FRESHHH2017

part
RETAIL
Game
Rules
Welcome to the RETAIL Simulation part of Freshhh2017
Programme!

Game
concept

In this game You and Your teammates face the exciting world of retail business! Your team is
the management of a service station network in a virtual country. Service stations are the
next step of the retail business: not just selling gasoline but to provide high-class services
and
goodsaswell.

The purpose of this manual is to show the economic environment step by step, the decision
possibilities,theframesinwhichthevirtualservicestationnetworkwilloperate.

Your task is to create a successful business strategy based on the market analysis. The goal is
to manage the operation of the service station network in the most effective way, in order to
maximize the average Return on Assets, the ROA (ROA = Profit/Assets) in the next 10 virtual
years. The profit is calculated in the Profit and loss statement, and the Assets value is the
Total
AssetslineoftheBalancesheet.

The game has 10 periods (turns), each period represents a year (twelve months). In each
period you should make decision for the next year and indicate them on the online Decision
Form which you can reach by logging in on the www.freshhh.net website. Your decisions
are processed by the simulation software which creates reports and statistics. Continuous
reviewing
oftheReportsinlinewiththereadingofthismanualisrecommended!
In the game each team is on a separate market, they only interact through the marketplace.
The company sells fuel (gasoline 95, gasoline 98, normal diesel, premium diesel and
alternative fuel) and other products in the shops in the following categories: basic, non-food,
hot
beverages,groceryandrestaurant.

Your company, the network has 91 service stations which are technically the same at the
beginning. There are 6 fuel pumps and 100 m2 shop at each service station. It operates with
16 opening hours, between 6:00 and 22:00. The station can be found in three different
localizationareas:inthecity,highwayandcountryside.

There are 2 kind of decision type: global and local. You can set the local decisions in the
localization panel, any other decision are global. You have to make local decisions for every
localization areas; it means that you can decide on different prices on the same product at
different segment. The station acquaintances, promotion and maintenance budget are also
considered to be local decisions. On the other panels any decision you make applies for all
the
three
localizations.

On default the decisions you make in the n period will have effects in the n+1 period,
however, there are some exceptions. For example the pre-order decision will not have an
effect
in
then+1periodbutinthen+2.

In the game the scope of activities can be extended by selling alternative fuel, by offering car
wash service and by initiating various projects. These projects are described at the end of
this
manual.

In
the
gametheunitofcurrencyisFreshhhdollar(F$).

2

Strategy

The goal is to manage the service station network efficiency in order to maximize the
average ROA (=Return on Assets, the ROA (ROA = Profit/Assets)). For this you should take
into consideration the marketing mix (4P=Product, Price, Promotion, Place), the optimal staff
number, the logistic capacity, the market information about the consumers and the demand
forecast. These key criteria are in connection with each other, so good performance in an
area has an effect on the other areas too. If a goal e.g. the market share increasing - is in
your focus, the company is likely to be forced to make a compromise in other fields, e.g.
margin rate. The performance of the team depends on the decisions they made. Also the
general
market/economictrendsmustbetakenintoconsideration.

-
-
-
-
-
-----------
------

The
Decisions

The service station network is managed by your team by yearly (12 months) strategic
decisions.

The decisions to be made and the results are shown in the online report. You can set your
decisions on the input fields in the online platform. The decisions can be classified into the
following
categories:

I. Supply/Pricing V. Maintenance

II. Promotion VI. Finance

III. Openinghours VII. Marketinformation

IV. HumanResources VIII. Extraordinaryevents&projects

3
Supply/Pricing
The company orders the gasoline, diesel and the alternative fuel from the nationwide fuel
wholesaler.Thecontractedsuppliersoftheshoparealsospecializedwholesalers.

