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  1. 1. REPORT Alex Wada Kyle Kosnoff Ryland Mortlock Sherry Wang Vinod Tadikamalla WBB CONSULTING 3/4/2016 Mounir Ghabrial
  2. 2.     Table of Content​s    Executive Summary 3  Methodology 3    Location    4    Demographics    4    Competition    6    Property Map    7    Expansion Plan    8    Farmers Market   10    Lotus Partnership   13    Boba Loca   15    Cup o’ Joy   18    ICON Plaza   24    Food Truck   26    Appendices   31            2  
  3. 3.     This deliverable aims to answer two key questions for Boba7:  1. Which locations near USC have the greatest potential for expansion?  2. With this long­term goal of expansion to USC in mind, what short­term and mid­term                            strategies can be used to gain exposure to and penetrate the USC market?      RESEARCH & METHODOLOGY    To identify high­potential locations, we used the site selection factors outlined in Kunsoon                          Park and Mahmood A. Khan’s “An Exploratory Study to Identify the Site Selection Factors                            for U.S. Franchise Restaurants.” ​  The following six factors guided our analysis:  1   General Location ­ Refers to a general area within a city. Physical characteristics and area                              characteristics will be considered. The factors related to the general location include but are                            not limited to population (density), market statistics, and neighborhood.    Position of Site ­ Site is a specific piece of property. Size, parking facilities, accessibility of                                utility and public services, convenience, and visibility are factors included in the position of                            site.     Demographics ­ Information pertaining to consumers will be collected including data about                        age, sex, occupation, income, food preferences and potential for future growth and                        development.    Traffic Information ­ Traffic flow patterns are important for the analysis of the site. The                              factors related to traffic information include traffic counts and patterns, and frequency pattern                          of traffic flow.    Competition ­ A restaurant operation needs to consider its actual and potential competition.                          The factors related to competition include but are not limited to location and operating results                              of competitor, and proximity to competitors.     Cost Consideration ­ Costs associated with the development of the site need to be calculated                              carefully. This includes both the cost of purchase and the cost of site development, which                              covers factors such as building, landscaping, and the provision of associated facilities such as                            car parking and access roads. The cost of improvement–renovations and modifications–is                      also an important consideration.          Before delving into our expansion options, the following ​sections represent common                      elements amongst all expansion options.      1  See Appendix for full research paper  3  
  4. 4.         USC LOCATION    Given your target is the boba­hungry population, the                University Park area is a great location to capture such a                      target market. The university is in the heart of Los                    Angeles, ten minutes away from Downtown to the                southwest. The school itself presents a constant ​volume                of customers; USC is home to more than 43,000                  students and nearly 3,945 full­time faculty. The              2 Housing Density Map on the right shows the estimated                  student population in these regions around the campus.    While the Asian population in the area is not as large as                        the White or Latino populations, the University Park                population is relatively young. The racial demographic              might imply that many individuals have little              experience with boba, but there is still a significant                  opportunity to provide a lounge experience for young                adults.      DEMOGRAPHICS    USC Students (2015­16 academic year):   3   The surrounding residential population is          extremely large, not only because of USC,              but also because of the neighborhoods that              have formed around Downtown Los          Angeles. Both the daytime and evening            populations stay very dense. In the daytime,              most students keep within the college            campus, venturing out only on cars, along              University Park, and towards residences          north of the Campus. The evening            population booms because of USC’s free            Uber service.     2  ​http://about.usc.edu/   3  Numbers courtesy of ​http://about.usc.edu/facts/   4  
  5. 5.     The working population around the USC area is also quite large, given the USC staff and the                                  various businesses that operate in the area. It is advisable to target the former group as most                                  USC staff tend to  utilize on­campus food facilities.     In the University Park area, income is heavily                polarized because the neighborhoods to the west of                USC are considered “low­income” areas by the Los                Angeles Times while USC itself houses some of the                  4 richest students in the nation. The population of USC                  is made up of largely white, Asian­American, and                international students with relatively large disposable            incomes; the latter two groups are culturally disposed                to consume boba. The surrounding residential areas,              however, are largely Hispanic and Black.     Interestingly, during research conducted on the west              side of campus, a majority of the customers was                  Hispanic and came from the local community. On the northeast side, it was largely Asian                              students. A large portion of customers for businesses                around USC come from student dormitories, which              house roughly 4,000 students. A large section of the                  5 residential students on the West side is Asian ​ . ​Not                  6 only are the demographics of USC’s student              population ideal for your Boba product, it seems like a                    sizeable portion of the local population has already                taken to ​Boba and would be potential clientele once                  you choose your preferred method of expansion.        4  http://maps.latimes.com/neighborhoods/neighborhood/exposition­park/  5  USC freshman classes are usually around 5,000 students. Webb, Flour, IRC, and Parkside make up half of  USC’s freshman housing spaces  6  While we would have liked to confirm the demographic makeup of the dorms, USC Housing keeps that  information confidential  5  
  6. 6.     COMPETITION AROUND USC    Opening in the University Park area, Boba7 would face the following competition:    1. Boba Loca  2. Cup O Joy  3. Trio House  4. Volcano Tea House  5. Boba Food Trucks  6. HASHTAG Coffee and Tea    As highlighted in the map on the right, the main boba vendors                        are concentrated towards the northeast side of campus,                including ​Cup o’ Joy​, ​Trio House​, and ​Volcano Tea House​,                    which are near the intersection of Figueroa and 30th ​ . The                    7 other competitors are in the form of Boba Loca on the west                        side of campus and 2 Boba food trucks to the North, namely                        The Boba Truck​ and ​Phantom Food Truck​.     Biggest Threats    Based on our own market research, we have reached a conclusion that Cup O Joy poses the                                  greatest challenge, followed by The Boba Truck, to Boba 7’s planned expansion in the USC                              region. The Boba Truck tends to have greater traffic than Cup o’ Joy; however, the truck is                                  only parked at USC one day a week, around lunch hours until 5pm. The Phantom Food Truck                                  stays for an even shorter period, and does not tend to attract the same crowds. Ultimately,                                Cup o’ Joy is well known for being cheap and accessible and so much of USC goes there                                    solely for convenience’s sake.    Upcoming Threats    HASHTAG Coffee and Tea is the most recent competitor to join the mix. It is located much                                  farther north and is marked with the purple pin on the above map. In its one and a half year                                        presence near campus, it has developed a reputation as a high quality alternative to Cup o’                                Joy. It is, however, nearly a mile away from campus and so it does not dominate the space                                    and has not made any solid steps towards capturing the imagination of Boba lovers around                              USC.    Competition is greatest and attracts most people to the North East side of campus  With an established culture and large number of options, the northeast side of campus attracts                              most individuals and poses the largest threat if Boba 7 were to position itself in a space that is                                      not too central.      7  For closer view, please look under “Boba7 Placement” and note the “Competitors” layer  6  
