Fan-Rove UK Car Rental Business - Essay Example

FAN-ROVE UK CAR RENTAL BUSINESS PLAN By: [Insert full s] Presented [insert teacher’s of Table of Contents 1. Executive Summary Rental car business is among the unique businesses that the UK and many of other European countries and cities enjoy for a number of reasons (Blythe and Zimmerman 2005, p96). Top on the list of these reasons include a sustainable and thriving tourism industry for both domestic and foreign clients that push the demand for transport services nearly every month of the year. To this end, the following business plan that details on the approach to adopt in establishing a competitive business provides the specifics from different perspectives. Detailed business description alongside clarifications on goals, financial and marketing strategies, opportunities, challenges and projected targets form the main sections of the business plan. 2. Business Description 2.1 Background The UK is a commercial and social hub not only for Europe but for the global community as well. Transport services for the numerous visitors into the country therefore form an important part of the support industries for the status of the country on the global slot. In light of the ever-increasing demand for transport services for persons visiting the country against constrained capital investment in the motor industry, a rare business opportunity lurks behind this industry. Fun-Rove UK is a business targeting the opportunity provided by the momentous opportunity that the status of the UK offers to commuter service industry, for both leisure and commercial business targets. 2.2 Business Idea and Specific Location As mentioned above, socioeconomic importance of the UK on the global level, offers the commuter service industry with a rare business opportunity that Fun-Rove UK targets. As a matter of location strategy, the City of London is undoubtedly the most competitive cities on the consideration of its status as the capital city of the UK. Numerous economic commuter service opportunities emerge from socioeconomic and political activities hosted by the London City for the UK and for various international organizations. In this view, Fun-Rove UK will set its base in the City of London, which acts as a connection centre for various clients also visiting various destinations in the UK. The car rental business in the City of London has increased over the years as the City grows to accommodate more visitors either as leisure tourists or as business tourists. Most of the clients visiting London prefer to hire the car and a driver to accompany them during the entire duration of the contract, which is considered by Fun-Rove UK. 2.3 Overview of Marketplace and Business Bases London is among the biggest cities in Europe with numbers expected to hit the nine million mark by 2020, which illustrates an extraordinary flow of human traffic in and out of the City. This population requires important transportation services to relocate from one Borough to the other, across the 32 centres of various socioeconomic and political importance across the boroughs. The vast metropolitan region of London is therefore ever growing and lucrative opportunities avail on a high turnover capable of sustaining the car rental business. Due to the vast size of the metropolitan region, the Fun-Rove UK car rental business will have operations spread out in five main locations that have unique growth opportunities. These growth opportunities will facilitate the rolling out of the car rental business to more locations across the City. The main locations will target business in Central, North, South, West and East of the City of London. Location specification for these main locations will be determined by the other major stations such as tube termini as well as airports. Since the car rental business relies on cultural and social gatherings, traditional sports centres, particularly around huge football clubs and hotel facilities will be targeted for the popular football fans movement across the City every week to supplement to the other tourist travels. Ten vehicles will be dispatched to every centre of the main five identified locations, under the management of two managers and their assistants. 2.4 Key Personnel One of the main advantages for the business relates to the uniformity of operations carried out directly by qualified drivers under minimum supervision. To this end, every vehicle will have two drivers for the day and night shifts, each relieving the other upon the expiration of the applicable shift. The two managers will be assisted by the two assistants in order to ensure a smooth running of the two separate shifts. The company will also venture into hiring part time drivers from drivers outsourcing services in cases of urgent need to have an extra driver, for instance during official leaves for the designated drivers. The vision of Fun-Rove UK is based on the need to provide competent and quality commuter services for private class visitors and dwellers of the City of London. Offering up-to-date services for the advanced status of the City of London, to improve customer experience in private travel and drive business as well as leisure expectations of our clientele. Growth towards a comprehensive coverage for the entire UK in commuter services is the future target for Fun-Rove UK, which remains optimistic of the opportunities to expand operations across the entire country. 