Syed M Waqar Azeem

BUSINESS PLAN (CAFÉ BUSINESS PLAN) THE 5TH NOTE CAFE MODEL TOWN, LINK ROAD, LAHORE. PREPARED BY: WAQAR AZEEM 1 TABLE OF CONTENT Contents 1.0 Company Description ........................................................................................................ 4 Business Objectives ...................................................................................................................................................5 Mission Statement .....................................................................................................................................................5 Guiding Principles .....................................................................................................................................................5 Keys to Success .........................................................................................................................................................5 Ownership..................................................................................................................................................................5 Legal Form ................................................................................................................................................................5 Start-Up Summary .....................................................................................................................................................5 Location and Facilities ...............................................................................................................................................6 2.0 Products/Services ............................................................................................................... 6 Products Mix..............................................................................................................................................................6 • Jalapeno Grilled Panini ................................................................................................................................7 • Grilled Chicken Sandwich ...........................................................................................................................7 PASTA & NOODLES .............................................................................................................................................7 • French Onion Chicken Sandwich .................................................................................................................7 • Penne Mushroom .........................................................................................................................................7 Pasta .......................................................................................................................................................................7 Competitive Comparison ...........................................................................................................................................8 Product/Service Sourcing ..........................................................................................................................................8 Future Products/Services ...........................................................................................................................................8 4.0 Market Analysis ...................................................................................................................... 8 4.1 Target Market Segment Strategy .........................................................................................................................9 4.2 Market Needs .......................................................................................................................................................9 4.3 Market Trends...................................................................................................................................................9 4.4 Marketing Strategy and Implementation .........................................................................................................9 2.6 SWOT Analysis ......................................................................................................................................... 10 Strengths .............................................................................................................................................................. 10 Weaknesses .......................................................................................................................................................... 10 Opportunities ....................................................................................................................................................... 10 Threats ................................................................................................................................................................. 10 4.7 Strategy Pyramid ............................................................................................................................................... 10 4.8 Unique Selling Proposition (USP) ..................................................................................................................... 