  7. 7.     PROPERTY MAP    We started by widely examining all properties within a mile radius of the university campus’                              borders both on foot and online, and began to narrow our search to points of interest. We                                  listed apartment complexes, churches, and university buildings as no priority given the                        immense difficulty and high start­up costs that would be incurred if you chose to expand                              there. Given the success of Study Hall, tucked in the heart of USC’s off­campus housing, we                                thoroughly estimated the property values of residential blocks around USC, but also decided                          that the start­up costs of tearing down the house and constructing a new building would be                                unfeasible.      The property map provides an overview of all locations within a mile of USC. Each layer                                contains different properties, which can be identified in the key located on the left hand side                                of the screen. Layers can be selected and deselected as desired to view specific information.                              Residential buildings are sorted by their property value in increments of $100,000, as listed                            by Zillow, while points of commercial interest are located in the “Traffic Generators” tab.                            Competitors are also shown on the map.    The link to the Boba Placement Map will be shared via Google Drive.      7  
  8. 8.       EXPANSION PLAN    We have accumulated our research into an adaptable expansion plan, containing short­term                        and long­term solutions. Summaries are provided below, followed by full reports for each                          expansion option.    Engaging through the USC farmers market    By participating in the USC farmers market, Boba7 could potentially open up a new revenue                              stream while penetrating the USC market segment without the high­startup costs of opening a                            store or a food truck. Although sales are limited by the fact that the market only takes place                                    once a week, this option could serve as a revenue­generating “stepping stone” to a physical                              location or as a chance to try out the wholesale tea idea by selling tea directly to customers.                                    We recommend that you reach out to Raw Inspiration in order to find out specific                              information, because the USC farmers market could be a valuable opportunity for Boba7.    Possibility of a partnership    Partnering with Lotus Lounge could help provide the necessary exposure for Boba 7 to create                              its own brand in the long term. Lotus appears to be a successful establishment, drawing most                                of its customers during the evening hours. By partnering with Lotus, Boba7 should be able to                                save itself a great deal of construction and marketing costs; the fully operational bar should                              reduce equipment prices as well. Lotus has expressed openness to the possibility of working                            with an alcoholic boba provider, but you will need to contact them and discuss the specifics                                of a potential arrangement.    Taking over current locations serving boba    These options come with the necessary equipment, furniture, and brand awareness as people                          have an affinity for these current boba restaurants. However, taking over a currently occupied                            Boba location could come with the additional cost of buying out the current owner.                            Converting one of these Boba locations also might result in partnerships with the current                            franchise owners, possibly helping Boba 7 develop a franchise model of its own and look into                                partnership development opportunities in the future with greater experience.    For our first boba store expansion option, see “Boba Loca.” For our second boba store                              expansion option, see “Cup o’ Joy.”    Expansion through purchase of vacant space    Our last expansion is to take over a vacant lot near USC. Working with these plots of land                                    will allow you flexibility in store concept, greater autonomy and a bigger shot at redefining                              the food culture around USC with a stand­alone store. This however comes at an extremely                              high price, with the rent at ICON Plaza and at the very high price tags held by other                                    properties around USC.  8  
  9. 9.       For ICON plaza, refer to the” ICON plaza” section. For the other locations around USC that                                we have identified, please review the Boba Placement Map.    Diversification through the option of a Food Truck    This option does not necessarily represent a physical expansion and was researched before                          the rest of the options. Thus, it does not follow the “Six Factors Framework”; rather, it is                                  presented as an opportunity recognition report.      A food truck could provide the opportunity to sell Boba in the USC area, most likely at a                                    lower overhead cost than a brick & mortar shop. The model could be a stepping­stone to raise                                  capital for a permanent location and gain brand awareness in the USC area or it could be a                                    long­term business model. However, there are limitations such as restricted hours of                        operation and high variable costs. We recommend that you contact Tyler Kalin at Roaming                            Hunger (contact information is listed in the report) to better understand this possibility.        9  
  10. 10.       Engaging through the USC farmers market    Option Name: USC Farmers Market  Street Address: McCarthy Quad, on USC campus  Point of Contact: Raw Inspiration  Phone: 818­591­8162  Hours: 11AM­3PM Wednesdays during USC academic year  Website: http://www.rawinspiration.org/home.html    POSITION OF SITE    The USC Farmer’s Market takes place every Wednesday during the academic school year on                            McCarthy Quad, located on the South side of campus. The Von Kleinsmid Center                          8 (classrooms) borders the Quad on the Northwest. Leavey Library (USC’s main study library),                          Everybody’s Kitchen (one of the three on­campus dining halls), New/North Residential                      College (271 students) ​ , and Birnkrant Residential College (259 students) border the Quad                        9 10 on the Northeast. Parking Structure X and the South Area Residential College (758 students)                          border the Quad on the Southeast, and Doheny Memorial Library borders it on the                              11 Southwest. The Farmer’s Market has very high visibility because it quite literally takes over                            the Quad on Wednesdays (see picture below). Parking can be found at PSX or on Figueroa,                                although most people attending the Farmer’s Market seem to be students or faculty, who are                              not parking specifically to attend the market. Each store has signage, which would be one of                                the startup­costs of opening at the Farmer’s Market. The Farmer’s Market is conveniently                          placed for on­campus students because of its proximity to Leavey Library, EVK, and many of                              the freshman residence halls. I am not sure about the accessibility to utilities; the booths that                                sell food seem to use gas­powered stoves.         8  See ​http://web­app.usc.edu/maps/​ for online interactive map  9  ​https://housing.usc.edu/index.php/buildings/new­residential­college/   10  ​https://housing.usc.edu/index.php/buildings/birnkrant­residential­college/    11  ​https://housing.usc.edu/index.php/interactive­map/    10  
