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August 1, 2012

YRI Guidance on Pizza Hut Dough Commissary. August 1, 2012. YRI Commissary Classification System. Financial Model - Market Inputs. Need Accurate Data: Average Annual Store Sales. Pies per order ratio SSSG and Transaction Growth are averages for all stores

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August 1, 2012

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  1. YRI Guidance on Pizza Hut Dough Commissary August 1, 2012

  2. YRI Commissary Classification System

  3. Financial Model - Market Inputs • Need Accurate Data: • Average Annual Store Sales. • Pies per order ratio • SSSG and Transaction Growth are averages for all stores • # Stores is the final number after 10 years • PHD vs PBP mix • Size mix – important to determine dough weight. • Store Count Forecast • Based on a 10 year build • Start with Existing number of Stores • Contract Par Baked Pan

  4. Financial Model - CAPeX • Commissary CAPeX: • Design & Construction; Architectures • Building Equipment; i.e. HVAC, Proofing Room, & Refrigeration. • Dough Making Equipment; Mixer, Divider / Rounder, Sheeter, Oven, MD, etc. • Taxes; Duties will vary by country • Rent; Assumes facility is leased for 10 yr. Duration. The rate per m2 will be one of the site location criteria. • Store CAPeX avoidance for new builds only. • New Store rent and depreciation also predicated on smaller footprint which was assumed to be up to 20%.

  5. Financial Model – CF Summary

  6. Outputs estimate of space required C2 – 20 Stores Capacity Calculator – Space Requirements 2,830 Trays Required 189 Dollies Required 90 Dolly Positions in Cooler Enter Estimated Transactions & Product Mix 20 Stores 900 Transactions/wk/store 1.5 Pies Per Transaction 5 days Operating per Week 20% Family Pan 80% Medium Traditional Engineered Solution C2 – 1 Shift Approx. 4,950 Sq. Ft.

  7. Outputs estimate of space required C2 – 60 Stores Capacity Calculator – Space Requirements 8,500 Trays Required 566 Dollies Required 270 Dolly Positions in Cooler Enter Estimated Transactions & Product Mix 60 Stores 900 Transactions/wk/store 1.5 Pies Per Transaction 5 days Operating per Week 20% Family Pan 80% Medium Traditional Engineered Solution C2 – 2 Shifts Approx. 6,900 Sq. Ft.

  8. Outputs estimate of space required C2 – 100 Stores Capacity Calculator – Space Requirements 14,150 Trays Required 950 Dollies Required 450 Dolly Positions in Cooler Enter Estimated Transactions & Product Mix 100 Stores 900 Transactions/wk/store 1.5 Pies Per Transaction 5 days Operating per Week 20% Family Pan 80% Medium Traditional Engineered Solution C2 – 3 Shifts Approx. 8,200 Sq. Ft.

  9. C2 Future Expansion: 20 Stores - 1 Shift 175 sq ft Ingredient Storage Usage Processing Estimated 7,820 sq ft of Total Space Proofing & Retarding 435 sq ft Cooler Usage Packaging Tray/Pan Washing Par-Baking

  10. C2 Future Expansion: 60 Stores – 2 Shifts 336 sq ft Ingredient Storage Usage Processing Estimated 7,820 sq ft of Total Space Proofing & Retarding 1,100 sq ft Cooler Usage Packaging Tray/Pan Washing Par-Baking

  11. C2 Future Expansion: 100 Stores – 3 Shifts 500 sq ft Ingredient Storage Usage Processing Estimated 7,820 sq. ft of total space Proofing & Retarding 1,700 sq. ft Cooler Capacity Packaging Tray/Pan Washing Par-Baking

  12. Appendix Appendix

  13. Pizza Hut Commissaries and PHD Stores 32 COMMISSARIES (21 -C1, 11-C2&C4) ** 2012 500 STORES SUPPORTED 2011 27 COMMISSARIES 338 STORES SUPPORTED* 15 COMMISSARIES 2010 195 STORES SUPPORTED 6 COMMISSARIES 2009 163 STORES SUPPORTED 2008 # of Commissaries 3 COMMISSARIES 71 STORES SUPPORTED # of PHD’s 2007 1 COMMISSARY 21 STORES SUPPORTED 450 50 100 250 300 150 200 350 400 * Data as of October 2011 ** Includes 2012 forecast

  14. Commissary Roles and Responsibilities of Dallas vs Field Dallas BMU/FBU Field all initial Franchise commissary requests Resource to: Define 10 year Growth Potential Cascade & review Financial Model Approve Site Selection Approve Construction of facility conforming with latest manual Start-up Support Make each facility ready for CCA & STAR audit Understanding Contractual Agreements • Define & Develop : • QA/Sanitation Policies (CCA) • Training Materials (Business Model) • Facility/Ops processes & systems • Commissary Contract • Approve: • Critical equipment specs • Layout & Workflows • Review Committee process for exceptions to recommended layout and business model. • Central Repository for all necessary information (Website)

