Sample Business Plan on Vending Company - Redbox Business Plan
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EXECUTIVE SUMMARY
The Business Concept
ABC Vending, LLC (ABC Vending or the Company) is in the business of renting and selling DVD’s utilizing automated DVD kiosks. The Company will purchase its kiosks from a leading DVD kiosk manufacturer; DVDNow Kiosks, Inc. DVDNow has developed the finest automated DVD rental terminal available today. Its terminals provide consumers with a fast, efficient and convenient way to rent the hottest DVD's and Video Games.
ABC Vending will place its DVD kiosks in high volume and well established business locations such as grocery stores, convenience stores, restaurants, apartment/condo areas and college campuses throughout the city and county limits of Orlando Florida. This DVD vending machine only accepts credit or debit cards and no paper cash. Its use is prohibited outdoors, which means that it will only be inside any potential location. The benefit of this is that it will increase foot traffic and sales to that location, attract new customers, increase customer loyalty, and cross promote the location’s products and services. ABC Vending is located in Orlando, Florida.
The DVD kiosks allow costumers to rent and purchase DVDs, video games, and Blu-ray movies. The Company will load its kiosks exclusively with heavily rented, high profitable, new release DVD's. The automated kiosk is easy to use and provides step-by-step rental instructions. It has a large LCD screen to view movie trailers and has see-through protective glass to view the movies that are in stock.
Excellent Market Opportunity
ABC Vending will take advantage of the tremendous growth in DVD rentals to drive its revenues. The DVD rental market is over $8 billion annually. As part of this market, the DVD kiosk industry is rapidly growing and is overcoming the common video store rental. The number of DVD rental kiosks in the United States is expected to double in the next two years.
A leading player in the DVD kiosk industry, RedBox, showed a 99.1% increase in its sales in 2009 over 2008 ($773.5 million in 2009 compared with $388.5 million in 2008). Experts predict that more than 10% of the total movie rental market will shift to DVD kiosks in the next three years. This is driven by the fact that the kiosks utilize advanced automated technology, are open 24-hours and are cheaper than store rentals.
Profitable Growth
ABC Vending expects to gain a profitable market share within a very short period of time. Determinations have been made for the size of the market, amounts of budgeted advertising and promotional dollars and the competitive landscape.
Projections call for the Company to generate revenues of $168,000 in its first twelve months. ABC Vending will achieve strong growth over the next several years, reaching $2.69 million in revenues and more than $1.5 million of net income by the fifth year.
The Opportunity
Entertainment and Media Market Growth
In the United States, the entertainment and media (E&M) industry continues to increase in revenue; by 2013 the market is predicted to reach $495 billion, at a 1.2% compound annual growth rate. According to Film Journal International (FJI) and PricewaterhouseCoopers’ (PwC) annual “Global Entertainment and Media Outlook 2009-2013”, global E&M will grow to $1.6 trillion in 2013, with a compound annual growth driven by digital gains reflecting a 2.7% increase.
In the company’s report, PwC states it expects, “U.S. consumer spending on media and entertainment as the main growth driver over the five-year period, while advertising is projected to decline.” Furthermore, PwC projections indicate, “The share of digital media revenue will further expand in the coming years. It will grow from 17% of U.S. revenue in 2008 to 25% by 2013.” 6
The United States remains the largest entertainment and media market in the world. Filmed entertainment, rapid growth in DVD sell-through, shorter theatrical-to-video release windows, and the transition from VHS to DVD will drive home video growth. Subscription services such as mail-order DVD rentals and growing DVD hardware penetration will also boost global spending, which was estimated at $108 billion in 2008 from $75.3 billion in 2003, rising at a 7.5% annually.
Video games will be the fastest-growing segment during the next five years; global video game spending increased to about $56 billion in 2008, at a 20.1% annual rate. The PC game market will shrink, and console game spending will grow as next generation consoles are introduced. 5
Hollywood movies seen at theaters are expected to remain as popular as ever; however, DVD and Blu-ray discs sales trends are expected to increase substantially over the next decade; in 2009 DVD and Blu-ray sales totaled $8.73 billion, as compared to U. S. box office receipts of $9.87 billion, according to Adams Media Research (AMR).
The number of U. S. homes with Blu-ray disc players has grown from 3 million in 2008 to 8 million in 2009; approximately $1.1 billion movie discs were bought in 2009. Although disc sales continue to grow, the accelerated rise of $1 low-cost DVD kiosk rental options such as Redbox, and online subscriptions are increasing in popularity. Tom Adams, president of Adams Media Research, said, "Those two sectors of rental have really been growing, and causing people to hesitate about how many discs they're going to buy." 7
Plunk Research, industry market research firm, released the following Entertainment & Media Industry Overview: 8
w The convenience store industry continues to be dominated by small, “mom-and-pop” stores — those that are owned and operated as a one-store business or franchise. The number of one-store owners now stands at 89,957 stores, 62% of all stores in the United States. This is the highest percentage recorded to date; only five years ago the percentage of one-store operators stood at 50.0%