International Expansion Chick’n Lick’n in Bolivia

1. International ExpansionChick’n Lick’n in Bolivia Presented by: International Development Team, YRI MBA 04 December 5, 2002

2. Agenda • Chick’n Lick’n– The Clear Choice • Bolivia • Market and culture • Competition • Market research • Financial projections • Action plan

3. Chick’n Lick’n: The Clear Choice • Tasty! Brands – Chick’n Lick’n, Pizza House, Veggie Hut, R&L, and Fin and Feathers • Chick’n Lick’n’s profitable formula • 2001 International system sales by brand • Worldwide systems sales 1997-2001 • New brand, lack of competition • Further expansion throughout South America

4. Chick’n Lick’n – 2001 Largest Sales by Brand www.tasty.com

5. SFC – Worldwide System Sales 5-Year Growth Chick’n Lick’n Pizza House Veggie Hut www.tasty.com

6. SFC – New Brand • Few Latin America locations • Little competition within chicken market • Success in China – over 500 units • Leverage into South America

7. Bolivia

8. Bolivia – Market • GDP – $20.3 billion • Annual GDP per capita – $2,447 • Steady 10% annual GDP growth • Population - 8 million residents • 80% of population poor • $200 average monthly income Source: www.factiva.com

9. Bolivia – Culture • Market segment has busy lifestyles • Frequent dining out at inexpensive restaurants • High consumption of chicken La Paz

10. Bolivia – Competition • Only two Quick Serve Restaurants (QSR’s) in Bolivia • Untapped chicken market

11. Bolivia – Market Research • Conducted focus group • High level of awareness in Brazil • $2.50 average spending on lunch meal • Lack of national or international brand in chicken market

12. Bolivia – Locations • 15 total units • 5 - La Paz – nation’s capital, population 774,776 • 7 - Santa Cruz – population 1,017,141 • 3 - Sucre – population 172,003 Source: www.population.com

13. Bolivia – Cities Targeted La Paz Santa Cruz Sucre

14. Financial Projections – Costs • Initial costs • Land, building and construction • Equipment • Hiring and training • Other initial set-up costs • Acquisition costs • Marketing & advertising • Promotions • Operating costs & revenues

15. Financial Projections – Initial Costs • Plant, Property & EquipmentCosts • Land $ 25,000 • Construction $ 70,000 • Equipment $ 90,000 • Furniture & Fixtures $ 30,000 • Associates (30) • Hiring $ 14,800 • Training $ 18,200 • Uniforms $ 2,000 • Other set-up costs • Supplies $ 35,000 • Total Initial Costs $285,000 Source: www.worldfranchising.com

16. Financial Projections – Acquisition Costs ExpensesCosts Marketing $ 35,000 Advertising $ 35,000 Promotions $ 20,000 Total acquisition costs $ 90,000 Per restaurant unit – $90,000/15 = $6,000 Source: www.tasty.com

17. Financial Projections – Operating Costs Estimated Annual Operating ExpensesCostsPercent Payroll and employee benefits $138,316 17.75% Supplies $ 11,300 1.45% Food and paper $210,411 27.00% Occupancy and other expenses $187,032 24.00% General and administrative $ 89,230 11.45% Foreign exchange net loss $ 311 0.04% Total Operating Costs $636,600 82% Marketing Expense $ 31,000 4% Total Annual Costs $667,600 86% Source: www.tasty.com

18. Financial Projections: Revenue & Market Share • Current per unit revenue – $779,301 • Average $2.50 per meal $779,301/$2.50 = 311,720 customers needed annually 311,720/365 = 854 customers needed daily 854/8M population = .01% of market needed daily Source: www.tasty.com

19. Financial Projections – NPV ItemT = 0Perpetuity Initial ($285,000) Acquisition ($6,000) Revenue $779,301 Expenses ($636,600) Advertising ($31,000) Growth 5% Discount rate 10% NPV = (291,000) + 779,301 – 667,600 = $1,943,020 per unit 0.10 - 0.05 NPV for all 15 units = $1,943,020 x 15 = $29,145,300

20. Financial Projections: Breakeven $Thousands Accumulated Profits Breakeven = 3.0 yrs. Initial Investment 1 3 5 7 9

21. Marketing Mix Price Promotion • Low price to support low average income • TV and radio • Billboard • Leverage Brazilian ad agency success Product Placement • Leverage international brand notoriety • Dining experience • Fried chicken fitting for untapped chicken market • Santa Cruz • La Paz • Sucre

22. Action Plan

23. ActionPlan Phase 1: Immediate • Finalize real estate contracts • Initiate construction • Incorporate in Bolivia • Concrete Marketing campaign • Leverage successful Brazilian ad agency

24. Action Plan Phase 1: Immediate Phase 2: Months 1-2 • Finalize real estate contracts • Initiate construction • Incorporate in Bolivia • Finalize Marketing campaign • Leverage successful Brazilian ad agency • Continue PR with Bolivian Gov. • Solidify supplier contracts • Notify media and release press kits • Begin hiring process

25. Action Plan Phase 1: Immediate Phase 2: Months 1-2 Phase 3: Months 3-4 • Finalize real estate contracts • Initiate construction • Incorporate in Bolivia • Concrete Marketing campaign • Leverage successful Brazilian ad agency • Launch marketing and ad campaign, including billboard, TV and radio • Ensure proper progress and completion of construction • Ensure proper equipment and fixture installation • Train employees • Continue PR with Bolivian Gov. • Solidify supplier contracts • Notify media and release press kits • Begin hiring process

26. Action Plan Phase 1: Immediate Phase 2: Months 1-2 Phase 3: Months 3-4 Phase 4: Launch • Finalize real estate contracts • Initiate construction • Incorporate in Bolivia • Concrete Marketing campaign • Leverage successful Brazilian ad agency • Launch marketing and ad campaign, including billboard, TV and radio • Ensure proper progress and completion of construction • Ensure proper equipment and fixture installation • Train employees • Launch each city for 3 consecutive weeks beginning mid-month 5 • Continue PR with Bolivian Gov. • Solidify supplier contracts • Notify media and release press kits • Begin hiring process

27. Conclusion • Chick’n Lick’n – the right brand: Tremendous international success • Bolivia – the right market: Untapped chicken market • NPV - $29M: Breakeven 3 years • Successful action plan in place: First units in 5 ½ months

28. Summary “There’s fast food…then there’s Chick’n Lick’n (in Bolivia)”