Executive Summary

The purpose of this business plan is to secure additional, long-term funding to open a QSR (Quick Service Retail)
franchise in Ashland, Oregon. The owners of the company are willing to invest $30,000, and assume over $110,000
in short-term liability to secure the funding for inventory, and early operations. The SBA 504 loan we seek is in the
amount of $200,000, and if approved, will be amortized to 10 years.

The franchiser, "The Sub Shop Corp.," is one of the fastest growing franchises in North America. Sales last
year topped $800,000,000. The chain is positioned somewhere between traditional fast food restaurants, and sit-
down restaurants. This segment of the market is attuned to the health benefits of their eating habits, are more
conscious of their buying habits than the general population, and more importantly, they have higher incomes and are
willing to pay more for a better fast food choice. Our goal is to be that choice in the Ashland Metro area.

To succeed with our goal, and to encourage a healthy lifestyle, we will sponsor local sporting events, and give 3% of
profits to local charities. We will build roots into the community. We will also market our products with local
businesses, the famous Shakespearean Festival, to local hotels, and offer catering services through local party
supply stores and through close ties to local hotel managers and executives. 

Our primary goal for this plan is that it help us secure this $200,000 SBA loan. Once we have done that, our goal will
be to build value for our constituents, ourselves, our employees, our customers, and the community. We see these
goals as being consistent with the goals the SBA expects of itself and its guarantors.

Objectives
Our first objective is to open the Franchise restaurant four months from the day that our site is confirmed by the
realtor.  Our site was confirmed in April, therefore our goal is to be up and running by August.  Our P&L and Balance
Sheet all begin in August.  Start-up costs between April and August may be found in the Start-up Summary Section.

The Sub Shop will turn a profit by the beginning of our second fiscal year of operations.

We will pay down our $200,000 SBA loan to $180,000 by the end of year one.

Repeat customers will constitute 70% of our overall business by the end of year one. We will track customer habits
and loyalty through a local marketing research firm, and publish the results of these findings to our employees once a
quarter.

Net Profit for year one will be 21%.

Mission
Our mission is to bring to market the tastiest and healthiest fast food in Ashland, at a slight cost premium over other
fast food restaurants.   Our high standards of quality and cleanliness will establish our reputation as the cleanest fast
food restaurant in Ashland. 

Our community is as important to us as making a profit. We will devote 2% of profits to a local women's shelter, and
1% to a local environmental conservation fund. This company is founded on the concept that good works and good
deeds not only serve the needs of the community, but will also keep our company healthy and committed to the
success of its customers.

Keys to Success
The most important key to success is our location. It is very important that our location live up to our expectations,
and is convenient to as many potential customers as possible. As stipulated by the franchise agreement, our "Type A
- Profile 1" location must contain a minimum of 6,000 customers within a four block radius (or five minute walk time).
The pedestrian traffic must be adequate and the lunch habits of the customers must be conducive to eating out.  

Another key to success lies with our ability to execute our plan. If we neglect one or more aspects of our plan,
whether that is our numbers, our employees, our cleaning and food standards, or our commitment to customers, we
will not succeed and thrive.

Company Summary
"The Sub Shop" Corporation franchises, and sometimes owns and operates quick-service Italian-style sub sandwich
shops called, appropriately, "The Sub Shop" subs.

The Sub Shop's upscale concept fits a niche between fast food and fine dining--offering the customer the best
benefits of both segments.  The company provides the convenience of fast food with rapid response times,
affordability, as well as carry-out and home meal replacement options.  The Sub Shop also offers a fresher and
tastier alternative to typical fried fast food products such as hamburgers and french fries.

The Sub Shop's concept was born in the kitchen of a popular Italian sit-down restaurant called Gianni's.  The goal of
the original owner was to provide great Italian food in a clean, urban environment, and at a reasonable price.  After
two years as Gianni's, the owner changed the name to The Sub Shop and began selling subs and soup to go.  In
1993, the company expanded to two stores and sales tripled.  Financing was secured in December of 1993, and the
company became a local Franchise, then a national Franchise.  Now with 53 stores in 23 states and four
countries, The Sub Shop has taken the Fast Food segment by storm by producing a better product than its
competitors, and at a moderately low price.

Company Ownership
Ninety-seven percent of the restaurant belongs to Walsh and Walsh LLC. The company was formed in Oregon in
1995, and is owned by Jack William Walsh and his father Luke Walsh. Luke owns 77% and Jack owns 30% of Walsh
and Walsh LLC.  The remaining 3% is held by Lisa McKewan, Store Manager.

Start-up Summary
The start-up table shows a summary of our overall start-up costs. The highest initial outlay is for the franchise fee.
This is required to launch the franchise. After paying our Franchise fee, our only liability to the franchise will be the
7% cost of sales, and 2.2% advertising charge. Normally the franchise fee would be paid in interest accruing
installments, but we decided to forego this to keep the books as clean as possible and to reduce the possibility of a
"parent/child" conflict between our company and the constituents.

