Paris Baguette

Franchise Proposal

Regional Franchise Investment in the UAE

Thursday, September 25, 2014

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Table of Content

Introduction ...... 4

Reasons to Choose the UAE ...... 5

Development Plan & Site Selection ...... 8

Highlight about Major Locations...... 9

Business & Management Structure ...... 12

Major Duties and Responsibilities ...... 12

Training of Operations Personnel ...... 13

Political & Economic Conditions: ...... 14

Current Business Environment ...... 14

Taxation in United Arab Emirates ...... 16

Unemployment ...... 16

Current Political Environment ...... 17

Competitors Analysis ...... 18

Financial Highlight ...... 23

Demand Assumptions ...... 27

Financial Statements ...... 33

Investment Valuation ...... 34

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Table of Figures

Figure 1: Dubai Map ...... 10

Figure 2: The Organization Chart of Paris Baguette Franchise in UAE ...... 12

Figure 3: Ease of Doing Business – 2014 ...... 15

Figure 4: No. of branches of McDonald’s and KFC in UAE ...... 18

Figure 5: Customer Service and Shop Fit Ranks of the main Competitors ...... 21

Figure 6: Ranking of the main Competitors versus product quality, marketing, locations ...... 22

Table of Tables

Table 1: Average annual rental terms ...... 11

Table 2: Average monthly rental terms ...... 11

Table 3: No. of locations of McDonald’s and KFC in UAE ...... 18

Table 4: Competitors Grid ...... 19

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This proposal is developed to provide a business assessment of establishing the presence of Paris Baguette - Korea in the Middle East through a franchise investment. It describes the investment opportunity for implementing the franchise in the UAE either as a master franchisor or/and acting as a franchisee.

In general, the vision is a successful implementation of the franchise in the UAE to meet the demand of the middle to higher income bracket of resident and tourists.

The investment vision is to acquire the master franchise of Paris Baguette to be implemented in the gulf (In United Arab Emirates mainly). Implementation includes either acting as a franchisee or/and acting as a regional franchisor responsible for sub franchising the brand for other (sub) franchisees interested in the UAE (and mainly in Dubai).

Best effort will be put to create a unique place where customers can socialize with each other in a comfortable and relaxing environment and enjoy the best bakeries and patisseries in town. The decoration and the design will help our customers to relieve their daily stresses by providing piece of mind through great ambience, convenient location, friendly customer service, and products of consistently high quality.

Throughout this proposal, there are several anchors that were pinpointed to proof the high viability of this business opportunity. Development plan & site selection of the outlets was highlighted first, followed by a discussion of the political and economic conditions and competitive environment.

Afterwards, a major description of the management structure, training of the operations personnel and the financial plan were all highlighted.

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GCC is a fertile ground for foodservice companies, particularly due to the region’s flourishing economy; urbanization; growth of its multicultural, young population; and steady rise in per capita income. Consequently, international fast food and casual dining restaurants are successfully making inroads into the GCC region through franchise agreements, the preferred method of doing business in the region.

When considering the gulf, The United Arab Emirates (UAE) is marked a top destination for foreign investment, according to khaleej times, The UAE is expected to attract foreign direct investment (FDI) of $14.4 billion in 2014, 20 per cent higher than 2013.1

. Solid reputation of Dubai: Dubai has developed a distinct identity as a modern and dynamic emirate. Dubai now enjoys a global reputation as an economic hub and an excellent location for investment.

. High potential return on Investment: Investing in UAE in General and Dubai particular is considered a golden opportunity for high returns on investment for different investors’ clusters. In addition, the recent win of Dubai for hosting World expo 2020 will significantly boost foreign direct investment in services sectors of the country.

. Remarkable attraction to tourist: Dubai is a destination of more than 9 to 11 million tourists per year. The first 9 months of 2013, the emirate welcomed around 7.9 million visitors, up 93.8% from the previous year. The below diagram illustrates the level of tourism activity in the UAE compared to the rest of the GCC2

1 http://www.khaleejtimes.com/biz/inside.asp?section=uaebusiness&xfile=/data/uaebusiness/2014/January/uaebusines s_January196.xml 2 http://91.74.184.66/videoplayer/report_114.pdf?ich_u_r_i=7478959bce16789a83f1fd469978fc82&ich_s_t_a_r_t=0&ic h_e_n_d=0&ich_k_e_y=1445098922751163592480&ich_t_y_p_e=1&ich_d_i_s_k_i_d=3&ich_u_n_i_t=1

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. Globalized market: The UAE is a liberal economy that is fully integrated within the world economy. The UAE was ranked 24 out of 144 for 2013, ascending from rank 27 realized in 2012 on the global competiveness index issued by the World Economic Forum3

. Strategic location: Dubai is strategically located between Europe, Asia and Africa and attracts approximately 5 million investors and tourists on an annual basis.

. High standards of safety: The low crime rate associated with the fair judicial system qualifies the UAE (and Dubai) to be superior destination for business implantation

. Home of diversity: The UAE embraces more than 200 nationalities, which makes it a rich spot of workforce diversity; which usually creates a superior value of professional conduct of business they are constantly learning from one another and creating natural vibrancy and globalization.

