Problem-Solution Proposal

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A Proposal to Increase Profit for Boba Guys by Developing a Mobile

App for Online Ordering

Prepared for Bin Chen & Andrew Chau Co-Owners of Boba Guys

By

Jason Smith November 2, 2017

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Transmittal Letter Jason Smith 372 Barbara Ln Daly City, CA 94015 Bin Chen & Andrew Chau Co-Owners 3491 19th St. San Francisco, CA 94110 Since discovering boba milk tea, I have tried to incorporate Boba Guys into my daily routine, but the lines are too long. Boba Guys has become one of the most popular establishments the Bay Area, and I regularly find myself waiting between 30-40 minutes to order my drink. At this point, I will avoid Boba Guys completely if I see the line wrapped around the block. I have prepared a proposal to show you the potential earnings of developing a mobile app that will reduce wait times, increase transactions, and increase overall profit. I am confident a mobile app would lead to increased efficiency and overall performance without sacrificing quality or customer service. As Boba Guys becomes more popular, the wait time to order drinks has dramatically gone up. During peak times on certain days, customers wait on average 30-40 minutes just to order their drinks. Recently, I have noticed customers passing up Boba Guys entirely, simply because the line was too long. Reducing the amount of time it takes to order a drink will result in an increase in daily transactions. My proposal to reduce the amount of wait time in lines would be to create a mobile app that allows customers to order online and pay in advance. If customers were able to order online and pay in advance, they would be able to bypass the line completely and pick up their order from the counter. This would cause customers to incorporate Boba Guys into their regular schedules instead of it being an occasional splurge. Since Boba Guys already uses iPad’s for their in-store transactions, implementing a mobile app would be an easy transition. It would be a pleasure to discuss this opportunity further with you, and develop an app that would drive more customers through your doors on a regular basis. Thank you for your time, and I look forward to hearing from you. Sincerely, Jason Smith

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Table of Contents

Executive Summary…………………………………………………………..4 Introduction………………………………………………………………….5 Problem / Need Statement Analysis…………………………………………6 Solution Analysis……………………………………………………………..8 Work Plan…………………………………………………………………...10 Budget Cost Analysis………………………………………………………..12 Evaluation…………………………………………………………………..14 Conclusion………………………………………………………………….15 References…………………………………………………………………..16

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Executive Summary The wait times to order drinks at Boba Guys ranges from 30-40 minutes during peak hours of the day. The solution to cutting down the wait times would be to develop a mobile app that allows customers to order their drinks and pay in advance from their mobile device. The benefits of the mobile app will result in increased transactions, reduced wait times, and an overall increase in profit. The work plan to develop the mobile app will cover a 6-month design period, which includes research, design, and marketing for the app release. Once the app is released, the marketing campaign will continue until there is a steady flow of mobile app use. The total cost for this project will be $65,497.50, with a possible savings of $1,000 if the loan is paid in less than a year.

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Introduction

Proposal Purpose: This proposal is intended to draw attention to the potential earnings from a mobile app that allows customers to order online and pay in advance. To be competitive in the food and beverage industry, it is vital for companies to reach their customers in the easiest way possible. A mobile app would not only reduce lines and wait times, but would result in an increase in profit for Boba Guys as well. Boba Guys has the potential to become a daily routine for customers by taking advantage of online ordering. Contact Information: Jason Smith [email protected] 372 Barbara Ln Daly City, CA 94015 415-527-8032 Written For: Bin Chen & Andrew Chau Co-Owners 3491 19th St. San Francisco, CA 94110 Written on: November 2, 2017 Effective Start Date: February 1st, 2018

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Problem/Need Statement and Analysis

The Problem: Waiting in line 30-40 minutes for a drink that can be consumed in less than ten minutes is driving customers away and reducing overall profit for Boba Guys. The inefficient ordering system Boba Guys currently uses limits the amount of revenue each store can earn per day. On average, wait times for boba milk tea at Boba Guys is between 30-40 minutes during peak times. In San Francisco there is at least one high school with a population of 1,000 students or more within one mile of every Boba Guys location in the city (All Schools, n.d.). This is causing the wait times to peak in the afternoon when kids get out of school, into the evening when adults are getting off of work (Boba Guys, n.d.).