This
table
showsthefuelproducts.TheunitofmeasureisThousandliter=kLiter.
The purchase price is the price you pay for the wholesaler for the fuel. The wholesaler
delivers the ordered fuel to your Headquarter where you have store capacity, listed below in
the table. The final pricing of the fuel products is your task, the purchase prices are however
fixed during the game (see in the table below). You can set the prices for the different fuel
types in the localization panel, for all three segments. (See more about localization segments
at
the
marketinformationsection.)
Product Unitofmeasure Purchaseprice Storecapacity

Gasoline
95 ThousandLiter 70F$/kLiter 1800
k
Liter

Gasoline
98 ThousandLiter 75F$/kLiter 400k
Liter

Diesel ThousandLiter 72F$/kLiter 1800k

Liter

Premium
Diesel ThousandLiter 81F$/kLiter 400k
Liter

Alternativefuel* ThousandLiter 49F$/kLiter 300k

Liter

*
Requires
aproject

The orders should be posted on the decision form for the actual year. The ordered fuel and
products constantly (daily delivery) arrive at the service stations, but since a year is treated
as one time unit, a yearly quantity of fuel and products should be ordered. This means that
the order above your store capacity is valid! The ordered stocks are paid at the period of the
delivery.

The accurate order is the responsibility of the management, so if the fuel store capacity is
not enough for the year end stock, the remaining stock will be stored at the wholesaler
(external inventory) for 5% of the value of the leased stored stock. This cost will appear as

4
Other misc. costs. The store capacity of the shop is not limited in this game, however
storage
costs(5%)shouldbepaidaswell.

There is a possibility to order in advance (pre-order; e.g. set an order for n+2 year in the n
year), in this case the wholesaler pays back the 3% of the value of the pre-order. The risk of
order
and
thestocksurplusisalsotheresponsibilityofthemanagement.

The
shop product pricing is to set the margin percentage only. You are free to change the
margin
of
allfiveproducttypesinthelocalizationpanel.

Shop
productassortment Whatisit?

Basic tobacco,mobilephonecardsandnewspapers

Non-food lubricant,accessoriesandtools

Hot
beverages* high-classhotbeverages,coffee,tea

Grocery* everydaygoods,likemilk,egg,bacon,bread

Restaurant* separaterestaurantsectioninthestation

*
Requires
aproject

The stocks of the shop are valued on the purchase price, so the orders should be posted on
the
purchasevalueaswell.

Your customers are price sensitive. The market tolerates smaller price increasing, but there
is
a
point
wherethepriceistoohighandthecustomersabandonyournetwork.

5
Promotion

The service station network spends money for the promotion locally. The management of
the company decides about the budget for the promotion. With higher promotion budget
you can strengthen your company brand, which will result in higher sales amounts. The
promotion expense has no limit, but the growing expenses increase the sales in a decreasing
measure.

Be
sure
tosetthepromotionbudgetforallthreedifferentlocalizations.

Beside the promotion budget, you can make decision about the fuel card and multi point
card
. There are project-like decisions, which means that you can only decide when to start
the projects (in which period).The fuel card is a pre-pay tool for companies, with which the
employees (like truck drivers, couriers) can buy fuel and goods at the services station. By the
multi
pointcardconsumerscancollectpoints,whichwillgivethemdiscounts.

These projects will increase the effect of your promotions by about 10%. For further
informationabouttheprojects,seetheendofthegamerules.

OpeningHours

The basic opening hours are between 6:00 and 22:00. The opening hours can be extended to
0-24, but it requires more persons/station in the staff. The additional number of employees
will be hired automatically to reach the minimum number of staff in case of 0-24 opening
hours. Besides that the energy costs are also rising with ~45%. And of course at night, the
transit traffic generates new demand opportunities. The growth is different in the traffic of
every costumer segment. While it is really high (above 10%) in the corporate segment, it is
the
lowestinthelow-endresidentialsegment(below5%).

6
HumanResources

There
are
threetypesofstaffinthesimulation.

