Hardware Retail Franchise Business Plan

In the company summary section, we will review the Troy Enterprises business and corporate entity and ownership, the role of Building Blocks in the business, the proposed location, and the start-up costs and funding.

2.1 Start-up Summary

Hisarlik Hardware has worked very closely with Building Blocks Hardware to establish a detailed start-up cost list.  Building Blocks’ knowledge, track record and expertise have been invaluable in setting up this venture.

2.1.1 Start-up Expenses

The start-up costs of Hisarlik Hardware, as detailed below, will consist primarily of inventory, equipment and fixtures.  Hector Priamson will invest cash, benefits and labor to the start up.  Investors will contribute substantially.  The company will secure an SBA 7(a) loan to be paid back on a 7-year amortization.

There is an amount budgeted for leasehold improvements which is intended to make minor modifications to the proposed site to prepare it for opening.  These improvements include replacing missing ceiling tiles and cleaning, polishing, or redoing the floor tile.  It is anticipated that the new floor tile can be laid over the existing tile at a substantial savings with no loss in quality or durability.

2.2 Building Blocks’ Role

With the merger of Kadmus, Homer & Company and Delphi/Ouroboros, Building Blocks is a cooperative comprised of members who are entrepreneur-retailers.  Building Blocks is committed to empowering the independent retailer by setting industry and market standards with their niche businesses and unique brand of creative marketing, wide product assortment, award winning merchandising and technology, and quality training and business expertise.  Building Blocks’ buying power of more than $2.5 billion annually helps pass on benefits to independent members. 

Building Blocks has been a world leader in the hardware industry in product selection and customer service for do-it-yourselfers since 1948.

Vision
To be the best-in-class provider of products and solution choices that drive our members’ and our co-op’s profitability. 

Mission
To provide:

• Choices of retail and commercial solutions to drive members’ sales and profits
• Assortments to support the solutions
• Operational excellence in the delivery of products and solutions

2.2.1 Market Reseach

Building Blocks has a wealth of experience and know-how on opening new hardware stores, with 6,567 stores worldwide.  Building Blocks has become a leader in determining what factors make a hardware retailer successful. 

Building Blocks currently uses a service called Yorikle.  This service is used to define the demographics and the expenditure potential of new markets.  For Hisarlik Hardware, the report was run on a one-, two-, and three-mile radius around the proposed location.  The report showed an exceptional amount of business (only reporting households, the study does not include property managers, businesses, or commuters), especially considering that there is no direct competition in the area.  The reports also get very specific as far as what the potential market is for hardware overall as well as specific categories within a store.  There are also numbers reports for the expected growth in the area over the next five years.

2.2.2 Planning

Building Blocks supplies professional design services to maximize merchandisable space and traffic flow.  Services include fixture plans, interior signage and decor, merchandising plans, lighting, basic site plans, and exterior storefront elevations. These plans are custom developed for each location and each store’s footprint.  The associated costs are included in the start-up costs.

A unique plan will be done for the proposed site for Hisarlik Hardware.  This process will begin as soon as the lease for the property is signed.

2.2.3 Support

Building Blocks provides a variety of support to all current members as well as prospects seeking to join the co-op.  The support comes to members in the form of retail consultants, knowledge, profit building programs, retail automation, training, advertising & promotion, a national brand, buying power, semi-annual markets, and an operations and distribution network.

Retail Consultant

Every member and prospect is assigned a retail consultant who works with them on an ongoing basis.  There is also a retail operations specialist who helps prospects open new stores.  There are regional marketing staff that are available as well as individual Building Blocks staff for individual marketing programs.

Knowledge

All specialists share their wealth of personal knowledge as well as having access to Building Blocks’ cumulative knowledge and experience.  Building Blocks has made this model work since 1948.  It works very well and enables members to be very successful business people and has made Building Blocks the largest retail hardware co-operative in North America.

Proven Profit Building

Building Blocks makes available a large number of programs that entrepreneurs can choose to participate in.  They include retail pricing systems, electronic order entry systems, commercial and industrial sales, category specific planograms, and direct mail circulars, just to name a few. 