Cash requirements for start-up are $19,700, and most of this will sit in a zero interest bearing, highly liquid bank
account.  The first month our change in accounts payable will top $61,000, so we need this $19,700 in case sales are
not what we expected. If sales are 30% off projected, this $19,700 will help us gather enough cash to pay off our
accounts payable within 30 days. The principles will invest a combined $30,000 to start-up the franchise. We expect
that the majority of this will be paid back to the owners within two years of operations, in the form of dividends. This
investment makes up over 8% of the total start-up requirements for the company. The remainder consists of one
$65,000 short-term interest bearing, unsecured personal loan, one $15,980 interest-free "First Card Visa" 0%
promotional loan, and a $200,000 long-term loan guaranteed by the SBA 504 program. The term of the expected loan
is 10 years.

The SBA loan that we are seeking will be secured via the pre-appraised market value of the land and property, as
well as the improvements to be made on the property through 2001. The estimated net market value of the property
following all improvements is approximately $320,000.

Start-up

Requirements

Start-up Expenses

Business License $180

Refrigerator/Freezer $5,500

Building Improvements $35,000

Franchise Fee $45,000

3% Loan Originition Fee $7,800

Insurance $1,500

Research and development $1,500

Total Start-up Expenses $96,480

Start-up Assets

Cash Required $19,700

Start-up Inventory $15,800

Other Current Assets $4,000

Long-term Assets $205,000

Total Assets $244,500

Total Requirements $340,980

Start-up Funding

Start-up Expenses to Fund $96,480

Start-up Assets to Fund $244,500

Total Funding Required $340,980

Assets

Non-cash Assets from Start-up $224,800

Cash Requirements from Start-up $19,700

Additional Cash Raised $0

Cash Balance on Starting Date $19,700

Total Assets $244,500

Liabilities and Capital

Liabilities

Current Borrowing $65,000

Long-term Liabilities $200,000

Accounts Payable (Outstanding Bills) $30,000

Other Current Liabilities (interest-free) $15,980

Total Liabilities $310,980

Capital

Planned Investment

Luke Walsh $15,000

Jack Walsh $15,000

Additional Investment Requirement $0

Total Planned Investment $30,000

Loss at Start-up (Start-up Expenses) ($96,480)

Total Capital ($66,480)

Total Capital and Liabilities $244,500

Total Funding $340,980

Company Locations and Facilities

The company will be located in Bandra Kurla Complex   It is the busiest shopping district in Ashland, and is very
close to world famous Lithia Park, also a bustling tourist destination.  The building will be decorated like many of the
merchants along this thoroughfare; as would befit a former 19th century gold-mining town.

Products
We will offer a large variety of Submarine sandwiches, salads, soups, chili, chips, cookies, and sodas. The
sandwiches are made with The Sub Shop's unique sweet mustard sauce and each loaf of bread is made fresh daily.
The bread is toasted for every order and the soups are made daily.

Product Description
All of our sandwiches are available for customization. In addition, customers will love the fresh, toasted bread, and
the freshly sliced meats and cheeses. 

Below is a short list of some of the subs we will market, the rest of the products are broken down by unit sales in the
sales forecast table:

German Snack: Italian Salami, Bologna, Roast Beef, Tomato, Onion, Bell Pepper, Cheese, Vinegar & Oil and Salt &
Pepper upon request.

Swiss Delight: Cheeses (3), Tomato, Onion, Bell Pepper, Cheese, Vinegar & Oil and Salt & Pepper upon request.

Spanish Conqueror: Cheeses (2), White Meat Chicken, Jalapeno Sauce, Tomato, Onion, Bell Pepper, Conqueror &
Oil and Salt & Pepper upon request.

American Suburban: PB&J.

American Urban: Tofu, Onions, Tomatoes, Cucumber, Carrot, and two Cheeses.

American Traditional: Angus Beef, American Cheese, Lettuce, Tomato, with a 1/4 slice Kosher Pickle.

Competitive Comparison
Our competition consists of on-campus sandwich shops, fast food restaurants, and downtown eateries. There
are three SubSub Sandwich shops in the Ashland metro area, and 10 fast food restaurants. Our competition will be
fierce, but our specialized sub sandwiches will set us apart from the competition, as will our focus on healthy, yet
tasty fast food. SubSub has emphasized the benefits of their healthy sandwiches, yet their sandwich bread is often
tasteless and stale, they don't toast their bread, they don't use a special sauce, and their production facilities are
rarely clean enough to make dining in their restaurant an appetizing venture.

The other fast food restaurants in Ashland will offer a more serious challenge: How do we position ourselves so that
people know food is both healthy AND tasty. Many people who eat fast food burgers and fries are not concerned with
the health benefits of such activities, but rather, the way the food tastes. To be competitive, our sales literature and
promotions will make it clear that our products are tastier than any greasy hamburger, yet will provide a fun, guilt-free
eating experience.

