The E3 Playhouse's central downtown Santa Cruz location, demographics, and minimum competition are major advantages for the success of the venture. The proposed venue will provide a local solution to the lack of social atmosphere and live entertainment venues in the region.
The Santa Cruz area lacks an entertainment venue that offers seating for 200-400 guests. The region has a distinct need for a live music and dance venue. The area also is lacking in a venue that offers educational courses to the community. The E3 venue will appeal to a wide age range with events offered that will appeal to 16-70 year olds.
E3 will appeal to the large student population in the region, the large tourism industry in the Santa Cruz area, and the local population seeking mainstream entertainment venue. The venue will also benefit from visitors from surrounding population centers such as San Jose, Monterey, and San Francisco. The Santa Cruz vicinity also provides a strong business population seeking venue rental and entertainment opportunities.
E3 will focus on offering exceptional service to its customers. To reach and maintain a unique, high-quality image, the venue will provide attentive and friendly service and will invest in on-going training of its employees. Our second strategy is emphasizing entertainment. The tactics are interactive entertainment, constant sensory appeal, and unique event viewing. Finally, we will focus on our identified target markets, stressing the following concepts:
Emphasize Exceptional Service--We must prove to guests that exceptional service is still available and should be expected as part of a entertainment experience. We will differentiate ourselves from the mediocre service venues.
Emphasize an Entertaining Experience--By assuring that all guests enjoy themselves, we will secure market share through repeat business.
Focus on Target Markets--Our marketing and themes of mass appeal and music based entertainment will attract our target market segments.
Our marketing budget is set at 1% of our overall sales revenue. This budget will be used to reach our targeted customers through cost-effective marketing campaigns. On-going processes will be geared to promote the brand name and keep the venue at the forefront of entertainment establishments in the Santa Cruz area. Our marketing efforts will focus on the following channels for reaching new and repeat customers:
Our first three months will focus on our grand opening event. An aggressive, comprehensive marketing campaign will precede the grand opening. A radio advertising campaign will precede the event. Contests will be held on the target radio stations giving away V.I.P. passes (coupons) to the event while at the same time creating excitement about the opening. We will initiate a regular local radio, TV, and print campaign to create brand awareness.
A website is an important component of our advertising and marketing campaign, allowing us to stay in contact with our customers and provide up-to-date information regarding all of our programs. We will launch a website within the first month of operations, and develop the website's content over the first six-months. The site will include upcoming entertainment schedules, along with course descriptions and online registration for our educational classes.
Through commercial repetition, a teaser campaign, and the use of catchy phrases, we will focus on our target market segments.
We will advertise directly to local hotel guests and surrounding businesses in the downtown area to attract business travelers and tourists. Through the use of fliers and table tents placed in hotel rooms, we will create visitor awareness of our location and event promotion. Promos such as 'show your room key and get a free drink' in conjunction with the room ads would be relatively inexpensive from an advertising standpoint and requires limited ongoing maintenance and expense. Print ads will appear in the local and college newspapers serving the region.
Shirts, ball caps, shakers, magnets, and bumper stickers bearing the company logo will be marketed, as well as given away as prizes to spread brand awareness.
Loyal, repeat customers are critical to our success. To drive repeat business revenue, we will maintain an 'opt-in' database of customers. This valuable database will be used to distribute monthly email newsletters. The newsletter will be a vehicle to announce our upcoming programs and specials. The newsletter will provide timely information regarding entertainment schedules, educational course offerings, and special Members announcements.
The following table details our Sales and Marketing plan for the first six months, including the venue's grand opening.
We have targeted an average of 1% of sales as our on-going Sales and Marketing budget. This allocation is included into the "Sales & Marketing and Other Expenses" in the Profit and Loss table in the Financial section of this business plan. Marketing expenses during the 6 months of the project rollout are estimated at a substantially higher level and are summarized in the table below for each type of advertising. This rollout allows us to manage costs and cash flow. The timeline coincides with our sales revenue ramp-up strategy.
We anticipate developing our radio advertising in August, prior to our grand opening in September. Website development will also begin in August, as does print advertising, followed by television advertising in September. We anticipate beginning a neighborhood marketing campaign in October, an in-store promotion campaign in November, and an email/newsletter campaign in December.
The nightclub and bar industry is shifting toward a more entertainment-oriented concept. Guests of these venues are not only offered a dynamic place to gather and mingle, but also a place to participate in the entertainment through interactive contests, theme nights, and other events. We intend to heavily utilize entertainment-oriented marketing in an effort to withstand the perpetual shift in trends and cater to as large a client base as possible.
E3 Playhouse's competitive advantage is derived from several factors. The following differentiate it from its competitors.
Sales revenue for E3 will be generated through seven separate product and service areas:
Managing seven separate revenue streams requires ramping up each one individually, ensuring that each area performs well before developing the next revenue stream. In order of importance, Food/Beverage and Entertainment are expected to provide the most stable revenue streams. Both of these revenue streams will be developed first, followed by Membership Fees, Educational Courses, Retail Merchandise, Arcade, and Venue Rental.
