Bridge Guest House Business Plan by Daniel Pinkney

BRIDGE GUEST HOUSE & TEA ROOM

BUSINESS PLAN Strictly Private & Confidential

Prospective Purchasers: Mr Stephen Osborne Mr Stephen Bytheway Mr Daniel Scott Pinkney Bridge Guest House 5-9 Bridge Street Great Ayton North Yorkshire TS9 6NP

EXECUTIVE SUMMARY Brief Introduction Occupying a prime spot in the heart of Great Ayton (Captain Cook Country and regarded as the best village in the most beautiful part of the UK by the British Tourist Board), Bridge Guest House currently operates solely as a Bed & Breakfast with 4 guest bedrooms, although they do provide evening meals for guests upon request. The property consists of three former cottages which have been internally restructured to enable provision of full Guest House facilities plus owner accommodation. The Guest House has also been awarded a 3-diamond rating for accommodation by the British Tourism Board. The town has only two other establishments offering overnight accommodation and as such, current demand outstrips supply. There is scope to expand the current turnover and profit of the business by either converting one of the lounges into a further ensuite bedroom or, as we plan to do, by reverting the guest lounge on the ground floor back to a Tea Room. This enables us to offer hot and cold snacks and refreshments throughout the day for those in the Low Green area of Great Ayton. There are currently no such establishments offering a similar service in this area, and with a publically designated 'picnic area' directly opposite the Guest House, it would greatly benefit from such a service. The tea room will help provide additional means of income over and above the income from the Guest House. In doing so we expect to generate enough profit through both endeavours to pay all associated costs of running both businesses, property maintenance, household bills and mortgage costs and still have a minimum net profit at the end of ÂŁ9k per annum. Business Objectives We aim to build upon the existing business by: Converting part of the ground floor space into a tea room providing hot/cold snacks and refreshments Restructuring the existing commercial dining and kitchen space to better serve both the Tea Room and breakfast catering for guests Extending the current trading hours Adding ensuites (if possible) to the bedrooms that currently go without Looking to restructure the existing layout and perhaps utilise loft space to accommodate a further bedroom or additional facilities such as office space (for business customers). Expanding marketing, advertising and PR efforts. Propective Purchasers / Investors Mr Stephen Osborne, Mr Stephen Bytheway and Mr Daniel Pinkney How we aim to do this Converting part of ground floor into a tea room: Part of the downstairs space (effectively cottage no. 9) is currently used as a guest lounge, however this is rarely used by guests so this has the potential to be converted for another use. In the past this area has actually been used as a Tea Room so the relevant permissions to run this kind of establishment can be easily secured. The existing owners having bought the Guest House outright in 2004 ran the Tea Room for a limited period but as they didn't require the extra income generated from the Tea Room and it

proved too busy and intensive for them, they chose to convert the space into a guest lounge. The owners have also informed us that the Tea Room generated up to ÂŁ250 income per day when they ran the place. However, with our experience in the catering trade, business and marketing, coupled with youthful enthusiasm, we believe this figure can be exceeded. Restructuring the existing commercial kitchen and dining space Having incorporated a Tea Room in the past, the current layout of the downstairs kitchen, dining room and prospective 'Tea Room' space will complement each other well, and there will be minimum alterations and building work to concert the space back to a fully-operational Tea Room. Extending current trading hours The current trading hours of the B&B/Guest House business effectively covers early mornings and evenings. This gives scope to utilise the facilities during the daytime hours - hence the introduction of a Tea Room. At first we will be looking to trade between the hours of 10am and 2pm so as not to overlap with the breakfast time of the paying guests. However we believe, given the layout of the building, that we will be able to accommodate an early start for the Tea Room, providing breakfasts without interfering with the incumbent guests. This will however only be done if demand dictates and after we have successfully settled in to running both the B&B/Guest House and Tea Room as profitable enterprises. Adding en-suites to bedrooms Three of the four bedrooms do not have ensuite facilities so these guests have to share the main house bathroom (the owner accommodation has an ensuite). We will be looking to introduce ensuites to at least one of the other bedrooms to facilitate easier operation of the guest house - plus it will also mean prices can be readjusted upwards as the facilities are better. This then helps to increase income and subsequently profit margins. Restructuring existing layout Perhaps a more long-term plan, but as the Guest House comprises of three cottages, we have ample amount of loft space that may be utilised in a variety of ways - either additional storage space, further bedroom/s (with or without ensuites), office space (broadband facilities, fax machines for business use). Although this may unltimately prove to be unsuitable to provide accommodation it can definitely be utilised for increased storage facilities. Expanding current marketing, advertising and PR efforts One of the prospective purchasers, Mr Daniel Pinkney (who will also be resident at the property and running the B&B and Tea Room), has an extensive background in this business arena having been a director in a successful design and advertising agency for over 6 years and qualified to 1st Class Degree standard in Graphic Design. These skills and knowledge can be harnessed in providing comprehensive promotion of both the Guest House and the Tea Room thus generating more interest, income and ultimately increased profits.