  11. 11.     DEMOGRAPHICS    The Demographic profile for the USC Farmer’s Market is primarily the USC student body.                            12 USC students, as well as faculty, and those visiting USC for tours or conferences tend to have                                  a good deal of disposable income and a high willingness to spend. Food and drink tents at the                                    farmer’s market tend to do well with people visiting campus because they often plan to eat at                                  a restaurant on campus and see the farmer’s market as a great alternative. Those who buy                                drinks at Honey Queen, a fruit/vegetable juice stand currently at the farmer’s market, tend to                              be students (age 18­22) who are grabbing a drink before or after class. Volume of sales is                                  definitely higher during warm weather; you should expect sales volume to increase                        considerably as you get deeper into the Spring semester, or at the beginning of the Fall                                semester.     One of the reasons this option is so attractive is because the demographic that would be                                buying your boba would be USC students, which is the population you would like to target in                                  the long run if you open a location near USC. A spot in the farmer’s market would introduce                                    people to Boba7, thus building a customer base while gaining extra revenue to supplement                            Boba7’s downtown location.      TRAFFIC INFORMATION      There is significant student foot traffic at McCarthy Quad because of its proximity to Parking                              Structure X and Leavey Library as well as VKC and THH, two very popular buildings for                                classes. Also, McCarthy Quad is one of USC’s iconic spots the location of many large events                                (concerts, etc.). Thus, it is an important site for people visiting USC. One disadvantage of the                                traffic flow is that your target demographic (Asian­American students) find their highest                        concentration at the International Residence College at Parkside, which is across campus                        from the quad. Although these students are often near the quad for classes and for Leavey                                13 library, you would not be close to their actual place of residence.      COMPETITION    There is only one beverage company            currently at the farmers market: a stand              called Honey Queen: Organic Fruit &            Vegetable Juice which has big jugs of              sweet juice. They scoop it into cups and                add chia seeds or lychee jelly. They sell                the medium sized cups for $5. As you                12  See Executive Summary, USC Demographics  13  See USC Campus map  11  
  12. 12.     can see from the photograph, this juice              stand is very popular.        I observed Honey Queen from 12:30 to 12:45 on Wednesday, February 9 in order to make                                sales projections for Boba7. Note that because this was peak hours, we estimated that the rest                                of the day sees a lower concentration of customers. The numbers are listed below:     Time Period  15 minutes  Customers Served  33  Employees  2  Customers per Hour  132  Customers per Day (Conservative Estimate)  400  Daily Revenue  $2,000   Yearly Revenue (based on 30­week academic year)  $60,000       COST CONSIDERATIONS    The price to be a part of the farmers market is the price of $250 weekly for a 10x10 tent or                                          10% of sales, whichever is greater. In order to gain more information, call Raw Inspiration’s                              number: 818­591­8162 and they can help you through the application process. She could not                            really give me much information without your information.    This is a cheap option at 10% of sales rather than the 15% of sales that soi7 takes, especially                                      considering the volume of sales that the farmers market facilitates. Also, if USC farmers                            market works out well, there are other markets run by Raw Inspiration in L.A that charge                                lower costs and operate different days of the week. Eventually, selling at these markets could                              be Boba7’s primary revenue stream.    There are equipment costs associated with setting up at the farmers market, such as purchase                              of a tent and possibly more portable boba­making equipment. Obviously, these start­up costs                          are lower than those associated with opening a physical location; however, they must still be                              taken into account. You can garner more information on these costs by speaking with a                              representative at Raw Inspiration. Labor costs would not change, although I would presume                          that you would want a second employee working with you during the farmers markets,                            especially if Boba7 is a hit on campus. It is important to note that the increased sales volumes                                    would most likely come with increased labor costs, because I understand that you usually do                              not have a second person working at this time.      12  
  13. 13.     Possibility of a partnership – Lotus      Option Name: Partnership with Lotus  Street Address: ​3742 South Flower Street, Los Angeles, CA 90007  Phone: (213) 478­0090  Hours: Sun­Tues 5pm­12am, Wed 5pm­1am, Thurs 5pm­2am, Fri­Sat 5pm­3am  Website: http://www.lotusonflower.com/  Email: lotusonflower@gmail.com  Yelp Review: ​http://www.yelp.com/biz/lotus­los­angeles­3      Lotus is a hookah lounge that also serves sushi and shabu shabu. It is a major player in the                                      “nightlife” and “social lounging” scene in the USC area. The following lists a detailed                            analysis of why a partnership between Boba 7 and Lotus would be very advantageous toward                              expanding Boba 7’s brand. The management has mentioned that they are interested in a                            partnership and that they can discuss further details via email.       POSITION OF SITE    Lotus is strategically located within the vicinity of both USC, downtown Los Angeles, and                            nearby retailers. Lotus is the only restaurant located on this section of Flower Street, and                              while its bright signage and open concept aesthetic distinguish it from its surroundings, it is                              located in a corner, which will reduce the overall visibility of the restaurant. Lotus is located                                adjacent to the USC Credit Union and Garnett Apartments and directly across the street from                              Tuscany Apartments. ​Underneath Tuscany Apartments is a strip mall full of restaurants,                        including Chipotle, Chik­fil­a, Coldstone Creamery, The Coffee Bean and Tea Leaf, all of                          which generate high levels of traffic from USC students. These institutions will help drive                            consumers to your location and generate more sales.    For customers not living in these complexes, Lotus is conveniently situated within the USC                            Free Uber and Campus Cruiser range and is also easily accessible by walking or biking. This                                is fortunate, as many USC students already make the trek out for food. There is a large                                  parking lot directly adjacent to the restaurant which provides both parking and space for                            outdoor social lounging. The building itself is in quality condition and is well advertised.     13  
