property code of the Philippines and for other purposes.”

Figure 12: Physical Lay-Out of Sorvetes

 69

Equipment and Other Fixed Assets

Any ice cream business requires ice cream machine regardless

of its brand and type. Sorvetes’ machine is a floor type China brand in

which most of its parts are locally available. For the protection of the

machine, Automatic Voltage Regulator (AVR) is installed to avoid

electrical problems.

To start the business it needs to have enough electric power for

the ice cream machine. Power shortage and interruptions affect the

operation of the business and may cause machine problems. It is not

enough to have electricity with current fluctuation that results in

under and over voltage. Automatic Voltage Regulator (AVR) that has

5000watts has stabilized the flow of current since the machine

consumes 1.7kw under normal 220 voltages.

A good source of potable water is needed for the daily cleaning of

the machine and mixing tools for the premix (Refer to Annexes E, F

and G).

Maintenance and Repairs

Repairs and maintenance of ice cream machine are assigned

solely to the technician of the supplier. Quarterly maintenance

includes cleaning the condenser. Repairs refer to the refrigeration

system of the machine that includes balance of pressure or Freon and

replacement of the compressor and gear box if necessary. Since the

 70

unit is covered with warranty agreement for one year, all parts for the

repair will be provided by the supplier of the machine.

Repairs and maintenance have an estimated monthly budget of

P 600.00 and will be increased by 5% on the following year.

Staffing Requirements

Sorvetes has two operation staffs who work on a daily basis: one

production crew and one store manager, who also serve as the cashier.

They are equipped with proper training in handling the machine and

are empowered with customer service since they are in charge of the

day to day operations of the business. A written policies and

procedures manual is the foundation for the training in order to best

serve the customers. Quality control, cleanliness and sanitation

procedures are utilized within the food store.

All the employees are managed by the manager who sees the

value of the Total Quality Management (TQM) and applies in Sorvetes.

The internal and external factors of the entire workforce are

monitored, handled, assessed, and studied by the manager.

The owners have good leadership experienced combined with

expertise in technical and management techniques and styles. Their

corporate wealth of exposure in sales and customers service becomes

the competitive edge against competitors.

 71

Salaries and Wages Schedule of the Staff

Sorvetes follows the mandatory daily rate in the region. Daily

rate for Region 12 is P310.00 per day for non-agriculture sector.

Employees work from Mondays to Fridays or five (5) days a week.

Allowances are also given out depending on the position handled by

the employee; this is apart from the cost of living allowance mandated

by law which is P5.00 per day for Region 12. Every employee is given

Social Security System (SSS). They are also insured with Employees

Compensation Commission (ECC) and Philhealth Insurance

Corporation (PHIC). Employees are also given out Home Development

Mutual Fund (HDMF) or Pag-ibig benefits.

Sorvetes De Davao Company is already a registered employer

with SSS, PHIC and HDMF (Refer to Annexes H, I and J).

Salaries and wages are given every 15th and 30th of the month.

(Refer to Annex K). Deductions of employee shares in the benefits

together with the employer shares are remitted on the following month

(Refer to Annex L).

The compensation schedule of the employees is shown in Table

21.
 72

Table 21: Staff Monthly Salaries and Other Benefits

SORVETES DE DAVAO COMPANY
Salaries and Benefits
Staff Basic Pay COLA Allowance
Manager/Cashier 6,200.00 100.00 900.00
Production Crew 6,200.00 100.00
Total 12,400.00 200.00 900.00

Staff Employer Share

SSS ECC PHIC HDMF
Manager/ Cashier 442.00 10.00 100.00 100.00
Production Crew 442.00 10.00 100.00 100.00
Total 884.00 20.00 200.00 200.00

Total Total
Staff Salaries Benefits

Cashier 7,200.00 652.00

Production Crew 6,300.00 652.00
Total 13,500.00 1,304.00

Production Plan

Sorvetes on the average sells 212 of Princess Cones, 22 of Queen

Cups, 1 of King Cup and 1 of Sundae Flotte per day. Therefore, ice

cream machine is producing on the average a total of 236 cones per

day which is equivalent to four (4) premium premix powder per day

based on 60 Princess Cones produced per day. Data is gathered from

the three (3) months or fifty-three (53) days operations of Sorvetes for

the period from January 18, 2017 to March 31, 2017 (Refer to Table

15).
 73

Major identified suppliers of raw materials are Monterozza Ritz

Food Corporation, Glory Foods Corporation, Rafsky Enterprises and

Baking Pantry, which are all located in Davao City. Raw materials for

these products are included in the store shelves and storage for

production.