. High standards of living and appreciation of luxury: Dubai represents around 60% of the UAE’s luxury market and 30% of the Middle East Market.

3 http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf

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. Ease of doing business: According to the World Bank, the United Arab Emirates was ranked the 23rd over 189 economies on the “ease of doing business” index issued by the World Bank Group4

. Enormous development in the pipeline: The winning of EXPO 2020 will create endless opportunities; attract inbound investment alongside further endorsing pivotal sector such as leisure & Hospitality, real estate, construction and transportation. This event will provide opportunities on which small projects will be able to capitalize on.

. Solid F&B service sector in UAE: Dubai’s government, in its endeavor to make the country an ultimate tourist destination, is constantly seeking creative ways to increase the number of visitors. Following the success of the Dubai Shopping Festival, the government has started hosting the Dubai Food Festival (DFF) to celebrate and enhance the country’s position as the region’s gastronomy capital. DFF, which was held between February 21st and March 15th 2014, with almost 700 restaurants participating, presented the general public with a wide range of food- related activities, tastings, offers, and events that showcased the emirate’s diverse food offerings.

4 http://www.doingbusiness.org/data/exploreeconomies/united-arab-emirates/

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The implementation of the franchise chain will be gradually carried out over five years, the plan is to end up with 7 branches in 5 years, and target cities are Dubai, Abu Dhabi and Sharja.

The franchise will be implemented as follows:

1- The regional franchisor will be incepting one shop, therefore, will be acting as a full franchisee, location selected is “Dubai Mall” 2- The regional franchisor will support the inception of additional 6 locations in Dubai, Abu Dhabi and Sharjah

The factors that were used to select places were:

1- The extent of covering the main sites in Dubai 2- The level of population density areas

Y1 Y2 Y3 Y4 Y5

Shop 1

Shop 2

Shop3

Shop 4

Shop 5

Shop 6

Shop 7

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Dubai

Abu Dhabi Shrajah

The roll out plan is as follows:

1- First year: 2 shops in Dubai in Dubai Mall and Mall of the Emirates, the one established in Dubai Mall will be fully managed by the regional franchisor 2- Second year: Additional shop in Dubai in Midriff City Center 3- Third year: Additional shop in Dubai in Festival City Center 4- Forth year: Additional shop in Abu Dhabi in Yas 5- Fifth year: Additional 2 shop, one in Abu Dhabi (Forth year)- Galleria Mall and the other in Sharjah in Saharah Mall

The UAE is one of the most growing economies in the world. With the hectic lifestyle in the country, the growing population, and the developing industries and commercial project, the need for a place where people can socialize in a comfortable and relaxing environment enjoying the best bakeries and pastries in the town is highly vial to grantee success

The success for Paris Baguette will vastly depend on the selected shopping venue. The below section gives a general highlight of the most two important mall in the UAE (and in the Middle East): Dubai mall and the Mall of Emirates.

Strategic kick-off location- Dubai Mall: Dubai Mall has become the world’s most visited destination for the 3rd consecutive year, in 2013 alone; the mall embraced over 75 million visitors. Choosing such location to start the business will shorten the time needed for establishing brand recall and will vastly contribute to building client loyalty. Dubai Mall is a significant investment in global retail as it introduced 165 new brands into the Middle East through its massive outlets & unveiled flagship stores of international brands. Tourists

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Mall of Emirates: A shopping center that includes a variety of shops opened there, and the popularity of the mall. The multi-level shopping center currently features more than 560 international brands, more than 700 stores, 11 anchor stores with a total gross leasable area (GLA) of 234,479 sqm including department stores, fashion, lifestyle, sports, electronics and home furnishing outlets. The family leisure includes Ski Dubai - the Middle East’s first indoor ski resort and snow park, The range of shops at the Mall of the Emirates include anchor stores like the Carrefour hypermarket, Centre point, Debenhams, Harvey Nichols, Home Centre, Jashanmal and Marks & Spencer. There are outlets for books, stationery, toys, gift, fashion, art, accessories, electronics, jewelry, watches, furniture, cosmetics, perfumes and financial services. Around 36 million person visits the mall annually. The below map illustrates the locations of prime Malls of Dubai ( as a major location of the development plan)

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Paris Baguette dinning outlets will focus on creating an atmosphere where customers can relieve their daily stresses and get peace of mind. In addition to those valuable factors, customers’ loyalty will lay greatly on great ambience, convenient location, friendly customer service, and high quality products, clients loyalty of consistently.

Regarding rentals in UAE, prices vary due to the type of the site and the emirate selected.

However, rentals inside Shopping malls are higher than in a street site location. Moreover, rentals in Abu Dhabi are the highest as it is the capital. As per our survey, the average rents are the following:

Location Shopping Center Site Selection (Outside a Mall- separate entity) Dubai AED 950,000 AED 650,000 Abu Dhabi AED 1,100,000 AED 750,000 Sharjah AED 650,000 AED 350,000

Location Shopping Center Site Selection (Outside a Mall- separate entity) Dubai 79,167 54,167 Abu Dhabi 91,667 62,500 Sharjah 54,167 29,167

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As a regional franchise, it’s very essential to define a flexible organizational structure that is highly efficient to enable the regional franchisor to undertake its operations effectively and be able to support sub franchisees.