  14. 14.       DEMOGRAPHICS    As previously stated, Lotus is located next to two USC student apartment complexes. USC’s                            student population is likely to have disposable income, and many students already enjoy                          going to Lotus to use the hookah longue. Lotus generally attracts younger populations who                            come out for a relaxing night with friends. Customers are nearly always in groups, and                              because of Lotus’s excellent reputation, there is often a waiting line outside the restaurant.                            The surrounding residential population is largely Latino, which bodes well for Boba7 in that                            many of the local customers may be predisposed to favor your specialty fusion Horchata                            Boba drink.       TRAFFIC INFORMATION    Because Lotus opens at 5pm, customers do not start arriving until the late afternoon. All of                                the 80 customers observed at Lotus between the hours of 8­10 PM either arrived by Uber or                                  by car. Students are more likely to utilize the Uber service, as it is within the free coverage                                    offered by USC after 7 PM. Cars have easy access to Lotus because of the nearby freeway.                                  However, despite this time­period commonly being associated with the rush hour in Los                          Angeles, Flower Street has very little traffic at this time. It appears that this location does not                                  have much access to incidental passer­by, which may serve as an issue for Boba7 to appeal to                                  locals looking for a new boba restaurant. Despite this lack of constant traffic, ​Lotus is                              generally very busy during its happy hour (Mon­Fri 4­7 PM), offers an excellent chance for                              Boba 7 drinks to gain exposure. Also, there is always somebody in Lotus at any given time to                                    utilize their Hookah service and this traffic can still be very healthy for Boba7 sales.     Lotus appears to remain successful largely due to its reputation and existent marketing,                          meaning that if Boba7 were to choose this location, it would gain a respectable pool of                                potential customers.    COMPETITION    Competitors such as Trio House and Volcano Tea House have not monopolized the boba                            market, while both food trucks only operate during daylight hours. All competing boba                          locations, including Boba Loca and Cup o’ Joy, close by midnight, meaning that by                            collaborating with Lotus Boba7 would benefit from a three­hour monopoly on boba. In                          addition, if you collaborate with Lotus, Boba7 will be more than a boba shop, but also                                become an instant part of the social nightlife experience, a business aspect your competitors                            will not be able to compete against. Boba Bear, a restaurant relatively far from campus,                              currently combines hookah and boba in the same way that this partnership aims to                            accomplish. Their consistent success bodes well for this potential partnership.     COST CONSIDERATIONS    14  
  15. 15.     Probably the most attractive aspect of a partnership with Lotus is that there are no costs                                associated with purchasing land, construction costs, remodeling, marketing, or licensing. The                      inside of Lotus is very spacious, dimly lit, decorated with a “zen” Asian theme, which work                                together to create an effective lounge­like area. Equipment costs should be low as well, given                              that Lotus already has an operational bar. Labor costs should stay around the same level (you                                may need to take into account extra hours of operation). Free parking will also save you the                                  cost of the yearly parking pass you currently purchase. Another notable cost advantage is that                              Lotus has an alcohol license, allowing Boba 7 to continue serving its specialty drinks                            throughout the entirety of its transition to this location. Also, Lotus’s reputation around                          campus is strong enough so that marketing efforts are not necessary to acquire customers and                              achieve profits. Lotus already has a TV, music, and wifi.  Taking over current locations ­ Boba Loca    Street Address: ​Address: 3617 S Vermont Ave, Los Angeles, CA 90007  Phone: (323) 766­2622  Hours: 9AM ­ 9 PM Everyday  Website: http://www.bobaloca.com/  Menu: http://www.bobaloca.com/category_s/1814.htm      SPECIFIC LOCATION    Boba Loca’s USC branch is located ​on Vermont Ave, just west of USC. Boba Loca is                                bordered by residential areas on the west, and it is not visible from Exposition Blvd or                                Jefferson Blvd, the main avenues that daily traffic flows through. Boba Loca is located                            within a small strip mall that contains the following businesses: Smart & Final, Citibank,                            Togo’s Sandwiches, Supercuts, Advance America, Radioshack, CashAdvance, and Taco                  Bell. To the north of the plaza is the United States Post Office’s Dockweiler Station and to                                  the south is the medium­sized St. Mark’s Lutheran Church. All of these institutions will help                              drive consumers to your location and generate more sales. Smart & Final’s size dominates the                              area and Taco Bell’s stand­alone location closer to the street makes it stand out. The                              presence of retail outlet Smart & Final, as well as fast food outlets Togo’s Sandwiches and                                Taco Bell may also help your sales. Overall, Boba Loca’s general location is disadvantaged                            14 by its distance from major roads and position on the west side of campus, but its proximity to                                    USC and nearby commercial and retail locations more than makes up for it.    The key drawback for Boba Loca’s position is that most off­campus student housing is                            concentrated to the north of campus and USC’s more popular shopping plazas are located in                              that general direction, ranging from the North East to the North West along Figueroa and                              Vermont respectively. Please refer to the Housing Concentration Map in the USC Location                          section of the Executive Summary for a better idea on housing concentration.    14  The presence of other fast­food restaurants or food stores may help rather than hinder sales, which indicates  that shoppers may be attracted to an area rather than to a specific store. The presence of other restaurants in the  immediate vicinity is often referred to as a restaurant cluster (Okabe et al., 1985; Pillsbury, 1987)  15  
  16. 16.       POSITION OF SITE    Within the plaza, Boba Loca’s ​is in the center and is a focal point of the commercial area in                                      that regard. ​While Taco Bell and Smart & Final have been discussed with regards to car                                traffic, it is clearly visible from the entire parking lot and sidewalks, and given that most of                                  your traffic will be coming on foot from USC, Boba Loca’s visibility is sufficient.                            Throughout the six hours that was spent monitoring traffic in and out of Boba Loca, the                                parking lot was never full. Parking is also free in contrast to the nearby paid parking                                structures of USC and so it is common for students to park in this parking lot to avoid costs.                                      As far as signage goes, there is ample space and infrastructure in place for a well­lit sign                                  above the store entrance. There is a plaza sign near the main entrance of the plaza clearly                                  visible along Vermont Avenue. Oddly, Boba Loca does not have a place on the plaza sign, so                                  if you plan to move into this location, plan to work to get your presence up there. Boba                                    Loca’s site is accessible from both Vermont Ave and 36th Plaza and is quite convenient not                                only for traffic coming from outside of the area, but also the local residential and student                                populations given that it is tucked in between USC’s campus and residential areas. Boba                            Loca is, however, quite far from public transportation and utilities. This plot’s                        Commercial/Industrial zoning type will allow you to operate your business as any restaurant                          would. Overall, Boba Loca has an average place within its site, but the site itself is a                                  15 valuable asset.      