Table 22: List of Raw Materials, Suppliers and Addresses

Raw Materials Supplier Address
Premix Soft Monterozza Ritz Food Lanang, Davao City
Serve Powder Corporation

Cones Glory Foods Corporation Uyanguren Avenue

Corner Suazo St.,
Davao City
Cups, Sprinkles Rafsky Enterprise Sta. Ana Avenue,
or Toppings Davao City

Cups for Flotte Oro Hi-Q Packaging Arellano St., Davao

City
Corporation

Superstix NCCC Centerpoint Crossing Matina,

Davao City

The above listed suppliers of premix powder, cones, cups and

toppings are cash on delivery (COD) purchases except for Monterozza

Ritz Food Corporation which extended Sorvetes a 15-day term for a

minimum purchase order of 100 premix powders.

 74

Table 23: List of Raw Materials, Suppliers, Price, Volume and Total
Costs
Type Supplier Unit Price Volume Total Cost
Required

To produce 60 Princess Cones

Premix Powder Monterozza P 125.00 per Kg 1 Kg P 125.00
Cones Glory Foods P 600.00 per 60 cones P 58.06
box or 620 pcs
Total Cost Per P 183.06
Yield
To produce 50 Queen Cups
Premix Powder Monterozza P 125.00 per Kg 1 Kg P 125.00
Cups Rafsky P 65.00 per box 50 cups P 65.00
or 50 pcs
Sprinkles Rafsky P 3.04 per cup 50 cups P 152.00

Superstix NCCC P0.25 per cup 50 cups P12.50

Total Cost Per P 354.50

Yield
To produce 50 King Cups
Premix Powder Monterozza P 125.00 per Kg 1 Kg P 125.00
Cups Glory Foods P 65.00 per box 50 cups P 65.00
or 50 pcs
Toppings or Rafsky P 3.04 per cup 50 cups P 152.00
Sprinkles
Special Add- Rafsky P9.38/cup 50 cups P 469.00
ons
Superstix NCCC P0.50 per cup 50 cups P 25.00

Total Cost Per P 836.00

Yield
To produce 50 Sundae Flottes
Premix Powder Monterozza P 125.00 per Kg 1 Kg P 125.00
Cups Oro Hi-Q P 451.00 per 50 cups P 225.50
box or 100 pcs
Coke NCCC P 4.48 per cup 50 cups P 224.00

Total Cost Per P 574.50

Yield
 75

A list of products, suppliers, price, volume and total costs on

Table 23 provides a summary of the production plan Sorvetes is

undertaking. This table also shows the computed total cost per yield

per product.

Inventory Volume

Inventory volume is maintained according to the weekly

requirements of each offering and the re-order level of each product is

planned as well.

Inventory is kept at an acceptable minimum level so that the

business can cater to the daily needs of the customers. Inventory at

the end of each period is maintained at 40 kg of premium mixes, 4

boxes of cones, 4 boxes of cups, 4 kg of syrup, 2 liters of Coke and 25

pieces of bottled water. With total value of P8, 410.00, this amount

forms part of the business equity at the beginning and all throughout

its operations.

Inventory re-orders point is observed by the business. By having

a realistic re-order level, Sorvetes not only ensures enough stock but

also avoiding overstock of raw materials. Table 24 shows the end

period inventory and the safety stock per raw material. Safety stock

amounting to P3, 588.48 is the minimum amount of the raw materials

Sorvetes holds in stock for emergency situation. These are 20 kg of

 76

premium mixes, 1 box of cones, 2 boxes of cups, 2 kg of syrup, 1 liter

of Coke and 10 pieces of bottled water.

