Background

Slated to be opened in the fourth quarter of 2019, the S$3.2 billion Paya Lebar Quarter (PLQ) will be the newest addition in transforming the Paya Lebar Central precinct into a vibrant business and lifestyle hub. Adjacent to the Paya Lebar MRT interchange, PLQ will serve an estimated working population of about 22,000 within a seven-minute walk and more than one million residents in the area.

The four-hectare mixed-use development comprises of three office towers (PLQ Workplace), three residential towers with 429 apartments (Park Place Residences @ PLQ) and a retail complex with over 200 shops covering 340,000 square feet of retail space (PLQ Mall).

A uniqueness of Paya Lebar Quarter is that it is the first in Singapore to be awarded the WELL Core and Shell Certification issued by the International WELL Building Institute (IWBI). The WELL Building Standard (WELL) is the world’s first building standard focused exclusively on promoting the overall well-being, health and productivity of occupants (www.wellcertified.com).

The integrated development will have a wellness theme with 100,000 square feet of green public spaces and a 20,000 square feet covered event space outside the mall. There will also be a 6m-wide cycling trail and pedestrian pathway within the development that will link to the Sims Avenue park connector.

You are considering obtaining a franchise as a way to start a business. An advantage of established franchises is the strong brand-name appeal that is backed by a proven track record.

Coupled with the training and guidance provided by the franchisor, the chances of success are higher. The Franchising and Licensing Association (FLA) Singapore offers details of the various franchises available in Singapore (www.flasingapore.org).

Question

You are to formulate a business plan to analyse the opportunities for launching a local or overseas-sourced franchised business at Paya Lebar Quarter (PLQ) Mall. Your chosen franchise must be in line with PLQ’s unique WELL certification in promoting “health and wellness”.

In your comprehensive business plan, it should use a SWOT analysis framework to discuss the business internal and external environment and examine the market segmentation. You will need to design a marketing plan and the organisation structure and discuss the legal issues relating to obtaining and operating a franchised business.

As part of the financial analysis, you need to apply a break-even analysis, including designing a strategy for capital funding in relation to the expected financial returns. The business plan needs to be well written to appeal to Angel Investors for their consideration in investing in your business.

Assumptions

1. You are free to conduct library research, field research, interviews, etc. during the writing of the business plan.
2. The selected franchise should fulfil a key criterion of the lease agreement of providing “health and/or wellness” related products and/or services that complements PLQ’s WELL certification. How this criterion shall be met by the franchise concept must be clearly articulated in the “Description of the Franchise and its Unique Selling Point” (section 2.1). Franchised concepts that do not fulfil this requirement (for example wholly F&B and convenience stores) will not be accepted.
3. The first month of operations is the gestation period of the new business, e.g., staff recruitment, renovation, staff training and etc. The first revenue can only be received by the new business from the second month onwards in the financial forecast.
4. The depreciation for any capital investment is a straight line over three (3) years.
5. Your business will be situated at PLQ Mall. The unfurnished unit of 1,200 square feet is available at a monthly rental of $18,000, fixed for a minimum 3-year lease. Rental deposit required is equivalent to 2 months’ rental, to be paid together with the first month’s rental upon commencement of the lease. Sub-letting is not allowed by the management.
6. The Cost of Capital (Weighted Average Cost of Capital, WACC) formula is:
   WACC = E / V x Re + D / V x Rd x (1 – Tc)
   > Re = Cost of Equity
   > Rd = Cost of Debt
   > E = Funding from Equity
   > D = Funding from Debt / Loans
   > V = E + D (i.e., total funding)
   > E/V = Percentage of Financing that is Equity
   > D/V = Percentage of Financing that is Debt
   > Tc = Corporate Tax Rate*
   *Specific Tax Exemptions, Credits & Reliefs (e.g., Tax Exemption Scheme for New Start-Up Companies), Concessions, Rebates, Loss-Carrying Forward and similar Schemes are to be ignored in computationsThis is the full equation of the WACC formula and it must be used in this ECA. If any other simplified WACC formula is used in this ECA, no marks will be awarded.

ECA REPORT FORMAT

1. Executive Summary (Maximum 1 page)
Note: In this section, summarise the key messages from each of the sections below to support the viability of the business plan. It is the most important page of your report for potential investors and partners.

2. The Business Concept (2 pages)
2.1 Description of the Franchise and its Unique Selling Point
2.2 Goals and Potential of the Franchise

3 Research and Analysis (3 pages)
3.1 Target Market and Their Needs
3.2 Market Size and Trends based on Research Data
3.3 SWOT Analysis

4 Marketing Plan (3 pages)
4.1 Product(s)/Service(s) of the Franchise
4.2 Pricing Strategy
4.3 Promotional Activities

5 Organisation / Management Design (1 page)
5.1 Personnel Requirements and Perceived Gaps
5.2 Legal Responsibilities and Obligations of the Franchisee

6 Financial Analysis (6 pages) *challenge question*
6.1 Projection of Financial Statements for 3 years
6.1.1 Income Statement
(1st year on Monthly Basis; 2nd to 3rd year on Quarterly Basis
6.1.2 Cash Flow Statement (Quarterly Basis)
6.1.3 Balance Sheet (Yearly Basis)
6.2 Break-even Analysis using the Graphical Method

7 Investment Proposal (3 pages)
7.1 Capital Requirement: Amount, Proportion and Sources (Debt and Equity)
7.2 Expected Financial Returns: Valuation, NPV and IRR
(Assume: Cost of Debt = 4%; Cost of Equity = 10%; Corporate Tax Rate = 17%)
7.3 Total Capital Required from Angel Investors & Percentage Shareholding Offered

8 Critical Risks (1 page)
8.1 Potential Obstacles and Risks
8.2 Alternative Courses of Action