DEMOGRAPHICS    Boba Loca has a following in the non­student population of the area and we recommend that                                this be cultivated if you choose to operate out of Boba Loca’s current location. Another big                                portion of your customers will be coming from the ​Webb, Flour, Parkside, and IRC student                              dorms. These student dorms are on the western edge of campus and several gates lead out                                onto Vermont Avenue. Around 2,500 students live here, a large proportion of which are                            Asian, and so put you closest to your target demographic. There may also be more students in                                  general. ​Not only are USC students primed for your boba product, it seems a small portion of                                  the local population towards the west has taken to boba as well.      TRAFFIC INFORMATION    While there is significant traffic during the day going down Vermont Avenue, the majority of                              the residential­to­work traffic flow travels along Exposition and Jefferson. Boba Loca lies                        about a mile away from the Interstate 110, so that highway will have little influence on traffic                                  volume. On­foot traffic will be quite ample given Boba Loca’s vicinity to the only wholesale                              grocer in the area and USC. There is a traffic light on the intersection of 36th Plaza and                                    15  Look up this plot’s Zoning Type by using the AIN ​5040­029­025 through this link  http://maps.assessor.lacounty.gov/GVH_2_2/Index.html?configBase=http://maps.assessor.lacounty.gov/Geocort ex/Essentials/REST/sites/PAIS/viewers/PAIS_hv/virtualdirectory/Resources/Config/Default  16  
  17. 17.     Vermont Avenue which will gives the plaza Boba Loca is located in more exposure. The side                                streets of 36th Plaza and 36th Street are simpler two lane streets with room for parking along                                  the sidewalk. These high­volume traffic patterns will remain quite consistent, but only during                          USC’s academic year. During academic breaks, especially winter and summer break, most of                          your customer base will disappear. A large amount of traffic passes by Boba Loca and the                                key to taking advantage of this foot traffic is on­campus marketing and connections while                            also building ties with the residential population for the academic breaks.      COMPETITION    In its specific vicinity, Boba Loca faces no considerable threat from any other direct                            competition and very limited threat to similar cafes and restaurants due to their lack of                              influence. However, the dominance of Taco Bell and the absence of any other established                            stores within the strip mall might reduce the chances of individuals coming upon Boba 7 by                                chance. Having said that, this makes for an exciting opportunity for Boba 7 to start being the                                  center of traffic in this mall.      COST CONSIDERATIONS    Boba Loca’s USC branch is a franchise, part of a 22 branch chain. Given this, the current                                  franchisees could be convinced to work for you. On the other hand if we were to consider                                  buying Boba Loca out, the most attractive aspect is there being no costs associated with                              purchasing land or construction. Cost of improvement and development could be costly                        depending on how much remodeling you wish to do to match your desired theme. The inside                                of Boba Loca is elongated, yet spacious with a large skylight; the space lends itself to a                                  lounge­like area. Equipment costs should be low as well, given that Boba Loca already has                              all the machinery in place to operate a boba vendor. Labor costs should stay around the same                                  level as it costs you now. Free parking will also save you the cost of the yearly parking pass                                      you currently purchase.     Reputation    Partially because it is away from the concentration of food outlets near the Northeast side of                                campus and because of its lack of reputation, Boba Loca sees far fewer customers from USC.                                Currently Boba Loca’s USC location has 1.8 stars on Google Reviews, 2 stars on Yelp. Many                                people on our team haven’t even heard of the place. ​There is also ​a negative perception of the                                    neighbourhoods west of campus, west of Boba Loca, given its proximity to lower­income                          areas and lack of student housing there.    17  
  18. 18.     Taking over current locations – Cup o’ Joy    Option Name: Cup o’ Joy  Street Address: ​3016 S Figueroa St, Los Angeles, CA 90007  Phone: (213) 745­8569  Hours: ​10:30 AM ­ 11:45 PM  Monday ­ Friday  11AM ­ 11:45 PM Saturday ­ Sunday  Website: No Official Website     Facebook, https://www.facebook.com/CupOOJoy  Menu: Physical Copy in Appendix      POSITION OF SITE    Located on S. Figueroa Street between W 30​th and W 31​st Streets, Cup o’ Joy’s visibility                                changes depending on the location of the viewer. Northbound traffic and patrons already                          inside the plaza, Cup o’ Joy is easily visible; it is in the middle of a strip mall, so regardless                                        of a consumer’s intended destination within the plaza, they are able to see Cup o’ Joy. In                                  addition, Cup o’ Joy is easily viewable through the windows of Fatburger, which occupies the                              opposite side of the parking lot. The parking lot contains 39 standard parking spots, and is                                shared by Cup o’ Joy, its three strip mall partners (Hawaiian BBQ, Arabian Nights Smoke                              Shop, an American Express Kiosk, and ​Fred Lloyd Insurance​), as well as Fatburger.         Relocating to this location will keep Boba7 relatively close to the heart of Los Angeles, while                                at the same time maintaining easy accessibility. Not only can USC students utilize Uber (Free                              18  
  19. 19.     after 7:00 pm), but there are stations for both the LA metro bus and train services within                                  walking distance.     Despite these benefits, the storefront is not visible from southbound traffic on Figueroa,                          which may be a limiting factor in attracting new customers T​hus, for this location to continue                                to be successful, Boba7 will want the Ono Hawaiian BBQ to be successful, as it is the only                                    shop visible to southbound traffic. At the time of this write­up, this restaurant has not yet                                opened for business, so there are no success metrics available.       View from across S. Figueroa.     Boba7 will clearly not want to rely on another restaurant to achieve success, and can instead                                rely on its customers will to raise social awareness once it has finished relocating. This                              should be relatively simple, as many USC students will be eager to try a new boba shop in the                                      hopes of finding high quality product, as there is currently no high quality provider near                              campus. Knowing Boba7’s superior quality, many of these customers will likely be pleased,                          and look to share this new restaurant with their friends.      19  
