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Fabrica – Executive Summary

What should a weaving mill do when a customer wants a sample of a new fabric pattern? It seems like a reasonable request, and one that should be met quickly – a yard or two is all that’s needed. But a modem loom is scaled to hold yarn to make a bare minimum 120 yards of cloth, and the smallest economical production run is 1,000 yards. Weaving the first couple of yards of sample takes only a few minutes, but setting up the loom requires 67+ hours’ labor and overtime – not counting waiting time for a free loom in a busy mill. Today there are four ways out:

a) charge the customer as much as you dare of the $3,000 cost (in the US) of making the sample;
b) make the sample for free, hoping the customer turns out to be worth it;
c) try to convince the customer to place a firm order without a sample; or
d) provide a computer-generated image of the pattern from a high-end color printer.

Fabrica has come into being to offer a true no-tradeoffs solution to the weaver’s quandary. In no more than three working days, for less than a sixth of the cost of producing it on the mill’s own looms.1, Fabrica can provide a sample woven to the same pattern from the same yarns, dyed with the same dyes, as the finished product. Production plans are unaffected – there’s no need to annoy the customer with talk about how expensive it is to make samples – response is immediate – and the customer can assess the drape, color, texture and sheen of real fabric (all impossible with computer printouts).

The secret to Fabrica’s unique capability lies in 10 years of research and experiment in textile engineering by inventor Dr. Sathit Putthachaiyong, our Director for Research and Development. Over this time he perfected and patented a small dobby2 loom that embodies a unique constellation of features: it is cheap to construct, easy to operate, highly reliable and produces fabric of the same quality as a large, modem loom. This loom, the KS 16 can produce a sample of virtually any type of woven fabric within as little as three hours from receipt of the design. This is not a projection from specifications: it is a market-proven fact, confirmed by over 20 current industrial users.

Our market research has clearly confirmed what common sense suggested: weavers (and also fabric traders and designers) are extremely eager to find a way to get their customers production identical samples fast and affordably, As trade barriers fall and fabric production migrates from country to country and continent to continent following the opposing pulls of advanced technology and cheap labor, more and more transactions are between comparative strangers. Excluding the very poorest countries, annual woven textile production is about 49 billion meters, worth over $200 billion exfactory.3 This amount of cloth involves a very conservatively estimated 12.5 million separate production runs, of which at least 2 million will be of woven patterns.4

There is no direct competitor to Fabrica on the horizon, and we are convinced – because the KS loom series is already far along the learning curve, and because of the optimal combination of technical, entrepreneurial and managerial skills embodied in our management team – that we can dominate our target market for many years, and that by 2004 we can sell one Fabrica sample for every five patterned fabric production runs in the major nations of the Americas, Asia, and Western Europe.

YEAR 1999 2000 2001 2002 2003 2004
ASSETS 413,913 1,004,944 2,940,306 3,201,543 3,093,477 3,318,372
DIVIDENDS 0 0 1,137,239 2,109,479 3,421,762 5,801,595
EBIT (105,703) 47,163 4,088,042 3,411,198 4,666,508 8,462,053
NET SALES 0 935,476 7,115,474 5,870,898 7,776,928 12,470,861

Our strategy of expansion by licensing, with licensees paying the entire cost of their plants in advance, will permit us to grow rapidly while returning most of our earnings to shareholders.5 The result is a business that will require initial investment of only US$1,000,000 and yet grow to gross sales of $51 million in 2004, with an NPV of $4.26 million, payback within 21 months and IRR of 176%.

The need to proceed with all possible speed and the near-total paralysis of Asian financial systems have led us to seek Western venture financing for half the company’s equity, and to offer extremely attractive terms.

+ See graph on page 9
1 See cost comparison table in appendix A
2 The dobby is the mechanism that enables a loom to weave small figures or patterns into the fabric, such as are commonly seen in checked or plaid shirting, women’s blouses, neckties, household linen, upholstery.
3 These and other data on world textile production and trade from the International Textile Manufacturers’ Association 1998 World Data Summary, and from a proprietary market opportunity study by Decision Data Ltd., Bangkok.
4 Estimates of the patterned proportion of all woven fabric range from 3.4% to 6.5%, with average run length estimates from 600 m to 1,334 m. These figures imply anywhere from 1.25 to 5.3 million production runs.
5 As Fabrica retains legal title to all KS looms and ancillary equipment installed for licensees, our balance sheet gives the impression of heavy investment in plant From a risk-assessment perspective this is very misleading: each increase in plant run by licensees produces immediate positive cashflow greater than the assets’ book value, with minimal contingent liability.

Fabrica Co., Ltd.
Table of Contents Appendices
0. Executive Summary
1. Company
2. People
3. Product
4. Market
5. Marketing Strategy
6. Operations Strategy
7. Financial Plan
8. The Deal
Sample Production Costs
Glossary of Terms
Patentable Features
Sample Order Flow
Financial Assumptions
Investment Structure
Yearly Income Statement
Yearly Cash Flow
Yearly Balance Sheet
Monthly & Quarterly
Proprietary to Fabrica Co., Ltd.

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