Table 24: Inventory Level and Safety

Stocks Sorvetes De Davao Company
Inventory Level and Safety Stocks

Cost Safety
Inventory Safety Per Inventory Stocks
Particulars Stocks Unit Amount Amount
a b c d= a*c e=b*c
Premix
Powder 40 Kg 20 Kg 125.00 5,400.00 2,500.00
Cones 4 Boxes 1 Box 600.00 2,400.00 600.00

Cups 4 Boxes 2 Boxes 60.00 240.00 120.00

Syrup 4 Kg 2 Kg 140.00 560.00 280.00

Coke 2 Ltrs 1 Ltr 22.42 44.84 22.42

Bottled
Water 25 pcs 10 pcs 6.61 165.16 66.06
Total 8,410.00 3,588.48

For example, to compute for the re-order level of premix powder,

the owners consider the products delivery lead time of 5 days, which is

the amount of time it usually takes for the shipment of the product to

arrive. Per day consumption of premix powder is on the average 4Kg

per day.

Formula

Re-Order Level = (Lead Time x Demand per Day) + Safety Stock

 77

Computation:

Re-Order Point = (5 Days x 4 Kg) + 20 Kg

= 40 Kg

Graphical presentation of the re-order level is shown on Figure

13. Qty of Premix

100
90

80

70

60

50

Re-Order Point

40
Lead
Time
30
Safety Stock

20
10

0 No. of Days

5 10 15 20 25 30 35 40 45

Figure 13: Re-Order Point

 78

Cost of the Products

Costs of the products are provided above. These costs are up to

date as of March 31, 2017.

Labor Costs

Since the business is into productions using machine process,

manpower costs forms part of the operating expenses of the business

as provided under salaries and wages schedule for the staff and key

personnel.

Overhead Expenses

Schedules of expenses that substantiate the business operations

are provided and presented further in the financial plan. Since the

business is using machine process, there are no overhead expenses

incurred related to production, but the business incurs general and

administrative expenses.

Further, operating expenses are the costs associated with the

store’s main operational activities to produce the required volume

sales plan. These costs constitute which are directly related to selling,

advertising, and delivery of goods to customers. The costs that are

directly attributed to the operations are necessary to give and meet the

standards of the products, complying customers’ desires and achieve

the store goals.

 79

ORGANIZATIONAL

PLAN
 80

Legal Structure of the Business

Sorvetes De Davao Company is organized as a partnership

business agreement with three persons binding to contribute

resources to common fund in the co-owned business for a profit (Refer

to Annex M, N and O).

The owners or partners are persons of, Marbert E. Gregorio,

Dengie Lyn C. Mamac and Lemar E. Trumata. The capital to be

contributed to the business is in the form of money.

Partners have completely understood by all means the legal

structure of the business, to wit:

That any partner can bind the partnership into a contract

irrespective of the consent of the other partners as long as he/she is

with authority and is for the benefit of the partnership due to mutual

agency.

That the established partnership is not considered a separate

entity from the partners when it involves debts to third party creditors.

That a mere change due to the withdrawal, admission, death,

insolvency or insanity of any of the partner in the parties of

partnership agreement dissolves the partnership.

Aside from the capital accumulation and the willingness of the

partners to invest money to the business capitalization, mutual trust

is also the reason among investors to venture into partnership.

 81

Ownership

Sorvetes is owned by the three partners. Capital investment is

equally shared by the three partners. Sharing is also equal among the

partners and is applicable to the division of the accumulated profits

annually. Net profit sharing is only to be carried out after Sorvetes is

able to establish its third branch.

Table 25: Shareholdings and Percentage of Ownership

Name Shareholdings % Share
Gregorio, Marbert E. P 50,000.00 33.33%
Mamac, Dengie Lyn C. P 50,000.00 33.33%
Trumata, Lemar E. P 50, 000.00 33.33%
TOTAL P 150, 000.00 100%

Organizational Structure and Key Management Personnel

BUSINESS
OWNERS/PARTNERS/MANAGERS
Gregorio, Marbert E.
Mamac, Dengie Lyn C.
Trumata, Lemar E.

-Cashier -Production
Crew

Figure 14: Sorvetes Organizational Chart

 82

Table 26: Job Description of Sorvetes Key Personnel

Designation Job Description

Manager  Responsible for overall operations in the business

 Monitor the operation of the store
( before and after )
 In charge of procuring all raw materials
 Update social networking sites
 Formulate business strategies as to the pricing
and sales activities
 Solve issues and concerns of the customers
through phone calls and personal messages if not
emails in Facebook, Instagram or other social
media tools
Cashier  Responsible for the collection and preparation of
the financial accounts
 Manage the accuracy and completion of monthly
financial statements
Production  In charge in daily operation of the ice cream store
Crew  Take charge in the cleanliness
 Serve the customer
 Get customers feedback, concerns & suggestions
 Turn Over all survey forms for customers
feedback

Pre-Operating Activities

Before Sorvetes operates, it has undertaken some pre-operating

activities. These pre-operating activities include but not limited to the

following: market survey or research, the business plan preparation

and obtaining appropriate permits and licenses of the business.