Each of these areas is detailed as a component of a revenue model. While the financial model of each of the revenue streams shows a full sales potential, we are taking a very conservative approach during the first year of operation and assuming that we will actually reach only about 35% of those potential first-year revenues during that time.By the second year we will reach the full sales potential of the venue and our third year model assumes a 7% growth over the second year.
The financial tables of this business plan utilize the total of these components as the Combined Annual Revenue Streams.
Membership Fees are based on the assumption that E3 will have 24,000 customer visits annually. We anticipate selling three types of Memberships:
We are additionally anticipating a 15 and Under discount offered for free.
Members will receive discounts on all E3 products and services. Member Benefits include:
Sales are based on a percentage of visitors purchasing the Memberships. The following table reflects our current projections for the first year of sales revenue generated from Memberships, totaling $369,600 for the year.
Educational Courses are offered to the general community for music and art classes taught by local professionals. We anticipate providing two classrooms dedicated to the purpose, with one 15x15 group room and one 8x8 private room. Each course is comprised of four classes. E3 members are offered a price discount for each course. Course participants that are not E3 members will be charged a course registration fee. The following table reflects our first year sales projections for Education Courses, totaling $103,644 for the year.
Food and Beverage sales are based on the assumption that 50% of the 24,000 visitors per year will purchase food while visiting E3 Playhouse, and 75% will purchase an average of one beverage. This results in 12,000 units of food and 24,000 beverages. We estimate that the average food check will be $7, while the average beverage check will be $8. Based on these assumptions, we estimate the annual food and beverage revenue for the first year will be $276,000.
Sales Revenue for tickets sold for live music entertainment is based on the average ticket price of $10, with an average of 75 tickets sold per show for 288 shows per year. We anticipate two types of entertainment shows: national and local entertainment groups. We are scheduling one national group per week, and five local groups per week. These assumptions support the annual revenue forecast of $216,000 for live entertainment ticket sales.
Retail Merchandise revenue is based on a range of merchandise pricing and the number of anticipated units sold annually. The model allows for flexibility within the range of merchandise. Initially, lower priced products are expected to sell at a higher volume than higher priced merchandise. Based on our initial assumptions, we anticipate that retail merchandise will provide $18,720 in sales revenue for our first year.
Arcade revenue is based on the assumption that 30% of our visitors will play arcade games during their visit, resulting in 7,200 arcade visitors. We anticipate an average of $5 in revenue per each arcade visitor, resulting in annual revenue of $36,000.
The arcade area will include high revenue games such as:
We will offer three types of Venue Rentals: Event Rentals; Kitchen Rentals; and Mercantile Rentals.
Event Rentals will include revenue from offering additional services. We anticipate four monthly rentals at $700 per rental. Additional revenue sources within the Event Rentals category include bar revenue from each event (100 people per event @ $8 average bar ticket = $3,200 per month) and venue rental services for each event. These services include charging 'cost plus' for the following items:
Kitchen Rentals will be provided to local chefs and bakers at times during the day when our kitchen is available. We anticipate kitchen rentals eight days during each month at $50 per day.
Mercantile Rental will offer 25 square foot units of merchandise space to local area retailers that offer products that resonate with our music and art focus. We plan to provide three spaces, initially leased at $150 per month and increasing to 10% of each retailer's gross revenues as sales permit.
Our Venue Rental forecast results in annual revenue of $106,200 for the first year.
Our combined revenue streams reflect a potential gross annual income of $1,222,164, however, we conservatively estimate that we'll reach only approximately 35% of our annual sales potential during the first year due to the ramp-up period.
Each revenue table in this business plan is interactive, allowing us to adjust the revenue streams as data becomes available. We will utilize this tool during our day-to-day operations in order to understand our position and plan accordingly.
The data from these tables is imported into the Sales Forecast table in the next section of this business plan.
E3 will generate sales through seven revenue streams that comprise the company's products and services:
The company is forecasting a conservative revenue ramp-up period while marketing and word-of-mouth advertising efforts are established during the first year. As mentioned above, our conservative assumptions estimate that we'll reach only 35% of our sales potential during the first year. The full sales potential of the venue will be reached during the second year of operations. This allows for a more conservative cash flow forecast and better manage revenue expectations. The first year of sales is forecasted to generate $394,157 in sales revenue, with a cost of sales of $236,494. We anticipate opening our doors with a Grand Opening in mid-September, consequently there will be no sales in July or August, and only 1/2 month's revenue in September.
In the second year, sales are expected to increase to $1,222,164 with a cost of sales of $733,298. This increase includes twelve months of revenue at 100% of projections, as we assume our ramp-up period is over and we are operating at full potential.
The third year shows an increase in sales to $1,307,715 with a cost of sales of $784,629, assuming a 7% growth rate.
The following table highlights the company's 3-Year revenue forecast. A 12-month detail is provided in the Appendix of the business plan.