Why Bridge Guest House Cafe & Tea Room? As prospective purchasers of this establishment we all have valuable skills and knowledge to bring to this this business. In doing so we hope to increase both the profitability and the Guest House and Tea Room to create a profitable and growing business which in turn provides us with a long-term investment opportunity. As the property is freehold, and in a prominent and highly desirable area of Great Ayton it also has tremendous potential for outstanding capital growth. We also harbour the option of converting back to three residential cottages at some stage in the future, which judging by current asking prices in the immediate area (£198,500 for a 3-bedroomed terraced at 16 Bridge Street - see appendices) would prove highly profitable. The Market Opportunity There are currently two other establishments in the Great Ayton area who cater for the B&B and accommodation trade (Angie D's B&B and The Royal Oak Hotel). Demand currently outstrips supply in Great Ayton and trade is quite often passed between these two establishments and the Bridge Guest House. As we all have only 4-5 bedrooms available, we are looking long term to be able to buy the cottages adjacent to the Guest House to allow us to expand the number of bedrooms. This gives us the opportunity to create the largest Guest House in Great Ayton with the capability to provide up to 16 guest bedrooms. Finance Requirements The purchase price of the business (Freehold) is £375,000. We have however been informed by the current owner that they would accept £350,000. We are looking to invest £70,000 (20%) and are therefore looking to borrow £280,000 to complete the purchase (80%). We envisage the term of the loan/mortgage to be over a 20 year period.

TABLE OF CONTENTS Executive Summary 2 Table of Contents

Business Introduction

Products & Services

Management & Personnel

The Market

Competitive Business Strategy

Marketing Plan

Future Prospects

Financial Information

Appendices Current Website Screenshots (www.greataytonaccommodation.co.uk)

BUSINESS INTRODUCTION Location Great Ayton is situated at the foot of the Cleveland Hills beneath Easby Moor and the distinctively-shaped Roseberry Topping. The River Leven, a tributary of the River Tees, flows through the village and links its two centres, High Green and Low Green. It is served by Great Ayton railway station. Much of Great Ayton is now a conservation area and is regarded as the best village in the most beautiful part of the UK (according to the British Tourist Board). The High Green is the centre of the village while the Low Green, with the river running alongside, is a popular picnic place in the summer months. The Bridge House is situated in a prime spot of the Low Green area of Great Ayton and is on the main road through Great Ayton (A173 Guisborough Road). It is directly adjacent to the bridge crossing the river Leven thus is prominently visible to all passing trade and thoroughfare. The village was the childhood home of the famous explorer Captain James Cook, who lived in the village from the age of 8 to when he left at 16. This helps to attract tourism from all over the UK and as far afield as Australia and New Zealand! There is a Tourist Information Centre situated in the High Street car park which provides information on local holiday accommodation. A good range of shops mostly situated in the High Street, which together with restaurants, cafes and public houses cater for residents’ and visitors’ usual requirements. Suggitt’s Ices and Petch’s Pork Pies are particularly well known. Great Ayton is a superb base for a walking holiday (you can join the 110 mile Cleveland Way from the village). It is overlooked by Roseberry Topping and Easby Moor (where you’ll find a monument to Cook) and which offer spectacular views of the surrounding countryside, especially in the summer months when the moors turn purple with the blooming heather. Leisure amenities include tennis courts and a bowling green as well as cricket and football fields. There is also a village fete is held in June every two years on the High Green starting with decorated floats parading from Low to High Green and a “Captain Cook” day is held annually on or near his birthday (27th October) when children race model boats in the river. Trading Address: 5-9 Bridge Street Great Ayton North Yorkshire TS9 6NP Business History The present owners bought the Guest House in May 2004, when it was then trading as both a B&B and Tea Room. They bought the house outright and subsequently chose to close the Tea Room as they did not wish to work full time. The accommodation at the guest house has a 3-diamond rating awarded by the English Tourism Council.