Further, these activities from the business inception to the start of the

operations are best described at a Gantt chart below:

 83

Table 27: Sorvetes Pre-Operating Activities * (Gantt Chart)

SORVETES DE DAVAO
COMPANY
PRE-OPERATING ACTIVITIES
GANTT CHART
ACTIVITY Aug Sept Oct Nov Dec Jan
2016 2016 2016 2016 2016 2017
Market Research and
Study
Business Plan
Raise Capital
Signing of Contract of
Lease
Publish of Job Hiring
Obtain Permits and
Licenses
Purchase of Ice
Cream Machine
Purchase Equipments
Fabricate of Store
Advertisement
Selection of
Applicants
Orientation and
Training of Staff
Start of Commercial
Operations

Pre-Operating Costs
Pre-operating costs are being incurred by the business before its

commercial operations on January 18, 2017. Based on the pre-

operating activities and key points given, above are the pre-operating

costs involved together with the target dates of completion.

The business owners or partners initially invested an amount of

P1,000.00 for market research and study and the business plan
 84

preparation because raising initial capital from all sources happened

after the two activities mentioned as presented in the GANTT Chart.

Market research, study and the business plan was prepared by the

partners.

Initial capital is needed for the project to be realized, partners

contribute an initial total capital of P 150,000.00 exclusive of

incidental expenses related to this activity. Each of them may

contribute their personal savings or they may borrow from other

sources.

Contract of lease signing follow suit on November 19, 2016 to

secure the place where the business is established. One month

advance of P6,000.00 plus two months recoverable deposit of

P12,000.00 is paid to the lessor. This forms part of the business

prepayments.

Initial permits and licenses application commence after the

initial capital has been acquired with an initial costs of P 2,506.00.

Acquisition of an ice cream machine, the purchase of assets, and the

hiring and training of staff follow through after the aforementioned

activities.

Estimated expenses are provided at the start of the commercial

operations of the business. These expenses cover the costs of the

grand opening of the business.

 85

Presented below are the details of the pre-operating costs of the

business.

Table 28: Pre-operating Costs

SORVETES DE DAVAO COMPANY
PRE-OPERATING COSTS
Target Costs
Dates ACTIVITY Involved Remarks
August Market Research and
2016 Study 1,000.00 One Time
Sept - Oct
2016 Business Plan 300.00 One Time
November Raised Capital (Net for
2016 Contingency Fund) One Time
November Signing of Contract of
2016 Lease 24,000.00 One Time
Nov - Dec Obtain Permits and
2016 Licenses 2,506.00 One Time
December Purchase of Ice Cream
2016 Machine 71,954.80 One Time
December Purchase of Equipments
2016 and other Assets 8,150.00
December Fabricate of Ice Cream
2016 Store 26,660.00 One Time
November
2016 Publish of Job Hiring - One Time
December Advertisement & Purchase
2016 of Initial Products 13,295.65 One Time
December
2016 Selection of Applicants - One Time
December Orientation and Training of
2016 Staff - 3 Months
January Start of Commercial
2017 Operations 2,133.55 One Time
TOTAL 150,000.00
 86

Fixed Assets

Fixed Assets include the stand fans, tables and chairs used by

the staff and the customers. Other assets include freezer, calculators,

money detector, and trash bins.

Since everything is used for the day to day operations of the

business, detailed list of fixed assets, number, specifications, purpose,

suppliers and prices are already presented and discussed in the

operational plan (Refer to Annexes E, F and G).

General and Administrative Expenses

General and administrative expenses for trading or

merchandising concern include salaries of both the staff and the key

personnel since they are the ones acting as secretary (cashier) and

bookkeeper (cashier). These expenses are further presented under the

financial plan.

Other expenses which are not directly related to the trading

business operations such as office supplies, utilities and

communications are to be included here.

These costs have been incurred to support the trading and

marketing activities and these are shown on the following matrix.