(Boba Guys, n.d.) Customers waiting in line are frustrated by the time they order their drinks at the counter. This results in poor Yelp reviews for Boba Guys. After reading many of the Yelp reviews for the Mission location in San Francisco, the word “line” was referred to 16 times on the first of ten pages of reviews (Yelp, 2017). As poor Yelp reviews accumulate, fewer customers want to buy drinks at Boba Guys. Longer lines result in fewer transactions per hour and less revenue. On the west coast specifically, there are only locations in San Francisco and the peninsula, which both have long wait times averaging 30 minutes during peak hours. Therefore, customers are looking for quicker alternatives, resulting in less profit for Boba Guys. Who/What the Problem Affects: Time is the most valuable asset anyone has, and maximizing efficiency has become a main priority for consumers. Customers are the only source of profit for Boba Guys, and as the lines get longer, fewer customers are willing to take the time to experience Boba Guys on a regular basis. From busy moms to full-time students, time cannot be wasted standing in lines for drinks. Frustrated customers leave bad Yelp reviews, which cause Boba Guys to lose potential customers. With average wait time around 30 minutes during peak hours, a customer who visits Boba Guys every day would have to spend 14 hours per month waiting in line for boba milk tea. If the wait times were cut in half, customers would want to come back on a regular basis and also leave Yelp reviews that don’t mention how long the line was. An article from the New York Times compared waiting in line to torture, and how even a few minutes waiting can seem unbearable (Stone, 2012). If waiting in line for a few minutes seems difficult, customers who wait for 30-40 minutes are in agony by the time they order

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their drinks. Quality is the main focus for Boba Guys, but customers are still choosing convenience over quality (Gingerich, 2015). Boba Guys is losing revenue to customers who can’t wait in line for 30-40 minutes during peak times of the day. Why a Solution is Necessary: After reading many of the reviews on Boba Guys’ Yelp page for the Mission location, people who gave less than five stars also mentioned how long the line was. As lines become longer, Boba Guys will begin to lose business to their competition. With rent in San Francisco on the rise, Boba Guys needs to increase their customer base in order to stay profitable. First time customers who experience 30-40 minute wait times at Boba Guys are dissatisfied and less likely to become a recurring customer. In order to keep customers coming back to Boba Guys on a regular basis, the long wait times need to be reduced. Unlike its competitors, Boba Guys offers no other incentive for customers to come back. Customers who become regulars are more likely to refer Boba Guys to their network, which will result in growth for the company. Without a growing customer base, Boba Guys will only be a temporary business instead of a leader in the boba industry. Higher than average wait times do not allow customers to incorporate Boba Guys into their everyday routine. Boba Guys is currently a place customers can only experience once in a while, which results in lower overall profit. Since Boba Guys only takes orders at the register, they are missing out on profit, growth, and the opportunity to increase their customer base. During the hours of 3pm-6pm, 3 bobaristas can only process an average of 60 drinks per hour at 3 minutes per drink. This process is very limited since the orders are only being received from walk-in customers. 60 drinks at an average price of $5 per drink results in $300 of revenue per hour during peak times. If wait times could reduce from 30 minutes to 15 minutes, the total number of transactions would double and revenue would increase. With this current system in place there is no opportunity for growth, which is what Boba Guys needs to survive.

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Solution Analysis

Solution Description: Investing in a mobile app would cut wait times dramatically, increase the number of transactions per day, and result in an increase in profit. Creating a mobile app that allows customers to preorder drinks and pay in advance can alleviate the long lines at Boba Guys. Boba Guys currently has a no rewards program for customers. With the introduction of a mobile app, Boba Guys could create a rewards program to give customers incentives for ordering through the mobile app. This would build a loyal customer base that can sustain business for a long period of time. Mobile orders have seen a 100% increase in the past two years, which means Boba Guys is missing out on doubling their profit (PYMNTS, 2015). Ordering food and drinks for pickup has been around for several years, but customers are finding it more convenient to pay in advance to make the transaction more efficient. Boba Guys is missing out on profit from customers who want to order ahead. By creating a mobile app for Boba Guys, they would be able to connect with an already tech savvy customer base, which would result in increased profit. Customers waiting in line to order drinks are on their phones swiping aimlessly through social media when they could be ordering boba and increasing total transactions. The trend in mobile app purchases has been steadily increasing as customers find it more convenient to order ahead rather than wait in line. To spark the interest in downloading the mobile app, Boba Guys could offer an incentive such as $5 off your first purchase when ordering through the mobile app. Besides the incentive to download the app, Boba Guys needs a referral program that gives rewards to people who tell their friends about the app. For every referral, the customer would receive $2 in credit once the new customer makes their first order. According to Giovana Zanellato of AnnexCloud.com (2016), a study from Neilson Marketing shows that “77% of consumers are more likely to buy a new product when learning about it from friends or family.” This would result in more profit for a company who already has a word of mouth approach to marketing. The mobile app will allow customers to customize their drink orders and receive the same superior quality and customer service. Strategies to Accomplish Desired Solution: In order to develop a user-friendly mobile app, the following steps should be taken:

§ Research other mobile apps and note the best features from each one. § Hire LevelUp Consulting, LLC, to develop the mobile app. § Develop a rewards system that gives incentives to loyal customers. § Create a marketing campaign for the release of the new mobile ordering app with an

incentive for customers to download. § Hire an additional employee at each location who will be dedicated to mobile orders

during peak times, and is also trained to help with in-store orders during slower times.