  20. 20.       View from S. Figueroa and W 30​th Street. (Note the lack of branding on the back of the                                    building)       DEMOGRAPHICS    Cup o’ Joy is surrounded by a vast residential population. Most of this population is                              comprised of students, but the location is also situated to reach workers both commuting to                              Los Angeles and working in the nearby shopping areas. Cup o’ Joy enjoys premium access to                                many University Housing units, as well as the nearby Galen Center and the Fraternity Row.                              Because it is one of the closest locations to many of the freshman dorms, including Pardee                                Tower, Marks Tower, Marks Hall, Trojan Hall, Birnkrant, and New/North, this location gives                          Boba7 the potential to satisfy and maintain a customer base that may continue to support the                                company throughout their four years spend on campus. The population of USC is made up of                                largely white, Asian­American, and international students with disposable income; of which                      the latter two groups are likely culturally disposed to consume your product.     Both the daytime and evening populations provide large potential markets. The daytime                        population is comprised mostly of students either travelling to class or to the off­campus                            restaurants. The evening population, while numerically smaller, appears more likely to be of                          relevance. Not only are students more easily swayed to travel off campus because of USC’s                              free Uber service, but many students will already be off campus of their own volition, either                                due to sporting events at the Galen Center or parties on the Row. The two 2­hour observation                                  periods supported the belief that the area is more active at night, and also suggested that                                majority of customers were of East­Asian descent and appeared to be students; a small                            portion of the customers did appear to be either permanent residents or employees of nearby                              businesses. Though these individuals’ backgrounds were not confirmed, it appears that Cup                        20  
  21. 21.     o’ Joy does have a small following in the non­student population of the area, though it is very                                    small in comparison to the student following.      Thus accommodating for both USC students and the nearby retailers, the potential market                          population is quite large. It will be important to note when targeting freshmen that many will                                be predisposed to utilize the on­campus food facilities, as the University requires them to buy                              an all­you­can­eat dining hall meal plan. This issue in securing freshman customers will be                            slightly offset in that many enjoy eating off campus when possible, and the dining halls close                                at 10:00 PM, meaning that students attending parties and sporting events will often find                            themselves forced to find food off campus. While Cup o’ Joy does have an excellent location                                for securing freshman customers in these situations, it will likely miss out on students living                              in the ​Webb, Flour, Parkside, and IRC student dorms, as they are all situated on the western                                  side of campus. These dorms house around 2,500 students, many of whom are of Asian                              descent and could be within your target demographic.       TRAFFIC INFORMATION    There is significant traffic throughout the day flowing through Figueroa, and the nearby LA                            Metro bus and train systems run throughout the day.  In addition, Cup o’ Joy lies less than                                  half a mile from the Interstate 110, giving shops located on S. Figueroa a constant stream of                                  potential customers. Foot traffic is also quite heavy, given the Cup o’ Joy’s aforementioned                            proximity to the Row, Galen Center, and Residential buildings, and should remain similar for                            the foreseeable future.  Figueroa has four consistent lanes for northbound traffic, as well as                            stations the LA Metro Bus stop. Southbound traffic, however, only has two consistent lanes.                            This southbound traffic will likely contribute very little to the actual customer base of the                              plaza, due to the poor visibility of the plaza. The side street of W 31 Street has 2 lanes and                                        space for parking, with one lane for each eastbound and westbound traffic. Both Figueroa and                              W 31st Street have sidewalk access for pedestrians. These traffic paths will provide                          consistent, high­volume traffic that should remain constant throughout USC’s academic year.                      During academic breaks, it is likely that most of this traffic will disappear. The speed limit on                                  Figueroa is 35 mph, and is further slowed by traffic lights and high volume traffic during rush                                  hour. This will help to provide ample time for drivers to see your restaurant. For individuals                                who enter the plaza, there is a parking lot shared between Cup o’ Joy and the other stores in                                      its strip mall    To maximize the large amounts of traffic near Cup o’ Joy during the school year, I suggest                                  focusing on on­campus marketing, specifically emphasizing efforts on freshmen, as securing                      their loyalty will provide you with a consistent stream of customers for the remainder of their                                time at USC. To maintain success during school recess, it will also be crucial to also create                                  ties and incentives for the local community to choose to visit your boba shop as opposed to                                  your competition, which will likely be closer to their homes.       COMPETITION  21  
  22. 22.       Most of the current competitors in USC’s boba market are situated near Cup o’ Joy, which is                                  actually a blessing in disguise. Boba7’s product is much better than Cup o’ Joy’s, which                              according to both student customers and the reviews below, are average­at­best. Boba7’s                        drinks are also much higher quality than those of Trio House or Volcano Tea House, the two                                  other boba providers in the area. Because of the low quality of their drinks, the fact that these                                    locations carry boba at all is not well known, so if Boba7 implements smart marketing tactics,                                it could easily steal the few customers that visit these locations, becoming the only major                              provider in the area. However, ​while this location is excellent for securing customers around                            the eastern side of campus, it is worth mentioning that there is a boba shop on the west of                                      campus called Boba Loca, detailed in the previous section.          22  
  23. 23.         COST CONSIDERATIONS    Probably the most attractive aspect of buying out Cup o’ Joy is that there are no costs                                  associated with purchasing land or construction costs. Cost of improvement and development                        could be costly depending on how much remodeling you wish to do to match your desired                                theme, but is not necessary outside of changing nameplates and the menus. Cup o’ Joy’s                              seating area is rectangular, which provides patrons with ample space to socialize and                          therefore creates an atmosphere conducive to “lounge” concept that Boba7 wants to capture.                          Equipment costs should be low here, given that Cup o’ Joy already has all the machinery in                                  place to operate as a boba distributor. Labor costs should stay around the same level as it                                  costs you now unless you choose to hire more employees to help manage the increased                              consumer­base. Additionally, Cup o’ Joy has a parking lot, which should eliminate the need                            to purchase a parking permit    Other Concerns    By buying out a previously existing boba provider, Boba7 will likely have to deal with                              pre­existing expectations from past patrons. Fans of Cup o’ Joy may be skeptical or even                              resentful of Boba7 for buying out Cup o’ Joy, but due to a lack of quality boba restaurants                                    around USC, they will find themselves giving Boba7 a chance rather quickly and this can act                                as an avenue for building a loyal customer base in USC upon moving in. The bigger problem                                  would be patrons who started avoiding Cup o’ Joy, either for poor service (see below) or low                                  quality boba. These potential customers might find it hard to step over their hesitance to go                                back to the same location as Cup o’ Joy as many of them may still actively avoid the location.                                      It would be Boba7’s responsibility to redefine the experience so that customers give it a                              chance.          23  