2.2.4 Retail Automation

Building Blocks leads the industry in automating their stores.  Building Blocks has brought their stores into the future with the automation which is made available to members.  This is a strength of Building Blocks and a service that is available to all of their members.  This automation helps the members in many different ways including inventory control, ordering, sales, and accounts receivable, all tied together in one system called Delian.

Experienced technical support personnel work with members to ensure current retail automation capabilities are compatible with Building Blocks’ existing system.  Building Blocks’ existing system is Delian, an industry leading software program based on Triad Eagle for Windows platform.  Delian is an easy-to-use, easy-to-learn tool that contains up-to-the-minute ordering and inventory accuracy, point of sale, accounts receivable, and much more.  It contains all the daily business tools needed to manage Hisarlik Hardware.

• Inventory:  Building Blocks’ industry leading retail merchandise approach is designed to organize a store’s departments, maximize space by removing non-selling inventory, ultimately freeing up valuable floor space.  This unique concept accommodates the needs of customers by featuring the right merchandise assortment proven to increase overall profits.  Category specific guidelines and planograms maximize retail sales and inventory turns.  IAIS is based on the best selling items from the most successful Building Blocks stores.
• Ordering:  Building Blocks has made ordering easy.  The Delian program helps track the needs and generates the necessary inventory levels.  Orders can be placed through the Building Blocks electronic order Entry System. 
• Pricing:  Building Blocks’ Retail Pricing System enhances the ability of each store to maintain a competitive price image while maximizing profitability.  Building Blocks’ Retail Consultant will help establish retail pricing which results in increased sales opportunities and profit margins based on downtown Wilusa. 

2.2.5 Training

Building Blocks has educational programs which they call Building Blocks University.  Programs have been growing year after year and last year they offered certificate programs for new members.  There are four required courses and four Building Blocks University workshops and seminars.  There is also required course work for any member that is opening a The Tool Room Rentals as part of their program. 

There are five core programs for new store owners which make up the initial training.  They are:

• Certificate of Business Management
• Certificate of Marketing Management
• Certificate of Ownership Management
• Certificate of Retail and Sales Management
• Certificate of Human Resource Management

When a member opens a The Tool Room Rentals business there is also required training that applies only to The Tool Room Rentals.  There is also a wide range of do-it-yourself programs that are on CD-ROM and video.

2.2.6 Advertising and Promotion

Building Blocks’ marketing programs are second to none in the industry.  They include every tool needed to be successful in the retail hardware business.  They include Power Events, interior and exterior signage, online programs, and custom circulars.

Every member store is assigned a field marketing manager.  The marketing manager makes the members aware of the marketing tools available and how best to use them.

There are marketing strategy programs, programs that increase traffic, increase transactions, and those that merely build the brand.  All are made available, and it is the savvy member who uses the right programs and spend their advertising dollars best.  Based on the marketing experience Hisarlik Hardware has, this is a strength most start-up businesses do not possess.

• Marketing Strategies:  The field marketing managers work with each member to determine the needs and issues for each store.  They look at the market penetration and awareness in the market.  As this information is gathered, a list of strengths and weaknesses is developed and programs designed to work on each of the objectives.  A very basic local store marketing tool kit is given to each member.  This is designed to show members what has been successful and basic marketing information that can be used on the local level.  There are also national programs that support what is done on a local level.  They include national television, radio, and newspaper.
• Increasing Traffic:  Building Blocks has also developed programs designed to drive traffic to the stores.  They include bargain of the month, circulars, Yellow Page programs, and local television, radio and newspaper.  Circulars play a huge role in local advertising.  There are three ways to get the circulars in the hands of the consumer, newspaper insertion, ADVO circular distribution and direct mail.  Each of these programs have different costs associated with them and different penetration in the market.  Circulars can be designed for an individual store.  They are all customizable and can be generated in any volume necessary.  Building Blocks also plans four Power Events throughout the year which are nationally advertised programs supported by television, radio and print.  In 2003, Building Blocks saw a significant increase in traffic and bottom line during each of the Power Events.
• Increasing Transactions:  Programs have been developed to increase the amount of each transactions.  There are display shelving end caps, wing panels, and clip strips that help increase sales on these specially priced items.  There are also online sign making programs that help members produce professional signs and save money on creative and printing jobs.  Muzak is a program of in-store audio and messaging which customers cannot ignore, and that drives them to specials and promotions they may not have been aware of.
• Brand Building:  The brand building programs are designed to reinforce the established Building Blocks name, both on the interior and exterior of the store.  Programs have also been designed for vehicle graphics.