General Manager

Director of Human resource Operations Finance Marketing design & & training Legal Manager manager manager manager manufacturing manager

Director of design & manufacturing: Responsible for restaurant’ interiors (whether for own shops of for franchisees)

Human resource & training manager: Responsible for staff housing, transportation and governmental affairs

Legal manager: Responsible for solving all legal problems, and undertake all roles and responsibilities that involves processing all leasing and renting legal procedures

Operations manager: Operations include café (catering) services, in addition to running franchise operations

Finance manager: Central purchasing, warehousing and accounting processes are major areas of responsibilities of the finance manger

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Marketing manager: Responsible for carrying out market research and the implementation of public relations & marketing strategies

The outlets’ employees and wait staff are an integral part of success as they interact with end users the most. Bakery and coffee offered should meet the exact standards of Paris Baguette. Offerings have to taste great and the café has to be appealing and consistent with the overall brand image of Paris Baguette. It’s needless to emphasize how important it is to hire well qualified staff who can meet up the standards of serving customers quickly and courteously. Chefs and waiters should attend intensive and well defined training program that is congruent with specifications of the franchisor

Training themes include the following subjects:

1- How to complete orientation and be aware of restaurant policies and procedures. 2- How to welcome and greet guests 3- How to make recommendations and up- sell effectively. 4- How to answer questions about our food, beverages, in addition to other restaurant functions and services. 5- How to take food and beverage order from guests 6- How to enter an order in the POS system 7- How to deliver food & beverages, from kitchen to guests in a timely matter. 8- How to perform Side Works

However, on the managerial level, there is a plan to hire those who have a long experience in the hospitality field. As Food and beverage managers should have solid skills in areas like customer service, speaking, problem-solving, leadership, organizational and management.

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The United Arab Emirates (UAE) is a rapidly developing economy with an approximate population of 8 million. Its GDP was estimated at US$390bn in 2013, making it the 29th largest economy in the world and the second largest in the Middle East. Its GDP per capita is approximately US$43,000, the 19th highest globally. The UAE’s oil reserves are ranked the world’s sixth largest and the UAE possesses one of the most-developed economies in West Asia.

The United Arab Emirates is a constitutional federation of seven emirates; Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Qwain, Ras al-Khaimah and Fujairah. The federation was formally established on 2 December 1971.

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UAE has a high per capita GDP, with a nominal per capita GDP of US$47,407 as per the IMF. Fifteenth in purchasing power per capita and was ranked relatively high on the Human Development Index for the Asian continent, ranking thirty seventh globally.

In 2010, the UAE’s population was estimated at 4,975,593, of which less than 20% are UAE nationals or Emiratis, while the majority of the population are expatriates, however by 2020, Emiratis are projected to form 10% of total population.

There is growing presence of Asians, Europeans and people from more than 160 countries of the world making UAE a truly cosmopolitan country.

The UAE occupies an area of 83,600 sq. km along the south-eastern tip of the Arabian Peninsula. Qatar lies to the west, Saudi Arabia to the south and west, and Oman to the north and east. The capital and the largest city of the federation, Abu Dhabi, is located in the emirate of the same name.

Four-fifths of the UAE is desert, yet it is a country of contrasting landscapes, from awe-inspiring dunes to rich oases, precipitous Rocky Mountains to fertile plains.

Country Rate United Arab Emirates 23 Saudi Arabia 26 Bahrain 46 Oman 47 Qatar 48 Kuwait 104 Regional Average 107 (Middle East and North Africa) Jordan 119 Source: IFC, Doing Business, 2014, www.worldbank.org

Globally, United Arab Emirates stands at 37 in the ranking of 189 economies and the first one among other Arabic economies on the ease of starting a business. The rankings for comparator economies and the regional average ranking provide other useful information for assessing how easy it is for an entrepreneur in United Arab Emirates to start a business.

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The United Arab Emirates is a federation of seven emirates, with autonomous emirate and local governments. In Fact, UAE does not have any enforced federal income tax legislation for general business. An income tax decree has been enacted by each Emirate, but in practice, the enforcement of these decrees is restricted to foreign banks and to oil companies. The country is characterized by an almost complete absence of taxation.

Foreign banks are taxed at 20 percent of their income in the Emirates of Abu Dhabi, Dubai and Sharjah. The tax is restricted to the taxable income which is earned or deemed to be earned in that particular Emirate. Oil Companies (which include any chargeable person that deals in oil or right to oil both off-shore and on-shore) pay a flat rate of 55 percent on their taxable income in Dubai and 50 percent in the other Emirates. In addition, they pay royalties on production.

Municipal taxes are levied in most Emirates on annual rental paid at 5 percent for residential premises and 10 percent for commercial premises. Other local taxes include a 5 percent tax on hotel services and entertainment.

The UAE has a vibrant free economy, a significant proportion of its revenues arising from exports of oil and gas. Successful efforts have been made to diversify away from dependence on hydrocarbons and a solid industrial base has been created, together with a very strong services sector. The establishment of free zones has been an important feature of this diversification policy. Special economic zones and free zones offer 100 per cent ownership, repatriation of profit and capital as well as exemptions from taxes. Outside of these areas, significant incentives are being offered to investors and corporate governance provisions ensuring transparency and accountability are being enforced.