  15. Commissary 3-Step Process

  16. Financial Model – Store Level P&L

  17. Financial Model – Commissary Ingredient Costs • Dough Ingredient Expense based on 100kg batch: • Flour; will vary by market • Instant Dry Yeast available locally. • Oil per spec. • Lesaffre improver • Assumes 3 sizes for both PBP and PHD. • Store CAPeX avoidance for new builds only. • Smaller batches will have proportionate ingredient amounts associated.

  18. Financial Model – Commissary Wages • This sheet shows one of three 8hr shifts: • Can also be two 10hr shifts with 4hrs Cleaning & PM. • Assumes 9 team members. One of whom will be Shift Lead • Hourly wage will vary. Supervisor 1.5X team member • General Manager/QA Manager & Admin as full time employees. • This team member modeling based on 15% PBP. Please refer to Labor Table.

  19. Financial Model – Market Inputs • Fridge Truck: • $100,000 CAPeX • $10,000/yr Depreciation. • Labor expense of $10,000/yr could vary greatly. • R&M costs assumed to be outsourced but could be internalized with Maintenance Manager • Insurance $7,500 is just for internal investment. • Gas Expense assumes daily delivery 6 days per week at average of 500 miles per day driven. • Outsource Logistics of additional 50% contingency assumed for modelling.

  20. Key Cash Flow Drivers

  21. Fresh Commissary: Equipment

  22. Fresh Commissary: Assumptions

  23. Fresh Commissary: Capital Estimates

  24. Fresh Commissary: Capability Comparison

  25. Process Flow - Typical Load Hopper Verify Weight Traditional Warm Bowl Add Ingredients Place in Tray and Spray with Oil Mix Divide & Round Place in Pan and Spray edges with Oil Place on Cooling Tray Proof & Retard Par-Baked Pan Temper 30min Bake 3 minutes Package in Bags Let Dough Rest minimum of 3 minutes Store & Ship Add Perforated Pan Sheeting

  26. Real Opportunities for Innovation vs. • Water Metering – Automate temperature controlled water delivery to remove manual measurement with flow meter, load cells, etc. • Sheeting Throughput – Increase capacity of sheeters to reduce manpower, floor space, and bottlenecking. • Pan Oiling – Automate pan oiling with wiper or spray arm to remove manual pumping and pan rotation for coverage. • Pan Denesting/Stacking –Automate processes of staging pan, adding lid, stacking and racking pans for Proofing. • Proofing and Retarding – Spiral accumulation and singulation to/through Retarding. Consistent timing for continuous Proofing/Retarding process. • Right Size Oven - Maximize throughput to match continuous dough ball/pan speed. Eliminate Retarding time by oven outrunning production and going directly from Proofing to Oven.

  27. Process Flow C1 – Option 1 C2 – Manual C3 – Automatic (See Appendix) (See Appendix) (See Appendix) C1 – Option 2 C2 – Automatic (See Appendix) (See Appendix)

  28. C1 Equipment Optimization 5 Day Store Shelf Life Traditional: C1 – Option 1Sized for 5 Stores8 hours of production 20min Max Cold Proof 48hrs • (1) Hobart HL662 Mixer • 10kg Batches • Pan Family Pies 37 • Traditional 10” 64 • 48 kg/hr Par-Baked Pan: 3-10min Rest Proof 1hr Retard 1 to 2hrs Tempering 30min Store 1 Day 4 Day Store Shelf Life • (1) Doyon DFP18 Sheeter • 3-10 min Rest • Batch processed within 10 minutes • 8pcs/min per machine • 200 kg/hr • (1) Middleby Marshall • PS555 Oven • 2.5 to 3 minute bake time • Batch processed within 20 minutes • Pies per/hr per Oven: • Family 131 • 55 kg/hr • Manual Dividing/Rounding • Batch must be Divided/Rounded • within 20 minutes • 6 pcs/min per employee • One employee • 90 to 150 kg/hr Note: Equipment specification for example only.

