Truck Stop - Business Plan

Truck Stop - Business Plan 1.0 Executive SummaryInterstate Travel Center is intended to be the major travel center in Dallas, Texas. It will consist of a convenience store, gas/diesel islands, restaurant, and amenities for the trucking business. Interstate Travel Center is a corporation owned and operated by Steve and Janet Smith.The company's management philosophy is based on responsibility and mutual respect. Interstate Travel Center has an environment and structure that encourages productivity and respect for customers and fellow employees.Interstate Travel Center is organized into two main functional areas: convenience stores of this type of freight are food and consumer staples delivered locally, and manufactured goods shipped between commercial establishments or delivered to consumers or retail outlets.Truckers have the largest share of the freight market. Unlike railroads, pipelines, or water carriers, they don't face geographic limits caused by physical constraints, and can offer door-to-door service. They also pay relatively little to use the nation's highway system. Railroads, by contrast, must build, maintain, and police their rights-of-way.The trucking industry consists of two broad segments: private and for-hire. In turn, for-hire truckers fall into two broad categories: truckload (TL) and less-than-truckload (LTL) carriers.The accompanying Market Analysis chart and table reflect the total projected potential customers that Interstate Travel Center might acquire. The categories have been simplified to include all instate commercial trucks (both the TL and LTL segments) and all instate private vehicles as listed in the U.S. Department of Transportation's 1997 Vehicle Inventory for the state of Texas. The listed number of private vehicles in Texas is approximately 17 million, however, only a small percentage of private vehicle owners will be inclined to prefer truck stops over gas stations. Therefore, instead of using the larger number, a percentage of the overall private vehi cles based on the percentage of private vehicles that truck stops service is used. The third category contains all interstate and NAFTA-based commercial business that passes through Texas, and the final category reflects all out-of-state private vehicles, such as tourists. Again, the numbers in this final category reflects a percentage of out-of-state private vehicles that truck stops normally service.The growth rates used in this table are based on figures available from the U.S. Department of Transportation. The growth rate for the out-of-state and NAFTA commercial vehicles is only approximate, as it is difficult to project what affects investments in the "Port-to-Plains" trade corridor will have on traffic that passes adjacent to the travel center.Finally, it must be noted that although the Market Analysis table indicates that the largest market segment is instate private vehicles, the actual percentage will probably be significantly less. Experience has shown that the largest pe rcentage of vehicles serviced by truck stops, such as Interstate Travel, is in the commercial truck segment.Market Analysis (Pie)Click to EnlargeMarket AnalysisPotential Customers Growth 2001 2002 2003 2004 2005 CAGRInstate Commercial Trucks 4% 500,102 517,606 535,722 554,472 573,879 3.50%Out-of-state Commercial Trucks 6% 285,111 302,218 320,351 339,572 359,946 6.00%Instate Private Vehicles 3% 1,286,952 1,325,561 1,365,328 1,406,288 1,448,477 3.00%Out-of-state Private Vehicles 4% 458,154 476,480 495,539 515,361 535,975 4.00%Total 3.63% 2,530,319 2,621,865 2,716,940 2,815,693 2,918,277 3.63%4.1 Market Segmentation [back to top]With some $344 billion in 1998 revenues, the trucking (or motor carrier) business claimed approximately 79% of the U.S. commercial freight transportation market. This total was divided among two sectors: private carriage and for-hire.Figure 3. Commercial Freight Distribution(In billions of dollars)Transportation Billion $ % of TotalTrucking, Total $344 63.6%Pri vate, Interstate $115 21.3%Private, Local $85 15.7%Truckload $65 12.0%Local For-Hire $40 7.4%LTL, National $9 1.7%LTL, Regional $11 2.0%Package/Express (ground) $19 3.5%Railroad $36 6.7%Pipeline (oil gas) $26 4.8%Air freight, Package Domestic $17 3.1%Air freight, Heavy Domestic $6 1.1%Water (Great Lakes/rivers) $7 1.3%Transportation Total* $436 80.6%DistributionWarehousing $70 12.9%Logistics Administration $35 6.5%Distribution Total $105 19.4%Total $541 100.0%*Excluding $5 billion in international cargo.Sources: Standard Poor's, Data Resources, Inc., and Cass Information Systems.Private CarriersAlthough private carriers comprise the largest component of the motor carrier industry, financial information isn't available for them. However, the industry is estimated to provide services valued at some $200 billion annually (or 58% of motor carrier revenues in 1998).The Private Truck Council estimates that there are more than three million trucks operated by private fleets, and these tr ansport 3.5 billion tons of freight annually.For-Hire CarriersThe For-hire category generated $144 billion in 1998, or 42% of the industry total. Of that $144 billion, some $105 billion (73% of the sector's business) came from truckload shipments, and $39 billion (27%) was from less-than-truckload and package/express delivery.Truckload (TL): The national for-hire truckload segment had total revenues of $65 billion in 1998. The TL sector is largely privately owned, with the exception of the top ten publicly owned companies. (For this reason, we focus on the LTL sector in this survey.) Schneider National Carriers is the largest TL operator, with revenues of $2.8 billion in 1998, followed by J.B. Hunt Transport Services ($1.8 billion) and the Landstar family of truckload carriers ($1.3 billion). Of the 50,000 truckload carriers, perhaps 95% have annual revenues of less than $1 million.Less-than-truckload (LTL): We estimate that the less-than-truckload market garnered $20 billion in 199 8. Of this amount, the fast growing regional segment accounted for slightly more than the national market.The largest national LTL carrier in 1998 was Roadway Express Inc., with $2.32 billion in LTL revenues in that year; the company's total revenue of $2.55 billion includes TL freight. Yellow Freight System (a unit of Yellow Corporation) was close behind, with $2.25 billion (out of $2.46 billion total). Consolidated Freightways Corporation was third, with $1.95 billion in LTL revenues.In the regional LTL market, Con-Way Transportation (a unit of CNF Transportation Inc.) was the largest player, with $1.5 billion in LTL revenue in 1998. Second place belonged to US Freightways, whose family of five carriers has generated some $1.4 billion in LTL revenue. American Freightways Corporation was third, with $928 million in LTL revenues.4.1.1 Market Trends [back to top]Industry TrendsWhile a driver shortage continues to plague the truckload sector, the LTL carriers have adapted to changing market conditions in order to capitalize on growth opportunities. Intermodal shippers also stand to benefit from market trends. Finally, the evolution of e-commerce stands to intensify competition among all carriers.E-commerce is Big BusinessThe Internet is rapidly changing how the consumer selects and purchases merchandise. Age-old relationships between vendors, distributors, retailers, and carriers are being torn apart. For many Internet users, the computer has displaced the telephone as a means of transmitting a purchase order, while catalog vendors who have put their wares on the Internet may now receive orders electronically, in addition to mail and phone orders. For the shipping industry, e-commerce is changing the way