Sales Literature
Our sales literature consists of menus supplied by The Sub Shop and custom flyers designed in-house. The custom
flyers will offer catering prices, explain the difference between our lunch specials and those of our competitors, and
show our hours of operation. We will place the catering and lunch service flyers strategically near Oregon
Shakespearean theatre events, park events, with local businesses, and in Jackson County community centers.

Sourcing
The Sub Shop Corp. will provide the supplies necessary for operation. Due to bulk buying by The Sub Shop Corp.,
and our standardized franchise-based supply line, our purchasing costs will be 10% below similar costs incurred by a
non-Franchise restaurant and our payment days average 45 instead of the industry median of 30 days. 

To maintain a conservative financial perspective, we have not built this 10% discount into our cost of goods in the
Profit and Loss Statement. We have calculated cost of goods as a flat 35% of sales, an average for our industry. We
will update these amounts with real figures once we have three months of purchase history. We expect to revise our
sourcing costs down by at least 10% in November.

Technology
We will take advantage of the latest technology in order to speed our business processes and develop more efficient
operations. In planning for the launch, we have purchased three copies of Business Plan Pro software. Each principle
has been given a segment of the plan to work on. Jack is in charge of writing all franchise-specific topics, Luke is in
charge of generating and explaining the numbers, and Susan is responsible for all operations-specific topics. Each
person synchronizes their machine with the secureplan.com secure server, making the most recent version of the
business plan available at all times on the Web.

In addition to using technology to establish the business model and methodology, we also use technology for day-to-
day operations. The Sub Shop Corp. supplies us with the latest in ordering equipment, including a merchant credit
and debit card account, number verification, inventory management software and timeclock (HR) software. Each
employee is given a cell phone for personal use, and in exchange for this relatively inexpensive benefit, they are
expected to work flexible hours, and respond when called in to replace an employee that is sick, or otherwise not
available for their shift.  

Technology is also used for routine maintenance and sustainable operations. The company uses only biodegradable
soaps and cleaning supplies, and encourages all employees and customers to recycle plastic, glass, and cardboard
items. We view these options in sustainability as being tied directly to advances in technology. For instance, as wind
and solar power become available through the local utility, we will opt to source through those options.

Future Products
The product mix is determined by corporate (biodegradable).  Future product suggestions are welcome by corporate,
and if approved, may become part of the product mix.

Market Analysis Summary

Our market consists of both tourists, downtown workers, and students from Southern Oregon University.   Over
362,000 tourists visit Ashland each year--100,000 for the Shakespearean Festival and 262,000 for other
recreational/shopping activities. Tourist make up the largest segment of our target market, at about 85% of the total
market for our products.  There are about 18,000 people living and working in Ashland.  If we can convince just 15%
of those people to buy our sandwiches twice a month, we'll sell 65,000 sandwiches to that market alone in 2001.  Add
that amount to 20% of all tourists to the Ashland area, and those two segments alone will buy 138,000 meals.

In addition, demographics have shifted in recent years from traditional households (two parents with children) to more
non-traditional households; as a result, many adults feel they have less free time.  Consumers report that they are
eating out more often in order to free up time normally spent cooking, and use that time to enjoy their families and to
take advantage of other leisure activities. 

From the Ashland Chamber of Commerce:

Ashland (pop. 18,560) has built its economy on a resource base of timber, favorable climate, attractive landscape,
cultural attractions, a well-educated labor force and education. In addition, Ashland's location off Interstate 5 and the
Southern Pacific Railroad, and its proximity to the Rogue Valley International-Medford Airport, give it market access
that is more favorable than usual for a rural town. To offset the risk that comes with dependence on one economic
sector, the City of Ashland and the Chamber of Commerce encourage the diversification of markets. Establishment of
light manufacturing firms with value-added components, sophisticated services catering to a geographically dispersed
clientele, and retailing targeted to local residents are especially encouraged. The Oregon Shakespeare Festival
attracts more than 100,000 visitors annually. And because Ashland is considered a "destination" city, an additional
258,427 people visit here for its other attractions such as recreation, shopping and sightseeing. Ashland, while widely
known for the nine-month Shakespeare Festival, is also the location of the only federally funded wildlife forensics lab
and research facility in the country. Southern Oregon University plays a large part in Ashland's economic health, with
approximately 5,130 students, 576 faculty, 207 staff, 26 temps and 691 student employees.

The City of Ashland's population over the last four years has averaged 1.4% growth and is not expected to deviate
from that rate The City of Ashland's "official population projections" show a 19,995 population projection for the year
2,005. Over the 10-year period 1995-2005, a total of 2,010 new residents to Ashland are expected. The City of
Ashland's average household size is 2.22 (1990) persons per unit (12) compared to the average household size of
2.34 in 1980.