10 4.9 Competitive Edge .............................................................................................................................................. 11 4.10 Marketing Strategy and Positioning................................................................................................................. 11 4.11 Positioning Statement ...................................................................................................................................... 11 4.12 Pricing Strategy ............................................................................................................................................... 11 4.13 Promotion and Advertising Strategy ................................................................................................................ 12 4.15 Website ............................................................................................................................................................ 12 5. Sales Strategy .......................................................................................................................... 12 5.1 Sales Forecast .................................................................................................................................................... 12 5.2 Sales Programs .................................................................................................................................................. 12 6 Legal Requirements ................................................................................................................. 13 7. Project Investment .................................................................................................................. 13 8. Recommended Project Parameters ....................................................................................... 14 9. Financial Summary................................................................................................................. 14 10. MACHINERY & EQUIPMENT ......................................................................................... 14 10.1 Machinery Maintenance .................................................................................................................................. 15 10.2 Furniture & Fixtures ........................................................................................................................................ 15 2 10.3 Office Equipment............................................................................................................................................. 15 11. LAND & BUILDING REQUIREMENT ............................................................................ 16 12 HUMAN RESOURCE REQUIREMENTS ......................................................................... 16 13 FINANCIAL ANALYSIS ...................................................................................................... 17 13.1 Revenue & Cost Projections ............................................................................................................................ 17 13.2 Utilities Requirement ....................................................................................................................................... 17 13.3 Depreciation on Building & Equipment .......................................................................................................... 18 13.4 Account Receivables ....................................................................................................................................... 18 13.5 Miscellaneous Outlet Expenses ....................................................................................................................... 18 13.6 Taxation ........................................................................................................................................................... 18 13.7 Source of Capital ............................................................................................................................................. 18 3.0 14 Owner’s Withdrawal .................................................................................................. 19 3 Executive Summary The 5th Note Café is proposed to be established at a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses, preferably near densely populated middle income areas or apartments. Model Town Link Road, Lahore will be a good option for this Cafe. The 1,500 square foot café will be located in the newly constructed Amanah Mall located on the edge of Model Town. The 5th Note Cafe, fills the void of original cafes in the market area, stands out from its corporate peers with their fast food concepts and fast services. The 5th Note Cafe is the alternative to fast food/commercial/coffee shops and offers a much calmer, civilized gourmet coffee experience. There are no televisions in the café, the background music is subtle and work from local artists will hang on the walls. The Name 5th Note is based on the 5th note of scale of music, which is static and singular. The café is well appointed with overstuffed leather chairs and sofas in a library like setting. The café is reminiscent of times gone by yet is cutting edge technologically with WIFI and