The
Station staff operates the gas stations and the shops. The simulation automatically
handles
thenumberofemployees,youwillneedoneforevery30000F$salesrevenue.

The
Logistics staff operates the fuel logistic of the network between the headquarter and
the gas stations. The logistic staff is capacity based, one logistic employee can manage 2 850
F$
worth
ofcapacity.Thenumberoflogisticsstaffisautomaticallycalculatedaswell.

The
Admin staff is fixed number and their salaries is the average of the salary of the Logistics
and
the
Stationstaff.

Wages

The salary for the Station and for the Logistics staff is different in the beginning of the game.
The wages can be changed, but it cannot be less than the 300 F$ / person minimum salary.
More
salarymeansmoreemployeesatisfactionandperformance.Thewageisyearly.

Training

The management spends money on the training of the employees too. Language,
communication and technical trainings have effect on the level of the operation and
customer service. You can set the total budget of training. Note that if you do not spend on
training at all, it has a very negative effect. The training budget always appears as a cost for
the
company.

HSE,
LogisticsandMaintenance
The HSE (Health, Safety and Environment) and maintenance expenses are for the safety of
the service stations, minimizing the environmental pollution and improving the aesthetic
level (decoration, design). The more money the company spends for HSE & maintenance, the
more attractive it will be. You can set different maintenance budget for each localization
segment
(city,highwayandcountryside).

7
The company needs logistics equipment (machines and vehicles) to distribute the fuel
among the gas stations. The necessary logistic machinery capacity is the ordered amount /
22.5. The ordered amount is calculated as purchase price x amount ordered in case of fuels
and purchase value in case of shop products. So to be clear: 100 000 capacity unit can handle
up
to
2
250000F$valueorder.

Finance
The
companycanbefinancedfromexternalsources(bankloan).

The bank automatically provides overdraft loan (short term loan) in case the company run
out of cash, but you should try to avoid that! In the next period the loan should be refunded,
if the company still requires cash, the bank will provide a new loan. The interest of the loan
will be paid in the next period, interest rate is 6%/period. The interest rate should be payed
after
the
amountofloaninthebalancesheetineveryperiod.

The team can also decide to arrange a contract for long term loan with the bank. It is
simplified in the game, so you can only set the amount of cash you would like to borrow. It
can be taken up in any period and the cash will be available instantly, and can be repaid
totally or partly in any period. The interest has to be paid in the current period upon the
amount of the actual long term loan. The interest rate is 3% per year. The long term loan
limit
for
yourcompanyisF$9 500000.

The company has long term loan in the beginning. Currently only the interest should be paid,
which
is
3%/period.

For the suppliers of the company (wholesalers, service providers) pay the invoices with app.
30
days
duedate.

Dividend:
In case of profit, the dividend payment is 100% of the profit according to the will
of
the
ownerofthecompanyduring
thewholegame.

8
FINANCIALSTATEMENTS

The financial statements include the profit and loss statement, the cash flow and the balance
sheet.

Profit
andlossstatement

On one hand the profit and loss statement shows the net revenue in a period; the sales, the
cost of goods sold (shorting: COGS), and the gross margin of each product types. The
companies receive interests (1%) on the cash balance at the end of the year; the income of
the interest is also included in the profit and loss account. Other income is basically not used
in
this
game.

On the other hand the profit and loss statement shows the costs which are deducted from
the
gross
margin.
- Promotion:costsofpromotion
- Wages:alltheamountpaidtotheemployees
- Training:budgetofthetrainingoftheemployees
- HSE&Maintenance:summarizedcostsofmaintenance
- Energy: energy and other utility costs (based the number of stations you have, on
default2500F$perstation)
- Office overheads: office and other administration costs (1% of the revenue and 3% of
the
numberofstaff)
- Depreciation: depreciation costs of fixed asset, yearly 2,5% of the fixed assets + the
depreciationofthelogistics(10%)
- Projects:costsofstartedandongoingprojects
- Marketresearch:costsofmarketresearch,fix200000F$inthegame
- Interest:interestofinvestmentloanandtheotherloansofthepreviousperiod

