Teen Night Club

BUSINESS PLAN     VENTURES

40 Pebblestone Court
Rockville, Missouri 65804

This nonalcohol teen nightclub is aiming to give bored Midwestern teens another choice of where to go when they're tired of seeing movies and walking around the mall. Ventures will play Top 40s hits, screen the latest music videos, and serve a variety of sodas and tasty fruit drinks. Having no direct competition, Ventures anticipates popularity with the local teen population. This plan was provided by Lisa D. Morrow, J.D., and was compiled in conjunction with the business planning courses of St. Louis University's Entrepreneurship Program.

• business description
• introduction
• organizational form
• marketing
• management
• accounting
• risks
• financials

BUSINESS DESCRIPTION

Ventures, a nonalcohol nightclub, will cater to the 15- to 20-year-old age group. Ventures will be 7,000-8,000 square feet, accommodating around 650-700 people.

INTRODUCTION

During the past ten years, a new concept has been blazing the trails. Nonalcohol nightclubs have been popping up throughout the United States, as well as in other parts of the world. The majority of these nightclubs cater to teenagers by giving them a high-energy place where they can socialize and dance to the hottest Top 40 hits. In some locations, these clubs constitute the only entertainment for this age group.

Ventures, a nonalcohol nightclub, will cater to the 15- to 20-year-old age group in Bates County and these surrounding counties: Cass, Johnson, Henry, Hickory, St. Clair, and Vernon. Ventures will be the only nightclub catering to this age group in the Bates area. Ventures' goal is to furnish new answers to this age group's complaints of "nothing to do and nowhere to go." Instead of serving alcohol, Ventures will boast a menu of sodas, shakes, and several speciality drinks consisting of a variety of fruit juices and syrups.

ORGANIZATIONAL FORM

Ventures will be a family-owned business organized as a limited liability company. The principal owners will be David and Mary Jensen. Mary Jensen will be the decisionmaking partner while David Jensen will be a silent partner. The ownership split will be 60 percent for Mary Jensen and 40 percent for David Jensen. This organization will provide the owners the liability protections of a corporation and the flexibility and tax advantages of a partnership entity.

MARKETING

Target Market

Ventures' target market consists of individuals between the ages of 15-20 who listen to Top 40 radio stations and live within an hour's drive from Rockville, Missouri. According to recent research, this age group has the "time, money, and a steady desire to be entertained."

Ventures' market consists of over 120,000 individuals in seven counties:

Market Profile

Ventures' target market consists largely of high school teens and recent grads who listen to radio stations that play Top 40s tunes. Most of Ventures' target market will possess a driver's license. These kids tend to spend the majority of their money on clothing, food, and entertainment. Their primary entertainment options include going to the movies, buying CDs, and going on dates. Mediamark Research Inc. (MRI) surveyed a sample of teens and found that 28 percent of the teens go out either with friends or on a date at least once a week. Since this age group has a need for entertainment, Ventures will provide a place where they can bring their dates, dance to the hottest music, watch the latest videos, and hang out with their friends.

The majority of these teens tend to listen to Top 40s music. According to the Aribtron Company, most of the people in the 12-24 age group in the St. Louis metropolitan area listen to either straight rhythm and blues or a mixture of Top 40s hits. To draw the most customers, Ventures will cater to Z107.7 listeners because the radio station plays a variety of Top 40s music, including rhythm and blues, pop, alternative, and rap. By playing these types of music, Ventures will appeal to a wider audience by allowing its customers to dance to various types of music without isolating any one particular type.

Pricing and Advertising

Teenage spending has steadily increased since 1953 and it will continue every year. Gale Research, Inc. has determined that teens average about $40.00 of disposable income a week. Out of this amount, teens spend about 15 percent, or $6.00, for entertainment and about 8 percent, or $3.20, on fast food. Based on this data, Ventures will charge an entrance fee of $5.00. Ventures will provide more entertainment options for a longer period of time than any other entertainment venue. Thus, Ventures needs to keep the entrance fee in accordance with the amount teens usually pay for this type of entertainment. Ventures will be able to make additional revenue on the drinks, snacks, and video games that they will provide.