Property Details Three, 2-storey mid terraced cottages converted to Guest House. Briefly comprising: Guest Accommodation: Double room with ensuite facilities Double room Twin room Single room Owner Accommodation: Double bedroom with ensuite facilities Private lounge Kitchen / diner Garden room leading to small courtyard Other: Guest lounge (to be converted into tea room) Dining area for guests Commercial kitchen Opening Hours Guest House: As required Tea rooms. Envisage being every day between hours of 10am-2pm. Tenure Freehold - ÂŁ375,000 (ÂŁ350,000 will be accepted).

PRODUCTS & SERVICES Products: We envisage the tea room will be supplying the following products: Paninis Assorted sandwiches Toasties Jacket potatoes Variety of drinks and snacks Scones, cakes and other similar confectionery products Services: Bed & Breakfast. 4 guest bedrooms. Pricing Strategy: Current rates for the Bed & Breakfast range from £28 to £35 per person per night. We will be looking to provide further ensuite facilities and update facilities in each bedroom over time (TV, DVD, Telephone, BB connection), and hopefully expand into the loft space which will allow us to raise the current pricing structure for visiting guests. Regarding the Tea Room, pricing structure will reflect existing local existing businesses of a similar nature, these include: Tally’s Cafe Bistro (TS9 6HA) Whinstone View Bistro (TS9 6QG - on the B1292 M'Bro Road) Park Square Coffee Shop (TS9 6BP) The Cooks Room (TS9 6BW) All of these establishments are situated towards the High Green area of Great Ayton, whereas the Bridge Guest House is situated in the Low Green area thus we have a better market share, particularly when it comes to passing trade.

MANAGEMENT & PERSONNEL Day to day management and running of the B&B/Guest House and tea room businesses will be carried out by part owner, Mr Daniel S. Pinkney and his partner Miss Stephanie Bytheway. They will also be living in the owners accommodation to help facilitate the running of both businesses. The other owners of the business will be contributing their numerous skills to the venture to help build the success and future profitability of the venture. New Owners/Directors: Mr Stephen Osborne* As well as being fully-employed as a key manager and engineer at Cleveland Bridge, Stephen also co-owns the newsagents/convenience store with Stephen Bytheway. He has a wealth of engineering, construction, business and DIY skills that can be called upon to enhance any business operation. Mr Stephen Bytheway* A well as being fully-employed Stephen currently has two successful businesses including a cafe/ takeaway business and a newsagents/convenience store. He has extensive experience of managing and running catering businesses, including managing outside catering and delivery - he also holds all the required food and trading licences as well as having the licences to trade alcohol. Mr Daniel S. Pinkney* A former director of Ellahi & Pinkney Limited (a design/advertising agency based in Stainton Village, Middlesbrough), Daniel has a wealth of business experience and marketing/design skills that can be called on to realise the full potential of The Bridge Guest House. *See full CVs in the appendices section

Other Key Staff: Miss Stephanie Bytheway Stephanie has worked in both the newsagent/convenience store and the cafe/takeaway business owned by her father so has ample experience in dealing face-to-face with customers.