2.2 Long Term Goals of the Company As briefly mentioned above, the main objective of Fun-Rove UK for the long-term is set to become a competitive force in the car rental business not only in London but also across the entire country. Within the growth prospects of the City of London, this target is achievable. Long-term expansion plan for the business will therefore be aimed at enhancing the capacity of the most productive regions in the five main target locations within the City of London. Increment of the fleet as well as the personnel will be important in the long-term plan for coverage of the entire country by Fun-Rove UK (Fullen 2006, p46). In view of the need to provide comprehensive coverage for the country, fleet features will also require to be reviewed and improved to cover various market segments. The fleet composition will be revised to cover the various clientele needs with specific needs such as vans, saloons, station wagons as well as buses. 2.3 Starting Plan and Start-up Financing Fun-Rove UK currently operates as a small-scale taxi business with a fleet of ten units on the same category targeting the middle class. In view of the availability of the business opportunity that the market offers, as explained above, the expansion of the fleet is paramount to the enhanced capacity targeted at the lower, middle and higher classes within the five operation locations in the City of London. To this end, the available ten units will require to experience reviews to fit within the classification approach targeted in the Fun-Rove UK restructuring. Since the fleet is composed of saloon cars that are in a good condition to perform business for a long period of time, two will be distributed for every strategic location. The composition of the strategic fleet composition for the strategic locations in the short-term targets ten rental cars. In this regard, every location requires an additional eight units to kick off the operations by Fun-Rove UK as contained in this plan. The start-up capital for the enhanced capacity is estimated at £925,000 that will be acquired through a bank loan. Initial financial consultations with the Barclays Bank, Fulham Road, indicate willingness due to the collateral potential of the vehicles. 2.4 Company Strength & Uniqueness of Service Due to the increased demand for car rental services in London, Fun-Rove UK has identified the packaging of the service with designated drivers with additional risk mitigation element attached to assigning drivers to our fleet. Fun-Rove UK services will be unique in the sense that taxi business aspects of driver conversance with the UK geography as well as the rental concept that allows extended stay with the car enables a mix of services that only a few providers can afford. The strength that the company will boast of for much of the business emanates from the prior experience within the taxi business for five years within the City of London. Ordinary rental car business exposes the rented unit to risks of non-disclosure for damage and other hidden complications that may not be determined within the contract duration. To eliminate this substantial risk, provision of drivers to accompany every rented unit not only makes it possible to quash careless clients but also increases professionalism in the business (Burns 2010, p32). Such organized services also augur well with the tourism industry needs of providing guidance to visitors, which improves the experience and business opportunities. 2.5 Potential of the Business The long-term projections for the business are based on the promising fortunes with regard to tourism and commercial status that the location enjoys in the UK and the entire European Union. Research indicates that outsourcing of services favours various business processes instead of acquisitions. In this regard, rental business projections can be made on an optimistic note since more corporations are reluctant to engage in material capital investments such as motor vehicles. It is therefore timely for Fun-Rove UK to launch such an ambitious upgrading to a full-fledged rental business service with extra benefits of driver services at a reduced cost. 3. Marketing 3.1 Marketing Plan Initial market research findings obtained from the taxi business indicate that the particular market targets are highly achievable with the appropriate planning and funding. Information is available on the different markets that exist for the lower, middle and higher end segments and the relevant marketing choices will consider such information. The sales and marketing strategies to be considered in the launching of the company will involve tourists guide journals and the internet which is currently the leading marketing platform. Social media such as Twitter, Facebook, Google+ and YouTube will form the bulk of the advertising content relayed to the market. 3.2 Competition and Supplies The astronomical coverage potential that the internet renders to marketing functions, against huge reductions in costs forms part of the decision for the choice of marketing. Advert labels on the rental cars will also form an important inexpensive, yet influential advertising tool for the company (Mineli 2007, p25). Various marketing strategies mentioned above will cater for various customers, particularly the domestic clients who dwell in London, who will be covered by nearly every form of strategy adopted. Foreign customers will be catered for by travel journals and the internet at a highly efficient system that reaches every corner of the world. A small budget of £10,000 is expected to be sufficient as start-up cost in view of the social media and internet cost saving opportunities. In light of the nature competition, the taxi business provides much of the business risks involved in the business. However, the fleet portfolio for Fun-Rove UK takes care of this category by eh fact that its services offer private travel contracts from the taxi level to extended contractual stay with the unit. The extra extension facilitates tapping the extra potential offered by duration variation, which the ordinary taxi business does not offer. Further competition will be handled by the fact that the classification of the cars targeting three levels of market needs from lower to higher needs adds flair and prestige to the business. This handles competition from various star hotels, which charge high prices for the travel services that their clients may require in extended stay in their hotels. Vehicle supplies will be made locally through an agreement with local motor manufacturers to benefit from long term servicing and supplies that the entire fleet will require. External purchases are likely to affect daily operations in case of urgent servicing and maintenance. 