  29. C1 Equipment Optimization 5 Day Store Shelf Life Traditional: C1 – Option 2Sized for 5 Stores5 hours of production 20min Max Cold Proof 48hrs • (1) Thunderbird ASP-200 Mixer • 80kg Batches • Pan Family 188 • Traditional 10” 517 • 380 kg/hr Par-Baked Pan: 3-10min Rest Proof 1hr Retard 1 to 2hrs Tempering 30min Store 1 Day 4 Day Store Shelf Life • (1) AM S302 Divider/Rounder • Batch must be Divided/Rounded • within 20 minutes • 30pcs/min per machine capacity • 440 to 765 kg/hr • (2) Doyon DFP18 Sheeters • 3-10 min Rest • Batch processed within 30 minutes • 8pcs/min per machine • 408 kg/hr • (1) Middleby Marshall • PS555 Oven • 2.5 to 3 minute bake time • Batch processed within 60 minutes • Pies per/hr per Oven: • Family 131 • 55 kg/hr Note: Equipment specification for example only.

  30. C2 Equipment Optimization - Manual 5 Day Store Shelf Life Traditional: C2 Sized for Up to 100 StoresUp to 24-hour Production 20min Max Cold Proof 48hrs Par-Baked Pan: 3-10min Rest Proof 1hr Retard 1 to 2hrs Tempering 30min Store 1 Day 4 Day Store Shelf Life • (1) Thunderbird ASP-200 Mixer • 90kg Batches • Pan Family 335 • Traditional 10” 582 • 142 to 427 kg/hr • (1) Automated Scale • Check weight of every dough ball • 30pcs/min per machine • 440 to 765 kg/hr • (1) AM S300 Divider/Rounder • Batch must be Divided/Rounded • within 20 minutes • 30pcs/min per machine capacity • 440 to 765 kg/hr • (2) Doyon DFP18 Sheeters • 3-10 min Rest • Batch processed within 30 minutes • 8pcs/min per machine • 408 kg/hr • (3) Middleby Marshall • PS555 Ovens • 2.5 to 3 minute bake time • Batch processed within 20 minutes • Pies per/hr per Oven: • Family 131 • 167 kg/hr Note: Equipment specification for example only.

  31. C2 Equipment Optimization - Automatic 5 Day Store Shelf Life Traditional: C2 Sized for Up to 100 StoresUp to 24-hour Production 20min Max Cold Proof 48hrs Metal Detection Par-Baked Pan: 3min Rest Store 1 Day 4 Day Store Shelf Life Tempering 30min • (1) Horizontal Mixer • 100kg Batches • Pan Family 372 • Traditional 10” 647 • 475 kg/hr Proof 1hr • (1) Automated Scale • Check weight of every dough ball • 33pcs/min per machine minimum • 440 to 765 kg/hr Metal Detection • (1) Divider/Rounder • Batch must be Divided/Rounded • within 20 minutes • 33pcs/min per machine minimum • 485 to 841 kg/hr • (2) Sheeters • 3min Rest (conveyor) • Continuous processing • 17pcs/min per machine minimum • 867 kg/hr • Continuous Proofer & Conveyor Oven • 2.5 to 3 minute bake time • Batch processed within 20 minutes • Pies per/hr: Family 1,116 • 475 kg/hr Note: Equipment specification for example only.

  32. C3 Equipment Optimization 5 Day Store Shelf Life Traditional: C3 Sized for 100+ Stores24-hour Production 20min Max Cold Proof 24hrs Metal Detection Par-Baked Pan: 3min Rest Tempering 30min Store 1 Day 4 Day Store Shelf Life Proof 1hr Metal Detection • Continuous Proofer & Conveyor Oven • 2.5 to 3 minute bake time • Batch processed within 20 minutes • Pies per/hr: Family 5,592 • 2,400 kg/hr • (2) Horizontal Mixers • 250 kg Batches • Pan Family 932 • Traditional 10”1617 • 2,400 kg/hr • (2) Divider/Rounders • Batch must be Divided/Rounded • within 20 minutes • 100 pcs/min per machine capacity • 2,940 to 5,100 kg/hr • (2) Automated Scales • Check weight of every dough ball • 100pcs/min per machine • 2,940 to 5,100 kg/hr • (2) Sheeters • 3min Rest (conveyor) • Continuous processing • 100pcs/min per machine minimum • 5,100 kg/hr Note: Equipment specification for example only.

  33. Conceptual Commissary Layouts C1 – Option 1 C2 – 20 Stores C2 – Automatic C3 – Automatic (See Appendix) (See Appendix) (See Appendix) (See Appendix) C1 – Option 2 C2 – 60 Stores (See Appendix) (See Appendix) C2 – 100 Stores (See Appendix)

  34. C1 Layout – Option 1 Utilize Store Oven during Off Hours Additional 515 sq. ft. built out from typical store C1 – Option 1 (1) Hobart 60Qt Mixer Manual Dividing/Rounding (1) Sheeter (1) Oven (Store Oven, Off Hours) (4) Estimated Employees Additional 116 sq. ft. of Cooler Space