  24. 24.       Expansion through purchase of vacant space – ICON Plaza    Address: 3606 S Figueroa Street, Los Angeles, CA 90007  Contact Information:   Leasing Office ­ (213) 747­4266  Real Estate Agent ­ (310) 435­0446  Website: ​https://www.americancampus.com/student­apartments/ca/los­angeles/icon­plaza  Store Size: 1700 sq ft  Kitchen Equipment: Available  Rent per sq ft: $5.50    SPECIFIC LOCATION    ICON Plaza offers an ideal location, close to the heavily                    visited Figueroa stretch and a central location very close                  to campus with heavy human and vehicular traffic. The                  biggest limitation of this position is that unlike the other                    Boba places, ICON plaza is not a strip mall and as such                        does not have any parking space available. This would be                    the biggest deterring factor as far as this location goes.                    There is however, street parking available along Figueroa                during permitted hours. The lack of parking would make                  it harder for people to stop and grab Boba. It should not                        be an issue once the brand is established.    POSITION OF SITE    The graduate student commuters frequent Starbucks in ICON Plaza and Pizza Studio also                          exists right next to the proposed location for Boba 7. This vacant space is opposite the new                                  Marshall Business School hall being built next to Popovich. Once it is completed, there will                              be more people around this part of campus and the businesses nearby will likely see a growth                                  in demand. Being positioned right next to Starbucks will result in competition and will also                              require Boba 7 to not just be a beverage store, but more of a cafe/restaurant with food options                                    as Starbucks often has regulations with its leasers with regards to the kind of establishments                              they can also subsequently lease to in the same complex. This can however be seen as an                                  opportunity for Boba 7 to grow with another arm to its business or a partner firm with a focus                                      on food, creating better utilization of the space, and making the rent feasible.      DEMOGRAPHICS    There are over 2,400 students living on campus in the East side along with around 400                                students living in Tuscany and ICON Plaza and around 1,000 graduate students who come to                              USC while parking their vehicle at Parking Structure A. Most of the other demographics are                              similar to those reflected in the Executive Summary. It would be accurate to follow those                              24  
  25. 25.     details because if you were to choose the ICON Plaza location, you’d be in a prime spot and                                    should ideally target the entire USC population.      TRAFFIC INFORMATION    ICON Plaza is on a major road and will easily capture the attention of people passing. It                                  comes with the option of putting up a name board, and the store is positioned just on the side                                      of Pizza Studio and further down from Starbucks, which occupies the corner lot of ICON                              Plaza’s ground floor.    There are various parking structures, such as PS1, which attract lots of commuting students,                            especially graduate students, a lot of whom study on the South Side of campus. Other                              frequent visitors include those who live in Tuscany, ICON Plaza and the nearby USC                            housing. It is also part of a food stretch, which is walking distance from the East side of                                    campus and the academic buildings of Popovich and Price. Many of these consumers walk                            towards chipotle, chick­fil­a and the other restaurants that operate at Tuscany. The location is                            right next to the Galen Center and several bus stops, and it is also on the path that most                                      visitors to the Coliseum take when leaving from games and concerts. There is usually a full                                crowd at Pizza Studio during game days, representing the volume that comes through this                            path. The Science Center, Echo Park and other attractions are also close by. However, visitors                              typically do not venture onto Figueroa in search of food or beverages, but this can be an                                  opportunity in the future.      COMPETITION    There will be some competition from Popovich Cafe as they typically draw most of the                              students studying in the academic buildings. Most graduate students, once inside the                        academic buildings, prefer to do this instead of heading to Starbucks although it is just                              opposite the street. This could pose a challenge which can be overcome if Boba 7 were to put                                    up prominent signs.    The other Boba competitors up north on Figueroa Street might still pull customers to                            themselves if Boba 7’s products are not able to truly capture the imagination of the users. As                                  such, this location is at prime proximity, therefore the main differentiating factor would be                            the quality of product and extent of differentiation from the other Boba locations.      COST CONSIDERATIONS    For you to consider this location, your estimated rent per month will be around $9350, a stark                                  increase over what you might be currently paying. However, this location is a large space and                                comes with the opportunity of partnering with other vendors with whom the rent can be                              divided. With regards to cooking equipment, Built Burgers used to previously occupy this                          space and the space is built for a cafe or restaurant style business, with the necessary stove                                  25  
  26. 26.     gas and water outlets and kitchen equipment. This will reduce any further costs you might                              have to bear.  Diversification through a Boba7 Food Truck  #Boba #FoodTruck    MARKET RESEARCH    IBISWorld 2015 figures:        The food truck industry is in a period of “Quality Growth” (IBISWorld) that is expected to                                continue in the coming years. The industry enjoys a wide consumer base on the west coast,                                particularly in Los Angeles and San Francisco. Food truck customers tend to be young (18­35                              years old) and there are several food trucks located on the border of USC’s campus. The                                following chart lists the top cities in terms of food truck, based on 2014 numbers from NCR                                  Corporation:    Los Angeles                           ​366    San Francisco       ​  ​  ​  ​   ​193    Portland                ​  ​  ​  ​   ​168     Washington D.C.  ​  ​  ​  ​   ​167    New York              ​  ​  ​   ​116    Many believe that the rapid growth of the food truck industry we see today was catalysed by                                  the effective marketing and quality food of Kogi, founded in 2008 by Roy Choi (Southern                              California Mobile Food Vendors Association). The following overview is provided by                      IBISWorld:    Industry Structure  Life Cycle Stage: ​Growth  Revenue Volatility: ​Medium  Capital Intensity: ​Low    Industry Assistance: ​Low    Concentration Level: ​Low    Regulation Level: ​Medium  26  
  27. 27.     Barriers to Entry: ​Low  Industry Globalization: ​Low      Competition Level: ​High        27  