As per the Central Bank of the United Arab Emirates, the unemployment rate in the UAE decreased to 4.2% in 2014 from 4.6% in 2011. In Fact, Dubai has the lowest unemployment rate due to high level of economic activity.

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The UAE is a low-crime and politically-stable country. Moreover, the UAE enjoys financial and monetary stability. Its well-developed, sophisticated banking system features extensive credit facilities and ample liquidity. The Emirate’s emerging capital markets are built on a basis of leading-edge technologies and sound regulatory systems. The government has a long, consistent commitment to pro-business, liberal economic policies including the protection of intellectual property rights. The UAE benefits from stable and harmonious industrial relations. Finally, there is a well-defined, sound legal framework for business and a clear set of ownership rules. Foreigners are permitted ownership rights of up to 49% for limited liability companies established within the Emirate of Dubai and up to 100% for professional companies, branches and representative offices of foreign companies and free zones enterprises. All of these factors reflect positively in Dubai’s being assigned an investment grade rating for fixed income investment by Moody’s Investors Service.

The UAE has become a model of political stability at a time when some nations in the region are witnessing unrest despite the presence of a large foreign community in the country, which is bolstered by the strong cohesion between the country’s leadership and its openness, tolerance and acceptance of others.

Benchmarks and indices issued by international institutions have repeatedly confirmed this. Bank of America Merrill Lynch, recently released a 25-point index of politically stable countries in Eastern Europe, Middle East and Africa where point one referred to the least resilient country against political risks while point 25 indicated the most immune. The UAE ranked three, securing 23 points among 80 countries.

In Fact, the policy of openness and tolerance adopted by the UAE’s leadership is also considered one of the major elements of political stability and social harmony in the country. This is because such a policy bolsters the values of moderation, acceptance of others and complete rejects extremism and violence.

This atmosphere has encouraged the economic and the commercial growth of the country as safety and stability came on the first range when searching for investing in a foreign country.

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1- McDonald’s and KFC Locations:

Location McDonald's KFC Dubai 60 44 Abu Dhabi 20 23 North Emirates 6 15 Al Ain 9 13 Sharjah 17 16 Total 116 111

60

50

40

30

20

10

0 Dubai Abu Dhabi North Al Ain Sharjah Emirates McDonald's KFC

As seen in the graph, the majority of McDonald’s and KFC branches are located in Dubai. This is because of the hectic lifestyle in Dubai, the economic growth and the growing local and residential population in the emirate.

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2- Main Competitors in the local Market

Competitor Name Store numbers Locations Menus and Price 1-Paul Bakery and 14 branches in Dubai Dubai o Bakery (AED 9-AED Restaurant and 3 branches in Abu o Dubai Mall 24). Dhabi. o Burjuman Center o Breads (AED 10 –AED o JBR 15). o Mall of the Emirates. o Breakfast (AED 39 – o Deira City Center. AED 59). o Mirdif City Center. o Eggs (AED 33- AED o City Walk 45). o Dubai Airport (3) o Sandwiches (AED 39 o Downtown. – AED 44). o Wafi Center o Crepes (AED 49) o Beverages (AED 12- Abu Dhabi AED 30 ) o Al Wahda Mall. o Soup (AED 26- AED o Baniyas Mall. 27). o Yas Mall. o Quiches (AED 39). o Salads (AED 39- AED 59). o Main Courses (AED 49- AED 110). o Open Sandwiches (AED 50-AED 56). o Desserts (AED 13- AED20). 2- Shakespeare 9 branches in Dubai Dubai o Breakfast (AED 24 – and Co. and 5 branches in Abu o Sheikh Zayed Road AED 54). Dhabi. o Arabian Ranches. o Crepes (AED 25 - AED o Dubai Mall 28) o Emirates Hills o Saj (AED 15- AED 30) o Etihad Mall o Soup (AED 35 – AED o Safa Center 37) o Souk Al Bahar o Beverages (AED 12- o Village Mall (To be AED 30) opening Soon o Coffee (AED 16- AED o The Golden Mile. 21) o Silicon Oasis o Salads (AED 36- AED o Ibn Battuta Mall 47) o Jumeirah Lakes o Main Courses (AED 48 Tower - AED 60)

Abu Dhabi o The Souk Central Market o Al Matar.

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Competitor Name Store numbers Locations Menus and Price o Al Shahama. o Saadiyat Island. o Yas Mall.

3- le Pain Parisien (located only in Dubai) o Mall of the Emirates. o Bakery and Breads 7 branches in Dubai. o Dubai Mall. (AED 11 –AED 13) o Dubai Marina Mall. o Breakfast (AED 55 – o Jumeirah Beach AED 65) Road. o Breakfast Items (AED o Mirdif City Center. 16- AED 36) o Dubai International o Eggs (AED 18- AED Airport. 42) o DIFC o Tartines (AED 30 – AED 48) o Soup (AED 32). o Hot Beverages (AED 12- AED 30) o Cold Beverages (AED 17- AED 26). o Salads (AED 48- AED 52). o Side dishes (AED 18- AED 25). o Desserts (AED 13- AED 32).