state of the art espresso machines. The keys to success will be the ability to offer quality gourmet coffees, take advantage of its small size, and reliance on an outstanding staff. In order to achieve these goals, the café will offer some the area’s finest gourmet beans from local distributors. Its cost can vary depending on a number of factors including monthly rental payments, cost of assets (kitchen, furniture and crockery) and hence will also reflects on menu prices. Proposed Product Mix include: Espresso, Coffee, Sandwiches, Pasta, Desserts French Fries, and Beverages. Restaurant capacity is for 72 persons and initial capacity utilization is 42 %. Total Cost Estimates is Rs.5.7 million with fixed investment Rs.4.5 million and working capital Rs.0.5 million. Given the cost assumptions IRR and payback are 39 % and 2.55 years respectively The most critical considerations or factors for success of the project are: choosing the right location for the Coffee outlet creating the right menu and menu pricing hiring of experienced cooks and staff knowing the competition 1.0 Company Description The 5th Note Cafe will be a coffee house / café located in the Model Town Link Road. Located in the Lahore City, the cozy café will be located in the newly completed Amanah Mall. The café will serve gourmet coffees, espresso and drip coffee, lattes, and smoothies. The simple pastry offerings may vary with seasonality but the primary line will be muffins, breads, cookies, scones, and rolls. All pastries will be supplied daily by a local bakery. 4 The café will be owned and operated by Mr. XYZ, a veteran Food Lover with several years’ experience running and managing chain restaurants. The café will be open for business MondaySunday 9:00-22:00. Business Objectives The primary objectives of the business plan for 5th Note Cafe are below: • To increase revenues 5% in Year 2 and by 10% by Year 3 • Achieve a profit margin of 10% in Year 2 and 12% by Year 3 Mission Statement The 5th Note Cafe is committed to its products and employees which they believe is the recipe for market success. Guiding Principles The 5th Note Cafe is committed to values such as excellence, passion, quality, integrity and leadership which allow them to navigate challenges and provide for future opportunities. These core beliefs start with their commitment to their products and their employees. The 5th Note Cafe rewards excellence and cherishes loyalty. The café will work with its employees to build strong businesses and a secure future. Keys to Success The 5th Note Cafe stands out from the competition. Below are their Keys to Success: • • Great Products – providing exemplary products at market prices – will make customers want to return again and again Right Person for Right Job – Pay employees rates similar to the larger chains with opportunities for long term careers and opportunities for advancement with long term plans to open a second facility Ownership The 5th Note Cafe will be owned 100% by XYZ. Mr. XYZ has a postgraduate degree in business administration. Legal Form The 5th Note Cafe will be formed as a Sole Proprietorship wholly owned by XYZ. Start-Up Summary The 5th Note Cafe will have seating for 40 patrons. The rent is Rs. 100,000/- a month, with a three-five-year lease available. The site consists of 1500 square feet of leased space consisting of a dining room, a coffee bar, two restrooms, and a storage room in back. To be used as a restaurant, this storefront needs to be plumbed and wired appropriately. Painting, new floors, and countertops are also needed. With materials bought on sale and volunteer labor, the cost to renovate will be approximately Rs. 13, 00,000/-. The coffeehouse equipment will consist of two commercial espresso machines, air pots and urns, a 5 commercial blender, commercial brewer, top loading coffee bins, barista syrups, cold drink dispenser, frothing equipment, a commercial refrigerator, microwave and stainless steel prep bar. The cost for the equipment is approximately Rs. 13, 12,500/-. The furniture will consist of leather couches, and chairs (purchased at auction), coffee tables, bookcases, and window treatment. The artwork will come from local artists and will be sold on a consignment basis. Other startup expenses will be dishes, furniture, rent deposit, and marketing. Location and Facilities The new coffeehouse is located in the highly desirable location of Model Town Link Road, which is a junction of Model Town and Peko Road. The Road is highly commercial Area with shopping malls, restaurants and high traffic of shoppers. 