Market Segmentation
The largest market  is tourists.  Our next largest target market consists of downtown workers.   Weekend shoppers
and students who work or visit downtown make up the remaining two percent of the total market.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Geographic - Downtown
2% 17,000 17,255 17,514 17,777 18,044 1.50%
Workers and Students

Students - Seasonal 3% 4,700 4,841 4,986 5,136 5,290 3.00%

Tourists 9% 362,000 394,580 430,092 468,800 510,992 9.00%

Weekend Shoppers 2% 3,500 3,553 3,606 3,660 3,715 1.50%

Total 8.57% 387,200 420,229 456,198 495,373 538,041 8.57%

Target Market Segment Strategy

Downtown Workers:
We will target downtown workers through local businesses, advertising, event sponsorship, and word of mouth
advertising.

Students:
Ashland has a seasonal student population of around 4,700. We expect to reach students through campus activities
and marketing, as well as by sponsoring special student events.

Tourists:
Over 100,000 tourists will visit the Oregon Shakespearean Festival in 2001. Approximately 262,000 people will visit
Ashland for it's premier recreational activities. We will reach tourists at the time they visit Ashland. Most tourists aren't
thinking, "Where am I going to find good, inexpensive lunches?" when they plan their trips because they know fast
food venues are abundant everywhere in America. The strategy will be to stand out from the other venues available
on the street, and letting people know our food is relatively inexpensive, but without degrading the premium ambience
of shopping in Downtown Ashland.

Weekend Shoppers:
Weekend shoppers come from Medford to shop for clothes, gifts, and crafts in downtown Ashland. Over 40,000
people live and work in Medford, and we predict that at least 8% of those people will at some point shop in Downtown
Ashland.

Market Needs
There are two market needs we are attempting to fill.  First, there's a need for a fast food restaurant that produces
tasty fast food, at a low cost, in a clean environment.   There are many people, considered in the traditional sense to
be "Middle Class" and above who will not set foot inside a fast food restaurant due to a) the restaurant's lack of
cleanliness and b) the relative poverty and despair displayed by the people working in these fast food  restaurants. 

To fill the needs of these customers, we will market products that appeal to their healthy lifestyles, their taste buds,
and their sense of "place."  In addition, our food line, tables, floors, and counters will be cleaned constantly
throughout the day, and we will maintain a very high standard of cleanlin

Market Trends
The market for fast food is becoming more demanding. While fast food chains such as D-Lite and others in the mid-
1980s failed in their attempt to market low calorie fast food, since the 90's, some companies have found that healthy
fast food pays off. Garden burgers have become prevalent at many fast food restaurants, and even some fast food
burger franchises are beginning to offer gardenburgers, and other soy alternatives.  

While marketing fast food only as "healthy" would be corporate suicide, there is a trend towards quality in both food
and ambiance. As mentioned in the Market Needs topic, many people are heading for restaurants that offer fast food
at a slightly higher price, but at a much higher quality, and delivered by employees who do not feel degraded or
otherwise fatalistic about their role at work. While the latter issue may be debated by intellectuals in Management 410
B-school courses or  readers of the current bestselling book, "Fast Food Nation," the fact remains
that American society will continue to want more for less. If we pursue the niche of customers that reside between
the bargain-hunters and the spendthrifts, and of those, the ones that are repulsed by standard fast food
practices, lack of cleanliness, and the total lack ambiance inherent to most fast food restaurants, we will do a brisk
business. 

Consumers spend about 46% of their food budget on eating out.

Market Growth
The National Restaurant Association predicts that the QSR market will grow slightly slower than the overall market for
food services. This is due to reduced discretionary income, and recessionary economic pressures in 2000 and 2001.
The overall growth rate in the fast food business is expected to be 4.4% in 2001. Growth in catering services is
expected to be at around 6.5%. Based on the fact that only about 20% of our sales will be generated from catering
services, and that our franchise resides in the QSR sub-market of the fast food market, a slower growing market
during a recession, we have pegged our overall market growth rate at a weighted 4.82%.  However, because of the
faster than average growth of the Ashland area, and the increase in tourism in Jackson County over the last few
years, we have estimated that our potential customer base will grow at a healthy 8.57% clip.

Industry Analysis
Food service industry sales will reach an estimated $30 billion in 2010, or over 3% of Gross Domestic Product. 
Within this industry, the QSR (Quick Service Restaurant) segment represents over 2/3 of total traffic and over half of
restaurant sales.  QSRs are defined by the industry primarily based upon menu item, with the burger and pizza sub-
segments accounting for over half of total QSR sales.  QSR sales are estimated to reach $15 billion by 2010.

Industry Participants
The industry is composed of several large brand-name restaurants, and a large number of local fast food chains.
Depending on where you look in any given year, 4-5 new fast food outlets may open and close their doors. The
industry is always changing and is a highly competitive arena where staying power and customer loyalty is difficult to
acquire. The participants in the Ashland market include Burger King, McDonald's, Taco Bell, Taco Time. In the QSR
market, Blimpie, Subway, and several local sub-shops are industry participants most likely to compete directly with
The sub Shop.