in which goods are ordered.The estimated size and growth potential for e-commerce varies widely. Forrester Research, based in Cambridge, Massachusetts, has estimated e-commerce at the consumer level at $7.8 billion in 1998, and projects that it will rise to $18 billion in 1999, $33 billion in 2000, and $108 billion in 2003. According to Forrester, total worldwide e-commerce, including business-to-business transactions, was estimated at $43 billion in 1998, and projected to hit $127 billion in 1999.The Direct Marketing Association has calculated that e-commerce generated just $5.9 billion in 1998 (or 0.2% of sales), and will climb to 2.5% of retail sales by 2004, representing a 50% annual compound growth rate during this period.4.1.2 Market Growth [back to top]Dallas SupportAccording to information released by the Texas Department of Transportation (TxDOT), nearly $600 million in projects are already programmed over the next four years, and more than $1 billion in additional transportation projects are recommended for the Dallas region. The projects are on top of a $175 million increase in NAFTA transportation funding through 2003 that was part of the border initiative announced in April, 1999.It is said that a Ports-To-Plains Trade Corrido r could be in the future for Dallas, making it a major port of entry to Mexico. The corridor has been named a high priority corridor by the U.S. Congress, which has placed a greater emphasis on improving transportation in these regions. The major highway would have a direct route from the northern United States to two major port entries: Dallas and Eagles Pass.4.2 Business Participants [back to top]Industry: Trucking Terminal FacilitiesFigure 4, below, indicates the Market Statistics for trucking terminals. These are defined as establishments primarily engaged in the operation of route transshipment facilities used by highway-type property-carrying vehicles, including complexes which provide maintenance and service for motor vehicles.Figure 4: Market Size Statistics-Terminal FacilitiesEstimated number of U.S. establishments 1,386Number of people employed in this industry 64,105Total annual sales in this industry $181 millionAverage employees per establishment 52Average sales per est ablishment $.8 millionIndustry: Gasoline Service StationsGasoline service stations primarily engage in selling gasoline and lubricating oils. These establishments frequently sell other merchandise, such as tires, batteries, and other automobile parts, or perform minor repair work. Gasoline stations, combined with other activities, such as grocery stores, convenience stores, or carwashes, are classified in Figure 5 below according to primary activity.Figure 5: Market Size Statistics-Gasoline Service StationsEstimated number of U.S. establishments 71,159Number of people employed in this industry 471,041Total annual sales in this industry $98,817 millionNumber of employees per establishment 7Average sales per establishment $1.8 millionMarket Analysis by SpecialtyFigure 6 provides a market analysis by specialty for the gasoline service stations segment.Figure 6: Market Analysis by SpecialtySIC Code SIC Description Number of Businesses % of Total Total Employees5541-0000 Gasoline Service Stations 50,544 71% 286,0625541-9901 Filling Stations, Gasoline 18,844 26.5% 137,8975541-9902 Marine Service Station 171 0.2% 1,1235541-9903 Truck Stops 1,600 2.2% 45,959Total/Average 71,159 100% 471,041Note: Not all establishments have a specialty.5.0 Strategy [back to top]Interstate Travel Center's strategy is to develop a major travel center in Dallas, Texas. The center will consist of a major convenience store, gas/diesel islands, restaurant, and amenities for the trucking business. Key components of the company's initial strategy are summarized as follows:Advertising. Promote the new business through extensive