INFORMATION #2 08-12-2002DAKOTA
February 22, 2002
Mr. Dave Potvin
Northbound Liquor
19348 Evans Street
Elk River, MN 55330
Dear Dave:
Enclosed please find four copies of the Northbound Liquor Store study to determine the feasibility
of opening a second municipal liquor store in Elk River. One location (Site 1000) was tested at
the northwest quadrant of Joplin and U.S. Highway 10 on the outbound side of the highway on
the west side of Elk River.
This property should be available for immediate development, but these projections assume that
the second store will not likely be constructed until mid 2004 to allow for a reduction of the debt
load from the construction of the existing store. One size of 4,000 sales area square feet (8,000
total square feet) was tested for this location.
There are numerous market changes affecting the trade area. Currently, the cities of Monticello
and St. Francis are constructing additional space for their municipal stores and Rogers is expected
to start construction within the next year on a replacement unit that will be located adjacent to the
Super Target that is now under construction. In addition, Riverview Liquor in Ostego may have a
much needed remodel. Wiser's Liquor in Ramsey has been open for approximately six months
and for the projections, this store will have a matured image in the marketplace. A second
scenario is included to show the effects on the Northbound Liquor Stores by the addition of wine
sales in the grocery stores in the trade area.
A second municipal liquor operation allows Northbound Liquor to better compete with its
improved sister municipal liquor stores to the south and southwest, and remain competitive in the
marketplace. A second store will also expand Elk River's gross sales by approximately
$1,200,000 annually.
Thank you for selecting Dakota Worldwide for this market study. It was a pleasure meeting with
you and the rest of the city's staffa few weeks ago. Please call if you have any questions or if
Dakota Worldwide can be of further assistance.
Sincerely,
Len Sage
Enclosures
4801 81st Street, Suite 105 · Minneapolis, MN 55437
Telephone 952.835.4505 · Fax 952.835.4461
Internet: www. dakotaww, com E-mail: dakotaww~dakotaww, com
Elk River, Minnesota Market Study (CRO002 ~ Februa~. 2002) Page
Executive Summary
The purpose of this study is to evaluate the feasibility of opening a second municipal liquor store
in Elk River. One location (Site 1000) was tested at the northwest quadrant of Joplin and U.S.
Highway 10 on the outbound side of the highway on the west side of Elk River.
Site 1000 is currently the center lot of three vacant parcels of land awaiting future commercial
development. There is limited new housing growth occurring just to the north, but this part of
Elk River is less developed than the east side, which also has the prime shopping area of Elk
River. A new Holiday Station store is located at the southeast quadrant of Joplin and U.S.
Highway 10. U.S. Highway 10 is a major arterial between St. Cloud and Metropolitan
Minneapolis-St. Paul. Accessibility to the north and south of the site is possible by the
neighborhood street network. The majority of Elk River's population growth in the 1990's has
occurred on the east side, but some growth is now starting to the north of the site in Sector 10.1.
Physical site characteristics including accessibility, visibility and ingress/egress are rated from
good to very good. This location, like the existing stores', is in an excellent position to capture
westbound traffic and transient traffic heading west via Ilighway 10 to "lake country."
Elk River and its surrounding townships and communities constitute one of the fastest growing
areas in the metro area and the state. Its population inci-eased from 11,143 people in 1990 to
16,447 people in 2000 or 4.76% per year. Current increases are projected to be at least 4% per
year for the next several years. Most of this growth will be on the east side in Sector's 7, 8.3 and
9, and in the west in Sector 10.1. The surrounding communities and townships are also
experiencing strong growth, and this trend is also expected to continue for at the next several
years. Overall growth, based on the number of planned developments in the trade area is
projected to be just over 5% for the next several years
Three stores dominate the area's liquor store business, and they are all municipal stores.
Northbound Liquor, one of the better municipal operations in the state, is the market share leader
followed by Lake Center Liquor (Big Lake) and Hi-Way Liquor (Monticello). The other 14
stores affect the trade area to a lesser degree, with the best market share of these stores
belonging to Riverview Liquorette because of its location in the center of Ostego.