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Competitor Name Store numbers Locations Menus and Price La Brioche 11 branches in Abu Dubai o Breads(AED 9-AED Dhabi and 4 branches o JBR 16) in Dubai. o Mirdif City Center o Eggs (AED 20- AED o Jumeirah Beach 32). Hotel o Quiches (AED 19-AED o Dubai Marina Mall 23). o Tartines (AED 36-40). Abu Dhabi: o Cold Sandwiches (AED o Al Markaziya. 23-AED 41). o Khalifa City. o Hot Sandwiches (AED o Al Khalidiya. 38-AED 46). o Al Ram Island. o Salads (AED 42- AED o Mussafah. 46). o Madinet Zayed. o Main Dishes (AED 40- o Al Shahama. AED 75). o Marina Mall. o Hot beverages (AED o Al Karamah. 12-AED 19). o Dalma Mall. o Cold Beverages (AED o Al Matar. 14- AED 29 ).

9 8 7 6 5 4 3 2 1 0 Paul Shakespeare and Co Le pain Quotidien La brioche

Customer Service Shop Fit

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As the graph shows, as per customers’ reviews, Paul came in the first place as for the customer service, followed by Shakespeare and Co, la brioche and finally Le Pain Parisien. For the Shop Fit, Shakespeare and Co wins and this is maybe because of their granny chic interior that is inspired by the hallmarks of a bygone era – 18th century Europe , a period when elegance , luxury and exquisite attention to details.

9 8 7 6 5 4 3 2 1 0 Paul Shakespeare and Le pain Quotidien La brioche Co Product Quality Marketing Locations

Only “Paul “has a major advantage at the level of selecting location. As everywhere in Dubai , you can find a Paul’s Branch otherwise, all other competitors ,have the average level in quality , marketing and location selection.

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Basic Assumptions Currency AED Number of periods in years 5 Months in Year 0 6 Inflation "1" 1.11% 1 USD to AED exchange rate 3.67 "1" http://www.uaestatistics.gov.ae/EnglishHome/ReportDetailsEnglish/tabid/121/Default.aspx?ItemId=2126&PTID=104& MenuId=1

Franchisor Assumptions - Revenues ( inflows) Franchise Fee per Restaurant- Initial Investment Requirement TBD Total Number of Restaurants 6 Portion of revenues from Franchisees 7% Franchisor Assumptions- (Outflows) Portion of Gross Sales for Advertising 2% Royalty Fee – Paid to Franchisor 4%

Fixed Assets - Main Center- Dubai Mall Shop # Cost per Total Cost Deprecia Unit tion Rate Chairs "1" 15 110 1,652 10% Tables "2" 15 110 1,652 10% Complete Bakery Equipment (Mixer, Divider, 1 36,700 36,700 10% Rounder, Sheeter, Prover, Deck Oven) "4" Commercial cake 1 8,808 8,808 10% equipment set "5" curved glass cake 1 4,404 4,404 10% refrigerator "6" Computer and 1 18,350 18,350 20% Software "3" Additional Decorations 1 183,500 183,500 10%

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Admin Area Offices 6 1,101 6,606 10% laptops 6 3,670 22,020 20% Telephones "8" 1 184 184 20% HP LaserJet CM6030 Multifunction Printer 1 3,670 3,670 20% Other Simple Office fixtures"9" 1 991 991 10% Total 50 261,598 288,535

"1" http://www.alibaba.com/product-detail/Plastic-Rattan-Cafe- Chair_498449509.html "2" http://www.alibaba.com/product-detail/Hot-sale-tables-cafe_1282984488.html "3" Estimate of a cost of an ERP system for a restaurants chain "4" http://www.alibaba.com/product-detail/Complete-Bakery-Equipment-Mixer-Divider- Rounder_1477418526.html "5" http://www.alibaba.com/product-detail/25KG-comercial-cake-mixer-bakery- equipments_60035521976/showimage.html "6"http://www.alibaba.com/product-detail/Best-quality-curved-glass-cake- refrigerator_1015744303.html?s=p "7" http://www.alibaba.com/product-detail/best-selling-elegant-wooden-lacquering- office_1096304301.html "8" http://www.alibaba.com/trade/search?fsb=y&IndexArea=product_en&CatId=&SearchText=telephone "9" Based on several items

Personnel Plan No. Monthly Gross Annual Salary Salary Salary Pastry Chef "1" 2 8,900 17,800 213,600 Waiters "2" 5 3,500 17,500 210,000.00 Cook "3" 3 1,600 4,800 57,600.00 Shop manager "3" 1 9,000 9,000 108,000.00 Director of design & manufacturing "4" 1 20,000 20,000 240,000.00 Human resource & training manager 1 15,000 15,000 180,000.00 Legal manager 1 25,000 25,000 300,000.00 Operations manager 1 20,000 20,000 240,000.00 Finance manager 1 12,000 12,000 144,000.00 Marketing manager 1 12,000 12,000 144,000.00 "1" http://www.salaryexplorer.com/salary-survey.php?loc=2426&loctype=3&job=390&jobtype=3 2" http://www.hospitality-jobs-dubai.com/vacancies/waiterswaitresses "3" http://www.salaryexplorer.com/salary-survey.php?loc=2426&loctype=3&jobtype=1&job=28