Distribution Patterns
We distribute our products direct to customers, both through retail and through our catering service. We don't rely on
a channel of resellers or distributors to get our products into the hands of consumers.

Competition and Buying Patterns

The fast-food business is based largely on the impulsive choice of consumers. Many people buy their business lunch,
lunch, or family dinners at a fast food restaurant, and those fast food restaurants offer not necessarily the best
selection, but the most reliable menu and the fastest order completion time. Customers will try other fast food
restaurants, and shop around, but the majority of their fast food purchases are from one of their favorite fast food or
QSR restaurants. Our goal is to capture those customers, and to build loyalty to the product through purchase punch
cards, consistent daily specials, and a direct mail list.

Main Competitors
Our main competitors are the major national fast food franchises.  SubSub is our largest competitor, with 12,868
franchises in the U.S. alone.  

SubSub licenses franchises throughout the nation, and offers two locations in the Ashland Metro area. McDonald's
only has one store in the Ashland area. 

SubSub contributes to the growth in our market by advocating for healthy eating habits via online, TV, and radio
advertising. They are our largest competitor, yet they also contribute to the nationwide growth of the healthy food
segment of this market. We can count on them to bring people into our stores, and will target their local operations
through direct mail flyers that offer specials to customer that bring in their SubSub 10-sandwich punch cards.
Strategy and Implementation Summary
Our #1 strategy is to focus on our customer experience. Our success hinges on whether customers receive what we
promise them, and are pleased enough to come back for more. Our KISS (Keep it Simple Stupid) approach will be
successful only if we don't distract ourselves from the core business of making good sandwiches fast, and of treating
the customers as if they are special. 

As with any business model in the new millennium, we must adapt our strategy to the customer and market trends,
while maintaining consistency of brand and message. This is a challenge for any business in any industry because
the nature of business will always, and has always determined that the best strategy with the most resources behind
it will survive. This millennium has proved to be very successful in growing this market, and of supporting it's
franchises.

Strategy Pyramid

Build Customer Loyalty and Word-of-

Mouth (WOM) Buzz

Punch Card System Community Event Sponsorship Store Ambiance

10 Sandwiches, Toys for European Prints,

10K Jackson County Run
11th Free Tots Furniture

Value Proposition
Our value proposition is that we offer high-quality, healthy fast food at a reasonable price. Our facilities are clean and
our food is tastier than that of our competitors. The ambiance of our facilities contribute to customers' desire to eat
their meals in a comfortable, healthy environment.

Competitive Edge
We have a competitive edge in regards to the overall quality and differentiation of our products, and in the cleanliness
and ambiance of our seating area. Our sandwiches, soups, etc. are all of the finest quality, and have been refined
through taste-tests sponsored by The Sub Shop Corporate. Our seating area will be clean, the murals and prints on
the wall will feature airy Italian landscape and European lifestyle motifs. The walls will be painted a rich yellow color,
the tables and chairs are a rich walnut color, and the floor will consist of high-quality tile. 

We will differentiate our food from SubSub's in regards to taste, quality of bread and contents, attentiveness to
customers, and overall experience. We will build off of SubSub's national marketing strategy so that we gain from
their conversion of burger eaters to sandwich eaters, but alternately prove that we are more responsive to customers
and offer better fare than SubSub franchises.

Marketing Strategy
Our Marketing Strategy is to reach the largest amount of tourists, residents, and students for the least amount of
money.  

Our strategy will focus on three solid points:

1. Building customer loyalty.

 2. Extending the franchise brand locally.
3. Develop local word-of-mouth advertising (buzz).

Positioning Statement
For people looking for a fast, friendly, and tasty lunch, we produce a quick meal.  Our seating area will be clean and
the overall ambiance of the place will be pleasing to the senses.  The food will be good and the service, friendly and
fas

Pricing Strategy
Our pricing strategy is different for different customers. Prices to retail customers will be fixed by the chairs, and
based on a relative cost of living indicator. Retail prices will be competitive at about $6 for the average meal. This is
about 30% above McDonald's and Burger King prices, but only about 15% above the average price of a SubSub
sandwich. Customers are simply willing to pay more for healthy, flavorful food served in a clean, comfortable
environment.

Our highest margins will come from our catering services and large sub products. We will focus on expanding this
segment of the market as soon and as aggressively as possible.

Promotion Strategy
The chairs will promote our products on the national level. In order to reach our local customers, and build loyalty, we
will offer special mid-day promotions, sponsor local community events, advertise in the local classified paper, and our
President will become a leading figure and spokesman in the community.

Our strategy is to focus on promoting the business through local PR efforts, rather than paid advertising.

Distribution Strategy
We plan to distribute our products direct to customers, without the use of a separate channel of distributors.