9
 - Othermiscellaneouscosts:othercosts,e.g.storagecosts
- Corporatetax:thetaxrateis40%inthegame,incaseoflossthetaxiszero

Balancesheet

The
first
partofthebalancesheetshowsthecompanysassets,whicharethefollowings:

Cash:
The
closingcashfromtheCashflow.
Inventories:Fuelandshopproductsstockattheendofperiod(stockremainedaftersales)
Machines:thevalueofthelogistics,equaltotheclosingcapacity
Fixed
assets:theequipmentofservicestationsandbuildings.Depreciationis2.5%/year.
Land:
land
oftheservicestationsand
theHQ

The passives (liabilities) of the balance sheet (second part) are the origin of the companys
property,
whicharethefollowings:

Long
term
loan:investmentloan
Short
termloan:overdraft(automatic)
Suppliers:
debittothecompanyssuppliers
Share
capital:theamountthatthefoundersinvestedintothecompany
Reserves:
accumulatednetearningsofthecompany
Profit/Loss:profit/lossmadeintheperiod

Cash
Flow
In the cash-flow, the cash-ins are marked positive, while cash-outs are marked as negative
numbers.

Sales:
TotalSalesfromProfit/lossandcarwashincomeandinterestincome

10
Operating
costs:Operatingcostsfromtheprofitandlossstatementexceptdepreciation
Project
investing:Theamountofcashneededfortheprojecttostart
Machines:Thelogisticsinvestments
Stations:
Cashinvestmentoncaseof
stationacquisition
Loan
payback:theamountofpaidbackloan
Loan
receive:theamountofloanyou
borrowed
Interest rates: interest rates paid after the loans and here appears the overdraft from last
year
(it
is
automaticallyrepaid)
Dividend:
equaltotheprofitofthelastyear(inY1youpaytheY0profitasdividend)
Overdraft:
theautomatic,shortterm
loan

MarketInformation

Information about the market and the competitors is available in order to help the team to
make decisions. This information can be found in the market information panel and is
different
ineachperiod.Itisreallyvaluableforyouandthepricecannotbechanged.

There are 3 different consumer segments, each have different preferences. In the market
information panel you can see their preferences for each product. You can interpret the
tables
as
thefollowings:

Customer preference: It means that from the whole customer base this percent will likely to
choose
theproductonthetotalmarket.

Avg.
consumption:Iftheconsumerwillbuyyourproduct,thisamountwouldbesold.

Customer sensitivity: Based on these factors, the customer will decide if he/she buys your
product
ornot.Theweightingofthesefactorsareshowninthetables.

11
Localizationsegmentsandtrafficforecast

As we mentioned before, you have to distribute your resources in 3 different localization

segments: city, highway and countryside. In the Localization panel, you can make decisions
about each panel. You can also see there the base of the expected traffic for that location
(for all 3 different customer segments). This is for the total market and in order to predict
the actual sales amounts, you should take into consideration other factors as well (see the
examples
above).

Firstly, you should calculate with the coverage ratio in every segment. It shows how well you
cover the whole market, so if it is for instance 75%, it means that you only reach 75% of the
total customers shown in the expected traffic. This will be your base traffic. After that, you
should calculate with the factors given you in the market information panel (customer
preference, avg. consumption, customer sensitivity, etc.). And finally consider that the
customers are sensitive to your decisions. If you raise the price, there will be less customers
and
so
on.

Let
us
showanexample.

The
expected traffic for a customer segment is 100, the customer preference for Gasoline
95 is
60%,
the avg. consumption is 0.6 unit (in this case kLiter) and their preference is as
follows: (65% price, 20% brand, 5% training lvl, 10% maintenance). Also, your company in
this localization has 80% coverage ratio (this ratio shows the number of reachable customer
out
of
the
total).