  28. 28.     The main challenges facing food trucks today are increasing competition and increasing                        government regulation. Government regulation varies greatly based on state/city, but Los                      Angeles county is relatively food­truck friendly with only a permit registered to the truck and                              a yearly certification inspection (Public Health, County of Los Angeles).    IBISWorld lists the five key success factors for the food truck as ability to control stock on                                  hand, proximity to key markets, license/permit, effective quality control, and a unique,                        differentiated menu. Below is an analysis of these success factors in relation to                          Boba7/Labobatory.    Success Factor  Description  Boba7  Ability to control  stock on hand  Minimal wastage,  experience with restaurant  industry  Experience running Boba7 for  five years, relatively low  wastage costs as reported in  2015 financial statement      Proximity to key  markets  Location, location,  location for a food truck.  Roaming Hunger can help  with this, borders of USC  campus have high volume      Must have license  Permit and yearly  certification inspection  Roaming Hunger provides  permit      Effective quality  control  High standards to pass  inspections   Not as many health standards  for drinks compared to foods       Unique,  differentiated menu  Competition from other  food trucks and restaraunts  Past success and unique drink  menu         The outlook for the food truck industry looks positive moving forward; the consumer                          confidence index is expected to rise as people gain more disposable income. Here is the                              revenue outlook, provided by IBISWorld:    Revenue Outlook  Year  Revenue $ million  Growth %  2016  889.5  3.8  2017  926.9  4.2  2018  955.9  3.1  2019  975.7  2.1  2020  996.2  2.1  2021  1,012.1  1.6      COMPETITOR ANALYSIS    28  
  29. 29.     There are two boba­selling food trucks that operate on the north side of campus near Cafe 84,                                  namely the Boba Truck and Phantom Food Truck. The Boba Truck, however, only stays a                              portion of the day and usually only once a week; the Phantom Food Truck stays even less                                  frequently. Although these competitors could provide obstacle to Boba7’s growth, they may                        also support the popularity of boba and serve as a primer for Boba7’s higher quality boba.  OVERVIEW    This report provides preliminary information about the opportunities a food truck provides                        and the costs of starting a food truck. It is not a complete business plan; the report identifies                                    resources so that you can explore the food truck option further if you see fit. Roaming                                Hunger is a website that connects people with food trucks in their area, as well as provides                                  services to vendors entering the food truck industry. We have been in contact with Tyler                              Kalin, a Marketplace Manager, who has helped us figure out what your options are and what                                your costs would be to get into the food truck industry. His contact information is below, and                                  you can feel free to contact him anytime.     Tyler Kalin  323­868­6410  tyler@roaminghunger.com    The main two options he gave would be leasing a food truck or buying a food truck, both of                                      which can be done through Roaming Hunger.      LEASING A FOOD TRUCK    The price to lease a food truck through Roaming Hunger is between $2,000 and $4,000 a                                month, usually falling right around $3,000. Tyler would help connect you to a truck that                              matches your needs and price range, and he has already sent me the best­fit truck he has                                  available now. I have attached the information for this truck at the end of the report.     In Los Angeles, food trucks are required by law to belong to a commissary, which is where                                  the food truck lives. Commissaries have hook­ups for water, propane, etc. and have electrical                            inputs to keep the fridge running overnight to avoid spoilage. They also provide dump                            stations and security from theft/damage.    Commissary costs run at $900 – $1,200 a month. Roaming Hunger provides the permit for                              the vehicle and covers normal wear & tear repair costs. Tyler also stipulated that insurance                              for a food truck (in case of accident) is covered by normal car insurance, so for overhead                                  costs, you would be looking at ~$3,000 lease payment and ~$1,000 of commissary fees, for a                                total of around $4,000 a month.     In terms of start­up costs, the deposit, which you receive back at the end of the lease, is two                                      months lease payment, so around $6,000. You must also wrap the vehicle, i.e. put your logo                                on the side. Roaming Hunger can do this for you for $4,000 to $5,000, but I believe it would                                      be cheaper with a company that specializes in vehicle wrapping. Many companies do online                            29  
  30. 30.     quotes for vehicle wraps; here is a link to Top Wraps, which gets excellent reviews on Yelp,                                  and can give a quote over the phone: http://www.yelp.com/biz/top­wraps­los­angeles­2.The                  startups costs total to about $10,000 ­ $12,000 for leasing a food truck.          30  
  31. 31.     BUYING A FOOD TRUCK    There are two options for buying a food truck from the Roaming Hunger marketplace: buying                              a used truck, or building a custom truck. Tyler recommends buying a used food truck as an                                  even better option than renting, if you have the credit to do so. This is because the mortgage                                    on the food truck is normally a little bit less than a lease payment, and you would be building                                      equity in the truck.     The truck prices vary widely based on the features and equipment, but we think the trucks                                priced around $60,000 would be a good fit. The down payment for these trucks is 10% of the                                    price, so it would be the same start­up cost as leasing, at about $6,000. The health permit also                                    comes with the truck once again.    In terms of building a custom truck, Roaming Hunger does fully renovate used trucks (with                              about 40­90K miles on them) for $55,000 ­ $75,000. With this option, the truck would be                                custom­built for your needs. Roaming Hunger can also build the custom car new, which runs                              from $80,000 to $150,000 depending on features.     In terms of overhead costs for buying the truck, commissary costs + mortgage payments                            would be about the same as renting, around $4,000 a month. However, if you buy the truck,                                  you would be building equity towards owning the truck and possibly selling it or leasing it                                out in the future. The start­up costs are also the same, $10,000­$12,000. This is of course                                dependent on quality and features of the food truck.      CATERING    Through Roaming Hunger’s website, you would be connected to people looking to cater their                            events. This is a great opportunity for an extra revenue stream, as well as an opportunity to                                  build your personal brand as a boba maker and bartender.    In Los Angeles, you cannot sell alcohol on the street from a food truck. However, because                                you have a brick & mortar store and an alcohol license, you can sell alcohol at private events.                                    So any catering opportunities (college parties, business events), you would be able to sell                            alcoholic boba.       EXAMPLE OF AN AVAILABLE FOOD TRUCK    Tyler provided the following description:    The Açai & Coffee Juice Truck was manufactured according to the customer’s needs for                            delivering Açai bowl, fresh cold pressed juice and at the same time to have coffee available                                inside the truck. As you can appreciate, the truck has all necessary equipment to make cold                                pressed juices of many different types of fruits and vegetable, and healthy Açai bowls. It has                              an espresso coffee machine as well.  31  
  32. 32.             Features and equipment:    • Easy to drive  • Easy to operate  • Built in durable materials  • Reliable  • 3 Compartment sinks  • Hand wash sink  • Top shelving  • Bottom storage  • Prep area  • Service window  • Propane generator  Comes with:    • Pressed Juice Machine  • Blender  • Espresso Coffee Machine  • Coffee Grinder  • Drink Dispenser  • Under the counter refrigerator  • Large / Tall Refrigerator  • Cash Register  • Receipt Printer  • Square Stand  • TV Screen     This truck is in the $3,000/month range to lease, but you could talk to Tyler to inquire about                                    the specific price and mileage. This truck has similar features to the used trucks in the                                $60,000 range on the marketplace        32  
  33. 33.     Appendices    Volcano Tea House Menu        33