4. Operation Plan 4.1 Pricing of Services Just as in Taxi business, journeys to various locations across London as well as throughout the country are priced according to the distance covered in a zoning approach. For extended rental costs, the duration of time spent with the vehicle determine the amount of money to be charged. Highly attractive prices will be adopted by Fun-Rove UK, based on the need to attract new clients from the taxi segment as well as from the high-end corporate and tourism clients. Current taxi pricing model will be revised to accommodate the new business demands, which include brand benefits attached to prestige in higher niches. 4.2 Services Portfolio As mentioned above, there will be different market segments as identified in available findings, which prompts three categories of fleet and service delivery for all the segments. In view of the need to handle each segment, three uniquely designed classes will get different vehicle types. 5. Financial Plan As mentioned above, capital investment will require at least £925,000 to purchase eight new units for the five strategic locations in the City of London. Further to this cost will be additional £25,000, which will be spread into various costs and expenses such as hiring and paying new drivers. The following projected financial reports relating to the approach to be launched illustrate various details in the running of the business. 5.1 Projected Profit & loss statement Revenues Total Revenues 92,000 Cost of Production 35,000 Gross Profit 57,000 Selling General & Admin Expenses, 20,000 Other operating expenses, 12,000 (32,000) Operating Income Interest Expense 5,000 Interest and Investment 9,000 Net Interest Expense -14,000 Income tax expense 52,000 Earnings from continuing operations 13,000 65,000 33,000 Net income 90,000 5.1 Projected Cash Flow Statement Cash From Operating Activities + Net Income 200,000.25 + Depreciation & Amortization 600,000.00 + Other Non-Cash Adjustments 20,000.56 + Changes in Non-Cash Capital 330,000.78 1,150,002.09 Cash From Investing Activities + Disposal of Fixed Assets 0.00 + Capital Expenditures -925,000.00 (for forty new units) + Increase in Investments 0.00 + Decrease in Investments 0.00 + Other Investing Activities -1000.00 -926,000.00 Cash from Financing Activities + Dividends Paid -2000.00 + Change in Short-Term Borrowings 100,000.00 + Increase in Long-Term Borrowings 220.00 + Decrease in Long-term Borrowings -900,000.000 + Increase in Capital Stocks 0.00 + Decrease in Capital Stocks 0.00 + Other Financing Activities -300,000.00 -101,780.00 Net Changes in Cash -777,777.01 5.2 Break Even Analysis In view of profitability consideration at the projected fixed and variable costs, a break-even analysis is provided to determine the various appropriate cost management decisions to take (Guan, Hansen & Mowen 2007, p26 ). In view of the high fixed cost element presented by depreciation of the motor vehicles, the profitability level of the company will determine if the 50 motor vehicle capacity is sufficient or over traded. As illustrated in the computation below, revenue figures should be targeted at meeting £84,000 collection to avoid running out of options to finance the most critical costs in the business. Annual fixed costs- £42,000 Annual variable costs- £48,000 Earnings-£92,000 Contribution (Earnings less variable costs) =£92,000-£48,000=£44,000 Contribution margin (£44000/£92000*100) =47.8% BEP= (fixed costs/ contribution margin) £42000/0.5= £87866.12 6. Critical Risks 6.1 Potential Problems The most potent challenge to this business is the current slump in economic performance within the Eurozone that has a contagion impact on the UK and other global economies from where Fun-Rove UK will draw its customers. To this end, there will be significant dangers posed to a smooth flow of activities and operations win various industries, particularly leisure activities. This poses a danger to the targeted revenues that tourism offers to the market, affecting both the domestic segment as well as the international tourism markets across Europe. 6.2 Course of Action The initial stage in the business will involve sourcing funds to support the whole business plan. In view of the economic challenges posed to this industry as illustrated above, Fun-Rove UK will require a keen rolling out program particularly for the fleet expansion program. Since there are three market target sections in terms of vehicle class and model to be acquisitioned, the most significant revenue collector among the sections will be rolled out ahead of the rest. The other low-income earners will be rolled out in to the plan as economic hardship in the market eases with time. Purchases will then be followed up by hiring of appropriate driving personnel to coincide with the demands of the market strategy. References Blythe, J. & Zimmerman, A. S. (2005) Business-to-business Marketing Management: A Global Perspective, London, UK: Thomson Learning Burns, P. (2010) Entrepreneurship and Small Business: Start-Up, Growth and Maturity, London, UK: Palgrave MacMillan Fullen, S. L. (2006) How to Get the Financing for Your New Small Business: Innovative Solutions from Experts Who Do it Every Day, Ocala, FL: Atlantic Publishing Group. Guan, L., Hansen, D. R., & Mowen, M. M. (2007) Cost Management: Accounting and Control, Mason, OH: South-Western Cengage Learning. Mineli, B. (2007) How to Save Big Money on Car Rentals: Uncovering Secrets they Don’t Want to Know, Bloomington, IN: AuthorHouse Read More