§ Purchase additional iPad to be used for confirming mobile orders. § Purchase additional receipt terminal dedicated to mobile orders. Receipts for mobile

orders will be printed on a different color of paper than in-store purchases.

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§ Once the mobile order is placed, the customer will be given a future pickup time and a notification of when the order is ready to be picked up.

§ Once the mobile order is completed, the bobarista will print out a sticker with the customer’s name and description of the drink. Each sticker will be placed on top of the drink and placed in a dedicated part of the pickup counter for mobile orders.

To make this an absolutely flawless experience, customers will be able to pay using Apple Pay, Android Pay, and any debit or credit card. The entire menu will be made available to the customer through the mobile app, where they can customize the desired additional toppings, level of sweetness, and size of the drink. The mobile app will offer customers a more enjoyable experience at Boba Guys by allowing the customer to walk in, grab their drink, and walk out. Foreseen Changes After the Solution is Accomplished: When the mobile app is completed, wait times for drink orders will be reduced dramatically. Increasing the number of mobile orders will also result in increased number of daily transactions. According to Wallace (2017) “67% of Millennials prefer to shop online,” and Millennials make up the majority of Boba Guys’ customer base. Customers who can effortlessly order a drink with minimal wait time will be more likely to order Boba Guys on a regular basis. As the growth in mobile ordering continues to grow, this mobile app will become a prime source of revenue for Boba Guys. By introducing a rewards program for recurring customers, Boba Guys will see an increase in customer loyalty and overall profits. Zanellato (2016) states, “65% of consumers say that receiving rewards impacts their frequency of use.” As the customer base grows from the popularity of the mobile app, there will also be an increase in total revenue. The incentive to download the app as well as the refer-a-friend program will boost the customer base and result in recurring customers. Mobile ordering will also cause customers to write Yelp reviews about how their experience was painless and required little to no wait time for their drinks. Long Term Effects: Customer service has typically been a physical experience. Now, companies like Starbucks have extended their customer service into a digital experience for consumers (Samuely, n.d.). If Boba Guys can connect to their already tech savvy customer base, they would increase overall transactions and profit. This mobile app would provide a faster, more efficient way to order drinks, which will result in an increase in profit. Boba Guys would go from processing 50 orders per hour, to processing over 100 orders an hour by introducing a mobile app. Since Boba Guys has no mobile app for pre-ordering drinks, they are missing out on profit, growth, and the opportunity to increase their customer base. With a growing trend in mobile ordering, this app will provide Boba Guys with the long-term growth of its loyal customer base. Rather than playing catch-up in a billion dollar industry, the mobile app will allow Boba Guys to become one of the first boba establishments in the Bay Area to allow customers to order ahead and pay in advance.

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Work Plan

Date Task Resource People

1 Feb 2018 Mobile App Surveys: § Consumer based survey

researching best features from mobile ordering apps

Features to look for: § Payment method, options

to customize drink orders, user-friendly, communication with company

Survey group to be created from existing Boba Guys email list.

Computers, wages, conference rooms

Survey Group – 10 Research Analyst – 1

14 Feb 2018 Develop Mobile App § Request proposal from

LevelUp Consulting, LLC § Include desired features

Develop rewards program for mobile app

§ Incentives for loyal customers

Computers, wages

Software engineers – 4 Consultant -1 Co-owners - 2

14 May 2018 Review version 1.0 of mobile app § Make necessary changes

Purchase additional equipment for stores

§ iPad for incoming mobile orders

§ Receipt printer for mobile orders, colored printer paper

§ Purchase sticker printer for customer name and drink description

§ Hire and train additional employee dedicated to mobile orders

Wages, computers

Co-owners - 2 Managers -4

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15 June 2018 Release version 2.0 of mobile app to iTunes app store / Android app store Create social media campaign to include incentive for first time app users Partition the counter space to provide area for mobile order pickups

Wages, computers

Director of social media -1 Managers – 4 Employees dedicated to mobile orders - 10

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Budget/Cost Analysis

Wages: (From Bureau of Labor and Statistics) Title Average Yearly Wage Total Number of

Employees Estimated Expense

Mobile App Researchers

$29,120 ($14/hr. min. wage in San

Francisco)

4 40 hrs. - $2,240

Advertising, promotion and marketing manager

$116,270 1 4 weeks - $8,943.85

Design: (From Bureau of Labor and Statistics)

Title Average Yearly Wage Total Number of Employees

Estimated Expense

Software Engineer $100,080 1 6 months - $50,040

Source of Funds: In order for Boba Guys to stay cash positive during the design phase of the mobile app, I propose taking out a loan at Wells Fargo for the total cost of $61,500. The interest rate on the loan will be 6.5% per year (Personal Lines and Loans Comparison Table, 2017). The loan will be paid in full 6 months after the app is released. Loan Details: (Personal Lines and Loans Comparison Table, 2017) Loan Provider Interest Rate Loan Amount Length of Loan Wells Fargo

6.5%

$61,500

1 year

The total cost of the loan will be $65,497.50, which includes $3,997.50 of interest. The total monthly payment of the loan will be $5,458.13 per month, and monthly payments will begin 30 days after the loan is taken out. Both the principal and interest are tax deductible since this will be an expense of the company. There is a possibility that this cost can be depreciated over several years depending on how Boba Guys presents their intangible assets on their balance sheet.