THE MARKET Given the prime location of Bridge Guest House and Tea Room in the heart of Great Ayton, out target audience (market) for the products and services would encompass the following : Tourists visiting 'Captain Cook Country' (from as far afield as Australia and New Zealand) Hikers and walkers (Cleveland Way, Roseberry Topping and North Yorkshire Moors) Business people and contractors (usually the Mon-Fri trade) People who are visiting family in area who have limited accommodation Those who require temporary accommodation in local area

COMPETITIVE BUSINESS STRATEGY Analysis of Industry Structure (Porterâ&#x20AC;&#x2122;s Five Forces) Threat of New Entrants For a new player to enter the B&B/Guest House market in Great Ayton they would ideally be looking to convert a large residential house to enable them to provide all the required facilities to service as a Guest House. They would also require the necessary permissions to allow conversion to 'business' use. This would in effect devalue the property, as private residential housing in the centre of Great Ayton can command premium prices. Most developments in the area as a result will also be of 'residential' status due to this. Regarding the Tea Room side, there is always the risk of a commercial property on the high-street, close to the Guest House being utilised to provide a similar service. Threat of Subsitute Products At present there are two other establishments offering guest accommodation in Great Ayton, one being Susie D's Bed & Breakfast and the other being the Royal Oak Hotel. However demand currently outstrips supply so custom is currently passed between establishments providing a small network which helps generate continuing business for all parties involved. There are several coffee house and cafe style businesses in the High Green area of Great Ayton so the demand is obviously there to allow new entrants to survive without affecting other similar businesses. Power of Buyers The threat posed by buyers of our products/service is very low as demand for both Guest House accommodation and Tea Room services (especially in the Low Green area) is high. Individuals have therefore little or no control over how we structure our products and prices. Power of Suppliers The power of our suppliers (food and drink products) is weak as there are a large number of suppliers and intense competition between them. Rivalry Amongst Existing Players As stated above for the Guest House, demand currently outstrips supply so custom is currently passed between the three main establishments - this provides a small business network which helps generate continuing and growing business for all three Guest Houses. Concerning the Tea Room, there are several in the High Green area of Great Ayton but none in the Low Green area, where the Bridge Guest House is situated. With us catering for the opposite end of the town, next to the main thoroughfare and in the designated 'picnic' area there will be high demand for such a service.

SWOT Analysis The internal Strengths & Weaknesses of the business and the External Opportunities & Threats, can be summarised as follows: Strengths Provides two incomes (Guest House and Tea Room) Prime location and on main thoroughfare Experienced owners / management (in both catering and business) Ability to conduct marketing and advertising in-house Freehold purchase (security and the opportunity for capital appreciation) Weaknesses Limitations for short-term expansion of Guest House accommodation Opportunities Scope to increase business hours (through Tea Room) No competition in Low Green area of Great Ayton (for both trades) High demand for guest accommodation Using marketing activity, advertising, and PR to increase perception and knowledge of Tea Room, Guest House and associated facilities. Threats Other entrants into the Guest House sector and tea room style business in the Low Green area of Great Ayton. Our strengths will allow us to exploit opportunities in the market: Our experience in the field of catering and business will allow us expand upon the current trading hours by introuducing the Tea Room. Our ability to provide marketing, advertising and design in-house will allow us to promote both the Guest House and tea room cost-effectively whilst also creating a unique brand identity that can be incorporated across all media in a drive to improve perception and awareness of both products. We are mitigating against weaknesses and threats: Although the threat of new entrants to both businesses exist, current demand outstrips supply for Guest Houses in Great Ayton and there is no Tea Room type business in the Low Green area. Our limitation for expanding the number of guest rooms may be overcome by purchasing the adjacent cottage(s) at a later date.