While the $5.00 entrance fee is less than what the local movie theaters charge ($6.50), it is more than the cost of just hanging out at the local malls. By charging less than the movies, Ventures will become a less costly alternative that will provide heart-thumping entertainment for a longer period of time than a movie. And, although Ventures will cost more than the price of just hanging out at the malls, it will nonetheless be an attractive alternative: it will allow teens the opportunity to dance to base-thumping music, listen to the hottest musical artists, watch the most popular videos, play the most exciting videos games, and visit their favorite DJ during live radio remotes.

Teenage Research Unlimited did a study in 1996 in which they surveyed teens, asking what makes places/brands cool to them and where do they learn trends. In answering the question, the teens reported the following (in part):

• 47 percent stated if it's for people of my age
• 39 percent stated advertising
• 24 percent stated if cool friends or peers use it
• 18 percent stated if it's a new place/brand.

In answering the question, "Where do teens learn trends?," the teens reported the following (in part):

• 47 percent stated friends
• 21 percent stated myself
• 14 percent stated advertising
• 13 percent stated "coolest" people in school
• 9 percent stated DJ (radio)
• 6 percent stated celebrities

In keeping with the above data, Ventures plans to advertise in the following ways. First, as any new nightclub would do, Ventures plans to have a huge grand opening celebration. Ventures will reach its target market by placing radio ads on Z107.7. In addition to ads, this station will also do lives remotes for the grand opening and on weekends. The radio station will also give away free passes for each of their radio spots, including the grand opening. This will be the most expensive form of advertising that Ventures will employ. Ventures advertising budget will be 15 percent of its monthly revenue. The radio ads will cost an average of $140 each, depending on the time slot. The live remotes will cost about $2,500. This cost includes two live "call-ins" per hour, 8-10 exclusive promotional announcement slots to begin airing three days prior to appearance, giveaways, the services of the on-air DJ, promotional banners, and the radio station's van. These live remotes will generally occur about 3-4 times a month. This may seem like a lot; however, several alcohol clubs hold these types of live remotes every weekend. Also, once the radio station establishes that you will advertise with them, the cost of these live remotes drops substantially. Plus, these live remotes draw large crowds because customers can hang out with their favorite DJ, while receiving free giveaways or concert tickets.

Secondly, in order to increase revenue during the week, Ventures plans to pre-sell these nights to the local radio stations, soft drink bottlers, and clothing manufacturers. These companies will sponsor a night in order to reach its target market and thus build Ventures' audience base. This will guarantee cash flow. For example, Pepsi might sponsor a night where people are invited to participate in an indoor triathlon. The first 100 get in free; contest entrants get Pepsi t-shirts; other club-goers win free Pepsi drinks, trophies, and other such prizes. Pepsi supplies everything and Ventures only supplies the use of the building.

Finally, Ventures will set up a panel of "experts." This panel will consist of teens within Ventures' target market. Ventures will announce a contest on Z107.7 in which they will have a chance to be one of the teen experts for the new club Ventures. Ventures will use this panel to pass out flyers and to advise on choosing decorations, special events, and contests. These experts will receive a Ventures employee shirt, free passes, and discount on special event prices. The flyers' cost will be included in the advertising budget for Ventures.

Competitors

Ventures considers any goods or services that teens would rather spend their money on for entertainment purposes as our competition. At the same time, Ventures also feels that we have no direct competition because no type of nightclub that caters to teens is currently in operation in our target area. Our indirect competitors consist of the following: several movie theaters, a monthly D.A.R.E. dance, several alcohol bars, and any "free" hangout spots such parking lots and parks within our target radius.

Mediamark Research Inc. conducted a survey on teen spending on entertainment and leisure. The teens reported that, in the past 90 days, 85 percent of them attended a movie in the following time frame:

• 8 percent attended once a week
• 25 percent attended 2-3 times a month
• 23 percent attended once a month
• 28 percent attended less than once a month

If this sample holds true, then Ventures would suffer little competition from the movie theater because only a small percentage of kids attend the movies on a regular basis because of the general lack of entertainment options that movie theaters supply. Teens usually receive an allowance from their parents and, in general, look for ways to make the allowance go further. Ventures will provide more entertainment options for a longer period of time. Ventures customers can dance to base-thumping dance music, watch the hottest videos on several monitors throughout the building, play the latest video games, or just sit and socialize with their friends.