2.0 Products/Services Products Mix The 5th Note Cafe’s primary offering is gourmet roasted coffees with such varieties such as mocha, carmelicious, white mocha, candy bar latte, and brewed coffee. Rounding out the simple menu line will be pastries obtained with an outside supplier, freshly made and delivered daily. The pastry offerings may vary with seasonality but the primary line will muffins, breads, cookies, scones, and rolls. The Desi and Traditional sweets like Gulab Jamuns, Ras Malaee, Kheer and Jalebi etc. will also be our feature products. The Drinks other than coffee will include the Shakes, Fresh Juices and Traditional Duudh Kulfa. The proposed project is assumed to provide customers with a variety of items as outlined in the following menu: Product Price Product CHILLERS Price 320 290 Very Vanilla 320 230 Crème Brule 330 270 Voltage 330 320 Cocoa Loco ESPRESSOS Cappuccino / Café Latté Café Americano Espresso / Ristretto / Macchiato / Piccolo Latté Café Mocha 340 6 Caramelatte Very Vanilla Latté 320 Cookies & Cream 350 350 320 Chocolate 320 Iced Coffee 300 320 Iced Coffee 300 320 Iced Coffee 300 Iced Tea 200 400 Italian Soda 300 Sandwich Jalapeno Grilled Panini 400 Water 80 • Grilled Chicken Sandwich 450 PASTA & NOODLES French Onion Chicken Sandwich 450 Irish Nut Crème White Chocolate Mocha White Chocolate Mocha SANDWICHES Classic Club • • • Penne Mushroom Pasta 450 Cheese Coated pasta 450 Alfredo Pasta 500 DESSERT Banana Tempura Almond Syrup cake - 7 Red Velvet cake Slice Molten Lava Cake Chocolate Brownies Fudge cake slice - Competitive Comparison The Model Town Link Road has lot of food chains and fast food restaurants, however the coffee shop is just Gloria Jeans. Apart from the food chain, the Gloria Jeans is the direct competitor at the particular location. Product/Service Sourcing The 5th Note Cafe has negotiated supplier agreements with several local food-service wholesalers and coffee wholesalers in the Model Town Link Road area that have a reputation for quality and reliability: Future Products/Services Young families which comprise the third largest market share in Overland Park, are often overlooked in the coffee market. Coffeehouses traditionally have not been considered ‘kid’ friendly. To overcome this hurdle, the 5th Note Cafe has long term plans (5 years) to open a 2nd coffee shop: A combination indoor play area / coffee bar. This concept allows parents and caregivers an opportunity to meet and relax with other adults while the children can enjoy the indoor playground amenities. Additional future services will include in-store sales for home purchase as well as an online store. 4.0 Market Analysis Amanah Mall is the newly constructed Mall at Model Town Link Road. The Mall has promising chances of food court. The most likely food chains at Food Court will be KFC, Mc Donald, Subway, OPTP, Burger King, Pizza Hut, Domino Pizza, Gloria Jeans, Bombay Chowpaty, Italian Grill and others. Amanah Mall is the only Mall other than PACE, at Model Town Link Road. The other food chains are at Road, which could be counted as competitors. Model Town Link Road is also near to METRO Store opposite PACE. The Road has excellent business opportunity for all sort of businesses. Particularly the coffee shop is not present other than Gloria Jeans at the said location. Model Town Link Road, is few kilometers away from Johar 8 Town and Township, which are one of the congested residential locations at Lahore. The Model Town is adjacent to Model Town Link Road. 4.1 Target Market Segment Strategy Most adult coffee drinkers said their lifelong habit began during their teenage years. In fact, 54% said they began drinking coffee between 13 and 19. Another 22% reported their coffee cravings started between the ages of 20 and 24. This means that 76% of adult coffee drinkers began drinking coffee by the time they were 24. So, despite the large amount of marketing and advertising directed at the younger age groups, savvy coffee shop owners will not forget to cater some of their offerings to the adult and senior market. (National Coffee Drinking Study, US). The 5th Note Cafe will offer a unique experience for coffee aficionado by offering a quiet and cozy yet sophisticated cafe and offer a sense of refinement and peace in an otherwise hectic and fast paced world. While other coffee shops cater to convenience with drive through or loud music venues late into the night, the 5th Note Cafe will stand apart from its competitors with its quiet yet soothing ambience, capturing a truly unique (and much needed) market niche 4.2 Market Needs Coffee shop customers, by nature, are looking for something special — that’s why they are willing to pay so much for a cup of coffee! Many customers of the big national chains, while satisfied with their daily coffee would be intrigued to find a local coffee that is different 4.3 Market Trends • Unique products (specialized roasts, local ingredients, locally themed or named drinks, custom drinks by the ‘star’ barista, etc.) • Games, puzzles, mind benders and other activities that encourage customers to linger over their coffee • Hosting or sponsoring local events (entertainment, readings, book clubs, etc.) • Using technology to creatively compete in marketing with the big chains — services like Foursquare, Yelp, and Google Places can increase visibility in the local market. • Delivering amazing service from knowledgeable baristas — spend lots of time training staff and utilize online services like the American Coffee & Barista School Selling coffee-related items (and track down any co-marketing opportunities with a local community college or other student-related group in the area. 4.4 Marketing Strategy and Implementation The 5th Note Cafe will provide a quiet and relaxing environment to enjoy gourmet roasted coffee and smoothies and an opportunity to visit with friends, catch up on one’s email, or read a chapter 9 of a book. The Café will fill the great void providing originality in a sea of facsimile, corporate coffee shops. 