Marketing Programs
Our marketing programs will include customer-centric appeals to switch from the competition, build loyalty, provide
cost value to the customers, and build word of mouth marketing.

Here's a list of the sales and marketing programs we intend to implement within the next 15 months:

 Five daily in-store regular specials, at least 15% off one particular sandwich item.
 A direct mail coupon offering 50% off your first sandwich when you bring in a stamped SubSub card and
sign up for our coupon mailing list.
 High profile sponsorship of two local sporting or charity events.
 20% off a menu item when you bring in your Oregon Shakespeare festival ticket stub.
 Free delivery to any of the local hotels (market only through hotels), and offer to pay hotels a slotting fee.

We may institute more programs as we see fit. This list of programs is aggressive when compared to the local
marketing done by our competitors, so this should give us an early advantage as long as we can keep cash balance
and sales numbers up.

Milestones
The following table shows important milestones for the franchise Sub Shop.

Milestones
Milestone Start Date End Date Budget Manager Department

Shakespeare Festival Ticket

6/1/2001 10/31/2001 $700 Luke Department
Stub Promotion

50% off Coupon - Preparation

6/1/2001 7/25/2001 $400 Jack Department
and Distribution

Sponsorship of "Pear Blossom

2/1/2002 2/5/2002 $600 Jack Department
Run"

Establish Menus in Hotels -

5/1/2001 7/1/2001 $2,000 Lisa Department
Slotting

Devise Specials Schedule and

7/1/2001 7/31/2001 $100 Luke Department
Logistics

Wrap-up Menu, Special Offers 7/1/2001 7/25/2001 $0 Luke Department

Complete Interior Decor 7/1/2001 7/15/2001 $0 Jack Department

Hire and Train Employees 7/1/2001 7/31/2001 $1,200 Lisa Department

Other 1/1/2001 1/1/2001 $0 Manager Department

Totals $5,000

Sales Strategy
Our sales strategy will be to reach the largest amount of Jackson county residents and tourists with consistent value-
added incentives to purchase our products and visit our restaurant. In this industry, and especially as a franchise, our
marketing programs are almost indistinguishable from our sales programs. The indistinguishable handles a lot of the
national and regional marketing, and we just pay our fee to have it done. Our flexibility will lie in our ability to push the
boundaries of freedom the indistinguishable has given us, and to take advantage of opportunities to differentiate
ourselves on sales by sale level.

Sales Programs
Here's a list of the sales and marketing programs we intend to implement within the next 15 months:

 Five daily in-store regular specials, at least 15% off one particular sandwich item.
 A direct mail coupon offering 50% off your first sandwich when you bring in a stamped SubSub card and
sign up for our coupon mailing list.
 High profile sponsorship of two local sporting or charity events.
 20% off a menu item when you bring in your Oregon Shakespeare festival ticket stub.
  Free delivery to any of the local hotels (market only through hotels), and offer to pay hotels a slotting fee.

We may institute more programs as we see fit. This list of programs is aggressive when compared to the local
marketing done by our competitors, so this should give us an early advantage as long as we can keep cash balance
and sales numbers up.

Sales Forecast
The majority of our revenue will be generated through medium subs and cookies/desserts. The breakdown by
product is below.