 87

Table 29: General and Administrative Expenses

SORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño, Davao City
For A Month
General and Administrative Expenses
Annex P
Notes to
Particulars FS Amount
Depreciation expense 7 2,159.20
Electricity, light and water 8 1,650.00
Rent expense 9 6,000.00
Repairs and maintenance 10 600.00
Salaries and wages 11 13,500.00
SSS, PHIC and HDMF Con 12 1,304.00
Supplies expense 13 500.00
Taxes and licenses 14 2,500.00
Miscellaneous expense 15 50.00
Total 28,263.20
 88

FINANCIAL

PLAN
 89

Total Project Cost `

The three partners squeezed the entire initial investment of

P150,000.00 before the commercial operations of Sorvetes. Table 30

presents the total project cost in establishing the business.

Table 30: Total Project Cost

SORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño, Davao City
TOTAL PROJECT COST
Particulars Total Fund Source
Equity Loan

FIXED ASSETS
Leasehold improvements 26,660.00 26,660.00
Equipment & FFEs 80,104.80 80,104.80
Total Fixed Assets 106,764.80

WORKING CAPITAL
Advertisement and Promo 4,600.00 4,600.00
Initial Products Purchase 8,695.65 8,695.65
Rental payments 24,000.00 24,000.00
Total Working Capital 37,295.65

ORGANIZATIONAL COST
Market Research and
Study 1,000.00 1,000.00
Business Plan 300.00 300.00
Permits and Licenses 2,506.00 2,506.00
Commercial Operations 2,133.55 2,133.55
Total Organizational Cost 5,939.55

TOTAL PROJECT COST 150,000.00 150,000.00 -

FUNDING MIX 100% 100% 0%

 90

Sub-schedules for the total project cost are presented at Table

31. These costs were incurred before January 18, 2017, the start of

the business commercial operation.

Table 31: Total Project Cost Sub-Schedules

Leasehold Improvements Amount
Metal Fences 8,360.00
Renovation Contact 15,000.00
Trapal 3,300.00
TOTAL 26,660.00

Equipments & FFEs Amount

Ice Cream Machine 71,954.80
Sink 3,000.00
Freezer 5,150.00
TOTAL 80,104.80

Working Capital Amount

Advertisement and Promo 4,600.00
Raw Materials 3,771.10
Supplies 4,924.55
Rent (Dec, Jan & 2 Months Deposit) 24,000.00
TOTAL 37,295.65

Permits and licenses Amount

Articles of Partnership 836.00
Name Reservation 120.00
SEC Filing Fees 1,030.00
Barangay Clearance 20.00
Cedula 500.00
TOTAL 2,506.00

The three partners contributed equally shared capital in order to

implement the business. Schedule shows what funding requirements

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the business has undertaken. The business owners may have options

between equity as their personal capital or borrowings from the bank.

For this particular business, the owners and partners have

agreed to initially contribute P50,000.00 each in cash as capital

investment.

Projected Statements of Comprehensive Income

Sorvetes is using accrual method in accounting of its business

transactions. Meaning, the company realizes income even if not paid

and recognize expense even if not incurred.

Depreciation expenses are provided for all property plant and

equipment. This includes leasehold improvement.

Bonuses and 13th month pays are given on the second year of

business operations. Expenses directly related to sales are also

increased by 5% if applicable. Sales revenue composed of 100% cash

sales (Refer to Annex P).

Projected Statements of Financial Position

Sorvetes has to maintain at least P 12,500.00 of accounts

payable. This is equivalent to two weeks inventory or the 15-day term

payment awarded by Monterozza Ritz Food Corporation to Sorvetes.

Partners will not withdraw generated net income for three (3)

consecutive years or until it has established its third branch.

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Inventory held at the storage is replenished and maintained weekly at

the given amount (Refer to Annex Q).

Projected Cash Flow Statement

Projected cash flow of Sorvetes is presented at Annex R.

Financial Analysis

Horizontal Analysis - Income Statement and Balance Sheet

Horizontal analysis of Sorvetes Comparative Statements of

Income for 2017 to 2019, with 2017 as the base year, shows that Sales

revenue is increasing for 2018 and 2019 with percentage increase of

7.45% and 12.54% respectively (Refer to Annex S).