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Rent Assumptions - Main Location (Retail)

Rent per Square meter- Dubai Mall 5,926 Area 83 Annual rent 491,819 Monthly Rent 40,984.95

Rent Assumptions - Office Rent per Square meter 2,930 Area 80 Annual rent 234,432 Monthly Rent 19,536.02

Pre Operating Expenses Purchases for 6 months 1,008,407 Other Operating Expenses 79,366 license for a café 28,591 License for a bakery 37,590.97 Total Pre Operating 1,153,955

Start Up Cost AED Pre Operating 1,153,955 Fixed Assets 288,535 Additional Surplus 200,000 Total Start Up- AED 1,759,995

Summary of G&A Assumptions - Annual

Internet "2" 4,800 Stationary & General Supplies 3,670 Rent Annual- Shop 1 40,985 Staff transportation 22,020 Employee Insurance ( per person) 5,000.0 0 Maintenance 1,497.3

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Summary of G&A Assumptions - Annual

6 Audit 15,000 Cleaning 7,340 Residency Permits- paid every 2 years 51,000 Manpower Indemnity- at the end of 728,000 year1 Manpower Annual Ticket for all 34,000 employees Telephone and Mail 1,500.0 0 Audit 12,000 Utility"1" 41,472 Governmental licenses 66,182 "1" based on the assumption of consumption of 5000 KW/h/ month "2" Estimates by the consultants based on several approximations from online sources

Working Capital Assumptions AR Assumption Cash collected at the Same Period 100% Cash collected at the Next Period 0% AP Assumptions Cash paid to suppliers at the same 60% period Cash paid to suppliers at the next 40% period Inventory Assumptions Inventory as % of GCS 0.10%

Weighted Average Cost of Capital Beta " business and consumer services" 4 0.75 Risk Free Rate "1" 3% Market Risk Premium "2" 5.75% Country Risk Premium "3" 0.75% WACC 7.88% "1"EMIRATES INTERBANK OFFERED RATES: http://www.centralbank.ae/pdf/EIBOR/eibor_today240914.pdf "2" http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html "3" http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html

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Summary of G&A Assumptions - Annual

"4"http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html

Demand assumption was made assuming that the investors will operate two revenue streams:

Basic mall Assumptions Operating Hours 12 Number of Shops/ 7 Venues

Footfall data Daily Footfall Dubai Mall "1" 200,000 Mall of the Emirates "2" 105,000 Midriff City Center "3" 57,534 Festival City Center "4" 67,000 Yas Mall "5" 68,493 Galleria Mall "6" 70,000 Saharah Mall "6" 60,000 "1" http://www.dubaifaqs.com/mall-of-the-emirates.php "2"http://www.dubaifaqs.com/mall-of-the-emirates.php "3"http://www.majidalfuttaim.com/en/article/majid-al-futtaim-properties/shopping-malls/mirdif-city- centre.html "4"http://www.dubaifestivalcity.com/cntn.aspx?id=101 "5"http://ruwais.ae/yas-mall-to-attract-25-million-visitors-to-abu-dhabi/ "6" Assumption since those two malls are not incepted yet

Mall Visitors per hour Dubai Mall 16,666.00 Mall of the Emirates 8,750.00 Midriff City Center 4,794.00 Festival City Center 5,583.00 Yas 5,707.00 Galleria Mall 5,833.00 Saharah Mall 5,000.00

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Roll out plan Y1 Y2 Y3 Y4 Y5 Sho Dubai Mall Dubai Mall Dubai Mall Dubai Mall Dubai Mall p 1 Sho Mall of the Mall of the Mall of the Mall of the Mall of the p 2 Emirates Emirates Emirates Emirates Emirates Sho Midriff City Midriff City Midriff City Midriff City p3 Center Center Center Center Sho Festival city Festival city Festival city p 4 center center center Sho Yas Yas p 5 Sho Galleria Mall p 6 Sho Saharah Mall p 7

Roll out plan Y1 Y2 Y3 Y4 Y5 Shop 1 1 1 1 1 1 Shop 2 1 1 1 1 1 Shop3 1 1 1 1 Shop 4 1 1 1 Shop 5 1 1 Shop 6 1 Shop 7 1 "1" Conservative Assumption - Consultant Estimate connected to capacity of shops

Capacity Assumptions Bakery Max Capacity per 75 hour ( in customers) Duration of one Visit 1 Average ( hour)

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1- Assumptions for Line 1: franchisee Capacity Utilization Y1 Y2 Y3 Y4 Y5 Capacity Utilization per 30% 50% 60% 70% 80% Shop - Dubai Mall

Expected clients per Y1 Y2 Y3 Y4 Y5 hour based on capacity Dubai Mall 23.00 38.00 45.00 53.00 60.00

Expected Clients per Y1 Y2 Y3 Y4 Y5 Annual Based on capacity Dubai Mall 100,740 166,440. 197,100 232,140. 262,800

Average bill size 50.00 50.00 60.00 60.00 65.00

Cost of Goods Sold 40% Assumption "1" "1" Consultant Estimation to cover service and supplies

