Reference no: EM131400686

Managerial Economics Assignment: Chocolate Company

Directions:

Consider the problem of opening your own chocolate candy retail business in your local town (Orlando, Florida). In order to do this, you need estimates on the amount of chocolate candy you can sell in a given month, as well as estimates on the cost of running your business. Conduct research to determine the average per-capita consumption of chocolate candy to determine how much candy you can realistically be expected to sell in a given month in your town. Find a suitable location within your town, for example a small retail store at the mall or some other location that is for lease, and define fixed costs such as rent, required insurance, etc. to determine your fixed costs. Set up an appropriate number of hours to be open and determine how many employees you will need and how much you will have to pay them. Data on wages for different occupations in different parts of the country is available from the Bureau of Labor Statistics. Finally, determine various costs, for example your average fixed and variable costs, and the price at which you can realistically be expected to sell your chocolate candy. Are you able to turn a profit on your business? Why or why not? Write up your analysis and discussion in a 800 to 950 word APA formatted paper (word count does not include title page, Certificate of Authorship, or references)

Every firm in the real world deals with more than just production costs because there are other variable cost attached like opportunity cost of next best alternative in use, long run cost involves capital cost of setting up business, transaction cost involve both explicit and implicit cost where firms have to ensure reduction in all of these. There are other operational marketing, short run cost than firms undertake to ensure profitable functioning so that they earn over and above what they spend. To achieve economies of scale minimum use of resource is necessary to ensure more output is generated to reduce cost firms hire labor on contractual basis to reduce full time cost of hiring. Use of more technology expertise R&D helping to achieve economies of scale. There are ways to seize opportunities like outsourcing, negotiation of lower prices, less travel expenses, geographical features, keeping a check on capital cost.

Below is a little bit of INFO I found (just for your information).

Research says that in United States $20.6 billion worth of chocolates are sold every year. This means that opening a chocolate shop can be a lucrative investment. The research also says that the sales for boutique chocolate shops alone increased 17% between 2006 and 2011, a trend that does not appear to be slowing down soon. This means that the end reward to be a chocolatier is very appealing. One of the safe options if I plan to open a chocolate candy shop would be to adopt a franchisee since these are businesses that are well established elsewhere giving a ready-made foundation to build on and costing only the initial fees and ongoing royalties.

Chocolate Store Franchise Costs

 

Franchise	Franchise Fee	Royalties
The Chocolate Bar	$35,000	4 percent
Kilwins	$40,000	5 percent
Chocolate Works	$50,000	5 percent
Rocky Mountain Chocolate Factory	$24,500	5 percent
Chocolate ChocolateChocolate Factory	$20,000	5 percent
Schakolad Chocolate Factory	$30,000	$600/month

As per this research opening a candy franchise can cost anywhere from $112,000 to $622,000 including franchise fees, location, equipment, employees and supplies to make the chocolate.

Chocolate is often an impulsive buy. A indoor or a strip mall location or a store front in a down town can be a good idea. Further a lot of licenses and permissions need to be obtained. Few of which are business license, a seller's permit, health code permit, fire department permit, I will have to apply for the Employer Identification number, liquor license (incase of chocolates infused with liquor), weights and measures device registration. Other than permissions various insurances are also important like a General liability which is a must - this covers any and every accident that may happen on the property or any kind of illness brought by the product to the consumers after consuming the same, further I will need worker's compensation insurance for the workers helping to run the business. I will also have to make provision for intellectual copyright. I will need some equipment as well depending on the chocolates that I decide to sell some of the equipment are work table, ingredient bins, commercial mixers, pans and pan racks etc.

To add to all this the factor that will help me boost my business is efficient marketing because it is only through productive marketing that I will win over potential customers and expand my business.