Sustainable Market for Juice Plus Shop - Case Study Example

JUICE PLUS 1.0 Introduction Beverages the world over are taken by people from all walks of life at various functions whether formal or informal. Fruit juice specifically is recommended with every meal due to its nutritious value to the human body. Juice is consumed by the masses in restaurants, cafes, hotels, recreational facilities just to name but a few. Thus, there is a sustainable market for fruit juice. 1.1 New Juice Recipes There are a number of companies and shops serving different flavors and recipes of juice and to be able to establish a sustainable business and brand, Juice Plus has invested both intellectual and financial resources in creating new and uniques juice formulas. Juice Plus has focused on formulas that are of nutritious value to customers blended from fresh fruits with no additives. In order to have a wider reach, Juice Plus has developed formulas with different flavors so as to avail a favorite flavor for everyone. 1.2 Juice Plus Shop Juice Plus has set out to operate a Juice Shop that will act as the manufacturing base of the Juice Plus recipes as well as packaging center. Not only will Juice Plus operate this single outlet but engage existing food courts and restaurants in retailing these wonderful formulas to the wider market. Juice Plus juices will be kept chilled once manufactured and served either chilled or at room temperature. Chilling will be a core part of the manufacturing, storage and preservation of Juice Plus as there will be no artificial preservatives to the formulas. 2.0 Business Model A business model clearly defines how a business is managed and handled by both debtors and creditors. It may also determine the type of financing that the business may be able to attract as well as its relation with the owners or otherwise shareholders. There are different types of business entities with most businesses using the sole proprietorship, partnership or company model. 2.1 Sole Proprietorship This type of business entity refers to an entity where there is no distinct separation between the owner of the business and the business itself. This type of entity is usually owned by an individual who usually takes all the liability of the business entity. 2.2 Partnership Partnerships refer to business entities where there exists more than one owner of the business entity and the owners share liability collectively. Both profits and losses incurred by the business are shared proportionately amongst the partners. Partnerships must always have collective ownership of some way mostly financially as well as participatory. 2.3 Company A company is a business entity where a group of people with a common interest come together to achieve a specific goal or a set of objectives. In most cases, the shareholders of a company do not take full liability for the business but this depends on whether the company is limited by shares, limited by guarantee or otherwise. Companies are usually their own entities which can take liabilities, sue other entities as well as be sued. Choice of the business model is therefore crucial as it may determine the type of funding that the business can receive as well as cushion its owner(s) from liabilities it incurs in its operations. The choice of the model comes into play in many of the operations of the business including registration of the business name, trade name, trademarks, trade secrets and patents amongst others. Juice Plus will highly consider registration as a Limited Liability Company. 3.0 Intellectual Property Intellectual Property (IP) covers the legal rights of both artistic and commercial creations of the mind including business ideas, inventions, literary works, artistic works among others. There are different types of intellectual property including but not limited to patents, copyrights, trademarks and trade secrets. 3.1 Trademark, Logos & Branding A trademark is a type of intellectual property that is a distinctive name, word, symbol, logo or otherwise used by a business entity to identify products and/or services it offers as having specifically originated from them. A trademark has a specific function of branding products and/or services of a specific business. 3.2 Trade Secret A trade secret refers to a process, design or formula held by a business that is not publicly available. This gives the business a competitive edge over its competitors. 3.3 Patents Patents on the other hand refer to rights exclusively granted to an entity for inventive works over a specified time duration. 3.4 Juice Plus Juice Plus will pursue the options of trademarks as well as trade secrets to attain the competitive advantage and ensure unique branding of its fruit juice products. All the fruit juices using Juice Plus formulas will bear Juice Plus trademark. Juice Plus will also register the new fruit juice recipes as trade secrets so as to protect the new formulas from other business competitors. 