2.6 SWOT Analysis The SWOT analysis examines the café’s strengths and weaknesses that need to be addressed. Further, this section examines the opportunities presented to Café as well as potential threats. Strengths • Based on its smaller size, the fact that it is not a franchise, the 5th Note Cafe is a unique coffee shop concept unlike any other in the Overland Park market. • The owner has firsthand experience, in operating and starting new restaurants, • Handpicked baristas will bring professionalism and enthusiasm to the shop. Weaknesses • • Opportunities • • • Threats • Franchises are the easiest way and often the safest conduit to start a café; the café will not have the backing of one of these established entities. The 5th Note Cafe has a minimal budget and is competing against larger and more established coffeehouses for market share. The Overland Park demographics support the need for a unique coffee shop. Additional opportunities to target the active and recently retired target market and 45 years+ age group. A small slice of a much bigger pie is the goal. Only 40 percent of the nation’s coffee drinkers are consuming premium ground and whole bean coffee. Encouraging coffee drinkers to become coffee connoisseurs is the key to continued growth. Another Coffee Shop is currently for sale at Model Town; should another independent purchase this café, it could pose significant threat to market share. 4.7 Strategy Pyramid • • In the short-term, a number of promotions and activities are planned around launch of the business to create awareness. The coffee shop will have a contest offering 20 bottomless mugs and will publicize this promotion via radio advertising, as well as countertop displays and posters in the shopping plaza. In addition, during its first year of operations the coffee shop will pass out a limited number of coupons for a free cup of coffee to prospective customers visiting the shopping center. 4.8 Unique Selling Proposition (USP) 10 The 5th Note Cafe truly stands out from a crowded sea of fast food and franchises. What sets them apart from the competition is primarily its smaller cozier size combined with premium coffees and sweet dishes. 4.9 Competitive Edge The 5th Note Cafe’s competitive edge, its size, is also its greatest attribute. Because they are small there is no red tape, and they can easily adjust business hours to say accommodate an afterhours book reading session whereas the corporate chains do not provide such an accommodation. The 5th Note Cafe will truly cater to its patrons needs. 4.10 Marketing Strategy and Positioning The 5th Note Cafe utilizes a focus strategy on its market. By specifically targeting three primary segments they can cater specifically to their needs. Senior Market (age 45+) The 5th Note Cafe will target this market simply by its well selected location. Although this demographic group could readily drive downtown, they prefer a local café to unwind and relax and historically become some of the most loyal patrons. Newly Hired Employees The café will attract regular customers (weekly or more) - particularly the newly employed (first job) by providing free WIFI services and providing interesting games in the customer area. Young Families The third targeted markets, younger families, often find that coffeehouse are not ‘kid’ friendly. The company has long term plans to create a combination coffee shop / play area so that parents and caregivers will have a place to meet with other adults while the children can enjoy the bounce houses, slides and indoor playground equipment. 4.11 Positioning Statement The 5th Note Cafe is a gourmet coffee lover’s gem. It is truly one of a kind coffee house offering outstanding gourmet coffees and blends, served in a warm, relaxed environment. It is the place to go to visit with friends or cozy up in a quiet corner with a good book either from the library or from one of the patron’s personal E-Books. 4.12 Pricing Strategy The 5th Note Cafe primarily utilizes competition based pricing. The café does not utilize coupons and discounts (other than opening promotion) because they believe that the most valuable customer demographic of daily coffee consumers is not influenced by discount programs or coupons. 11 4.13 Promotion and Advertising Strategy • Online Advertising - The 5th Note Cafe will advertise regularly on popular social media sites, such as Facebook. Compared to traditional print advertising, this is a cost effective tactic that will allow them to reach prospects in a highly targeted way (e.g., based on criteria such as age, gender, geography, etc.). • Web Site - the 5th Note Cafe will develop a simple Web site, which will provide basic information about the business, the menu, and links to their presence on the aforementioned social media channels. • Radio Advertising - During the first six months of operation, and during the busy holiday shopping season, the business will advertise on local radio stations. : 4.15 Website The 5th Note Cafe will have a simple website identifying its menu items of gourmet coffees, smoothies and pastries, along with the address, map and hours of operation. The website will also have a calendar of any upcoming events or sponsorships. The site will also have links to their social media sites – such as Facebook, Twitter, and Pinterest. 