advertising.Location. Provide a clean, safe and appealing location for travelers.Convenient center. Provide a convenient center with a full array of products and services for those that are traveling as well as for the citizens of Dallas and the surrounding communities.One-stop shop. Be the one-stop shop for travelers to and from Dallas.NAFTA trucking trade business. Cat er to the NAFTA trucking trade business.Good return on investment. Maintain a profitable business with a good return on investment.Interstate Travel Center will be developed in four phases. Phase development will enable the owner/operator to introduce viable, profitable goods and services without over-building. Over-building at this location would be easy to do because of the slower growth of the area associated with NAFTA, it would also mean certain failure if the owner/operator cannot secure resources for several years of financial staying power to support a negative cash flow. The timeline for the implementation of the various phases is contingent upon customer response and profitability and action is initiated at the discretion of the owners. It is assumed that the implementation of Phase II will occur sometime after the first three years of operation.Phase I: Initial DevelopmentDiesel fueling lanes: four; dual-sided fueling.Gasoline MPDs: four dispensers.Travel Store: Approxima tely 3,000 square feet.Showers: Approximately four stalls.Truck Loungers.Game Room.Restaurant: Seating for 64-69 patrons.Truck Parking: room for approximately 100-150 trucks.Scales: Owner to purchase scales.Phase II: Increased Goods and Services, Third Year of OperationDiesel fueling lanes: add two for a total of six lanes.Truck parking: add 100-150 spaces.Phase III: Increased Goods and Services, Fifth Year of OperationDiesel fueling lanes: increase to eight dual-sided fueling.Gasoline MPDs: increase to six dispensers.Travel Store: Enlarge to 4,800 square feet.Showers: Add four for a total of eight stalls.Truck services: Add lease space for truck services such as tires, batteries, oil and lube.Phase IV: Increased Goods and Services, Sixth Year of OperationAdd fast food unit.Add additional restaurant seating for a total of 100 patrons.Motel: Add 48 room unit.Truck Parking: Add 100 spaces (Total 400-525).Truck Wash.5.1 Marketing and Sales [back to top]A small traveler's guide will be published to advertise the travel center and all it has to offer. Advertising will be disseminated through the use of local newspapers, and radio and television commercials. Other promotional items, such as billboards and local chamber of commerce propaganda will also be employed. Customer service will be the number one priority of this business. This will, in turn, generate repeat business.5.2 Sales Strategy [back to top]The sales figures are based on projections of vehicles using the major highways adjacent to Interstate Travel Center. The yearly growth figures are based on conservative projections of increasing customer use as marketing and customer retention builds an established customer base. The growth rate for gas/diesel is five percent per year for the first three years. The restaurant growth rate is slightly higher, at seven percent per year. It it assumed that this venture will grow a stable customer base more quickly than the other ventures due to its more unique product experience. Finally, the growth rates for the travel store is set at four percent per year. This again reflects the belief that this venture will have the most difficulty in building service awareness and retention.Sales MonthlyClick to EnlargeSales ForecastUnit Sales 2001 2002 2003Diesel (gallons) 2,550,000 2,677,500 2,811,375Gasoline (gallons) 1,050,000 1,102,500 1,157,625Travel Store 230,004 236,904 244,011Interstate Travel Restaurant 81,276 86,965 93,052Rebates, allowances, etc. 246,600 246,600 246,600Total Unit Sales 