Kiowa Smoke Shops

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Tobacco Retail Business Plan

Company Summary

Kiowa Smoke Shops began in 1961 when Fernando Renaldo's father fled Cuba and started a cigar shop in Orlando, Florida. The elder Mr. Renaldo's store, Santiago Cigar Shop did well and eventually he passed the business on to his son, the current owner. In 1979 the business was relocated in Kansas City, KS. Since that time the company has enjoyed profitable returns and has had good enough growth to expand into three different locations.

Over the past ten years, due to increasingly hostile regulations, judicial decisions, and tobacco opposition groups, the tobacco industry has suffered serious declines. Kiowa sees a declining client base, increasing costs, and increasing difficulty with distribution channels. For the first time since the company's relocation in Kansas, management has been forced to reduce staffing levels and institute pay cuts, starting with retaining less earnings for the owners use. It is for this reason that the company is seeking to create a revitalization plan for the future.

2.1 Company History

In 1960 Mr. Carlos Armando Renaldo and his family left their native Cuba for the U.S. Mr. Renaldo's family had been tobacco growers in Cuba for generations, but the communist revolution in his homeland left no opportunities for growers outside of government controlled communes. Once in America, Mr. Renaldo leveraged his family connections there to create Santiago Cigar Store in Orlando, Florida. Santiago's catered to the growing Cuban population in the region and over the next 18 years the shop flourished, with an ever increasing clientele.

In 1979 the elder Renaldo sold the business to his son Fernando, who relocated the firm to Kansas City, Kansas. The younger Renaldo, wishing to conform to the midwest's image, renamed the business Kiowa Smoke Shop. Since then the company has prospered enough for Mr. Renaldo to buy out two other tobacco shops. In 1985 Kiowa bought out Tobacco Heaven, on the corner of 13th and Main street in Topeka Falls, a suburb of Kansas City, and in 1988 also acquired Great Plains Smoke Store on Parvin Avenue in Kansas City, MO. Both facilities were subsequently made satellite stores.

However, over the past ten years, the tobacco industry has suffered from declining profits due to adverse marketing from tobacco opposition groups and government regulations. This trend has hit Kiowa very hard and Mr. Renaldo foresees that unless profits can be brought up to previous levels, he will go out of business.

Past Performance
FY 2001 FY 2002 FY 2003
Sales $739,098 $693,159 $666,715
Gross Margin $229,416 $207,670 $195,414
Gross Margin % 31.04% 29.96% 29.31%
Operating Expenses $157,724 $160,141 $160,349
Inventory Turnover 8.00 8.00 8.00
Balance Sheet
FY 2001 FY 2002 FY 2003
Current Assets
Cash $50,712 $45,117 $43,682
Inventory $84,166 $80,687 $76,362
Other Current Assets $13,729 $14,866 $11,558
Total Current Assets $148,607 $140,670 $131,602
Long-term Assets
Long-term Assets $61,000 $56,500 $56,820
Accumulated Depreciation $8,000 $10,000 $12,000
Total Long-term Assets $53,000 $46,500 $44,820
Total Assets $201,607 $187,170 $176,422
Current Liabilities
Accounts Payable $45,838 $47,679 $44,042
Current Borrowing $35,915 $25,359 $24,820
Other Current Liabilities (interest free) $5,000 $7,000 $5,600
Total Current Liabilities $86,753 $80,038 $74,462
Long-term Liabilities $35,335 $32,877 $30,761
Total Liabilities $122,088 $112,915 $105,223
Paid-in Capital $0 $0 $0
Retained Earnings ($5,481) ($10,745) ($8,801)
Earnings $85,000 $85,000 $80,000
Total Capital $79,519 $74,255 $71,199
Total Capital and Liabilities $201,607 $187,170 $176,422
Other Inputs
Payment Days 45 45 45

2.2 Company Ownership

Kiowa Smoke Shops is a class C Limited Liability Company registered in the state of Kansas. Kiowa is exclusively owned by Mr. Fernando Renaldo (50%) and his wife, Elizabeth (50%). The company does not anticipate bringing on new owners in the foreseeable future.