5. Sales Strategy The 5th Note Cafe will use the following methods to increase sales revenue: • The menu will focus on the most profitable products sold. The café will always draw customer attention to the most profitable products. • As warranted, the café will raise prices to bolster brand image. Prices communicate a perceived value of a product; so if set too low, the customers might assume that the beverages are inferior compared to the competition. • Monitor flavoring inventory – Excess flavoring inventory ties up capital and valuable back room space for storage. The café will utilize 4-6 varieties, including sugar free offerings. • Monitor and evaluate hours of operation • Run employee sales contests – The baristas are the salespeople and have a great deal of influence over the customer ordering process. All baristas will have some form of sales and customer service training to make each transaction active, rather than passive. Sales contests will emphasize high margin items or cross selling 5.1 Sales Forecast The sales forecast assumes a conservative 5% increase in revenues during Year Two and 10% increase in Year Three. 5.2 Sales Programs The 5th Note Cafe will run employee sales contests – The baristas are the salespeople and have a great deal of influence over the customer ordering process. All baristas will be 12 required to have sales and customer service training to make each transaction. The sales contests will emphasize high margin items and cross selling. Milestone Secure occupancy location Tenant improvements and build outs Purchase furniture and décor Assemble and hire barista team Advertise on local radio station / mail fliers Open for Business Date Completed Mar 20XX Apr 20XX May 20XX May 20XX Jun 20XX 6 Legal Requirements The Pakistan Hotels and Restaurant Acts Act 1976 is the law which requires the owners of all types of restaurants to register and obtain a license with the government. The restaurant owner is required to apply to the controller for registration of the restaurant. Application for registration and determination of fair rates shall be made to the controller in Form “G” together with a certificate of medical fitness in Form “I” from a registered medical officer of the civil hospital in respect of the staff of the restaurant. For registration of a restaurant, the owner of the restaurant is required to conform to the Standard of health, hygiene and comfort which standards have been set out in Schedule II of the act. On receipt of application, the controller will carry out inspection of the aforementioned Premises and once satisfied will initiate the registration process. Once registered the owner of the restaurant will apply to the controller for license as per the Act which needs to be renewed on a yearly basis for the prescribed fee. 7. Project Investment Capital Cost Security Deposit Renovation Machinery & Equipment Furniture & Fixtures Office Equipment Pre-operating Costs Total Capital Cost Working Capital Equipment Spare Part Inventory Raw Material Inventory Upfront Building Rent Cash Total Working Capital TOTAL PROJECT COST 3,00,000 1,300,000 1,312,500 970,000 135,000 665,000 4,582,500 43,546 174,182 3,00,000 2,00,000 5,17,638 57,00,138 13 8. Recommended Project Parameters Capacity Initial Capacity Utilization 42 % 288 Customers per Day Human Resource Equipment Location 16 New Middle to High Income Level Area 9. Financial Summary Project Cost IRR 57,00,13825 39% Payback Period 2.55 Cost of Capital (WACC) 25% 10. MACHINERY & EQUIPMENT Understanding the customer’s individual needs and the capability to satisfy these completely is a vital part of the restaurant’s success. This is in turn dependent on the machinery and used to produce good quality food. Coffee Machines are easily available in the market wherein the owner has to choose between expensive brands and cheaper ones depending on how much he can afford to give quality to his customers. The typical Coffee shop as outlined above would require the following machine /equipment for its operations: ITEM DETAILS QUANTITY- UNIT PRICE (RS.) 45,000 3,00,000 10,000 100,000 50,000 TOTAL PRICE(RS) 90,000 3,00,000 20,000 100,000 50,000 Freezers (12 cf) Espresso machine Grinders Oven Hot Plate for Burgers, Kebab, Sandwiches Bin Marry Soup Container (2 Valve With Steel Cabinet Potato Cutter (8mm) Microwave Working Tables Keg Racks & Shelves 01 120,000 120,000 - 5,000 15,-,000 5,000 30,000 50,000 40,000 14 Crockery / Cutlery 108 1,000 Generator 15 KVA 01 322,500 Water Geyser 01 35,000 Total *Cutlery to be 1.5 times the maximum capacity (i.e. 72 customers) 150,000 322,500 35,000 1,312,500 10.1 Machinery Maintenance All machines require routine cleaning and maintenance after every three months and an annual service which costs around 01% to 05% of the total cost depending upon the use of the machine and operator's skill. We have assumed 01% of the product quantity sold as the annual maintenance cost 10.2 Furniture & Fixtures The restaurant is expected to entertain a minimum of 288 customers at 04 table rotations in a day, which requires a good seating layout to avoid any confusion and problems during rush hours. The following table gives the details of the dining tables and chairs that would serve approximately 72 customers (maximum capacity) at a