Research Paper: Campus Gelato Pushcart Feasibility Analysis

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[. . .] S. based survey consumed gelato, while 89% reported eating ice cream.[footnoteRef:6] Assuming the figures for Australian consumers are similar, there is a distinct marketing niche with a promising trend toward increased interest and consumption of artisanal gelato. [6: Senior research analyst David Morris at Mintel in Chicago said that "There's definitely momentum [for gelato] there." In Rifkin, G. (2008, September 4). Move aside, frozen custard, and make room for gelato, The New York Times. Retrieved http://www.nytimes.com/2008/09/04/business/smallbusiness/04sbiz.html]

Economics.

1. There are definitive advantages to partnering with the university's restaurant in order to get the Bond U. Gelato business operational. This is particularly true in light of the fact that the pushcart operation may be seasonal (this will be determined by further in-situ testing) and because the available hours of operation are limited by the entrepreneurial team members' collective availability. Given the cost of a start-up independent of the university's restaurant facility, staffing, and expertise, a 30% profit share is a fair and acceptable arrangement.

2. Assuming that the example day of selling gelato for charity resulted in about 4 hours of sales due to inclement weather, the amount of time that the entrepreneurial team has available in which to earn revenue is sufficient. That is, if the team can work four hours per day for five days every week, they should expect to sell approximately 750 scoops per week. Given the reported propensity of students for frozen treat consumption -- regardless of weather -- sales from the pushcart should be above the rate experienced on the day of sales for charity. The caveat is that outdoor consumption of gelato from pushcart offerings during cooler weather must be piloted tested.

Finances.

1. New York City tolerates very high prices for quality products, and gelato is no exception. Il Laboratorio del Gelato offers three sizes of individual servings of gelato in its cafe: Large, for $5.75, medium, for $4.50, and small (two-flavors) for $3.25. Grom, a relatively new gelateria, established by Italians from Turin 2007 in the Upper West Side of New York City, sells its artisanal gelato at prices even greater than "The Lab." A small serving at Grom costs $4.75, a medium is $5.75, a large sells for $6.75, and a very "American concept" huge size costs $9. Price point testing with students on-campus showed that a single scoop serving priced at $3.50 was acceptable to 56% of the students polled (Appendix D, Figure 4). Prices in urban areas of Australia are anticipated to be similar to those in New York City. Since there is no gelato competition on-campus, and assuming the gelato is of sufficiently good quality to warrant a single scoop price comparable to artisanal gelato in international cities, the $3.50 base price is reasonable. With a single-cone price of $3.50, the pushcart will break even by selling 264 scoops each semester. Assuming that 100% of the sales are double-scoop, the pushcart will break even at 226 servings per semester, if the price for a double-scoop serving is raised to $4.00. These figures are pre-profit sharing.

2. The profit-sharing arrangement with the university's restaurant increases the per scoop break-even costs to the extent that the pushcart would need to sell 302 single scoop servings each semester. Or, assuming that 100% of the sales are double-scoop, the pushcart will break even at 322 servings per semester, if the price for a double-scoop serving is raised to $4.00.

3. A limitation of the primary research in this analysis is that estimates of gelato are based on a charity activity, which could mean that sales figures are elevated. However, this figure is tempered by the changed weather during the day of charity sale, which would, in all likelihood, have depressed sales. If the 150 scoops in the single day of charity sales of gelato are taken as a base rate, a typical five day week of gelato sales would be 750 scoops, or 10,500 scoops per semester. Cash sales for these periods would be, respectively, $4,016 and $56,228. Net earnings would be $3,229 per week and $45,203 per semester. Profit sharing costs would be $968.63 per week and $13,561 per semester. The entrepreneurial team would make a profit of $2,260 per week and $31,642 per semester.

III. Recommendations.

Research on the competitive landscape for gelato production and sales indicate that the proposed on-campus gelato pushcart operation is feasible from a technology and marketing perspective. This conclusion is based on qualitative data from primary and secondary research regarding experience with gelato manufacturing and sales, and primary research of student consumer attitudes toward gelato and on-campus gelato purchase. The on-campus gelato pushcart business is economically and financially feasible, though further research is warranted. Estimated revenue and net profit figures are based on a single-point of time sales situation. Estimates could be substantively impacted by several as of yet unknown variables.

It is recommended that the survey be given a second time, perhaps during inclement weather, and that gelato taste tests be included in the survey process. Given a campus population of 4500 students, sample size should approach 530 students at 95% confidence level and a confidence interval of 4. As it stands, the current sample size of 50 students would give a confidence interval of 11 at a 95% confidence interval, with 80% of respondents giving the same categorical answer.