Summary Y1 Y2 Y3 Y4 Y5 Revenues 5,037,000 8,322,000 11,826,000 13,928,400 17,082,000 Cost of Goods Sold 2,014,800 3,328,800 4,730,400 5,571,360 6,832,800

Assumptions for Line 2 - Franchisor

Footfall data Y0 Mall of the Emirates 105,000 Midriff City Center 57,534 Festival City Center 67,000 Yas 68,493 Galleria Mall 70,000 Saharah Mall 60,000 "1" http://www.dubaifaqs.com/mall-of-the-emirates.php "2"http://www.dubaifaqs.com/mall-of-the-emirates.php "3"http://www.majidalfuttaim.com/en/article/majid-al-futtaim-properties/shopping-malls/mirdif-city- centre.html

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"4"http://www.dubaifestivalcity.com/cntn.aspx?id=101 "5"http://ruwais.ae/yas-mall-to-attract-25-million-visitors-to-abu-dhabi/

Capacity Assumptions Bakery Max Capacity per hour ( in customers) 75 Duration of one Visit Average ( hour) 1

Occupancy Rates For Y1 Y2 Y3 Y4 Y5 Other locations Mall of the Emirates 15% 20% 25% 55% 60% Midriff City Center 10% 15% 20% 50% 50% Festival City Center 5% 7% 10% 15% 40% Yas 5% 10% 12% 15% 40% Galleria Mall 3% 35% 40% 45% 40% Saharah Mall 2% 10% 20% 30% 40%

Other venues- Expected Y1 Y2 Y3 Y4 Y5 Clients based on Occupancy- per hour Mall of the Emirates 12.00 15.00 19.00 42.00 45.00 Midriff City Center 8.00 12.00 15.00 38.00 38.00 Festival City Center 4.00 6.00 8.00 12.00 30.00 Yas 4.00 8.00 9.00 12.00 30.00 Galleria Mall 3.00 27.00 30.00 34.00 30.00 Saharah Mall 2.00 8.00 15.00 23.00 30.00

Other venues- Expected Y1 Y2 Y3 Y4 Y5 Clients based on Occupancy- Annual Mall of the Emirates 52,560.00 65,700.00 83,220.00 183,960.00 197,100.00 Midriff City Center 35,040.00 52,560.00 65,700.00 166,440.00 166,440.00 Festival City Center 17,520.00 26,280.00 35,040.00 52,560.00 131,400.00 Yas 17,520.00 35,040.00 39,420.00 52,560.00 131,400.00 Galleria Mall 13,140.00 118,260 131,400.00 148,920.00 131,400.00 Saharah Mall 8,760.00 35,040 65,700.00 100,740.00 131,400.00

Average Order ( AED) 55.00 55.00 60.00 65.00 65.00

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Other Revenues- Y1 Y2 Y3 Y4 Y5 Proceeds to Sub franchisees Mall of the Emirates 2,890,800 3,613,500. 4,993,200. 11,957,400 12,811,500 Midriff City Center 1,927,200 2,890,800 3,942,000 10,818,600 10,818,600 Festival City Center 963,600.00 1,445,400 2,102,400 3,416,400 8,541,000 Yas 963,600.00 1,927,200. 2,365,200 3,416,400 8,541,000 Galleria Mall 722,700.00 6,504,300 7,884,000 9,679,800 8,541,000 Saharah Mall 481,800.00 1,927,200 3,942,000 6,548,100 8,541,000

Share of Revenues - Y1 Y2 Y3 Y4 Y5 Stream 2 Mall of the Emirates 202,356 252,945 349,524.00 837,018 896,805 Midriff City Center 134,904. 202,356 275,940.00 757,302.00 757,302 Festival City Center 67,452 101,178 147,168.00 239,148.00 597,870 Yas 67,452. 134,904 165,564.00 239,148.00 597,870 Galleria Mall 50,589 455,301 551,880.00 677,586.00 597,870. Saharah Mall 33,726 134,904 275,940 458,367.00 597,870 Total- AED 556,479.00 1,281,588 1,766,016 3,208,569 4,045,587

Summary of Revenues Y1 Y2 Y3 Y4 Y5 Revenues- Main 5,037,000 8,322,000 11,826,000 13,928,400 17,082,000 Other revenues 556,479 1,281,588 1,766,016 3,208,569 4,045,587 Cost of Goods Sold 2,014,800 3,328,800 4,730,400 5,571,360 6,832,800. Royalty (4%) 223,739.16 384,144 543,680.64 685,478.76 845,103.48 Sales and Marketing 100,740.00 166,440 236,520.00 278,568.00 341,640.00 (2%)

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G&A- AED Y0 Y1 Y2 Y3 Y4 Y5 Salaries 2,400 4,800 4,853 4,907 4,962 5,017 Depreciation 33,276 33,276 33,276 33,276 34,160

Rent for Office 20,492 40,985 43,034 45,186 47,445 49,817

Audit 15,000 15,000 15,000 15,000 15,000 maintenance 1,497 1,497 1,497 1,497 1,497