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Cost Benefit Analysis: Total estimated cost

$65,497.50

Estimated revenue 3 months after release (500 drinks per day x $5 per drink) x 9 stores

$1,890,000

Estimated revenue 1 year after release (500 drinks per day x $5 per drink) x 9 stores

$8,190,000

Since there are only locations in New York and San Francisco, there will only be marketing campaigns in those regions. The advertising campaign will focus on utilizing Boba Guys’ social media network that consists of more than 20 thousand followers on Instagram, Facebook, and Twitter. The amount of the loan can be paid back in less than a year, which will save Boba Guys $1,000 in interest payments. By cutting the wait time to order in half, total transactions per hour will double. Therefore, revenue will increase roughly 100% or more during peak times of the day.

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Evaluation

Strengths: • Increased customer base and

overall customer loyalty • Increased number of total

transaction • Increased revenue

Weaknesses: • Uncertain number of downloads • Mobile app caters to recurring

customers • Cost of updating app could be

costly

Opportunities: • Reduced wait times • Connecting with younger

generation of customers • First mobile app for boba milk

tea in Bay Area • Opportunity to expand

Threats: • Too much demand for mobile

app causes strain on smaller establishments

• Customers who don’t have the app might dislike people “cutting in line”

Issues: One issue could be lack of initial downloads once the app is released. Total wage expenses will increase due to the extra employee dedicated to mobile orders. As demand for the app increases, there will also be a need for additional employees dedicated to mobile orders. However, this cost will be offset by the increase in daily transactions resulting in more profit. The initial investment will be a temporary cost and will require little maintenance in the following years. Customers who don’t have the app will see people walking in and picking up their drinks without having to wait. This could cause some tension between old and new customers. The increase in daily transactions will require suppliers to meet the demand, which could be difficult in a short amount of time. Therefore, alerting the suppliers ahead of time will result in a smooth introduction of the mobile app. Contingency Plan: Besides campaigning through social media, Boba Guys could print out flyers and promote on college campuses such as USF, NYU, SFSU, and City College. Boba Guys already has a way to reach loyal customers through their email list and could easily pass on a link to download the mobile app. Since Facebook is the most widely used social media platform, Boba Guys will focus the majority of their campaigning here (Lister, 2017). To alleviate some of the tension between old and new customers, Boba Guys could display an average wait time depending on where the customer is in line. Estimating the wait time will alleviate some of the uncertainty for customers who are waiting in line and reduce overall stress (Stone, 2012). During peak hours of the day, Boba Guys could also hand out samples to guests who are waiting in line. This could increase happiness for customers and even distract them from seeing recurring customers “cut the line” with the app.

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Conclusion

Boba Guys needs to create a mobile app that allows customers to order their drinks and pay in advance. This would increase the number of total transactions each day, resulting in a 50- 100% increase in sales during peak times. Not only would this benefit the company, but also the tech savvy customer base that already exists. Boba Guys has the opportunity to create a more convenient way for their customers to order drinks. Busy people on their way to work or school would easily be able to stop in for a quick boba tea during rush hour and incorporate Boba Guys into their every day routine. More customers will appreciate the speedy ordering system and Boba Guys will see an instant growth in sales. Introducing a rewards program for recurring customers will strengthen their loyalty and keep them coming back for more. Adding a refer-a-friend program will grow the customer base and continue to popularize the Boba Guys brand. This app will not only revolutionize the way people order boba, but Boba Guys will also continue to set themselves apart from the competition by listening to the needs of their customers and being the first boba place to offer mobile ordering in the Bay Area. A mobile app would increase total transactions, reduce wait times, and increase overall profits, which is why I would like you to consider my proposal to create an extension of the quality and customer service guests receive at each location. It would be ideal to start this project as soon as possible in order to receive the benefits in Q2 of 2018. Mobile ordering will become a billion dollar industry in the coming years and Boba Guys has the opportunity to become a pioneer in the boba industry. I look forward to meeting you both and discussing the next steps to implement this plan. The sooner we can cut down the wait times to order drinks, the sooner customers can incorporate Boba Guys into their every day routine.

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