So the number of reachable customers are 100 x 80% = 80. The number of customers who
prefers the product is 80 x 60% = 48. Usually this is the base number, but you can boost it
with better product attributes! Lets see the customer preferences! This segment seems
really
price sensitive on the fuel market and the brand is also important for them. So if I
decrease the price and raise the promotion budget, the traffic will be higher, maybe 60 (note

12
that there are other factors as well, so the forecast is more difficult than this example). This
60 customers will have an average consumption of 0.6 kLiter in a year, so the forecasted
product intheGasoline95market.
salesare60x0.6=36kLiter

Acquisitionandconstruction

You have the opportunity to acquire or sell gas stations. The acquired station will not be
different from the ones you owe already. The price could be different in each period, you
can check it in the localization panel. You can acquire a maximum of 10 stations per period
for
the
nextperiod.

The
effects
oftheacquisition:

- Thefixedassetswillgrowwiththenotionalamountoftheprice.

- The purchase of machine in the cash-flow will grow with the notional amount of the
price.

- Yournumberofstations(andyourcoverageratio)willgrow.

You shall be careful about the amount of your acquisitions, because it can affect your ROA
grossly.

13
PROJECTS

Differentiateyourservicestationwiththeuniqueprojectsabove!

Beyond the above mentioned operative and periodic decisions, there are various available
. You can start any of these projects to widen the service of your service station
projects .
With the new product line new demand opportunities will appear! The permanent costs are
valid in every year, including the starting year. Also there is an expenditure, which is not a
cost,
howeveritwillappearinthecash-flowstatement.

Maximum 4 projects can be started in a period (including the 2 promotion projects: the
multipoint and fuel card.) Be careful in which segment you start a project; because it cannot
be stopped once it has been started. The effects of the projects are applied in the game on
the next turn. The time remaining column shows the number of period required by the
project
to
start.Ifthevalueiszero,theprojectwillstartnextyear.

Your project investment will affect the appearance of your station! Change the localization
on
the
bottom-rightsidetoseethedifference!

Cashinvestment(F$) Permanent
costs
Addedtopurchaseof
Projectdescription Effects
(F$/period)
machineandfixed
assets Project
costs

1.
Alternativefuel

The
gas
stationnetworkwillbeableto
sell
alternativefuel(LPG).Newpumps
Newproduct
and
tank
willbeinstalled.The 350000 0
line!
alternativefueliswell-knowncheaper
than
the
othersandthecustomersdo
not
toleratetoohighprice.

2.
Hot
beverages Newproduct
1 800/station 100
/
station
line!
The
completerenovationoftheshop
in

14
order
to
makeahigh-classcoffee
corner.

3.
Grocery

The
completerenovationoftheshop
in Newproduct
960/station 260
/
station
order
to
makeahigh-classcoffee line!

corner.

4.
Restaurant

High-class
restaurantattachedtothe Newproduct
2500/station 350
/
station
main
building,inordertosatisfythe line!

specific
consumerneeds.

5.
Car
wash
Newproduct
Separate,
highlyequippedautomaticcar 950/station 260
/
station
line!
wash.

6.
Green
EnergyInnovation

In
order
to
reducetheenergy
Lowerenergy
consumptionofthestation,thetotal 800/station 100
/
station
costsby15-20%
heating
andcoolingsystemisreplaced
and
a
new
fridgeroomisalsoinstalled.

Scoring&Ranking

The teams are going to be ranked according to the average ROA they have on their account.
SCORE depends on the number of teams ranked by RESULT (average ROA). E.g: If 1000 teams
play, the 1st team will earn 999 points (the number of teams they preceded). Decisions
made in the final turn (Turn #10) are also going to be evaluated. The 10 teams with the
highest scores at the end of the Online Qualification are going to be qualified for the second

15
round
of
thecompetition,theSemifinal.

16