4,157,880 4,350,469 4,552,663Unit Prices 2001 2002 2003Diesel (gallons) $1.75 $1.75 $1.75Gasoline (gallons) $1.50 $1.50 $1.50Travel Store $3.75 $3.75 $3.75Interstate Travel Restaurant $13.00 $13.00 $13.00Rebates, allowances, etc. $1.00 $1.00 $1.00SalesDiesel (gallons) $4,462,500 $4,685,625 $4,919,906Gasoline (gallons) $1,575,000 $1,653,750 $1,736,438Travel Store $862,515 $888,390 $915,041Interstate Travel Restaurant $1,056,588 $1,130,545 $1,209,676Rebates, allowan ces, etc. $246,600 $246,600 $246,600Total Sales $8,203,203 $8,604,910 $9,027,661Direct Unit Costs 2001 2002 2003Diesel (gallons) $1.67 $1.67 $1.67Gasoline (gallons) $1.40 $1.40 $1.40Travel Store $0.75 $0.75 $0.75Interstate Travel Restaurant $2.00 $2.00 $2.00Rebates, allowances, etc. $0.00 $0.00 $0.00Direct Cost of Sales 2001 2002 2003Diesel (gallons) $4,258,500 $4,471,425 $4,694,996Gasoline (gallons) $1,470,000 $1,543,500 $1,620,675Travel Store $172,503 $177,678 $183,008Interstate Travel Restaurant $162,552 $173,930 $186,104Rebates, allowances, etc. $0 $0 $0Subtotal Direct Cost of Sales $6,063,555 $6,366,533 $6,684,7846.0 Management Summary [back to top]Steven and Janet Smith will be the sole owners of Interstate Travel Center for the foreseeable future. It is planned that a management staff, consisting of a full-time manager and a part-time assistant manager, will be hired to handle the day-to-day operations of both the gas/diesel service and the restaurant sections of the travel c enter. As the company continues to grow, so too will management.Personnel Plan2001 2002 2003Steve Smith $50,000 $50,000 $50,000Janet Smith $50,000 $50,000 $50,000Convenience store/Gas station Manager $31,200 $31,200 $31,200Restaurant Manager $36,000 $36,000 $36,000Assist Manager - Cook $28,800 $28,800 $28,800Cook 2 $26,880 $26,880 $26,880Cook 3 $26,880 $26,880 $26,880Cook 4 $26,880 $26,880 $26,880Cook 5 $26,880 $26,880 $26,880Cook 6 $26,880 $26,880 $26,880Waitress/Waiter $11,808 $11,808 $11,808Waitress/Waiter $11,808 $11,808 $11,808Waitress/Waiter $11,808 $11,808 $11,808Waitress/Waiter $11,808 $11,808 $11,808Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Waitress/Waiter $7,680 $7,680 $7,680Assist. Manager - Cashier $9,000 $9,000 $9,000Cashier $6,000 $6,000 $6,000Cashier $6,000 $6,0 00 $6,000Cashier $6,000 $6,000 $6,000Cashier $6,000 $6,000 $6,000Maintenance $9,600 $9,600 $9,600Total People 0 0 0Total Payroll $481,672 $481,672 $481,6727.0 Finance [back to top]The following topics outline the financials for Interstate Travel Center.7.1 Assumptions [back to top]The chart indicating the projected cash account does not take into account the investment needed to initiate Phases II-IV. The General Assumptions table states some of the more important business assumptions for the company.General Assumptions2001 2002 2003Plan Month 1 2 3Current Interest Rate 10.00% 10.00% 10.00%Long-term Interest Rate 10.00% 10.00% 10.00%Tax Rate 25.42% 25.00% 25.42%Other 0 0 07.2 Break-even Analysis [back to top]The break-even chart and table below describe how much money will need to be made to be profitable each month. As can be seen in the table, 224,821 units per month, or $116,907, is necessary for Interstate Travel Center to be in the black. These numbers can also be seen with the accompanying chart.7.3 Projected Cash Flow [back to top]The following table and chart reveal the projected cash flow for Interstate Travel Center for fiscal years 2001, 2002, and 2003.CashClick to EnlargePro Forma Cash Flow2001 2002 2003Cash ReceivedCash from Operations:Cash Sales $8,203,203 $8,604,910 $9,027,661Cash from Receivables $0 $0 $0Subtotal Cash from Operations $8,203,203 $8,604,910 $9,027,661Additional Cash ReceivedSales Tax, VAT, HST/GST Received $0 $0 $0New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of Other Current Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $0 $0 $0Subtotal Cash Received $8,203,203 $8,604,910 $9,027,661Expenditures 2001 2002 2003Expenditures from Operations:Cash Spending $714,316 $732,403 $772,642Payment of Accounts Payable $6,500,180 $7,133,241 $7,484,370Subtotal Spent on Operations $7,214,496 $7,865,644 $8,257,012Additional Cash SpentSales Tax, VAT, HS T/GST Paid Out $0 $0 $0Principal Repayment of Current Borrowing $0 $0 $0Other Liabilities Principal Repayment $0 $0 $0Long-term Liabilities Principal Repayment $275,000 $275,000 $275,000Purchase Other Current Assets $0 $0 $0Purchase Long-term Assets $0 $0 $0Dividends $0 $0 $0Subtotal Cash Spent $7,489,496 $8,140,644 $8,532,012Net Cash Flow $713,707 $464,266 $495,649Cash Balance $963,707 $1,427,973 $1,923,6227.4 Projected Profit and Loss [back to top]The chart and table below projects the yearly profit and loss for the company. For a monthly breakdown, please see the appendices following the plan.Pro Forma Profit and Loss2001 2002 2003Sales $8,203,203 $8,604,910 $9,027,661Direct Costs of Goods $6,063,555 $6,366,533 $6,684,784Other $0 $0 $0 Cost of Goods Sold $6,063,555 $6,366,533 $6,684,784Gross Margin $2,139,648 $2,238,377 $2,342,878Gross Margin % 26.08% 26.01% 25.95%Expenses:Payroll $481,672 $481,672 $481,672Sales and Marketing and Other Expenses $220,800 $278,800 $378,800Deprecia tion $30,000 $30,000 $30,000Leased Equipment $49,800 $49,800 $49,800Utilities $49,200 $49,200 $49,200Insurance $91,800 $91,800 $91,800Rent $24,000 $30,000 $34,000Payroll Taxes $72,251 $72,251 $72,251Other $0 $0 $0 Total Operating Expenses $1,019,523 $1,083,523 $1,187,523Profit Before Interest and Taxes $1,120,125 $1,154,854 $1,155,355Interest Expense $235,104 $208,750 $181,250Taxes Incurred $224,890 $236,526 $247,585Net Profit $660,131 $709,578 $726,520Net Profit/Sales 8.05% 8.25% 8.05%Profit MonthlyClick to Enlarge7.5 Business Ratios [back to top]The table below outlines industry profile statistics for the gas and service station industry, as determined by the Standard Industry Classification (SIC) Index code 5541, Gasoline Service Stations. These statistics show a comparison of the industry standards and key ratios for this plan.Ratio Analysis2001 2002 2003 Industry ProfileSales Growth 0.00% 4.90% 4.91% 10.80%Percent of Total AssetsAccounts Receivable 0.00% 0.00% 0.00% 10.60%Inve ntory 8.91% 8.08% 7.40% 13.30%Other Current Assets 1.76% 1.52% 1.33% 25.60%Total Current Assets 44.65% 53.10% 59.86% 49.50%Long-term Assets 55.35% 46.90% 40.14% 50.50%Total Assets 100.00% 100.00% 100.00% 100.00%Current Liabilities 17.14% 15.18% 13.98% 31.60%Long-term Liabilities 78.45% 59.39% 44.52% 23.10%Total Liabilities 95.59% 74.58% 58.50% 54.70%Net Worth 4.41% 25.42% 41.50% 45.30%Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 26.08% 26.01% 25.95% 16.50%Selling, General Administrative Expenses 17.99% 17.77% 17.86% 10.40%Advertising Expenses 2.34% 2.32% 2.77% 0.20%Profit Before Interest and Taxes 13.65% 13.42% 12.80% 0.50%Main RatiosCurrent 2.60 3.50 4.28 1.55Quick 2.08 2.96 3.75 0.91Total Debt to Total Assets 95.59% 74.58% 58.50% 54.70%Pre-tax Return on Net Worth 707.28% 113.35% 62.39% 2.50%Pre-tax Return on Assets 31.20% 28.82% 25.89% 5.50%Additional Ratios 2001 2002 2003Net Profit Margin 8.05% 8.25% 8.05% n.aReturn on Equity 527.55% 85.01% 46.54% n.aActivit y RatiosAccounts Receivable Turnover 0.00 0.00 0.00 n.aCollection Days 0 0 0 n.aInventory Turnover 24.00 24.58 24.59 n.aAccounts Payable Turnover 14.37 14.33 14.28 n.aPayment Days 24 25 25 n.aTotal Asset Turnover 2.89 2.62 2.40 n.aDebt RatiosDebt to Net Worth 21.67 2.93 1.41 n.aCurrent Liab. to Liab. 0.18 0.20 0.24 n.aLiquidity RatiosNet Working Capital $780,131 $1,244,709 $1,726,229 n.aInterest Coverage 4.76 5.53 6.37 n.aAdditional RatiosAssets to Sales 0.35 0.38 0.42 n.aCurrent Debt/Total Assets 17% 15% 14% n.aAcid Test 2.08 2.96 3.75 n.aSales/Net Worth 65.56 10.31 5.78 n.aDividend Payout 0.00 0.00 0.00 n.a