Gross income on the other hand is increasing since the company

has established considerable mark ups for three years; consequently,

resulting to higher net income on the second and third year. This is

also attributed to the company’s target sales increase of 5% every year.

Operating expenses are also increasing in a three year period. The

company has not recorded other income for the next three years.

The financial condition of Sorvetes as shown in its Comparative

Statements of Financial Position as of 2017 to 2019, with 2017 as a

base year showed an increasing trend for all accounts. There were

some accounts on steady and in decreasing amounts; however, most of

the accounts increased steadily. Total Assets and Total Liabilities &
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Partners’ Capital for 2017 up to 2019 increased steadily (Refer to

Annex T).

Given the above analysis, it may be concluded that Sorvetes

performs well for three years evidenced by the increasing net income

for three consecutive years. Financial Position of the company also

shows positive results for the business. Management sells products on

steady mark-ups. These can be seen on the gross income for three

years.

Management must continue to look for ways to increase its sales

for all products that can give higher gross profits. The basic rule of

“Reducing costs and Maximizing the Profits” should always be applied

by the management.

Vertical Analysis - Income Statement and Balance Sheet

Given the schedules, the percentages of assets classified as

current for 2017 up to 2019 is on the average 70.43%. Total liabilities

for three years are on the average 12.55%. Inventory held is steady for

three years. This is composed of the initial inventory held for

replenishment (Refer to Annex V).

Cost of goods sold for three years are escalating.

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The common size income statement, with sales revenue at

100%, essentially shows how many cents of each sales pesos of the

business are absorbed by the various expenses of the company. In the

given schedules, it may appear that over the three years the company

is fairly doing well (Refer to Annex U).

In providing a common size statement, the management will

have a grip of the total financial condition of the company.

Unreasonable fluctuations on these percentages are significantly

different from the industry averages, the possibility of fraudulent

financial reporting should be considered.

Since these percentages will not provide the management with

much insight, it is recommended comparing these with the

competitors’ or industry averages to be more meaningful.

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Financial Highlights

The table below shows the financial highlights for the next three

(3) years.

Table 32: Financial Highlights

Particulars Actual Projected Total Projected Projected
Jan-Mar Apr-Dec 2017 2018 2019
2017 2017
Revenues 142,397.00 470,700.00 613,097.00 658,800.00 690,000.00

Gross 97,679.58 321,157.80 418,837.38 439,199.64 448,666.28

Profit
Net 7,937.33 31,473.95 39,411.28 63,392.90 67,461.74
Income
Total 171,872.41 215,400.12 216,835.20 292,472.56 361,678.10
Assets
Liabilities 13,935.08 25,988.84 27,423.92 39,668.38 41,412.18

Equity 150,000.00 157,937.33 150,000.00 189,411.28 252,804.18

Total 171,872.41 215,400.12 216,835.20 292,472.56 361,678.10

Liabilities
& Equity

Gross 68.60% 68.23% 68.32% 66.67% 65.02%

Margin
Ratio
Net 5.57% 6.69% 6.43% 9.62% 9.78%
Margin
Sales - - 0% 4.97% 9.94%
Growth
Debt-to- 0.09 .16 0.18 0.21 .16
Equity
Return on 0.05 .20 0.26 0.33 0.27
Equity
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Break-even Analysis

This is the consolidated three-year projected results of

operations of Sorvetes De Davao Company.

Table 33: Break-even Computation

SORVETES DE DAVAO COMPANY
Crossing Catalunan Pequeño, Davao City

CONTRIBUTION MARGIN and BREAK EVEN ANALYSIS

TOTAL Ratio
100%
Sales 1,961,897.00
Less: Variable Costs 941,854.35 48%

52%
Contribution Margin 1,020,042.65
Less: Fixed Costs 849,776.73 43%

9%
Net Income 170,265.92

a. Break Even in Currency = Fixed Costs/ Contribution Margin

Ratio

= 849,776.73/52%
BEP in Peso = P1,634,186.02

Given the computation, Sorvetes must sell a total of

P1,634,186.02 of soft serve ice cream to break-even.

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Ratio Analysis

Ratios used to gauge asset management efficiency and liquidity.

For the year 2017.

Current Ratio = Current Assets/Current Liabilities

= 113,193.76/27,423.92

= 4.13

The current ratio expresses the extent to which the current

liabilities due to be settled within 12 months are covered by its current

assets to be realized within 12 months. The current ratio indicates the

liquidity of the business.