Sales Forecast

Year 1 Year 2 Year 3 Year 4 Year 5

Unit Sales

Large Subs 19,024 20,926 23,019 25,321 27,853

Medium Subs 139,508 153,458 168,804 185,685 204,253

Small Subs 50,730 55,803 61,383 67,522 74,274

Entree Salads 19,024 20,926 23,019 25,321 27,853

Side Salads 15,219 16,741 18,415 20,256 22,282

Chips 38,048 41,852 46,037 50,641 55,705

Party Subs and/or Trays 254 279 307 338 371

Desserts 16,487 18,136 19,950 21,945 24,139

Cookies and Desserts 63,413 69,754 76,729 84,402 92,842

Soups and Chili 17,756 19,531 21,484 23,633 25,996

Drinks 50,729 55,803 61,383 67,522 74,274

Total Unit Sales 430,189 473,210 520,530 572,584 629,842

Unit Prices Year 1 Year 2 Year 3 Year 4 Year 5

Large Subs $7.10 $7.10 $7.10 $7.10 $7.10

Medium Subs $5.10 $5.10 $5.10 $5.10 $5.10

Small Subs $3.89 $3.89 $3.89 $3.89 $3.89

Entree Salads $5.10 $5.10 $5.10 $5.10 $5.10

Side Salads $1.59 $1.59 $1.59 $1.59 $1.59

Chips $0.89 $0.89 $0.89 $0.89 $0.89

Party Subs and/or Trays $22.00 $22.00 $22.00 $22.00 $22.00

Desserts $1.49 $1.49 $1.49 $1.49 $1.49

Cookies and Desserts $1.39 $1.39 $1.39 $1.39 $1.39

Soups and Chili $1.89 $1.89 $1.89 $1.89 $1.89

Drinks $0.99 $0.99 $0.99 $0.99 $0.99

Sales

Large Subs $135,069 $148,576 $163,433 $179,776 $197,754

Medium Subs $711,488 $782,637 $860,901 $946,991 $1,041,690

Small Subs $197,340 $217,074 $238,781 $262,659 $288,925

Entree Salads $97,021 $106,723 $117,396 $129,135 $142,049

Side Salads $24,198 $26,618 $29,280 $32,208 $35,429

Chips $33,862 $37,249 $40,973 $45,071 $49,578

Party Subs and/or Trays $5,580 $6,138 $6,752 $7,427 $8,170

Desserts $24,566 $27,023 $29,725 $32,697 $35,967

Cookies and Desserts $88,143 $96,958 $106,654 $117,319 $129,051

Soups and Chili $33,558 $36,914 $40,605 $44,666 $49,132

Drinks $50,222 $55,245 $60,769 $66,847 $73,531

Total Sales $1,401,048 $1,541,154 $1,695,269 $1,864,796 $2,051,276

Direct Unit Costs Year 1 Year 2 Year 3 Year 4 Year 5

Large Subs $2.49 $2.49 $2.49 $2.49 $2.49

Medium Subs $1.79 $1.79 $1.79 $1.79 $1.79

Small Subs $1.36 $1.36 $1.36 $1.36 $1.36

Entree Salads $1.79 $1.79 $1.79 $1.79 $1.79

Side Salads $0.56 $0.56 $0.56 $0.56 $0.56

Chips $0.31 $0.31 $0.31 $0.31 $0.31

Party Subs and/or Trays $7.70 $7.70 $7.70 $7.70 $7.70

Desserts $0.52 $0.52 $0.52 $0.52 $0.52

Cookies and Desserts $0.49 $0.49 $0.49 $0.49 $0.49

Soups and Chili $0.66 $0.66 $0.66 $0.66 $0.66

Drinks $0.35 $0.35 $0.35 $0.35 $0.35

Direct Cost of Sales

Large Subs $47,274 $52,001 $57,202 $62,922 $69,214

Medium Subs $249,021 $273,923 $301,315 $331,447 $364,592

Small Subs $69,069 $75,976 $83,573 $91,931 $101,124

Entree Salads $33,957 $37,353 $41,088 $45,197 $49,717

Side Salads $8,469 $9,316 $10,248 $11,273 $12,400

Chips $11,852 $13,037 $14,341 $15,775 $17,352

Party Subs and/or Trays $1,953 $2,148 $2,363 $2,600 $2,860

Desserts $8,598 $9,458 $10,404 $11,444 $12,588

Cookies and Desserts $30,850 $33,935 $37,329 $41,062 $45,168

Soups and Chili $11,745 $12,920 $14,212 $15,633 $17,196

Drinks $17,755 $19,531 $21,484 $23,633 $25,996

Subtotal Direct Cost of Sales $490,544 $539,599 $593,559 $652,915 $718,206

5.7 Strategic Alliances

The fast-food business is based largely on the impulsive choice of consumers. Many people buy their business lunch,
lunch, or family dinners at a fast food restaurant, and those fast food restaurants offer not necessarily the best
selection, but the most reliable menu and the fastest order completion time. Customers will try other fast food
restaurants, and shop around, but the majority of their fast food purchases are made through one retailer. Our goal is
to capture those customers, and to build loyalty to the product through purchase punch cards, consistent daily
specials, and a direct mail list.
Management Summary
Our managers are also owners. We want our managers to take a personal stake in the success of the company, and
for that reason we have given them a share of any profits they generate. 

Specific information about each manager is available in the following plan topics.

6.1 Personnel Plan

Most of our employees will come from the University of Southern Oregon in Ashland. They will be part-time students
and will not need healthcare benefits or 401K benefits. This will hold our payroll burden to less than 8% of total
payroll.

The store will hold an annual rafting trip and picnic on the Illinois River each summer. This "team building" exercise
will come out of the marketing budget. Please see the Profit and Loss table for details.

Our employees will be respected, and will wear a company polo or sweatshirt, not a tight-fitting, artificial fiber,
company-mandated jumpsuit. Our employees will be paid more (in salary & benefits) than employees at most other
fast food restaurants will be given tuition reimbursements, thereby making them more empowered, and more content
workers. In this way, we will meet the needs of our market, and differentiate our company from the myriad of fast food
behemoths, who's primary goal is to churn out worthless, tasteless food in a degraded facility and by degraded
employees.