D.A.R.E. holds a monthly dance for the local teens. These dances only occur once a month during the school year. D.A.R.E. holds no summer activities. However, Ventures will contact D.A.R.E. to see if they would like to hold their monthly dance at Ventures. This way they will have no overhead and Ventures will be able to maintain revenue.

Ventures anticipates that the alcohol bars will try to copy its concept by having all age nights or teen nights. Some of Ventures target market will undoubtedly attend these nights at first just to experience the new atmosphere. Also, Ventures does not anticipate the bars converting since they make most their money by serving alcohol, especially on the weekends. During this period of change, Ventures plans to institute the following new concepts and ideas in which to retain the customers that it has:

• Talent shows
• Battle of the local high school bands competitions
• Cheerleading competitions
• Performances by local teen bands
• Promotions and contests for gift certificates and makeovers

As for the "free" hangout spots, Ventures will have a hard time competing with them since Ventures will charge an entrance fee. However, Ventures can strive to make its establishment "the" place to be and thus making it the place to be seen. By implementing the above advertising campaigns, Ventures will let its customers know that it's a great place to socialize with friends and also they will have great music playing in the background.

MANAGEMENT

Mary Jensen, along with an experienced manager, will initially manage the club. Ms. Jensen is currently learning the field of bar management from an established bar manager with seven years of experience, as well as building a library of books on bar management. She has nine years of experience with teens in her work as a teacher and a tutor. She has also volunteered in the past with youth organizations such as Matthew Dicky. Once Ventures is up and running, a full-time manager and a part-time assistant manager will take over the day-to-day operations. This manager will be experienced in running a nightclub and supervising employees.

ACCOUNTING

Ventures will have a primarily cash business. Ventures will have basic cash registers and will collect the drawers at random times. This will keep theft by employees low and will hold each employee accountable. After collecting the drawers, either the owner or manager will fill out an accountability sheet. This sheet will list the employee's name, total receipts turned in, server's cash, amount in credit cards (if applicable), manager's adjustments, and whether the drawer is over or short. This will be checked against the register's tape to determine the above amounts.

RISKS

Teen clubs tend to suffer some risks. First, situations could occur involving patrons fighting. Ventures' goal is to prevent this type of occurrence by employing security and having these individuals pat down customers and lock up bags and coats. If such occurrences should happen, though, then it will be the bouncers' job to break up the fight, escort the fighting customer from the premises, and, if needed, call the police for assistance. Fighting inevitably occurs in clubs, and thus the public will not generally be alarmed. Ventures will just follow the above procedure to make it known that it will not tolerate such behavior.

Finally, Ventures could be closed down by the police for some drug or alcohol violation. If this occurs, Ventures will shut down and reopen under a new name. Ventures will simply change its name and form a new limited liability company. Under a new name, Ventures can continue to make revenue, profits, and continue to pay back loan monies.

FINANCIALS

ADDENDA

Start-up Notes

Construction Costs

This is an estimate for renovations and bar constructions. This price is based on bulk buying and sweat equity.

Bar Furniture

This includes point of sale equipment, shelves, and furniture. This price is based on bulk buying and sweat equity.

Video, Lighting, and Stereo Equipment

This is an estimate for lighting, video, and stereo equipment, electrical modifications, and signs.

Advertising

This includes promotional advertising (grand opening expenses including radio spots, passes given away on the radio and by the staff, and flyers).

First Month Rent

Based on $8.00 x 8,000 square feet per 12 months.

Phone

Estimate from GTE.

Insurance

This is just the content insurance. The worker's compensation and liability will be on the income statement since they are based on salaries and revenue.

Building Permit

Estimate from Rockville City Hall

Pretzel, Nacho, and Popcorn Machines

This is from Bates Restaurant and Bar Supply.

Snacks

This is an estimate for the Nacho chips, popcorn, and pretzel retail. Wholesale will be much lower once I find a vendor.

Ice Cream and Milk

This is an estimate for ice cream and milk for the shakes. I haven't determined the exact menu yet so it will be difficult to determine how much I will need. So I just based this amount on a large quantity.