Given the current ratio of 4.13, it means that Sorvetes has 4.13

times more sufficient current assets than current liabilities.

Acid Test (Quick) = Current Assets less Inventories/ Current Liabilities

=(113,193.76-8,410.00)/ 27,423.92

= 3.82

Acid test ratio shows the extent of cash and other current assets

that are readily convertible into cash in comparison to the short term

obligations of an organization.

The acid test ratio (quick ratio) measures Sorvetes ability to meet

current obligations based on the most liquid assets such as cash and

accounts receivable. The quick ratio of 3.82 indicates that the

company has 3.32 in liquid assets for each 1.00 current liabilities.
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Inventory Turnover = Cost of Goods Sold/ Average Inventory

= 194,259.62/8,410.00

=23.10

This ratio measures the company’s efficiency in turning its

inventory into sales. Its purpose is to measure the liquidity of the

inventory.

A 23.10 inventory turnover ratio of Sorvetes implies strong sales.

Inventory Turnover In Days = 365/Inventory Turnover

=365/23.10

=16 Days

Management wants to make sure its inventory moves as fast as

possible to minimize these costs and to increase cash flows.

Remember, the longer the inventory sits on the shelves, the longer the

company's cash cannot be used for other operations.

Management strives to only buy enough inventory to sell within

the next 90 days. If inventory sits longer than that, it can start costing

the company extra money.

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Given its computation, Sorvetes is able to convert and sell its

inventory for 16 Days.

Total Assets Turnover (Capital Turnover) = Net Sales/Total Assets

= 613,097.00)/216,835.20

=2.83

This ratio measures how efficiently a firm uses its assets to

generate sales, so a higher ratio is always more favorable. Higher

turnover ratios mean the company is using its assets more efficiently.

Lower ratios mean that the company isn't using its assets efficiently

and most likely has management or production problems.

A ratio of 2.83 means that the net sales of a company equals the

average total assets for the year. In other words, Sorvetes is generating

2.83 pesos of sales for every peso invested in assets.

Ratios used to gauge a firm’s utilization of debt and company stability.

For the Year 2017.

Debt-To-Capital = Total Debt/ Partners’ Capital

=27,423.92/ 150,000.00 =

0.18
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Given this case, the lower the value of debt-to-equity ratio

makes it favourable indicating less risk. Higher value of debt-to-equity

ratio tells otherwise.

A debt-to-capital ratio of 0.18 of Sorvetes means that almost all

the assets of the company are financed by partners’ capital rather than

debts.

Debt-To-Total-Assets = Total Debt/Total Assets

=27,423.92/ 216,835.20

= 0.13

It shows that Sorvetes’ extent of debt as to its assets is 13%.

Ratios used to gauge a firm’s profitability & return to owners. For the
Year 2017.

Net Profit Margin = Net Profit After Taxes/ Net Sales

= 39,411.28/613,097.00

=6.43%

This measures the amount of net income earned with each peso

of sales generated by comparing the net income and net sales of a

company.

Net Profit Margin of 6.43% shows that the percentage of sales is

left over after all expenses are paid.

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Return on Investment = Net Profit Margin x Total Asset Turnover

= 6.43% x 2.83

= 0.18
OR

Return on Investment = Net Profit After Tax/ Total Assets

=39,411.28/ 216,835.20

=0.18

This shows that 0.18 of net income was produced by Sorvetes

total assets during the period. It shows how efficient the company

manages its assets to produce profits during a period.

Return on Equity = Net Profit After Taxes / Partners’ Capital

= 39,411.28/150,000

=0.26

This means that every peso of Sorvetes partners’ capital

generates 0.26 peso of net income. This is an important measurement

for potential investors because they want to see how efficiently a

company will use their money to generate net income.

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Detailed and tabular computations ratios for three (3)

consecutive years are presented in Annex W.

Other Financial Assumptions

In making the financial plan of the Sorvetes, there are

financial assumptions that have been used:

a. Rough estimates are used in some expenses of the reports.

b. Partners have been informed on the development of the

Business Plan.

c. Estimated inventory held is equal to one week raw materials

used in production process.

d. Contingency funds are not provided due to money constraints.

e. Annual sales are 100% attributed to cash sales.