Personnel Plan

Year 1 Year 2 Year 3 Year 4 Year 5

Assistant Manager $32,400 $34,344 $36,405 $38,589 $40,904

Store Manager $44,400 $47,064 $49,888 $52,881 $56,054

Student Help (PT) $16,320 $17,299 $18,337 $19,437 $20,604

Student Help (PT) $16,320 $17,299 $18,337 $19,437 $20,604

Student Help (PT) $16,320 $17,299 $18,337 $19,437 $20,604

Student Help (PT) $16,320 $17,299 $18,337 $19,437 $20,604

Student Help (PT) $16,320 $17,229 $18,337 $19,437 $20,604

Total People 7 8 10 12 12

Total Payroll $158,400 $167,834 $177,978 $188,657 $199,977

6.2 Organizational Structure
The organizational structure is very flat. While it's important that our manager on duty is clearly in charge, we will not
belittle our employees through rankism that disempowers them from taking initiative. Our manage on duty will have
the final say regarding all decisions, yet we have trained her to teach the employees how to react to customer issues
on their own and respond based on their knowledge of company policy, and when that fails them, their common
sense. Fortunately all of the people we have lined up for our open positions appear to have an abundant supply of
common sense.

6.3 Management Team

The management team has a combined 30 years of experience in the food service industry, with 15 years of
delicatessen experience. 

Luke Walsh, the owner, owned and managed a deli in downtown Portland, OR for 15 years. During this period,
he turned the deli into a full-service convenience mart, added a dining area, and increase the menu from 10 items
when launched, to over 100 items prior to his exit from the company. Luke sold the company to a husband/wife
entrepreneur team in 1994 for $2 million, and has been living off personal investments and other ventures for the last
seven years. Luke received his MBA from Portland State University in 1998, and earned his BA in finance from the
University of Oregon in 1989. 

Lisa McKewan, Store Manager, has a BA in Psychology, and worked for over 15 years as manager of the The
Greentree Restaurant in Ashland. This restaurant is known for its friendly waitstaff, diverse and award-winning menu,
outdoor seating, and excellent service. Lisa turned The Greentree Restaurant from a small, 600 sq. ft deli, to a full-
service restaurant. She helped the owners find investors, and helped write the marketing and business expansion
plan. She managed the day-to-day operations of the business, trained and hired all waitstaff, set the menu, and
managed all advertising spending.  Lisa will assume the Store Manager position in title, a step down for her, but in
exchange for being flexible in this regard, she will receive 4% ownership in the company. Once the owner has moved
out of day-to-day operations, presumably around year three of operations, Lisa will receive another 2% of the
company as stipulated by her employment contract.

6.4 Management Team Gaps

The only gap we face is the fact that none of us have run a franchise business. Since both Lisa and Luke have
experience running a sole proprietorship, and non-franchised restaurant, our experience will more than compensate
for the increased "hand-holding" that comes with owning a franchise.

Due to the limited number of people managing the restaurant, our goals may not be met if we were to lose a manager
or owner. We have drawn up a legal contingency plan with a $1 million policy on the owner to prevent this from
disrupting the business. We have also allowed for a cash balance that would allow for a recruitment bonus to another
Store Manager if Lisa were to leave for any reason.

Financial Plan
Our financial plan is available in the following chapters. Our numbers are based on past experience, knowledge of the
industry, growth expectations for the fast food sector nationwide, and common sense.

7.1 Long-term Plan

Our long-term plan includes expansion into the Medford market in year two, followed by healthy dividend payouts in
years three through five. Our goal is to build a business out of two franchises, and run each franchise as a profit
center for the purpose of building wealth for employees, the community, and the Walsh family.

7.2 Important Assumptions

The SBA 504 loan program stipulates that loans for the purpose of purchasing and improving small business real
estate will not exceed 7.5%. The loan is pegged to the 10 year treasury note +1.7%. The current rate for the US
Treasury Note is 5.13%, so our estimated long-term loan rate will be about 7%.

The tax rate includes the Oregon State Revenue Tax, currently at 6.6% of NET revenue. We have prorated the
assumptive state tax rate to 4.6% due to the fact that this tax is levied on NET revenue, not GROSS. The Federal tax
rate average for our net revenue is expected to average 31%. Thus, or assumed total tax rate for this table is 37.6%.

7.4 Break-even Analysis

Our break-even analysis is based on a rough estimate of fixed costs. We predict average fixed costs to include the
cost to lease the building, equipment leases, and various other equipment costs and fees. Our variable costs include
the cost of labor, food inventory, and other product-related costs. Our variable cost estimate is $1.14 per unit,
although that number may be revised as we review our actuals in the coming months.  

Our monthly break-even unit sales are 12,754. This includes units other than sandwiches, such as cookies, soda,
chips and other add-ons. The basis for this break-even point is an average of entrees (sandwiches) and add-ons. The
average per unit revenue is $3.26.

Break-even Analysis

Monthly Units Break-even 12,754

Monthly Revenue Break-even $41,538

Assumptions:
Average Per-Unit Revenue $3.26

Average Per-Unit Variable Cost $1.14

Estimated Monthly Fixed Cost $26,994

7.5 Projected Profit and Loss

The following table is the projected profit and loss for franchise Sub Shop.
7.6 Projected Cash Flow
The following chart and table shows the projected cash flow.