The Shad Ice Cream Parlour Exercise

1. The Shad Ice Cream Parlour Exercise July 8, 2014 Kelley A. Packalen, PhDAssociate Professor of Entrepreneurship, Queen’s School of BusinessShad Valley Alum (Carleton 1992) kpackalen@business.queensu.ca

2. Task (Agenda) • Decide upon your story • Develop your ice cream sundae creations • Break until after dinner • Sell your sundaes to the rest of the class • Complete a post exercise activity with your group • Debrief

3. Goals of the exercise • Allow you to try being an entrepreneur • Give you an opportunity to start to understand what it takes to run a business • Expose you to core business issues such as planning, financing, managing, and marketing as well as team work, communication and leadership • Walk you through the components of a business plan • Provide an environment that enables learning while having fun

4. What do you do? • You have 10 minutes to answer this question • As a group come to an agreement on the answer to this question (in the context of this exercise) • You should be able to summarize what you do in one or two sentences • Everyone is running an ice cream parlour so think about what kind of ice cream parlour you want to be

5. Develop your ice cream sundae creations • Decide on whether to have one or two types of sundaes • Pick the ingredients for the sundae(s) • Name the sundae(s) & design an ad • Determine the COGS for each sundae sold • Set a sale price for the sundae

6. Pick your ice cream • Pick one of the following flavours: • Vanilla, Chocolate, Strawberry, Neapolitan, Butterscotch Ripple, Mint chocolate chip, vanilla low-fat frozen yogurt, chocolate low-fat frozen yogurt, or rainbow sorbet • All containers are 2 L. The suggested serving size is ½ cup or 125 mL. ½ cup is equivalent to about two scoops of ice cream.

7. Pick your toppings • If you picked ice cream keep up to four toppings, otherwise keep up to three. • If you want two orders of something then write two quantities next to it • Each of the following are $1 (all 1/2 cup) • Chocolate chips, Crushed Skor toffee, Gummy bears, Maraschino cherries, Marshmallows, Reese Pieces, Bananas (3 whole) • Each of the following are $2 (all about 1 cup) • Caramel sauce, Chocolate sauce; Strawberry jam; whipped topping

8. Payment is required up front $5 is from your team’s investment $5 is from a loan at 20% interest due at the end of the exercise NOTE: You may choose to spend less than $10 total Bill of Sale • Ice cream $ 5 • Topping budget $ 4 • 10 serving sets $ 1 • Total $10 • Yogurt or sorbet $ 6 • Topping budget $ 3 • 10 serving sets $ 1 • Total $10

9. Considerations for pricing • Your portion size will determine: • Your variable cost per sundae • The maximum number of sundaes you can make • Your customers: • If everyone buys a sundae on average you will sell 5 sundaes • Students will have $4 to $15 in cash on hand with which they can purchase ice cream (money is given out in roughly a bell-shaped distribution) • Price your sundaes so that if you sell your maximum number you will at least break-even

10. Other Costs To Consider • Expenses & Non-operating expenses: • Cost of two employees for half hour: $12 • Overhead (rent, electricity, etc.): $2 • $1440 per month / 30 days / 12 hours/day = $4 per hour • Advertisement: $1 • Inventory loss / spoilage: up to $9 (anything you didn’t sell) • Interest expense: 20% of value you borrowed from bank • You will also want to repay • Equity investment to team members: $5 • Principal portion of loan to bank: up to $5

11. Design your ad • Decide if you are going to make one type of sundae or two types. • Come up with a catchy name and description • Make sure that the name and description are consistent with your story • Ad is to be designed on one PowerPoint slide • When you are finished email the slide to me: • kpackalen@business.queensu.ca

12. Sundae Ad • You have one PowerPoint slide (in landscape view) to create an ad for your sundae(s) • Be sure to include: • The name of the sundae(s) • A description of the sundae(s) • A list of the ingredients • The cost of the sundae(s) • Make your ad visually appealing • (you can pull images from the web if applicable) • When you are finished: • Email the slide to kpackalen@business.queensu.ca • All of the ads will be combined into one PowerPoint file and rotated during the selling period (think about what this means for formatting) • You will also receive one colour copy to have at your storefront.

13. Instructions for selling and buying ice cream

14. Each team will receive • Equipment: • One or more ice cream scoops • Container to rinse scoops in • Other serving utensils (e.g. spoons for toppings) • Ingredients and serving bowls • Ice cream and toppings which you ordered • 10 serving sets (bowl, spoon, and napkin)

15. Ice cream sale set-up • Designate two people per team to make the sundaes. • You can trade off during the selling period, but no more than two should be working in any capacity at any time • Be sure to thoroughly wash your hands before you start preparing the ice cream. • Two minutes to set up stations.

16. Purchasing ice cream • You cannot purchase your own team’s sundae • You don’t have to purchase a sundae • You can only purchase one sundae • Sellers record sale on sales slip • Remember: • You should think of the money that you were given as cash on hand and not necessarily what you would spend • If you are the kind of person who never eats out and thinks Starbuck’s is expensive you probably wouldn’t purchase the most expensive sundae in real life so don’t do it today.