time. ITEM DETAILS QUANTITY 18 UNIT PRICE (RS.) 36,000 TOTAL PRICE (RS.) 648,000 Dining Table – Square plus 04 chairs Lights Counter Chairs Office Table and Chair Waiting Area for Take Away Customers Air Conditioner Split Units (02 Ton) Total - 800 6,000 25,000 4,000 40,000 2,000 25,000 20,000 Air Conditioner Split Units (02 Ton) 45,000 225,000 970,000 10.3 Office Equipment ITEM DETAILS Laptop Printer Telephones Broadband Cash Software Total QUANTITY- UNIT PRICE (RS.) 45,000 10,-,000 42,500 TOTAL PRICE (RS.) 45,000 25,-,000 42,500 135,000 15 11. LAND & BUILDING REQUIREMENT Land Requirement The land requirement is around 1,500sq.ft. In densely populated area where all utilities and facilities are properly available. It is recommended that the Coffee shop outlet be opened on the ground floor Amanah mall where the consumer traffic will be maximum Dedicated Area Requirement The floor space needs to be carefully allocated to allow for maximum dining space for customers in rush hours. The allocation of space between different sections would be as follows: DETAILS Dining % (SQ. FEET) 60% SIZE (SQ. FEET) 900 Waiting Kitchen & Preparation Stores 5% 30% 5% - DETAILS SIZE Total 1500 CIVIL WORKS & TOTAL DÉCOR* RENOVATION (COST IN RS. / COST SQUARE (RS.) FEET) 866.6 1,300,000 (Round off) * Includes interior decoration. Recommended Mode The proposed premises will be acquired on a rental basis with three month deposit and three months advance rent after which rent will be payable on a monthly basis. For this Pre-feasibility the monthly rent is assumed to be approximately Rs. 70/ Sq. Feet for the ground floor which would amount to Rs. 100,000 per month for the proposed fast food outlet (1,500 Sq. Ft.) 12 HUMAN RESOURCE REQUIREMENTS The human resource requirement for the general and management staff are as follows: DESIGNATION / TYPE NUMBER MONTHLY SALARY (RS.) TOTAL MONTHLY SALARY (RS.) Manager* 01 25000 25,000 16 Chef Supervisor (including reliever) Cook Helper Dishwasher Waiters / Servers Cleaner Guard Total 01 01 25,000 15,000 25,000 15,000 - 15,000 13,000 13,000 13,000 13,000 13,000 45,000 13,000 13,000 78,000 13,000 13,000 240,000 Manager can be owner him/herself Considering the size of the proposed establishment it is assumed that the owner would be managing the overall affairs of the fast food setup. He will be required to process and check bills, invoices, receivables management, maintain accounts, etc. for record. The owner will also ensure safe custody of store keys and it is important to note that many food outlets tend to lose out due to inadequate cash control by the owners especially during rush hours where the counter staff can easily slip out one or two payments. 13 FINANCIAL ANALYSIS The cost projections cover the cost of land, building, inventory, equipment including office furniture etc. The specific assumptions relating to individual cost components are given as under: 13.1 Revenue & Cost Projections Revenue is assumed to increase by 05%. The 02% annual increase in revenue is expected to result from a part increase in population increase and part increase in product price. The prices used to calculate the gross revenue earned are based on the billing rate at which the entrepreneur will charge the customer. The prices are also inclusive of the General Sales Tax. Furthermore it is assumed that the following sales breakup will form the revenue streams for the coffee shop. REVENUE STREAM % OF TOTAL SALES Dine In 70% Take Away 30% The minimum order size is assumed to be Rs. 300/- per order. For Take Away another 1% of sales added cost due to packing is assumed. 13.2 Utilities Requirement 17 The following table presents the assumed breakup of utilities on a monthly basis UTILITY Electricity (Direct & Indirect) Water Gas Telephone/Internet Total MONTHLY CHARGES (RS.) 75,443 4,335 21,773 3,520 1,05,071 As depicted above the most of the Coffee shop and baking machines require considerable electricity during the preparation process. The preheating procedure of the equipment before commencement of preparation also consumes considerable electricity. It is assumed that utilities expenses will be increased by 10% every year. 13.3 Depreciation on Building & Equipment Depreciation on Shop, Equipment, Machinery and Fixtures is assumed to be at the rate of 10% per annum based on the diminishing balance method for the projected period. 13.4 Account Receivables All sales will be made strictly on cash basis. It is not advisable to operate a fast food restaurant on credit basis . 13.5 Miscellaneous Outlet Expenses A yearly figure of Rs. 100,000 is assumed to be incurred for miscellaneous expenses which are expected to increase at the rate of 10% per annum for the projected period. 13.6 Taxation The tax rate applicable to sole proprietorship is the same as that of the salaried individual. Therefore, we are assuming that the tax rate would be the same for the proposed fast food setup. 13.7 Source of Capital The source of capital is explained in the following table: Particulars Rate Debt 0% Equity 100% 18 3.0 14 Owner’s Withdrawal It is assumed that the owner will withdraw from the business once the desired profitability is reached from the start of operations. The amount would depend on business sustainability and availability of funds for future growth. 19