2.2.7 National Brand

For over 40 years, the name Building Blocks has stood for trust, service and fair prices.  Building Blocks’ brand positioning statement is “Building Blocks is the best place to get just what you need to complete home repair and maintenance projects quickly and easily.”  It is a name with heritage and integrity.  Consistent national media and the fact that Building Blocks is the largest co-op of independent hardware store owners, has established Building Blocks as a recognizable name in retail hardware.

The bottom line is people know that the Building Blocks name means hardware.  That is an asset new businesses work for years to establish.

2.2.8 Buying Power

An independent hardware store cannot compete in the current market, without a co-op behind them.  A Building Blocks member has the benefit of $2.5 billion in buying power which is passed on in savings and profits.  That makes Building Blocks the largest co-op of its kind in North America.

This is the main factor in making sure all Building Blocks members are getting products at the best possible prices to enable them to maximize profits.

2.2.9 Semi-Annual Markets

Building Blocks holds semi-annual markets where members can buy products and plan purchases for the upcoming seasons.  Markets are held in March (Fall/Winter) and October (Spring/Summer).  Members are informed of new items and trends in the industry at these markets enabling them to make good purchasing decisions.  There are also programs which allow members to make purchasing commitments at large cash savings.

2.2.10 Operations and Distribution Network

Building Blocks has established a network of strategically placed distribution centers throughout the United States to assure timely deliveries regardless of where the store is located.  Trucks deliver at least once per week and twice if necessary.  This is a huge benefit, because this process allows excess inventory to sit in the distribution center as opposed to the store shelves.  Over 64,000 items can be purchased on a per piece basis enabling stores to get whatever quantity is needed at any time.

2.3 Company Ownership

Troy Enterprises, Inc. is a privately-held S corporation, currently 100% owned by its founder and president, Hector Priamson and his wife Andromache Eetion.  The company will be operating under the name of Hisarlik Hardware.  There are expected to be investors in the new venture.  Individual investors will own no more than 15% of Troy Enterprises, Inc.  These investors will provide investment in the way of seed cash to help start the business and none of the investors will be active participants in any management decisions. 

In order to make Troy Enterprises, Inc. financially viable, there are three major factors necessary to get the business up and running.  First, a feasible concept.  We have found that with Building Blocks in the downtown Wilusa market.  Second, the business needs someone to manage it.  It needed a professional with a good deal of experience to operate and manage the business.  This manager needs a sound financial background as well as an entrepreneurial spirit.  Third, the business needs financial support.  This support will come from three different sources.  Hector Priamson will invest time and some capital to start the business.  There is a need for investors to help with the initial capital to allow the business to have enough equity to get off the ground.  The final piece of financial support is the faith and commitment of a financial institution to loan the remaining funds that are needed to operate the business.

2.3.1 Hector Priamson

Troy Enterprises, Inc. founder and president is Hector Priamson.  Hector is a resident of Ilion.  He is married to Andromache Eetion who is currently a realtor with Ahhiyawa, Hatti & Company. 

Hector will spend 100% of his time on this new start-up venture.  Hector has a wealth of experience in business.  He started his career straight out of college with a very exclusive “Big Eight” Accounting firm.  While with  Manapa Tarhunda and Co. Hector earned his CPA license.  His interests led him to Wilusa, where he became involved in one of the city’s unique industries, Samothracing.  He started on the accounting side of the racing business and soon broke out into the part of the business that generates the revenue, sponsorship sales. 