There are a number of market changes that will affect the trade area. Monticello and St. Francis
are now undergoing major expansions and improvements for their municipal stores and the City of
Rogers is expected to start construction within the next year of a replacement off-sale liquor store
adjacent to the new Super Target. In addition, Riverview Liquor in Ostego may remodel, and
Wiser's Liquor in Ramsey (newly opened) will mature its image in the marketplace. In the next
several years wine sales in Minnesota grocery stores may be allowed and a test is included in this
study to show the effects on the marketplace and Northbound Liquor if this takes place.
Dakota Worldwide Corp.
4801 81~ Street, Suite 105 · Minneapolis, M2N 55437
Telephone 800 475.4505 · Fax 952.835.4461
Elk River, Minnesota Market Study (CRO002 - February 2002) Page 2
In summation, the first year sales for Site 1000 with 4,000 sales area square feet are $1,651,733
or $412.93 per square foot, and grow to $1,868,131 or'$467.03 per square foot in the third year
of operation. The existing Northbound Liquor will have sales of $3,558,025 during the stores
first year of operation and increase to $3,938,347 in the third year, nearly the same as its current
sales. Much of the existing stores strength are due to its location in the primary shopping district
in the area and its position near the Elk River's primary growth area.
A profit and loss analysis and break-even pro forma will best determine the feasibility of either site
and optimal size. If not now, Elk River should have sufficient potential in several years if
population growth continues at the expected rate to be able to support a second store.
Map Key/Site
Scenario 'Scenario
1 2
Map Key 1 Sales $4,000,000 $4,501,222 $3,558,025 $3,224,688
$/SF $888.89 $1,000.27 $790.67 $716.60
~0
Market Share 25.23% 23.3.~ ¼' 18.44% 16.71%
Site 1000 Sales $1,651,733 $1,521,956
$/SF N/A N/A $412.93 $380.49
Market Share 9.09% 8.38%
Totals $859,000 $986,432 $5,209,758 $4,746,644
$/SF $917.74 $1,053.88 $612.91 $558,43
Market Share 11.67% 12.72% 27.53% 25.09%
Dakota WorLdwide Corp.
4801 81~ Street, Suite 105 · Mim~eapolis, MN 55437
Telephone 800.475.4505 · Fax 952.835.4461
LIQUOR STORE SALES ESTIMATES
Gross Sales
Gross Profit
Operating Expenses
Nonoperating
NORTHBOUND
Actual Actual Estimated
2000 2001 2002 2003 2004 2005.
3,788,048 3,981,509 4,180,584 4,389,614 4,609,094 4,839,549
941,722 1,018,542 1,045,146 1,097,403 1,152,274 1,209,887
451,197 502,656 543,476 570,650 599,182 629,141
5,977 3,484 5,000 5,000 5,000 5,000
Income Before Transfers 496,502 519,370 506,670 531,754 558,091 585,746
Notes and Assumptions:
Gross Sales assume 5% annual increase.
Gross Profit - 25%
Operating Expenses- 13% of sales
Nonoperating expenses include interest expense on building debt.
NORTHBOUND AND WESTBOUND
Estimated
2000 2001 2002 2003 2004 2005.
Gross Sales Northbound 3,788,048 3,981,509 4,180,584 3,558,025 3,748,231 3,938,437
Gross Sales Westbound 1,651,733 1,759,932 1,868,131
Total Gross Sales 3,788,048 3,981,509 4,180,584 5,209,758 5,508,163 5,806,568
Gross Profit 941,722 1,018,542 1,045,146 1,302,440 1,377,041 1,451,642
Operating Expenses - Northbound 451,197 502,656 543,476 462,543 487,270 511,997
Nonoperating - Northbound 5,977 3,484 5,000 5,000 5,000 5,001
Operating Expenses - Westbound 400,000 400,000 400,000
Nonoperafing - Westbound (50,000) (50,000) (50,000)
Income Before Transfers 496,502 519,370 506,670 394,896 444,771 494,646
Notes and Assumptions:
Sales estimates (excluding 2002) taken from Dakota Worldwide market study dated February, 2002.
Sales estimates do not take into account possible loss in sales due to legislative changes (for example, wine in grocery stores).