  35. C1 Layout – Option 2 Utilize Store Oven during Off Hours Additional 830 sq. ft built out from typical store C1 – Option 2 (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (2) Sheeters (1) Oven (Store Oven, Off Hours) (3) Estimated Employees Additional 142 sq. ft of Cooler Space (Storage & Retarding)

  36. C2 Layout C2 – 20 Stores (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (2) Sheeters (3) Ovens (11) Estimated Employees Estimated 4,875 sq. ft. of Total Space Processing Proofing & Retarding 435 sq. ft. Cooler Capacity Packaging Par-Baking Tray/Pan Washing

  37. C2 Layout C2 – 60 Stores (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (2) Sheeters (3) Ovens (26) Estimated Employees Processing Estimated 6,665 sq. ft of total space Proofing & Retarding 1,100 sq. ft Cooler Capacity Packaging Tray/Pan Washing Par-Baking

  38. C2 Layout C2 – 100 Stores (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (2) Sheeters (3) Ovens (39) Estimated Employees Processing Estimated 7,820 sq. ft of total space Proofing & Retarding 1,700 sq. ft Cooler Capacity Packaging Tray/Pan Washing Par-Baking

  39. C2 Automatic Layout C2 – 100 Stores (1) 200kg Horizontal Mixer (1) Divider/Rounder (2) Sheeters (1) Continuous Proofer/Oven (6) Estimated Employees Bulk Ingredients Estimated 16,500 sq. ft of total space Processing Tray Packing & Metal Detection 1,700 sq. ft Cooler Capacity Proofing Tray/Pan Washing Par-Baking Packaging & Metal Detection

  40. C3 Layout Proofing Par-Baking Sheeting Cooling Processing Packaging Bulk Ingredients 5,615 sq. ft Cooler Capacity Tray/Pan Washing Estimated 56,700 sq. ft of total space C3 – 100+ Stores (2) Horizontal Mixers (2) Divider/Rounders (2) Sheeters (1) Continuous Proofer/Oven (12) Estimated Employees

  41. C1 Production Time Study C1 – Option 1 (1) Hobart 60Qt Mixer Manual Dividing/Rounding (1) Sheeter (1) Oven(Store Oven, Off Hours) Traditional 1 Shift Up to 5 Stores 22 Batches/Day 4 Employees Par-Bake 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs C1 – Option 2 (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (2) Sheeters (1) Oven (Store Oven, Off Hours) Traditional 1 Shift Up to 5 Stores 3 Batches/Day 3 Employees Par-Bake 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs

  42. C2 Manual Production Time Study 1 Shift Up to 20 Stores 10 Batches/Day 11 Employees C2 – Option 1 (1) Thunderbird 200kg Mixer (1) AM Divider/Rounder (1) Automated Scale (2) Sheeters (3) Ovens 2 Shifts Up to 60 Stores 28 Batches/Day 26 Employees 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 3 Shifts Up to 100 Stores 46 Batches/Day 39 Employees 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 11hrs 12hrs 13hrs 14hrs 15hrs Traditional Par-Bake 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 11hrs 12hrs 13hrs 14hrs 15hrs 16hrs 17hrs 18hrs 19hrs 20hrs 21hrs 22hrs 23hrs 24hrs

  43. C2 Manual Production Labor Optimization Traditional Par-Bake 2 Shifts Up to 100 Stores 42 Batches/Day 30 Employees 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 11hrs 12hrs 13hrs 14hrs 15hrs C2 – Optimization (1) Thunderbird 200kg Mixer (1) Divider/Rounder (1) Automated Scales (2) Sheeters (9) Ovens Optimize Oven Size

  44. C2 Automatic Production Time Study 2 Shifts Up to 100 Stores 42 Batches/Day 6 Employees Traditional Par-Bake 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 11hrs 12hrs 13hrs 14hrs 15hrs 16hrs C2 – Automatic (1) 200kg Horizontal Mixer (1) Divider/Rounder (2) Automated Scales (2) Sheeters (1) Continuous Proofer/Oven (1) Spiral Cooler (1) Automated Bagger/Tray Packer (1) Automated Dough Ball Tray Packer

  45. C3 Production Time Study 1 Shift 285 Stores 47 Batches/Day 12 Employees Traditional Par-Bake 1hr 2hrs 3hrs 4hrs 5hrs 6hrs 7hrs 8hrs 9hrs 10hrs 11hrs 12hrs C3 – 100+ Stores (2) Horizontal 400kg Mixers (2) Divider/Rounders (2) Automated Scales/Metal Detectors (2) Sheeters (1) Continuous Proofer/Oven (1) Spiral Cooler (1) Automated Bagger/Tray Packer (1) Automated Dough Ball Tray Packer

  46. Commissary Cost Comparison

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