His career led him to Trireme Racing Group where he served as the Vice President of Business Operations.  He led the turn-around of this team and company solidifying major sponsorships with companies like Corinthian Leather, Medusa-Gorgon Oars, and Posidon Libations.  He served in that position from 1996 through 2001.  During that period of time, Hector also served on the CURRAGH Franchise Board (rules making board of the sanctioning body).  His reputation and success led him to the top marketing position, Vice President of Sales and Marketing.  Hector served in that capacity from December of 2001 through July of 2003, at which time he left the company to pursue his current business, Troy Enterprises, Inc. 

Hector’s expertise in the entrepreneurial business of oarsports will be invaluable in his new venture.  He has a keen sense of finance, marketing, management of inventory, accounting and bookkeeping practices, and staff management.  This experience will be invaluable in leading Troy Enterprises and making sound business decisions in the future.

Hector’s resume, as Confidential and Proprietary information, has been omitted from this sample business plan.

2.4 Company Locations and Facilities

When Hisarlik Hardware began this project the key component was the location.  Hector Priamson/Troy Enterprises and Building Blocks  felt several criteria were crucial to making this venture a success.  The ideal size was determined to be between 7,500 and 10,000 sq.ft.  The price per square foot was important because the economics obviously had to work.  Adequate parking and easy access were must-have criteria while searching for locations.  A location with only street parking was not considered an alternative.  Being located on a major thoroughfare with visibility is important to get the store recognized as a solution for hardware.  Adequate signage that traffic can recognize is key.  Additionally, intangibles such as other commercial neighbors and the neighborhood makeup were considered. 

Based on these criteria, a site at 310 East Anglia Street is was selected.  It is part of the Troas Marketplace. 

This property shares a parking lot with Scamander’s Food Market and Buckbasket Cleaners which is the most important of the intangible factors.  This Scamander’s generates $12.0 million in revenue and is Scamander’s most successful store in Wilusa.  Scamander’s is the only grocery store in the downtown area, and is an icon in the downtown residential community.  In discussions with Scamander’s, they said the Troas store has much more traffic than their other locations.  They have found the average customer visits the Troas store every two days versus once a week for the others.  Hisarlik feels this is a huge advantage for its venture as this will drive more traffic, more often to the Troas parking lot.  Scamander’s is in the middle of its lease for this property and seems pleased with the results.  Hisarlik does not anticipate this advantage changing by a move by Scamander’s, whose lease extends through the year five. 

The proposed site has plenty of parking spots and excellent access from eastbound Anglia Street and northbound Mercia Blvd. 

Signage marquees sit on both streets as well as on the north, west, and south sides of 310 East Anglia Street.  Furthermore, the location is perfectly set on eastbound Anglia Street, which is one of the major thoroughfares.  There is a driveway entrance and exit to Anglia Street. 

The proposed site is ideal in size measuring 9,509 sq. ft. and was formerly an Osco Drug store that was closed as Osco downsized their Wilusa operations.  According to the landlord, the closing of this location by Osco had nothing to do with the location, but rather, a change in priority within the company.  The property needs very little in tenant improvements in order to be open for business.  The terms of the lease are currently being negotiated.  It is anticipated that Hisarlik Hardware will retain the property within the budgeted guidelines.  There were many properties that were investigated; however, for the stated reasons this is the best option as of last November.

The neighborhood has gone through major renovation over the past 10 years.  It is now a rejuvenated upscale neighborhood.  There is also major new development around the proposed site.  There is a brand new condominium development directly across East Anglia Street.  The development is called Lemnos Square.

There are three other new condominium developments under construction that are one block away.  They are Troas Terrace, The Anatolia, and The Konya.

The proposed location is one block from the successful Wessex Avenue District.  Wilusa has done a fantastic job in bringing in new business and culture into this area of downtown.

According to Wilusa Downtown Inc., Downtown has seen record demand and occupancy levels, driving the surge of residential development.  This has led to more than 615 new residential units currently in the pipeline.

The city of Wilusa is also reviewing plans for the former Cressida Agora site.  The plans all include a large number of residential and retail sites on the 29 acre site.  This site is located 2 blocks south of the proposed location.

Development downtown is happening in many different ways.  There is commercial, residential, as well as government development currently in process or planned.  All of these things add to the desirable nature of the proposed site.  We would be “right in the middle of it.”