MARKETING PLAN Brand identity The brand identity for the Guest House (and prospective Tea Room) is currently non-existant so we would be looking to produce a new identity in the first instance. We would not need to bring in the services of an outside advertising, design or marketing agency as we have the personnel to execute all this in house. The new image can then be carried through to a variety of mediums including: Exterior signage Menu designs and internal stationery (perhaps even crockery items) Enhancement of the current website (www.greataytonaccommodation.co.uk) Any subsequent advertising or promotional literature As the Guest House is in a very picturesque setting and the property itself exudes charm and character we would look to incorporate this 'image' in any brand identity or logo so that this is prominent in all promotional and advertising media. This tactic will only help in securing more and better custom. Enhancing the Website / WebMarketing The current website for the Bridge Guest House is fairly basic in design and functionality. We intend to renew the site, provide far more information on the Guest House and Great Ayton as well as look to add more functionality to the site such as online bookings and eventually online payments. Regarding promoting the website (and subsequently the Guest House) online, we would look to place links on websites that are reflective and relevant to our target audience (as on Page 10). At a later stage we may place banner adverts on key sites to attract further custom and aid awareness. Internal Restructure The current setup has a guest lounge, dining area and kitchen all within close proximity to each other which will aid the planned restructure to introduce a Tea Room to the Guest House. This increases our market share, provides two incomes and subsequently increases trading profits. Promotional Strategy & Advertising As the business has been trading primarily as a Guest House for the past two years and with the planned introduction of a 'new' Tea Room then marketing and advertising activities will prove necessary. This will be done through advertising on the premises (signage and posters) plus a door drop leaflet to local businesses and residential estates. This will prove to be an effective and inexpensive way of promoting the new service as well as also raising further awareness of the Guest House. As time goes on we would then look to advertise periodically in the local papers and produce a feature advert for the Yellow Pages. Public Relations Once the new identity is established, the internal restructure is complete and we are ready to launch the Tea Room, then a press release would be drafted and sent to the local papers for possible inclusion. This would help raise the profile and awareness of both businesses.

Diamond Rating System for Guest Houses The Bridge House currently boasts a Three Diamond Guest Accommodation rating awarded by the English Tourism Board, this signifies: Well maintained, practical decor, a good choice of breakfast dishes, a very good level of customer care. We would be aiming over time to reach a four or five diamond rating, which will help enhance the perception and awareness of the Guest House and thus enable us to revise the pricing structure upwards. A four or five diamond rating can be secured by achieving the following: Four Diamond Rating: An even higher level of quality and comfort. Very good levels of customer care. Five Diamond Rating: Exceptional overall quality in furnishing and rooms and customer care, anticipating guestsâ&#x20AC;&#x2122; needs. Exceptional level of quality.

FUTURE PROSPECTS Short-Term (1 year) Year one will be spent consolidating the existing business and improving profits by: Establishing the Tea Room business Introducing ensuites into key bedroom(s) Improving business operations Aiming to achieve a 4-Diamond accommodation rating Implementing a new brand identity Expanding marketing operations - advertising, websites and devising promotional schemes. Medium Term (2-3 years) Year two will be looking to build upon the first years work by: Increasing trading hours of the Tea Room Investigating ways and means of expanding into loft space Aiming to achieve a 5-Diamond accommodation rating Offering outside catering through other businesses (Snack Shack and Dukesway) Long-Term (3 years +) After year three we should be confidently operating two businesses that are running profitably and able to pay all associated costs of the property itself and yet still generating a healthy profit. We would then be looking to purchase the adjacent 2 cottages if and when either comes up for sale which could provide us with the space to introduce up to 12 further guest bedrooms.