Cleaning 88,080 89,058 90,046 91,046 92,056

Employee Insurance 88,080 89,058 90,046 91,046 92,056

Licenses 66,182

Residency Permits 51,000 51,000 51,000

Manpower Indemnity- 728,000 728,000 728,000 2,184,000 2,184,000 at the end of year1

Manpower Annual 34,000 34,000 34,000 34,000 34,000 Ticket for all employees

Employee Insurance ( 85,000 85,000 85,000 85,000 85,000 per person)

Telephone and Mail 18,000 18,000 18,000 18,000 18,000

Audit 12,000 12,000 12,000 12,000 12,000

Internet "2" 2,400 4,800 4,853 4,907 4,962 5,017

Stationary & General 1835 3,670 3,711 3,752 3,794 3,836 Supplies Rent Annual- Shop 1 20,492 40,985 41,440 41,900 42,365 42,835 Staff transportation 11010 22,020 22,264 22,512 22,761 23,014 Utility"1" 138,240 276,480 279,549 282,652 285,789 288,962 Total G&A- AED 263,052 1,547,673 1,504,593 1,563,681 2,976,943 3,037,268

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Annual Profit and Loss- AED Y0 Y1 Y2 Y3 Y4 Y5 Revenues- Main 0 5,037,000 8,322,000 11,826,000 13,928,400 17,082,000

Cost of Goods Sold 196,870 2,014,800 3,328,800 4,730,400 5,571,360 6,832,800

Royalty (4%) 223,739 384,144 543,681 685,479 845,103

Sales and Marketing (2%) 100,740 166,440 236,520 278,568 341,640

Gross Profit (196,870) 2,697,721 4,442,616 6,315,399 7,392,993 9,062,457 Other revenues 556,479 1,281,588 1,766,016 3,208,569 4,045,587 General and Admin 263,052 1,547,673 1,504,593 1,563,681 2,976,943 3,037,268 Operating Income(Income before (459,922) 1,706,527 2,938,023 4,751,718 4,416,051 6,025,189 Tax) Tax Rate 0 204,783 352,563 570,206 529,926 723,023 Net Proceeds (459,922) 1,501,743 2,585,460 4,181,512 3,886,125 5,302,166

Cash Flow Y0 Y1 Y2 Y3 Y4 Y5 Statement - AED Net Surplus (459,922) 1,501,743 2,585,460 4,181,512 3,886,125 5,302,166 Add Depreciation 0 33,276 33,276 33,276 33,276 34,160 Change in AP 805,920 525,600 560,640 336,384 504,576 Change in Inventory (1,008,407) (2,015) (3,329) (4,730) (5,571) (6,833) Net Cash Flows (1,468,329) 2,338,925 3,141,007 4,770,697 4,250,213 5,834,070 from Operating Activities Fixed Assets (288,535) 0 0 0 0 (4,422) Additions Net Cash Flows (288,535) 0 0 0 0 (4,422) from Investing Activities Financing Needed 2,159,995 0 0 0 0 Net Cash Flows 2,159,995 0 0 0 0 0 from Financing Activities Total Cash flows from 403,130 2,338,925 3,141,007 4,770,697 4,250,213 5,829,647 All Activities Beginning Balance 0 403,130 2,742,055 5,883,062 10,653,760 14,903,973 Ending Balance- 403,130 2,742,055 5,883,062 10,653,76 14,903,973 20,733,620 Cash 0

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Balance Sheet - Y0 Y1 Y2 Y3 Y4 Y5 USD Cash 403,130 2,742,055 5,883,062 10,653,760 14,903,973 20,733,620 Inventory 1,008,407 1,010,422 1,013,751 1,018,481 1,024,053 1,030,886 Fixed Assets 288,535 255,260 221,984 188,708 155,432 125,694 Total Assets 1,700,073 4,007,736 7,118,797 11,860,949 16,083,457 21,890,199 Liabilities Accounts Payables 0 805,920 1,331,520 1,892,160 2,228,544 2,733,120 Equity Start Up 2,159,995 2,159,995 2,159,995 2,159,995 2,159,995 2,159,995 Retained Earnings (459,922) 1,041,822 3,627,282 7,808,794 11,694,919 16,997,085 Total Equity 1,700,073 3,201,816 5,787,277 9,968,789 13,854,913 19,157,079 Total Liability & Equity 1,700,073 4,007,736 7,118,797 11,860,949 16,083,457 21,890,199

FCFF- AED Y0 Y1 Y2 Y3 Y4 Y5 Net Income (459,922) 1,501,743 2,585,460 4,181,512 3,886,125 5,302,166 Depreciation - 33,276 33,276 33,276 33,276 34,160 Change in Working Capital (1,008,407) 803,905 522,271 555,910 330,813 497,743 Additional Capital Expenditures (288,535) 0 0 0 0 (4,422) Free Cash Flow (1,756,865) 2,338,925 3,141,007 4,770,697 4,250,213 5,829,647

Valuation - NPV ( Net Present Value) AED 13,014,990 IRR ( Internal Rate of Return) 162% Cost of Capital 7.88% Payback Period 1

Based on the above, the business proposal reveals that it would be highly feasible to implement the project in the UAE given all budgetary estimates and constrains. The strong potential demand – even when making the most conservative assumptions- is expected to stay high despite the massive supply.

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