4.0 Business Financing For any business start up, start-up and working capital costs have to be greatly considered. Start up capital refers to initial costs that will be incurred to set up the business including registration, equipment and raw material purchases amongst others. Working capital refers to costs that will be incurred for successful operations of the business. Table 4.1 is a summary of the capital requirements. START UP CAPITAL Particulars Cost(AUSD) Juice Manufacturing Equipment 10000 Registration Of Company (Limited Liability, Licenses & Legal Fees) 2000 Raw Materials (Fruit Juices, flavor, etc) 3000 Total 15000 WORKING CAPITAL (6 Months) Particulars Cost(AUSD) Salaries 30000 Rent 12000 Communications 6000 Contingencies 6300 Total 54300 Grand Total Finance Requirements 69300 Table 4.1 : Start up & Working Capital There are several channels of business financing including shareholder equity, venture capital injection, banks, finance companies among others. External funding other than shareholder equity should mainly be used on asset acquisition and the type of external funding comes into play as short-term loans cannot be used to finance long-term requirements like equipment. 4.1 Shareholder Equity Shareholder equity refers to funds injected by the shareholders of a business entity towards funding of the business. The funding is usually geared towards asset finance as well as working capital for a business entity. It is the most preferable business finance option as the business entity avoids the risk of being thinly capitalized and ending up paying lots of money in debt repayments as well as interest rates. 4.2 Venture Capital Enterprises Venture capital refers to capital financing provided to enable the start up of a potentially high-profit business or business idea. Thus venture capital enterprises do focus on financing such potential business concepts which require high start up costs especially associated with bringing a product into the market as well as marketing it. 4.3 Loans (Banks, Friends & Lending Companies) Banks do provide personal and corporate financing options to its clients. Banks provide the financing at different lending rates which are dependent on the amount of loan being provided and the payment period of the loan. These institutions do provide their loans either as short-term or long-term loans. And for business purposes, short-term loans can be acquired if the funds are intended for purposes whose break-even duration is a short time period while long-term loans are usually preferred for equipment and asset financing. Financing can also be done from friends where friends of the shareholders or partners in the business can advance loans to the business. This is usually preferable because the interest rates are not as highly inflated as those of banks and other financial lending institutions. There are other lending companies including cooperative societies that may lend its members or any other business entity that is in the same interest group as the society. 4.4 Credit Unions Credit unions are associations that may lend money to its members at a minimal interest rate or at none. These associations may help the partners in the business entity to fund the business and the loan repaid later. In most cases, credit unions are membership organizations. 4.5 Juice Plus Alternative Juice Plus will consider multiple financing options in order to cut on interest rates as well as fund its start-up and operations adequately. This being a venture capital and the partners do not want to take full liability of the business entity, external funding that involves venture capital funding as well as minimal interest loans will highly be considered especially for long term asset acquisition. 5.0 Conclusions & Recommendations With the vision of establishing Juice Plus as an entity of its own with its own assets and liabilities, it is most viable register Juice Plus as a Limited Liability Company. This will ensure that Juice Plus is limited by shares, can sue other entities for intellectual property violations as well as take responsibility for its liabilities. Registration as a company will also ease with inclusion of more shareholders when necessary especially with regard to raising of start up and working capital for the business entity. It is therefore recommended that Juice Plus Limited be registered as a limited liability company. Juice Plus Limited will also proceed to register a Juice Plus as a trademark of Juice Plus Limited as well as apply for a trade secret for the fruit juice formulas and recipes created by the company. Thus all Juice Plus Limited Juice will be branded with the Juice Plus logo as well as have the Juice Plus trademark and all infringement of intellectual property right taken up by the company. Financing of Juice Plus Limited will mainly be from shareholder equity as well as an invitation to increase the shareholding with an aim of direct capital injection. If need be, the option of venture capital will looked into after a well drafted project plan with time lines and expected break even period. Finally, as a last resort, Juice Plus may seek to apply for asset financing from one of the major credit banks to facilitate acquisition of assets required for start up of the business. 6.0 References & Resources 1. A. Arora, M. Ceccagnoli, and W M. Cohen, “R & D and the Patent Premium” (mimeo, Carnegie Mellon University, 2004). 2. A. M. Spence, “Cost Reduction, Competition, and Industry Performance,” Econometrica 52 (1984): 101–21. 3. Arundel, A. [2001], “Patents in the Knowledge-Based Economy”, Beleidsstudies Technologie Economie 37, 67-88. 4. Barragan Arce, J. [2005], The Apples of Competition. A Study of Plants Innovation in Ninenteenth and Twentieth Century USA. Ph.D. Thesis, University of Minnesota, in progress. 5. Boldrin, M. and D. K. Levine [2005a], “The Economics of Ideas and Intellectual Property”, Proceedings of the National Academy of Sciences 102, 1252-56. 6. BARNEY, J. (1986). Organizational Culture: Can it be a source of competitive advantage? 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