A number of questions remain: Will the novelty of a gelato pushcart on campus wear off, resulting in depressed sales? Or, will the students on this international campus reflect more European and cosmopolitan tastes where an appetite for gelato becomes habitual?[footnoteRef:7] How much can climate factors be expected to impact outdoor sales of gelato? As the start-up costs for commencing business with the on-campus gelato pushcart, the recommendation is to move forward with the Bond U. Gelato business. [7: PreGel a wholly owned subsidiary of one of the largest gelato ingredients supplier in Italy. PreGel's CEO in the U.S. claims that "In Europe, gelato is part of the culture, part of people's daily routine…[but] you can't change culture overnight." In Rifkin, G. (2008, September 4). Move aside, frozen custard, and make room for gelato, The New York Times. Retrieved http://www.nytimes.com/2008/09/04/business/smallbusiness/04sbiz.html]

References

Fisher, I. (2007). 2 Turin gelato men, hoping New York will melt. The New York Times. Retrieved http://www.nytimes.com/2007/05//02dining/02grom.html

Rifkin, G. (2008, September 4). Move aside, frozen custard, and make room for gelato, The New York Times. Retrieved http://www.nytimes.com/2008/09/04/business / smallbusiness/04sbiz.html

Witchel, A. For this guy, gelato is the answer. The New York Times. Retrieved http://www.nytimes.com/2002/09/11/dining/for-this-guy-gelato-is-the-answer.html?src=pm

Appendix A -- Primary Research On-Campus Survey

Figure 1. Preferred Gelato Pushcart Locations

Figure 2. -- Preferred Season for Gelato Consumption

Figure 3. -- Student's Per Week Predication of Gelato Purchasing

Appendix B -- Primary Research Management Interview

An interview was conducted with the present manager of the University's restaurant. The following information was gleaned from the interview:

The restaurant currently serves ice cream and has served gelato (for a one-time charity event) in the past.

The Cost of Goods Sold for making gelato on the premises of the restaurant was ascertained. Those costs are reflected in Appendix D, Break-Even Figures.

Fixed costs for running the gelato pushcart operation were established. Those figures are included in Appendix D, Break-Even Figures.

The flavor preferences of on-campus consumers of gelato have been established. These preferences are indicated in Appendix D, Break-Even Figures.

Figures for low-end pushcart sales of gelato have been established, using as a day that was partly sunny and partly rainy as a baseline.

Demand for frozen treats was estimated by the manager based on his experience in the restaurant (i.e., ice cream).

Permission for licensing the gelato pushcart is embedded in the restaurant's operating license and health inspections. However, permission must also be obtained from the University to operate the pushcart on campus.

The restaurant manager has tentatively accepted a proposal for a partnership with the gelato pushcart operations. The first-pass agreement is that the restaurant will procure supplies, make the gelato, and store frozen gelato in its facility. In exchange for these services, 30% of the gross profit is to go to the restaurant. The distribution and sales of the gelato will be carried out by the entrepreneurial team.

Appendix C -- Financial Analysis

cost cost scoops apiece survey per day

Cups

0.08

41%

24.60

Waffle cones

0.05

59%

22.13

Spoons

0.02

N/A

15.00

COGS - container

61.73

COGS -gelato

96.25

Total COGS

Table 1. - Cost of Goods Sold (COGS)

Weekly Fixed Operating Costs

Gelato maker

15.00

Pushcart

17.00

Serving items

3.13

Umbrella

1.77

Book

0.31

37.21

Table 2. -- Fixed Costs

(Fixed Costs) / (1 -- (Variable cost per unit/Selling Price per unit)) = Revenue to break-even

Single scoop $1.53/$3.50 = $744 revenue per semester to break-even

Double scoop $1.69/$4.00 = $902 revenue / semester to break-even, assuming all double scoops

(Fixed Costs) / (Unit Contribution Margin)* = Number of units needed to break-even

* Unit Contribution Margin = Selling Price per Unit -- Variable cost per unit

Single scoop

1.53 is… [END OF PREVIEW]

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Campus Gelato Pushcart Feasibility Analysis.  (2011, March 27).  Retrieved May 23, 2019, from https://www.essaytown.com/subjects/paper/campus-gelato-pushcart-feasibility/9946898

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"Campus Gelato Pushcart Feasibility Analysis."  27 March 2011.  Web.  23 May 2019. <https://www.essaytown.com/subjects/paper/campus-gelato-pushcart-feasibility/9946898>.

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"Campus Gelato Pushcart Feasibility Analysis."  Essaytown.com.  March 27, 2011.  Accessed May 23, 2019.
https://www.essaytown.com/subjects/paper/campus-gelato-pushcart-feasibility/9946898.