FINANCIAL INFORMATION Price of business £375,000.00 (although current owners will accept £350,000) Finance requirement: With the Guest House being a freehold business, most lenders will usually finance up to 80% of the purchase price and in some cases up to 100%. Therefore at £350,000 we envisage providing a minimum of £70,000 deposit (20%) with the remaining £280,000 (80%) secured through borrowing. At a conservative mortgage rate of 6% pa over a 20 year term this equates to a £2,034.30pcm capital and interest repayment. However by approaching an Independent Finanacial Advisor (Mortgage specialist) we expect to be able to reduce this figure by a good margin and ultimately find a mortgage that is ideally suited to our specific requirements - see Page 17 for a few examples of more competitive mortgage rates. Overview of trading figures in 2005 Current trading figures show an annual turnover of around £35k per annum with estimated net profits of circa £12,000. Mr Daniel Pinkney will also be contributing £700pcm (equivalent to his current residential rental payment) until the tea room is established, running and profitable. This equates to £1,700 pcm and as such this is insufficient to pay the predicted mortgage costs (based upon 6%) of £2,034.30. Although we aim to introduce further ensuites and improve the current facilities thereby enabling us to increasing the pricing structure, it would still prove difficult to cover all the associated costs. This is where the Tea Room comes into play - having already utilised part of the guest house as a tea room in the past the current owners have testified to takings of up to £250 per day. We envisage a 340 day working year as this allows for a 25 day holiday entitlement but still caters for the busy Sunday and Bank Holiday trade. Taking a conservative value of £140 takings per day, this equates to £47,600 pa. From this we can estimate a Gross Profit figure of 45% (this is a figure comparable to Mr Bytheway's current cafe/takeaway business) which gives us a value of £21,420. With all the costs of the building and business being paid from the current profits of the Guest House and with no staff costs to pay (Mr Daniel Pinkney and Miss Stephanie Bytheway will be running and managing both businesses in the first instance) then the Gross Profit figure should be virtually identical to the Net Profit amount. Therefore with £12,000 profit from the Guest House and an estimated £21,420 from the tea room we have a total net profit of £33,420, which enables us to meet the mortgage repayments and still have £9k net profit at the end of the year. As it may take a couple of months to get the Tea Room operational, it is expected that the three owners/ directors of the Guest House will be supplement the initial mortgage repayments with income/savings.

Financial Predictions in Brief: Net Profit (Guest House)

£12,000.00

Net Profit (Tea Rooms)

£21,420.00

Total Net Profit

£33,420.00

Equivalent per month

£2,785.00

Less monthly Mortgage Costs of

£2,034.30

Overall Net Profit (pcm)

£750.70

Overall Net Profit (pa)

£9,008.40

Selection of Mortgages in Current UK Market (for Comparison) Lender

Mortgage Type

Max LTV

Rates

Mortgage Repayments

ING Direct

Fixed (no tie in beyond benefit period)

90%

4.95% for 2 years

Repayment: £1,864.39 Interest Only: £1,155.00

Woolwich Open Plan (Fixed)

Fixed (no tie in beyond benefit period)

80%

4.98% for 10 years

Repayment: £1,869.15 Interest Only: £1,162.00

Woolwich Open Plan (Variable)

Variable (stays 0.29% above Barclays Bank Base Rate, currently 4.75%)

80%

Currently 5.04% for full length of term

Repayment: £1,878.68 Interest Only: £1,176.00

Newcastle Building Society

Fixed Rates with extended Redemption Tie Ins (penalties charged for repaying mortgage early)

90%

1.8% till 31/01/09 (over 2 years). Redemption to 31/01/13.

Initial rate (2 years): Repayment: £1,399.59 Interest Only: £420.00

Derbyshire Building Society

Fixed Rates with extended Redemption Tie Ins (penalties charged for repaying mortgage early)

80%

1.85% till 30/11/08 (2 years). Redemption to 31/11/12.

Initial rate (2 years): Repayment: £1,406.41 Interest Only: £431.66

(based on £280,000 borrowings over a 20 year term)

CURRENT WEBSITE SCREENSHOTS Homepage

Contact Page

Accommodation

Accommodation (Continued)

Activities Page

THE BRIDGE GUEST HOUSE & TEA ROOM Prospective Purchasers: Mr Stephen Osborne Mr Stephen Bytheway Mr Daniel Scott Pinkney Bridge Guest House 5-9 Bridge Street Great Ayton North Yorkshire TS9 6NP