Dakota Worldwide sales estimates may be based on 2004 opening of second store. This change would significantly
change the above estimates.
Westbound operating expense includes $215,000 for personnel, $125,000 for supplies, utilities, and services, and $60,000
for depreciation.
Nonoperafing revenues for Northbound include interest income of approximately $60,000.
Nonoperating expenses for Westbound include an estimate of $50,000 per year in interest on new building debt.
Gross Sales assume 5% annual increase.
Gross Profit - 25%
Operating Expenses - 13% of sales
Nonoperating expenses include interest expense on building debt.
7/22/02
CITY OF ELK RIVER, MINNESOTA
MUNICIPAL LIQUOR FUND
COMPARATIVE BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
EXHIBIT E-7
ASSETS
CURRENT ASSETS
Cash and investments
Receivables:
Interest
Accounts
Inventories
TOTALCURRENTASSETS
FIXED ASSETS
Land and improvements
Buildings
Equipment, furniture and fixtures
TOTAL FIXED ASSETS, COST
LESS ACCUMULATED DEPRECIATION
TOTAL FIXED ASSETS, NET
TOTAL ASSETS
LIABILITIES AND FUND EQUITY
CURRENT LIABILITIES
Accounts payable
Salaries and benefits payable
Bonds payable, current portion
TOTAL CURRENT LIABILITIES
LONG-TERM LIABILITY
Bonds payable, less current portion above
TOTAL LIABILITIES
FUND EQUITY
Retained earnings -
Unreserved
TOTAL LIABILITIES AND FUND EQUITY
72
2001
$ 1,805,708
18,115
2,595
373,278
2,199,696
823,761
1,394,887
154,012
2,372,660
517,145
1,855,515
$ 4,055,211
$ 204,413
31,342
140,000
375,755
780,000
1,155,755
2,899,456
$ 4,055,211
2000
$ 1,416,935
11,722
411,238
1,839,895
823,761
1,394,887
149,203
2,367,851
443,128
1,924,723
$ 3,764,618
207,695
28,537
80,000
316,232
920,000
1,236,232
2,528,386
$ 3,764,618
CITY OF ELK RIVER, MINNESOTA
MUNICIPAL LIQUOR FUND
COMPARATIVE STATEMENTS OF REVENUE, EXPENSES
AND CHANGES IN RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 2001 AND 2000
EXHIBIT E-8
OPERATING REVENUE
Sales
Less cost of sales
GROSS PROFIT
OPERATING EXPENSES
Personal services
Professional services
Utilities
Maintenance and repairs
Insurance
Depreciation
Printing and adver[ising
Supplies and miscellaneous
TOTAL OPERATING EXPENSES
OPERATING INCOME
NONOPERATING REVENUE (EXPENSE)
Interest income
Miscellaneous revenue
Interest expense
Loss on disposal of fixed assets
TOTAL NONOPERATING REVENUE (EXPENSE)
INCOME BEFORE TRANSFERS
OPERATING TRANSFERS OUT
NET INCOME
RETAINED EARNINGS, JANUARY 1
RETAINED EARNINGS, DECEMBER 31
% of
2001 Sales
$ 3,981,509 100.00
2,962,967 74.42
1,018,542 25.58
310,016 7.79
2,982 0.07
27,051 0.68
15,305 O.38
5,083 0.13
74,017 1.86
21,577 0.54
48,625 1.17
502,656 12.62
515,886 12.96
60,412 1.52
4,032 0.10
(60,960) (1.53)
0.00
3,484 0.09
519,370 13.05
(148,300) (3.72)
371,07O 9.33
2,528,386
$ 2,899,456
2000
3,788,048
2,846,326
941,722
279,743
2,100
23,825
6,548
4,366
75,564
14,251
44,700
451,197
490,525
78,782
4,106
(66,040)
(10,871)
5,977
496,5O2
(146,400)
350,102
2,178,284
2,528,386
% of
Sales
100.00
75.14
24.86
7.38
0.06
0.83
0.17
0.12
2.00
0.38
1.18
11.92
12.94
2.08
0.11
(1.74)
(0.29)
0.16
13.10
(3.86)
9.24
?3