Soda Dispenser and Products

This is an estimate from Coke and Pepsi. Sodas will range from $35-55 for five gallons and water and juice will range about $55.00 for five gallons. The company will run the lines for free if you buy their products.

Ice Machine

This is an estimate for leasing an ice machine from Fowlers Leasing Company.

Freezer

This is from Bates Restaurant and Bar Supply.

Paper and Disposable Products

This is an estimate for napkins, toilet tissues, hand towels, and for two different sizes of plastic cups (one for sodas/drinks and one for shakes).

Shake Mixer

This is from Bates Restaurant and Bar Supply.

Business License

Rockville City Hall

Video Games

BFC, in Brentwood, stated that they deliver and maintain the games while the company provided the security/space and they split the cash boxes 50/50. No deposit is required.

Owner's contribution

The owners are planning on applying for a veteran's small business loan through the Small Business Administration once they have acquired 25 percent of the start of capital.

Notes for Year One Operating Budget

The expenses listed below are based on the gross revenue of (low) $242,400, (med) $492,000, and (high) $1,116,000.

Rent

Based on $8.00 x 8,000 square feet per 12 months.

Salaries

Salaries were calculated at 15 percent of gross revenue.

Social Security Tax

Based on 7.6 percent of the above salaries.

Phone

Based on GTE phone service and it included making long distance calls with the county and target market since they are in 314, 636, and 573 area codes.

Paper and Disposable Supplies

Based on the cost of napkins, toilet tissues, hand towels, and disposable cups. This is an average from several Internet sites specializing in these goods.

Insurance

1. Worker's Comp insurance is based on $3.25 per hundred dollars of salaries.
2. Liability insurance is based on $5.25 per thousand of gross revenue.
3. Content insurance is $1,223 per year. This year's content insurance was paid out of the start-up costs. These figures were supplied by Martin Labors Insurance Company located in Rockville, Missouri.

Electric and Water

Based on an average of usage.

Office Supplies

An average based on the use of register tape, paper, ink, and order slips.

Advertising/Promotions

Calculated at 12 percent of gross revenue. This will pay for flyers, radio ads, and live radio remotes.

Radio Personality

Based on 2 monthly appearances at $300.00 each.

Theft Replacement

Calculated at .5 percent of total gross revenue. This will pay to replace items such as menus, decorations, and other damaged or missing items.

Ice Machine

This is an estimate for leasing an ice machine from Fowlers Leasing Company.

Exterminating Expense

This is based on exterminating for pests every other month at the cost of $88.

Recorded Music Fees

These fees are for the playing of recorded music. This will average about $4,500 a year.

Notes for Year Two Operating Budget

The expenses listed below are based on the gross revenue of (low) $276,400, (med) $564,000, and (high) $1,284,000.

Rent

Based on $8.00 x 8,000 square feet per 12 months.

Salaries

Salaries were calculated at 15 percent of gross revenue.

Social Security Tax

Based on 7.6 percent of the above salaries.

Phone

Based on GTE phone service and it included making long distance calls with the county and target market since they are in 314, 636, and 573 area codes.

Paper and Disposable Supplies

Based on the cost of napkins, toilet tissues, hand towels, and disposable cups. This is an average from several Internet sites specializing in these goods.

Insurance

1. Worker's Comp insurance is based on $3.25 per hundred dollars of salaries.
2. Liability insurance is based on $5.25 per thousand of gross revenue.
3. Content insurance is $1,223 per year. This year's content insurance was paid out of the start-up costs. These figures were supplied by Martin Labors Insurance Company located in Rockville, Missouri.

Electric and Water

Based on an average of usage.

Office Supplies

An average based on the use of register tape, paper, ink, and order slips.

Advertising/Promotions

Calculated at 12 percent of gross revenue. This will pay for flyers, radio ads, and live radio remotes.

Radio Personality

Based on 2 monthly appearances at $300.00 each.

Theft Replacement

Calculated at .5 percent of total gross revenue. This will pay to replace items such as menus, decorations, and other damaged or missing items.

Ice Machine

This is an estimate for leasing an ice machine from Fowlers Leasing Company.

Exterminating Expense

This is based on exterminating for pests every other month at the cost of $88.

Recorded Music Fees

These fees are for the playing of recorded music. This will average about $4,500 a year.